www.economist.com Feb 6th 2003 | CARACAS From The Economist print edition EPA

Having survived a devastating opposition strike, Hugo Chávez is preparing to take the offensive. That looks like bad news for the beleaguered private sector

NO SELF-RESPECTING revolutionary lets slip the chance to bestow an important-sounding name on a year. For President Hugo Chávez, 2002 was “the year of the consolidation of the Bolivarian revolution”. This year, he promises, is that of the “strategic offensive”. Having ridden out a two-month strike against his government, which brought the economy close to ruin, Mr Chávez sees less reason than ever to negotiate with an opposition which he dismisses as run by “coup-mongers”.

With many of its supporters facing bankruptcy, the opposition bowed to the inevitable on February 2nd, and lifted the strike in the private sector. The strike continues in the state oil company, but it is fraying. To save face, the opposition organised a ballot, in which it claims that 4m citizens voted on several different ideas for ending the political conflict that has wracked Venezuela for 14 months. Two of these were suggested by Jimmy Carter, a former American president, who has been trying to mediate in Venezuela. They are a recall referendum on Mr Chávez's rule in August, or a constitutional amendment to cut short his term.

Mr Chávez, with the army and now the oil company under his thumb, has other plans. Some of his opponents remain convinced that he is merely an incompetent autocrat whose “Bolivarian revolution” is largely in his own head. Others, pointing to his veneration for Fidel Castro, accuse him of seeking to create another Cuba. Neither view is wholly right, says Alberto Garrido, a political consultant and the author of several books on Mr Chávez. He says that the president is indeed pursuing a revolution; he has been doing so since well before 1992, when as an army officer he led an attempted coup against a democratic government. But Mr Chávez has not yet “decided to bring down the guillotine” on democracy, says Mr Garrido.

What would Venezuela look like if and when he does? Neither socialist nor communist. Unlike Mr Castro, Hugo Chávez does not propose to abolish private property. But the private sector he has in mind would consist of enclaves of foreign investment, plus small firms dependent on the state. Neither would threaten his grip on power.

Many larger Venezuelan companies, most of which back the opposition, will struggle to survive. On top of the economic effects of the strike, they now face exchange controls, announced last month as oil exports dried up. The controls will enable the government to starve businesses of imports. They will be administered by a former army captain who took part in Mr Chávez's 1992 coup against a democratic government. The bolívar has been fixed 17% higher than its last trading rate, making corruption and a black market likely.

The outlook for the economy is bleak. Oil output is unlikely to return to its previous levels quickly, if at all (see article). The government says GDP will contract by not more than 5% this year; Venezuelan analysts at LatinSource, a New York-based consultancy, put this figure at 17-20%. But Mr Chávez will attempt to shield his own supporters. He is likely to divert scarce foreign currency and cheap credits to loyal small businesses or co-operatives; he also has plans to distribute urban plots and rural smallholdings to the poor.

The “revolutionary offensive” has other targets. The government has filed complaints against the main private television stations, which could lead to their being fined or temporarily closed. It has also sent a bill to the National Assembly that would allow the infrastructure minister to revoke the channels' licences. The government is also seeking to wrest control of police forces run by opposition mayors; it has already partly disarmed the Caracas police. And there is another bill in the assembly, this one to add ten judges to the supreme court (which has recently shown some signs of independence).

Mr Chávez calls all this the “revolution of the excluded”. While communists relied on a disciplined vanguard party and organised labour, the Bolivarian “revolution” seeks to draw its support from those that Karl Marx dismissed as the “lumpen proletariat”. For Mr Chávez, the army takes on the role of the missing revolutionary party. So if his plan is to succeed, he must turn Venezuela's armed forces, by recent tradition pro-American and apolitical, into a revolutionary militia. He must also ensure that his supporters among the poor, already less numerous than in the past, do not continue to desert him as the economy slides deeper into penury.

Mr Chávez dreams of a revolution that goes far wider than Venezuela. “The happy society we want to create is in order to change...the system of production and trade and the international political system,” says Eliécer Otaiza, a former head of the secret police who still advises the president. The dream begins with that of Simón Bolívar, South America's Venezuelan-born independence hero, for a single Andean nation with, Mr Chávez adds, its own NATO-style defence organisation.

The United States has rather different plans for the region: the Free-Trade Area of the Americas, rejected by Mr Chávez. But this is supported by most South American governments. And even Brazil, whose new president, Luiz Inácio Lula da Silva, has some sympathy for Mr Chávez, is wary of his pretensions to regional leadership. So far, the United States has not taken Venezuela's president very seriously, though it has given money and discreet encouragement to the opposition. But now that the opposition has twice failed to oust him, many governments in the Americas may have to think again.

english.pravda.ru 11:00 2003-02-10

Friday's blast had left 32 killed and 200 wounded, as fears of terror campaign rise.

President Alvaro Uribe, who has promised to crack down on the 40-year insurgency, Saturday claimed to the United Nations to give Colombia the same treatment as Iraq. Uribe made these declarations after visiting the place where before the bomb attack functioned the exclusive club "El Nogal", in an elite area of Bogota.

The late-night explosion blew debris on to a busy avenue, collapsing floors and starting a fire that burned for two hours. The car, which was carrying explosives, had been left in a car park on the third floor of the building. No one claimed responsibility for the attack which took place shortly after 8pm on Friday, but the Revolutionary Armed Forces of Colombia (FARC) had said several months ago it intended to attack Colombia’s elite. The rebels have recently brought their war, which has lasted four decades, from the countryside into the cities.

The attack has raised fears that the country’s rebels are making good their threats to attack the country’s ruling class. Therefore, Uribe made another attempt to internationalize the long- running conflict, as he has openly considered peace talks useless.

Alvaro Uribe had expressed such idea during the sworn in ceremony of the leftist President of Ecuador, Lucio Gutierrez. The Colombian Head of State thinks that country's guerrillas finance their activity thanks to the international consumption of drugs produced in the country.

"The world should not ask Colombia to tolerate terrorism; we need that the democratic nations of the world come to Colombia to help us fighting it", repeated Uribe.

However, Uribe will have to struggle hard to see his dream, a large-scale US military intervention, to become reality. There is an increasing opposition to such idea amid Colombia's powerful neighbors: Chavez's Venezuela and Lula's Brazil. They strongly rejected in several occasions all the attempts of US intervention into the Amazonian jungle.

The bomb attack was the second blow to hit Colombia in as many days. On Thursday, a light plane carrying minister of social welfare Juan Luis Londono and four other people disappeared on a domestic flight. On Friday, suspected rebels fired on a helicopter that was searching for the plane in the Andean Mountains of central Colombia.

Hernan Etchaleco PRAVDA.Ru Argentina

www.forbes.com Reuters, 02.10.03, 9:54 AM ET

SAO PAULO, Brazil, Feb 10 (Reuters) - Brazil's financial markets weakened in early trade on Monday amid growing worries a U.S. war with Iraq could stall the budding recovery of Latin America's largest economy. Traders said volume was low as investors held on to their cash awaiting a clear picture of how a possible war in Iraq will impact Brazil's sluggish economy. "This week is going to be lousy," said John Carioba, director at Indusval brokerage in Sao Paulo. "No one will want to take any decisions or invest because of the uncertainties," he said, adding that traders would be keen to see what United Nations weapons inspectors Hans Blix and Mohamed ElBaradei will report on Friday to the U.N. Security Council. The Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index was down 0.3 percent at 10,348 points, putting it about 8 percent lower than where it started the year. Brazil's currency, the real , was also weaker by midday, trading 2 centavos lower at 3.61 per U.S. dollar. "Foreign factors, like the uncertainty about a war between the United States and Iraq, will continue to weigh on the market," said Jose Roberto Carreira, a currency trader at Novacao brokerage. He also noted traders would be on the lookout to see what kind of announcements President Luiz Inacio Lula da Silva makes after a Cabinet meeting this afternoon and how well the Central Bank manages to sell $900 million in dollar-linked notes. On Friday, it sold $1.35 billion in dollar-indexed notes, meaning it has already rolled over 54 percent of $2.5 billion coming due on Thursday. With international crude prices reaching 26-month highs, Brazil's state-run oil giant Petrobras <PETR4.SA> was up 0.22 percent at 45.10 reais. Investors are worried however that a U.S. war with Iraq could hurt Brazil's economy as foreigners curtail investments in emerging markets and the price of oil begins to drag on the economy. At the stock market, losses by the highly liquid telecommunications sector were leading the market into the red. Telesp Celular Participacoes <TSPP4.SA> was down 3.1 percent at 3.45 reais after it said it had raised its stake in its mobile phone unit Global Telecom to 100 percent and could have to make a negative provision on its earnings statement for the investment. Market bellwether Tele Norte Leste Participacoes, or Telemar <TNLP4.SA>, was down 0.4 percent at 24.95 reais. It accounts for about 14 percent of the Bovespa.

www.upi.com By Carmen Gentile UPI Latin America Correspondent From the International Desk Published 2/10/2003 7:52 PM

SAO PAULO, Brazil, Feb. 10 (UPI) -- Brazil's president convened his full Cabinet Monday as part of a 40-day gut check for his fledgling administration and to announce a series of economic and social reform measures.

Capping a weekend described by one newspaper as a "diagnostic of the federal machine," Luiz Inacio Lula da Silva, for only the second time since assuming the presidency Jan. 1, brought his entire Cabinet together to reveal to Brazilians the next phase for his administration.

The president of the leftist Workers' Party, known as PT, has quieted most of his critics up to this point with a series of relatively conservative moves on the monetary front, while making good on a pledge to work toward greater social equality in South America's largest nation.

"He (Lula) has determined that the administration is doing well," said presidential spokesman Andre Singer following Monday's meetings that proceeded a number of new announcements by the administration.

Despite Lula's optimism, said Singer, the Brazilian leader remains concerned about the nation's flagging economy, although he wants to continue with his social agenda, saving it from budget cuts.

That said, the administration did, however, announce that it would "hold back" $14.1 billion reals (almost $4 billion) already earmarked for the 2003 federal budget in order to meet the primary surplus goal for the year.

Brazil recently raised its surplus goal to 4.25 percent, up from 3.75 percent.

Singer added that as it is not a "budget cut," the funds could be spent later in the year if the Brazilian economy improves. The country's key economic indicator, the Bovespa, and its currency have been in a nearly yearlong slump along with global markets, and like U.S. markets, taken several recent hits based on concerns about the prospects of war with Iraq.

The cuts are not expected to affect Lula's top priority for reform since winning a landslide victory in October.

Dubbed "Fome Zero" (Zero Hunger), the project's initial goal is to assist 10 million people via an aggressive food allotment program over the next five years.

In fact, Lula went on to announce additional social reform moves, including the dispersion of some 203,000 hectares (more than 500,000 acres) of unproductive land in 17 states and the enlargement of some indigenous areas for Brazilian Indian tribes.

The president also went on to note the imminent creation of a new secretariat for racial equality.

Following the meetings in the capital, Brasilia, local media took the opportunity to ask the president's spokesman about whether his party's "radical" members were discussed during the meetings.

The PT radicals have been critical of Lula on several fronts, though mostly regarding his economic team, which has won kudos from both local and foreign investors for not deviating from the free-market policies implemented by former President Fernando Henrique Cardoso.

They insist that Minster of Finance Antonio Palocci and Central Bank President Henrique Meirelles have been far too conservative for the leftist PT.

Lula himself intervened on Friday in the ongoing spat among PT officials and other parties' members who are allied with him, taking the opportunity to defend his choices to lead Brazil's economy and other decisions made during his brief presidency.

Singer, meanwhile, noted that the radicals were not discussed, as the ministers would not be offended by the far-left members of the party.

"The ministers are very conscious of the measures that should be taken," said Singer, diplomatically refraining from further comment.

news.ft.com By Raymond Colitt in São Paulo Published: February 11 2003 4:00 | Last Updated: February 11 2003 4:00

The Brazilian government announced draconian cuts in this year's budget yesterday but sought to highlight efforts to resolve social and economic problems with a series of emergency measures.

In the latest sign of tough fiscal discipline since President Luiz Inácio Lula da Silva took office on January 1, the government said it was freezing R$14bn (£2.4bn) in expenditure this year.

Andre Singer, Mr Lula da Silva's spokesman, did not say where cuts would be made but insisted social welfare projects would be spared, blaming the previous government for a R$8.9bn underestimate of expenditure.

More than R$5bn in cuts are to increase Brazil's primary budget surplus target - its budget savings excluding interest payments on public debt - to 4.25 per cent of gross domestic product this year. Last August, Brazil agreed a 3.75 per cent target with the International Monetary Fund.

The increased primary budget surplus will allow the government to service its net public debt of R$881bn, or 56 per cent of GDP.

Meanwhile, an IMF mission arrived yesterday to evaluate Brazil's compliance with a $30bn loan package agreed last August. The previous government drew on $6bn of that loan. IMF officials welcomed the revised fiscal target. "This shows again the new government's commitment to a comprehensive and sustainable economic and social programme," IMF officials said.

But Mr Lula da Silva's austere economic policy has come under fire from unions and leftwing radicals in his Workers' party (PT). To assuage critics, the government announced yesterday a package of measures to point up efforts to tackle economic and social problems in spite of the tight budget.

Among the measures are tax breaks for co-operatives, financing for this year's cereal harvest, guaranteed government prices for dairy farmers, and incentives for private banks to increase lending to small farmers.

The government will also expropriate more than 200,000 hectares of fallow land to settle 5,500 poor families by the year-end and will expand and demarcate native Indian territories.

Other measures include authorising public power companies to participate in a tender to build 1,672km of transmission lines, increase scientific research grants, and install 4,200 computers to give citizens limited free internet and e-mail access.