asia.reuters.com Fri February 21, 2003 10:14 AM ET By Silene Ramirez

CARACAS, Venezuela (Reuters) - At Isabel's beauty salon in downtown Caracas you can get more than a bikini wax, manicure or hair cut. You can now also dabble in the country's burgeoning black market.

Wedged next to a shuttered foreign currency exchange house, Isabel's is one of the newest additions to Venezuela's not-so-secret underworld of dollar traders looking to make quick cash off newly imposed draconian currency controls.

Embattled President Hugo Chavez unceremoniously shut currency markets last month, starving the nation of precious dollars in a bid to shield government foreign reserves from a swelling economic crisis.

"Hey mister, you looking for dollars?" one beauty salon worker, clips and brushes peeking from her uniform pockets, whispers to Jose Dos Santos, who is just outside.

Breaking his worried gaze from the darkened windows of the currency exchange next door, Dos Santos blurts out a confused but determined, "Yes, miss. I am."

"I'm leaving tomorrow to live in Portugal and what am I going to do with bolivars over there?" he said.

Dos Santos, his graying chest hair peeking out of the top of his light blue dress shirt, might as well be the poster-boy for Venezuela's disillusioned immigrant population. He arrived here on the eve of the country's oil boom in the 1960s and opened a small grocery store.

"I've sold everything, my family has sold everything, we're leaving this country," he explained.

ECONOMIC MELTDOWN

The currency controls, which value the crippled bolivar currency at an artificially strong 1,600 per U.S. greenback, are among the latest attempts by Chavez to stem fallout from a devastating economic crisis in the world's No. 5 oil exporter.

Latin America's fourth-largest economy shrank a whopping 8.9 percent last year, and striking oil workers bent on choking off the government's financial lifeline -- petroleum revenues -- will likely exacerbate the contraction this year.

The two-month shutdown was meant to buckle the populist president and force him to call early elections. But Chavez, who says he has the support of Venezuela's poor majority, seems dead-set on sticking around.

After surviving an April coup, Chavez jokes he will stay in power until 2021 -- well past the remaining three years of his elected term. Street clashes between allies and enemies of the charismatic president have left seven dead and scores injured since December.

Beyond threatening a government takeover of factories, Chavez has announced price controls that had forced retailers like Dos Santos to sell everything from tomatoes to kitchen soap at government-set levels.

So, Dos Santos wants out. And there are plenty of places like Isabel's willing to help him.

About an hour after his chat with the beauty parlor attendant, a casually dressed gentleman arrived at the salon. After exchanging a few whispers with the hairdresser, the gentleman asked "How much you want to buy?"

"I bought about $2,000 at 2,200 bolivars a dollar," Dos Santos said after the transaction. It valued the bolivar nearly 40 percent below the government's official rate.

NEXT ARGENTINA?

The head of the government's new currency control board, retired army Capt. Edgar Hernandez, recently admitted the black market is "difficult to avoid and difficult to control."

Some officials have said that the government could introduce a dual control system that would permit a parallel market orientated toward industry. But Chavez has refused.

"Leave a dollar free, floating around so the conspirators can slip in there? The dollar's value will rise and undermine the other controls. No, this must be an integrated system," Chavez said during his weekly Sunday television broadcast.

"Conspirators" against Chavez's self-styled "revolution" are already at work -- at least in the currency markets. Some are exploring the Internet as an option, eyeing schemes in countries like Argentina, which introduced currency controls at the start of 2002 after a devastating debt meltdown.

One idea would copy the model of an Argentine online music retailer, allowing paying patrons access to a virtual plaza for buying dollars. Venezuela has already adopted a lower-tech Argentine invention -- the so-called "Arbolito," or the currency seller who hawks his wares on street corners.

"We sell and buy gold," shouts out a middle-aged man in a Caracas plaza. With a sheepish look, he furtively hands over a scrap of paper to a potential client that offers to trade in dollars.

"How much?" asks the client who is looking to sell $500.

The question hangs in the air for a second until the seller leads his customer to a hidden location in the center of Caracas, where gold traders operate a few yards from the National Assembly.

So begins the trade.

"She wants to sell $500, how much?"

"1,700 bolivars," answers the trader.

The client respond quickly: "So low? The newspapers tout the price at 2,200 to 2,500 (bolivars)."

The customer leaves looking for a better price. She later sold the dollars to a friend for 2,000 bolivars to the dollar.

She should have gone to Isabel's.

www.online.ie Business & Finance 21 Feb 2003

Brent crude oil continued to gain in afternoon trade after US Defence Secretary Donald Rumsfeld said US forces are ready to attack Iraq. At 1430, Brent was trading up 48c at USD32.04.

Brent crude has gained around USD9.00 in the three months since mid-November as investors priced in the risk that any war with Iraq could jeopardise supplies from the country and possibly the wider region.

Analysts said that the sharply higher move this morning followed a slump in late trade yesterday, prompted by a collapse in oil products after recent 23 year highs on NYMEX heating oil.

Observers also noted that yesterday's slump was also prompted by weekly inventory data from the US Department of Energy which revealed a surprise rise in crude levels, lifting stocks from recent 28 year lows.

One dealer said that the market would not have recovered sufficiently from the Venezuelan stoppage before Iraq became a serious issue.

However, the fact that Venezuela is partially back up is much better than the fears a few weeks ago that both Venezuela and Iraq would be off line together, he added.

reuters.com Fri February 21, 2003 09:46 AM ET By Neil Chatterjee

LONDON (Reuters) - World oil prices now near two-year highs are set to slide 30 percent in the second half of the year after any U.S.-led war on Iraq, a Reuters poll found.

The survey of 14 oil analysts and consultants, undertaken on February 10-21, projects prices dropping nearly $10 to $22.46 a barrel in the second half of 2003, from $32 a barrel now.

It forecasts $27.53 a barrel for the first half of the year and gives a 2003 average of $24.30, down from $25.03 in 2002. Brent so far this year has averaged $30.98, forcing many analysts to revise forecasts higher.

Prices are expected to slump in the second half after being boosted in recent months by a strike in Venezuela and fears of an attack on Baghdad.

"Once war is over, it will come down pretty sharpish, and Venezuela will be less of a factor," said Matthew Parry of the Economist Intelligence Unit.

Analysts expect prices to slide after a short war in the next few months, a projection which, if borne out, would provide a welcome stimulus to a world economy struggling for growth as energy costs stay high.

"Most people are working on the basis of a big slide later on -- the economic impact will be beneficial," said John Waterlow of consultants Wood Mackenzie.

"The economy needs something to give it a boost -- the simplest way is an oil price drop."

Finance ministers from the Group of Seven wealthiest nations met in Paris on Friday to discuss what can be done to stop the rot in the global economy, following a poor set of U.S. economic data on Thursday.

Economists estimate every $10-a-barrel rise in oil over a year cuts world growth by 0.5 percentage points.

Oil prices have spiraled on worries that conflict with Iraq could spread in the Middle East, which supplies around one third of the world's oil.

First quarter prices have also been boosted by the prolonged strike in Venezuela, which has slashed oil shipments from the world's fifth biggest exporter.

Analysts have upped their price forecasts for the year by about $1.50 a barrel, over six percent, in the past month as the 11-week-old strike helped reduce U.S. crude inventories to 27-year lows.

"The Venezuela strike has tightened stocks considerably, and there'll be a need for stock building in the second quarter," said analyst Lawrence Eagles of brokers GNI-Man.

The U.S. Energy Information Administration said this month that it expected U.S. crude oil to stay above $30 a barrel for the rest of the year, though most analysts see oversupply by the fourth quarter.

OPEC COMPLIANCE?

Oil demand growth will be too sluggish to cope with the increased supply once Venezuelan production recovers and Iraqi output resumes after a war, they said, while non-OPEC countries' output is also on the up.

Differences in second half price forecasts depended on the extent to which oil cartel OPEC could control its production limits.

"We think there will be a significant fall off because of new capacity from the likes of Algeria and Nigeria, which will put increasing strain on OPEC cohesion," said Richard Savage of Bank of America.

"We think it will be higher for longer -- our view is that OPEC can control prices between $22-$28 in the medium term," said an analyst at another bank, which revised its figures upwards this week.

www.nationalreview.com February 21, 2003, 9:45 a.m. Basic economics. By Peter Ferrara

he American Left and its international comrades are claiming that the impending war with Iraq is not about defanging terrorism. Rather, they say, it's all about oil. They argue that President Bush is really motivated by a desire to seize Iraqi oil for American oil companies (and gas-guzzling American SUV drivers). "No blood for oil!" is their rallying cry.

No basis has ever been cited for this accusation — perhaps because the accusation makes no sense, as a matter of basic economics.

Unless the Iraqis drill and sell their oil, it is worthless to them. They must sell it somewhere on the world oil market to get any gain out of it.

But oil is a fungible commodity, so once they sell it — anywhere — it becomes part of the world oil supply. That increased supply in turn reduces the world oil price, until some equilibrium is reached between supply and demand.

From that point on, it doesn't matter to anyone where the Iraqi oil actually goes. If it goes to Japan, the Japanese will buy less oil from Venezuela and Nigeria. More oil from those countries would then go to the U.S. Indeed, as the oil supply sloshes around on world markets, no one really cares — or keeps track of — where it originated, so long as it meets quality standards. For all anybody knows or cares, every drop of Iraqi oil could end up at southern California gas stations.

Moreover, just who do the "war protesters" think Iraq would sell its oil to, in any event? The Western oil companies, primarily American companies, would be the primary purchasers of Iraqi oil, whether they buy it directly or circuitously through various middlemen. Who else is going to refine, distribute, and sell the stuff to the huge Western (and particularly American) consumer market? Have you ever seen or heard of any Iraqi gas stations?

In short, the oil companies already ultimately get the oil now. They don't need Bush to go to war to get it for them.

The proportion of the world oil supply currently consumed by America will continue to get here one way or another through world oil markets. If oil producers tried to cut off the huge American consumer market, there would effectively be a huge drop in the total world demand for their oil — and, consequently, a huge reduction in the world price.

Who else is going to consume world oil output except American consumers (and those gas-guzzling SUVs)? The truth is that Middle Eastern oil producers — including Iraq — need America and its consumers a lot more than we need them. We can always figure out other ways of powering our transportation and warming our homes, technologically. But has the Middle East ever figured out any way of getting dollars other than pumping and selling oil?

That is why an oil boycott is ultimately no real threat either. Again, Iraq and other oil producers must sell the oil somewhere on the world market to get anything out of it. And once they do, they add to the world oil supply and reduce the price to approach a new supply/demand equilibrium. The world oil market then distributes the available oil supply to wherever the demand is — which means America and the rest of the West.

Indeed, it is the West that has been restraining Iraqi oil supply since the Gulf War, with various restrictions on Iraqi oil sales. And it has been the Iraqis who have been pleading to open up their production and sales. An Iraqi oil boycott is not even remotely an issue today.

So the contention that the impending war is really about oil is senseless as well as being baseless. Which leaves us with this question: Why is the American Left joining with its foreign comrades to defame America with this silly and transparently false accusation? Is it really all just about anti-Americanism? Is it really just rooted in a hatred of American power and an attempt to stop its exercise? Isn't it time they came clean and told the truth?

— Peter Ferrara is director of the International Center for Law and Economics in Fairfax, Va.

www.canadait.com Friday, February 21, 2003

Computer Modelling Group Ltd. Announces Third Quarter FEBRUARY 21, 2003 - CALGARY, ALBERTA--CMG completed another highly successful quarter in the three months ended December 31, 2002. In the following report on CMG's financial results the term "operational earnings" has been used to more easily allow for the comparison of ongoing results between the reporting periods. The quarterly performance table provides the reconciliation from operational earnings to reported earnings for the respective periods.

The Company recorded quarterly revenues of $3,326,769, operational earnings of $739,284 ($0.10 per share) and cash flow from operations of $897,605 ($0.12 per share) for the three months ended December 31, 2002. These results compare to revenues of $2,634,888, operational earnings of $497,522 ($.07 per share) and cash flow from operations of $560,009 ($0.08 per share) for the comparative quarter ended December 31, 2001. CMG's earnings for the quarter ended December 31, 2002 are $458,784 ($0.06 per share) compared to $497,522 ($0.07 per share) last year.

CMG reported $8,766,242 in revenues, operational earnings of $1,742,913 ($0.24 per share) and cash flow from operations of $2,086,922 ($0.29 per share) for the nine months ended December 31, 2002. These results are consistently up in all categories from revenues of $7,092,834, operational earnings of $1,020,849 ($0.14 per share) and cash flow from operations of $1,130,226 ($0.15 per share) for the nine months ended December 31, 2001. CMG's earnings for the nine months ended December 31, 2002 are $2,362,413 ($0.33 per share) compared to $1,769,992 ($0.24 per share) for the nine months ended December 31, 2001.

"CMG recorded historical high quarterly software licensing revenues of $2.7 million, which is the best evidence of how CMG's products are perceived in the market place," said Kenneth Dedeluk, President and CEO. "It would not be prudent to expect software license sales to grow at this pace quarter over quarter as this last quarter contained a significant level of perpetual license sales. CMG, however, does expect sustainable year over year revenue growth as a result of the innovative and unique solutions in both advanced processes and technological advancements that are introduced in our software products."

CMG's generated $2,678,517 in software license sales for the quarter and $6,148,460 for the nine months ended December 31, 2002, up $1.1 million from the comparable nine months last year. Of these software license revenues, $4.2 million (69 percent) was generated from annuity/maintenance licensing in the nine months ended December 31, 2002, which is an increase of 19 percent from the $3.6 million (71 percent) generated in the comparative period last year. Licensing under perpetual sales was $1.9 million (31 percent) in the nine months ended December 31, 2002 compared to $1.4 million (29 percent) last year.

Consulting and contract research revenues were $2,619,829 for the nine months ended December 31, 2002, up $0.7 million from the $1,891,083 in revenues recorded in the comparable period last year. This business segment's profits for the quarter ended December 31, 2002 were impacted by the political unrest in Venezuela as CMG had geared up for committed work assignments. The third party consultants engaged for these projects were repatriated to Canada in December, thereby reducing the cost burdens on these assignments.

CMG's history of generating strong gross profits continued in this quarter. The gross profit margin for the nine months ended December 31, 2002 was 63 percent and CMG realized a gross profit of $5.5 million, up $1.1 million from the $4.4 million recorded in the nine months ended December 31, 2001. Total cash expenses for the nine months ended December 31, 2002 of $6.6 million were up $0.9 million from the comparative period levels. This was due to both a combination of planned increases in manpower and compensation as well as variable project related third-party contract costs.

"Based upon the continued unrest in Venezuela that has restricted CMG's ability to continue with its previously contracted consulting assignments and the time required to replace this work in other regions of the world, it is anticipated that near term consulting and contract research revenues will be lower than previous quarters," said Kenneth Dedeluk. "However, the economic conditions supporting a strong oil and gas industry activity level continue and it is anticipated that all business segments will provide strong revenues over the long term."

Computer Modelling Group Ltd. is a computer software technology and consulting company serving the oil and gas industry. Clients apply CMG's computer software technology to increase recovery from existing and future reserves. The Company, recognized by oil and gas companies worldwide as a leading developer of reservoir modelling software, has sales and technical support services based in Calgary, Houston, Beijing, London, and Caracas. CMG is the leading supplier of advanced processes reservoir modelling software in the world with a blue chip client base of international oil companies and technology centres in 37 countries. CMG's common shares are listed on the TSX Venture Exchange and trade under the symbol CPU. For more information, please visit CMG's web site at www.cmgl.ca.

Statements in this release that are forward-looking involve risks and uncertainties, including without limitation, continued acceptance of the Company's products, increased levels of competition for the Company and new products and technological changes. The results or events predicted in these statements may differ materially from actual results or events. For more information regarding potential risks, please see the "Business Risks" section of the Company's most recent Annual Report and Annual Information Form filed with Canadian regulatory authorities.

-30-

FOR FURTHER INFORMATION PLEASE CONTACT:

COMPUTER MODELLING GROUP LTD. Kenneth M. Dedeluk President & CEO (403) 531-1300 Email: ken.dedeluk@cmgl.ca

or

COMPUTER MODELLING GROUP LTD. Janet Taylor, C.A. Vice-President, Finance & CFO (403) 531-1300 Email: janet.taylor@cmgl.ca

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

« View Computer Modelling Group Profile