abc.net.au Friday, February  21, 2003. Posted: 00:22:54 (AEDT)

Reports from Venezuela say one of the leading organisers of the protests against President Hugo Chavez has been arrested. A director of the main business association says Carlos Fernandez had been detained by armed police in the capital Caracas. Mr Fernandez was one of the leaders of a 63-day general strike that ended on February 2 by business and union groups against the President. The news came after the New York-based group Human Rights Watch called on the Venezuelan authorities to investigate the killing of three soldiers who had called for civil disobedience against Mr Chavez.

www.austin360.com By JAMES ANDERSON Associated Press Writer

CARACAS, Venezuela (AP)--A leader of Venezuela's general strike was snatched out of a restaurant by secret police and faces charges of treason and instigating violence for his role in mass, anti-government protests that crippled the nation's economy.

On Thursday, the morning after the midnight arrest of Carlos Fernandez, opposition leaders threatened to call a new strike in response.

Strike co-leader Carlos Ortega, of the Venezuelan Workers Confederation, was ordered to surrender, also on treason and instigating violence charges, said magistrate Maikel Jose Moreno.

Ortega and Fernandez, president of Venezuela's largest business federation, Fedecamaras, led the two-month strike that started Dec. 2, seeking to oust leftist President Hugo Chavez. The strike ended this month except in Venezuela's oil sector.

Chavez accuses the two strike leaders of trying to topple his government.

Eight armed men seized Fernandez at about midnight Wednesday as he was leaving a restaurant in Caracas' trendy Las Mercedes district, his bodyguard, Juan Carlos Fernandez, told Globovision TV.

He said the men, who identified themselves as police agents, fired into the air when patrons tried to stop them from taking Fernandez away.

Ortega condemned the arrest as ``a terrorist act'' against Venezuela's opposition, already shaken by the slayings and possible torture of three dissident Venezuelan soldiers and an opposition activist.

International human rights groups have demanded an investigation into the slayings of the four, whose bodies were found in the suburbs of Caracas with hands tied and faces wrapped with tape.

Darwin Arguello, Angel Salas and Felix Pinto and opposition activist Zaida Peraza, 25, had multiple bullet wounds and showed signs of torture, Raul Yepez, deputy director of Venezuela's forensics police, said Wednesday.

He said the four were abducted Saturday night.

According to the New York-based Human Rights Watch, a witness saw the victims being forced into two vehicles by men wearing ski masks, not far from a plaza that has become the opposition's central rallying point.

``The circumstances strongly suggest that these were political killings,'' said Jose Miguel Vivanco, executive director of the Americas Division of Human Rights Watch.

Yepez said police had ``practically ruled out'' political motives. There have been no arrests.

Dissident soldiers supported the nationwide strike, which demanded Chavez's resignation or call for early elections. The strike was lifted Feb. 4 in all areas except the oil industry to protect businesses from bankruptcy.

The vice president of the Fedecamaras business association, Albis Munoz, warned of another nationwide strike. She said Fernandez was seized without a court order and was being held at secret police headquarters.

Definitely there will be actions, and very strong actions,'' Munoz said, adding that Fernandez was practically kidnapped.''

``There has been no way of communicating with him,'' she said.

Opposition leaders called for street protests and appealed to the Organization of American States, the United Nations and the Carter Center, run by former President Jimmy Carter, which have brokered talks here.

One opposition delegate to those talks, Rafael Alfonzo, said Fernandez's abduction made a mockery of a ``peace pact'' renouncing violence that government and opposition negotiators signed on Wednesday.

``This government doesn't want to negotiate. It only wants conflict. We won't back down,'' Alfonzo said.

Chavez was elected in 1998 and re-elected in 2000, vowing to wipe out the corruption of previous governments and redistribute Venezuela's vast oil wealth to the poor majority.

His critics charge he has mismanaged the economy, tried to grab authoritarian powers and split the country along class lines.

Having abandoned their strike, opponents are now petitioning for a constitutional amendment to cut Chavez's term in power from six to four years.

They said Wednesday that more than 4.4 million Venezuelans had signed, well over the 15 percent of registered voters, or about 1.8 million, needed to force a referendum on early elections.

www.sacbee.com Sacramento Bee/Bryan Patrick

The specter of war and other factors send gas prices soaring

By Dale Kasler and Cathleen Ferraro -- Bee Staff Writers Published 2:15 a.m. PST Thursday, February 20, 2003 Pamela Davis was filling her Mercedes with premium gasoline at a Shell station in Gold River on Wednesday when she glanced at the price -- $2.11 a gallon -- and stopped pumping.

"I looked at the sign and was taken aback," she said. "I stopped at halfway."

Gas prices are approaching extraordinary levels in Sacramento, fueled by the peculiarities of California's gasoline market and either pre-war profiteering or pre-war jitters, depending on whose assessment you buy.

The average price of regular in Sacramento hit $1.90 a gallon Wednesday, according to AAA of Northern California, a 19-cent jump in a month's time. And a spot check around town found prices as high as $1.99 for regular -- and well over $2 for the higher grades of fuel.

Californians are feeling more pain at the pump than are other Americans, who are paying $1.66 for a gallon of regular, up 19 cents in the last month.

Analysts said the buildup to a possible invasion of Iraq was the main culprit, but lingering effects of Venezuela's oil strike and conversion by California refiners to ethanol-additive fuels also have a role.

Another issue: Inventories of U.S. crude are at their lowest levels since 1975, the U.S. Department of Energy reported last week.

As a result, analysts believe prices will continue rising unless war is averted.

"It'll probably go higher before it'll go lower," said Chris Mennis, an independent oil and gas trader based in Santa Cruz.

Mennis and others said the largest factor in the run-up of pump prices is the rising worldwide price of crude. It topped $37 a barrel Wednesday, the highest in 29 months and near levels reached in fall 1990, on the eve of the Persian Gulf War.

Every $1 increase in oil barrel prices translates into 2.5 cents more per gallon at the pump. The price of oil has risen about $12 a barrel in the past few months, meaning 30 cents a gallon retail. A consumer advocate doesn't buy the analysts' explanations, saying oil companies are using the potential of war to generate a windfall for themselves.

The current price "is not based on the actual supply available today," said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "This is basically wartime profiteering by oil companies."

But oil industry sources and independent analysts said the jump in prices appears to be legitimate. The likelihood of war -- and the prospect of tightened supplies, especially if the conflict spreads to other Middle East nations -- has prompted traders to snap up supplies, and higher prices are the result.

War "is being priced into the current price of oil," said Severin Borenstein, director of the University of California Energy Institute.

"Expectations have always played a role in where prices are," added an industry source who asked not to be named.

California prices have risen even more, in part because of its strict clean-air regulations. The state is an island unto itself when it comes to gasoline because the gasoline it consumes must conform to pollution controls not found elsewhere.

Those requirements lead to higher prices than in other states and a more delicate supply-demand balance, making California prices more volatile.

This year things are a little worse. The rise in crude oil prices comes as several California refineries have temporarily shut down, either for regular late-winter maintenance or to convert their systems from the additive MTBE to ethanol, said analyst Gordon Schremp of the California Energy Commission.

Gasoline production at California's refineries is about 6 percent below a year ago, according to commission statistics.

Although the conversion to ethanol hasn't produced the huge price spikes some analysts predicted, it is keeping upward pressure on prices. So will the beginning of spring, when demand grows and prices normally go up, Schremp said.

The average price in California Wednesday was $1.89 for regular, up 21 cents from last month. California's prices are 23 cents higher than the U.S. average, according to AAA.

The highest prices in California were in San Francisco, where they averaged $2.04 a gallon. The average price in Los Angeles, meanwhile, was $1.86.

California produces nearly half of its own oil -- there's more in the Bakersfield area alone than in all of Oklahoma -- but the state still is subject to the world price.

"It doesn't matter that it's California oil," Borenstein said. "There's a world market."

Borenstein and others said a quick and relatively painless military victory over Iraq could deflate prices, just as it did after the 1991 war. Also working to keep prices from shooting out of sight: Saudi Arabia and other oil producers have promised to increase production to compensate for any wartime shortages.

About the Writer

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.

www.upi.com By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 2/20/2003 8:01 AM

RIO DE JANEIRO, Brazil, Feb. 20 (UPI) -- Latin American stocks were mixed in light trade this week, as the potential war in Iraq weighed on investors and domestic news did little to prompt action.

Brazil's central bank on Wednesday hiked its Selic interest rate to 26.5 percent from 25.5 percent, a move widely forecast by analysts.

It was the fifth hike since October as officials try to dampen inflation sparked by a currency that shed 35 percent of its value last year.

"The interest-rate move from the central bank was expected. What was a surprise was the increase in the reserve requirements from 45 (percent) to 60 percent," said Carlos Firetti, director of BBV Corretora in Sao Paulo.

That extra move to halt inflation and shore up the local currency -- the forcing of banks to deposit more cash into the central bank -- is seen by local economists as a positive, extra step and one that further indicates the government's appetite for austerity.

But Brazilian banking stocks dived after the announcement, with investors fretting that profits may sink 5 percent or more this year as banks have less money to invest.

Bradesco -- Brazil's largest private bank -- shed 4.3 percent, while the Itau bank finished 3.47 percent off.

But Firetti and other analysts agree that the effect of the rate hike and reserve requirements on Latin America's biggest economy will be short-lived, with the potential for conflict in the Middle East continuing to drive markets.

"It is all Iraq. The main catalyst for the (Brazilian) market will continue to be the international markets," Firetti said. "Most days now the Bovespa is trading close to the Dow and Nasdaq. That is going to continue."

And it will do so in the rest of Latin America as well, with the possible exception of Venezuela, where internal troubles are hefty enough to keep investors looking inward.

Meanwhile in Mexico -- Latin America's market most closely aligned with Wall Street -- a rash of earnings reports is receiving attention, though Iraq is dominant.

On Wednesday, Bear Stearns raised Mexican equities to "market weight" from "underweight."

The investment bank said in a report that the local market had lost enough in the past two months that bargain hunters should be moving in to buy cheap stocks.

But Bear Stearns said it didn't necessarily see any "catalyst for relative strength" apart from a turnaround in the United States.

As for the markets, Brazil's Bovespa stock index finished last Thursday down 3.8 percent at 10,107 as worries about a potential war in Iraq gave investors fright. Airplane manufacturer Embraer sunk 12.3 percent after it said its delivery projections for this year and 2004 would be substantially lower. Oil giant Petrobras lost 1.7 percent as investors fretted over its future should war break out in Iraq.

On Friday, the Bovespa ticked down 0.3 percent to 10,080 as investors were sidelined on Mideast worries. Embraer lost an additional 5.6 percent. Varig airlines gained more than 7 percent after word that talks for a merger with another domestic airline were going well.

Monday saw the Bovespa gain 1 percent to 10,188 as investors cheered the government's decision to increase utility rates. Eletrobras added 2.4 percent. Fixed-line phone company Telemar gained 1.4 percent.

The Bovespa gained 2.6 percent Tuesday to 10,450 as traders tracked Wall Street. Investors were also cheered by the thought that the central bank will hike interest rates the next day. Telemar gained more than 4 percent.

On Wednesday the Bovespa shed 1.89 percent to end at 10,252. Banking issues took a beating on the new reserve requirement. Elsewhere, long-distance carrier Embratel lost 3.8 percent, while Telemar shed 2.9 percent.

In Mexico, the IPC stock index ended last Thursday up 0.5 percent at 5,791. America Movil, Latin America's largest cellular company, gained 0.6 percent in heavy trade. Broadcaster TV Azteca rose 3.3 percent. On Friday the index lost 0.3 percent to 5,774 in quiet trade. TV Azteca lost 1.8 percent after its previous gain.

On Monday the IPC gained 1 percent to 5,830. America Movil added 1.7 percent, while TV Azteca rose 2.5 percent. Tuesday saw a gain of 0.9 percent to 5,880 for the index. America Movil added 1.8 percent.

Wednesday brought a loss of 0.38 percent to 5,857 for the IPC. America Movil gained 1.24 percent in heavy trade, BBVA bank lost 1.2 percent, and Wal-Mart de Mexico shed 1.09 percent.

Argentina's Merval index closed flat at 582.5 Thursday. Banco Frances lost 2.7 percent on profit taking after several sessions of gains. But energy company Perez Companc gained 1.8 percent. On Friday the Merval lost 1.9 percent to end at 580.5. Telecom Argentina shed 9.7 percent as worries about its debt burden mounted.

Monday brought a flat close at 580. Natural gas company TGS was one of the few movers, gaining 2.3 percent. The index gained 0.8 percent to 585 Tuesday. Telecom Argentina rose 3.7 percent as bargain hunters moved in.

Wednesday saw the index lose 0.76 percent to 580.5 in sluggish trade.

In Chile the IPSA index ended 0.5 percent down at 1,013 on Thursday. Friday brought a loss to 1,011. Telecom CTC Chile shed nearly 1 percent.

The IPSA ticked up to 1,012 Monday. On Tuesday, the index fell 0.2 percent to 1,010. Utility Enersis lost 3.3 percent. Wednesday saw the index lose to 1,004 in uneventful trade.

Venezuela's IBC index gained 1.1 percent to 8,022 Thursday. CANTV, the national telephone company which comprises 40 percent of the index, lost 2.6 percent. Friday saw a small gain to 8,080 for the index.

On Monday the index gained 1.4 percent to 8,195. Tuesday saw a close at 8,212. The IBC lost 0.89 percent to 8,140 Wednesday.

www.miami.com By Andres Oppenheimer Posted on Thu, Feb. 20, 2003

SAO PAULO - Six weeks after taking office, Brazil's leftist president Luiz Inácio Lula da Silva is doing better than many had anticipated: His popularity rating is higher than ever, the media treat him like a rock star, and many people here see him as an upcoming regional leader.

But will Brazil's political euphoria last? Or will South America's most powerful country soon lapse into a crisis of unfulfilled expectations?

Judging from what I heard here, da Silva's honeymoon will last longer than the usual 100 days. But there are several factors -- including a possible U.S. war against Iraq, and growing unemployment rates -- that may soon take some of the glitz away from Latin America's first elected leftist government in decades.

First, let me give you the facts. The percentage of Brazilians who believe da Silva is doing a good job has risen to a whopping 84 percent, higher than that of any recent Brazilian president, according to separate surveys by the Vox Populi and CNT-Sensus polling firms. By comparison, da Silva was elected with 61 percent of the vote.

So far, da Silva has successfully allayed fears that he would scare off investors with his radical rhetoric of the not-so-distant past. A lifelong socialist who founded the Workers Party 22 years ago, da Silva until recently called for severing ties with international financial institutions, and not paying Brazil's foreign debts.

Perhaps seeing what has happened in neighboring Venezuela, where President Hugo Chávez's incendiary speeches against the ''oligarchy'' have triggered massive capital flight and created 2.5 million new poor, da Silva is following pretty orthodox economic policies. At the same time, he has launched a nationwide campaign to eliminate hunger, and says he is pursuing a more independent and assertive foreign policy.

''He has done very well,'' U.S. Ambassador Donna Hrinak told me in an interview, reflecting the view of most foreign diplomats in Brazil.

EFFECTS OF A WAR

On the downside, a war against Iraq could hurt Brazil, economically and politically.

Brazil still imports 15 percent of its oil, meaning that a rise in oil prices could complicate the country's efforts to

meet its foreign debt payments. In addition, a war-linked world recession would affect Brazil's exports, and further dry up foreign loans and investments. In times of uncertainty, lenders tend to stay away from emerging markets.

Politically, there is a danger of a rift with the Bush administration over a possible war with Iraq. Despite a successful first meeting in Washington with President Bush last year, da Silva -- who is as prone to shoot from the hip as his U.S. counterpart -- has already angered U.S. officials by stating that Bush is ''obsessed'' with Iraq.

On the domestic front, da Silva is facing growing opposition from the radical wing of his party. Still, he seems to be gaining more support in Congress from centrist parties than he may lose in the event of a break with the Workers Party's ultra-leftist wing.

''The fight with the radicals is excellent for Lula,'' said Fatima P. Jordao, a sociologist and consultant to several polling firms. ``It places him at the center of the political spectrum.''

POSSIBLE BACKLASH

Da Silva's biggest problem may be a possible backlash from unfulfilled expectations. While 78 percent of Brazilians expect unemployment to drop, according to the Vox Populi poll, economists say unemployment levels may actually rise. Many jobless people who had given up hope are now starting to seek work, buoyed by the country's upbeat mood. That would drive up Brazil's 12 percent unemployment rate because, like many other countries, Brazil measures its unemployment rate by the number of people who seek work.

Ambassador Hrinak is optimistic that da Silva will do well. The success or failure of the da Silva presidency will have major repercussions in all of Latin America, she says.

''If he can combine sound economic management, with effective attention to social programs, this sends a powerful message to the hemisphere,'' she said. ``And if he can't do it, then what does it say to other progressive parties about waiting 22 years to come to power? Will they actually do that?''

I agree. One of the best things that could happen to Latin America would be if other leftist parties emulated da Silva's model, and gave up violence and totalitarian utopias. Conversely, one of the worst scenarios would be if da Silva fails, and groups such as Colombia's leftist guerrillas or the radical coca growers in Bolivia use Brazil's example to argue that fighting for social justice in the political arena is a waste of time.

So let's hope that da Silva continues on his present course. I'm not terribly optimistic that he will manage to maintain his current popularity, but I'm convinced that it's in everybody's interest that he does.