Posted: Tuesday, February 25, 2003 By: Dawn Gable

Date: Mon, 24 Feb 2003 04:06:58 +0000 From: Dawn Gable morning_ucsc@hotmail.com To: Editor@VHeadline.com Subject: Land of Smiles?

Dear Editor: To all those who don't have a grasp on Venezuelan history and who are being mislead by Gustavo Coronel and others like him, here is a piece I originally wrote for another purpose. You will notice many recurring themes such as coups, CTV strikes, capital flight, corruption, brutal military dictatorships, nationalization of industry, riots, etc. etc.

Brief History of Venezuelan Politics author: Dawn Gable - Bolivarian Fund

Pre-Democracy

Venezuela was emancipated from Spanish rule in 1811. Credit for the liberation is given chiefly to the Caracas-born Simon Bolivar whose vision reached beyond Venezuela to Gran Colombia which included present-day Bolivia, Columbia, Panama, Peru and Ecuador.

Gran Colombia fell quickly apart due to power struggles and bickering. Bolivar was in the end kicked out of Venezuela ... he left saying that Venezuela was ungovernable and that his life had been wasted "sewing the sea."

Military and politics were closely tied for nearly the first hundred years: 22 of the first 30 presidents were generals. This was a time of chronic civil war, approximately 50 coup d'etats, and 25 constitutions.

Oil was discovered in the early 1900s during the brutal 27-year reign of Juan Vincente Gomez.

After Gomez' death the oppressed masses burst with newfound freedom. Political parties sprang up like wild flowers but none were functionally structured. Nearly a decade passed before Accion Democratica emerged via a coup as an organized force and Romulo Betancourt was appointed interim President and the AD held the Palace for a few years. Among other things the party called for tax hikes, education and health reforms, higher royalties from oil industry and a civilian militia. A coup d'etat in late 1948 by dictator Marcos Perez Jimenez ended these efforts.

Perez Jimenez is remembered for his horrific cruelty, blatant thievery, and extreme anti-communism. This last trait earned him a decoration of high honor from Eisenhower. In his ten years, he focused nearly exclusively on developing Caracas at the expense of the countryside causing massive migrations into the "ranchos" (slums) that surround the capital. After he was finally run out of the country, loaded down with gigantic sums of money, the AD party took up where they left off. Literally. The coups benefactor was again the appointed interim president Romulo Betancourt. Somehow, despite Betancourt's avenues to the Palace, he is frequently misnamed "the father of democracy."

1960's AD decade

In the early sixties the country as a whole enjoyed a healthy period of economic growth. However, Venezuela's characteristic gross inequity showed little sign of reprieve for the vast majority. While, in 1965, the GDP rate of increase was 8%, at least 30% of the 1.5 million residents of Caracas lived in the "ranchos" and 40% of all Caracas habitations had no water. According to a UN report, Caracas was the most expensive city in the world at that time.

The AD took a strong stand against communism and banned the Venezuelan Communist Party (PCV) and the Movement of the Revolutionary Left (MIR) provoking leftist guerilla activity ... typical of Latin America in this decade ... by a group called the Armed Forces of National Liberation (FALN). In the short run at least, the FALN were counter-productive in that they made the AD appear centrist and thus allowed them to pick up support on the right. There were various military conspiracies, one coup attempt and at least one Presidential assassination attempt.

The AD carried out a land reform and distributed unproductive private and public lands to more than 166,000 persons. Unfortunately, it was not accompanied by loans or any other support and most of the new owners sold off their land quickly. OPEC was formed and Venezuelan Petroleum Corporation (CVP) was established to oversee the gradual nationalization of the oil industry while industry was protected from foreign competition, and even subsidized through the Venezuelan Development Corporation (CVF). Unionized labor was welcomed and money was allotted to social programs.

A glimpse of democracy

March 11, 1963 ... a milestone was reached in Venezuelan history. For the first time an elected President took office peacefully.

1970s

Rule was barely won by the more conservative COPEI (Christian Democratic Party) in 1970 largely due to a split in the AD party. Caldera promptly reopened relations with the Soviet Union and other European socialist countries as well as with some South American countries under military rule. He legalized the Communist Party, bestowed amnesty on the guerillas and continued carrying out many of the AD reforms. Tax on petro-companies reached 70% in 1971, and the Hydrocarbons Reversion Law was passed handing all oil companies back to the State when their concessions ran out. (These are the same people who today are crying about government intervention in the industry ... I guess it's only OK when they are in power).

1973 Presidential elections introduced the current Vice President, Jose Vincente Rangel ... then candidate of the Movement Toward Socialism (MAS) party which advocated socialist democracy and had split from the Moscow-line PCV.  However, using populist campaigning techniques, AD candidate Carlos Andres Perez took the sash and the two-party dominance of AD and COPEI was codified.

International oil prices had set the nation on a giant spending spree ... wages were increased, price controls were instated, imports were subsidized and $350 million worth of farming loans were forgiven.

Iron ore was nationalized in 1973

In 1976, PDVSA was created to oversee the newly fully nationalized oil industry.  The culture of "something for nothing," that has plagued Venezuela ever since, was born. Oil would pay for everything, and the government was the paternal, benevolent disperser of abundant riches ... everyone scrambled to get more than their share of the money and corruption abounded.

Venezuela was taking in so much money from oil revenues that it started granting international loans to oil-importing Latin American countries through the Venezuelan Investment Fund (FIV). It also loaned out money through the Inter-American Development Bank (IADB). Venezuela took the lead role among Latin American countries and promoted southern hemispheric independence from US hegemony. This, along with tensions concerning the OPEC oil embargo, the Panama canal, the US involvement in Salvador Allende's overthrow in Chile tainted Venezuela's relationship with the United States.

In 1976, however, oil revenues leveled-off and began to decline in 1978. Careless spending, capital flight, incompetence, graft and corruption quickly put the nation in debt. Perez had in his 5-year term spent more money in real terms than all the other governments to date combined! Voters decided by a slim margin to switch back to COPEI.

1980s collapse

Oil prices recovered considerably in 1980. President Herrera lifted price controls and raised wages and inflation rose too. The new boss, just like the old boss, spent like mad. Between 1979 and 1982 he managed to rack up a $8 billion deficit. Real GDP declined from the past 4 year's average of 6.1% to 1.2% between 1979 and 1983. Unemployment was plus or minus 20% throughout the 80s.

Oil prices settled lower again in 1981 and the country was in debt some $32 billion by 1983. A frenzy of capital flight occurred in anticipation of the impending devaluation of the Bolivar.

PDVSA leadership was politicized and billions of dollars of its reserves were expropriated to pay a bit of the debt ... price controls were again set.

The labor union (CTV) mounted various strikes bringing a mid-80s total of $2.2 million work hours lost since 1960. In 1983 the nation was handed back to AD in shambles and it continued to deteriorate.

In 1989 Perez was reelected at the height of discontent ... he immediately began inflicting an IMF-sponsored neo-liberal program (El Paquete) on the country. Privatization of State-owned industry, elimination of subsidies, devaluation of the currency hit the public hard and they screamed out in protest in the form of labor strikes, student strikes, and violent urban riots.

El Caracazo

A gas price hike was the last straw, and on 27 February, 1989, Caracas and other Venezuelan cities erupted. Spontaneously, the masses struck out against bus drivers who had unfairly raised their fares and shop clerks who were hoarding subsidized inventory for later sales. Joining them for 5 days of chaos were the destitute from the slums in the hills that surround Caracas who converged on the valley city looting stores, breaking windows, stealing cars, and generally wreaking havoc.

• The uprising was finally ended by a vicious massacre of some 2000 persons by the police and military.

1990s

The tone had been set for the next decade. The streets of the capital had become the arena for social discourse. Not only were there demonstrations, protests, and strikes by every imaginable organized group at one time or another, but also different factions of the State, such as the police and military cells began airing their grievances publicly. This practice continues today.

February 4, 1992 (then) Lieutenant Colonel Hugo Chavez Frias led an unsuccessful coup attempt. He was captured and incarcerated. But first he was allowed to address the nation on the television. During his address he admitted defeat "por ahora" (for now) and this statement became the mantra of the movement that would eventually sweep him into the Presidency.

Public displays of discontent became the norm. Choruses of banging of pots and pans out of windows were heard regularly. Violence often sprang out of protests. An attempt was made on President Carlos Andres Perez' life and the Bolivar and the Venezuelan stock market plummeted. In November there was another failed coup attempt and in December COPEI gained several governorships.

Mid-1993 Perez was accused by Congress of corruption and impeached. New elections were held in December. 40% abstained from voting and Rafael Caldera took the sash as an independent, breaking the two-party stranglehold. Caldera formed a following named Convergencia which included MAS (Movement Toward Socialism) together with La Causa R. These two peripheral leftist parties took in more votes than the two traditional parties AD and COPEI.

Chavez was released from prison in March 1994.

Because Congress was still held by the old parties, there was a stalemate and little change occurred in the next 5 years. La Causa R split with its larger faction becoming PPT which fully backed Chavez in 1998. (And still does)

At first loathsome of participating in the electoral process ... which Chavez considered to be a corrupt charade at the time... by 1997, he began to warm to the idea of running for office. He launched the transformation of his MBR200 Bolivarian Revolutionary Movement into a political organization.

By July 1998, he had formed an official political organization which he named MVR, Movimiento Quinta Republica, or Fifth Republic Movement which incorporated PPT and La Causa R, many smaller parties, and his own followers ... he was at this time receiving 45% of the votes in the polls.

Why MVR?  Venezuela had had 4 Republics in its history. Two formed in 1811 and 1813 during the wars of independence, the third encompassed Gran Columbia in 1819 and the fourth was founded after the breakup in 1830.

• Chavez describes the 4th Republic as being built by a class of oligarchs and bankers, on the bones of Bolivar and Sucre.

Chavez clearly felt the need for a new beginning. The MVR declaration states:

"Its Mission is to secure the well-being of the national community, to satisfy the individual and collective aspirations of the Venezuelan people, and to guarantee a state of optimum prosperity for the fatherland."

AD and COPEI scrambled to pick up candidates and promptly drop them and choose another when the polls showed little hope of their success. In the end they both backed the same candidate who brought in 39% of the vote among 4 candidates. Chavez walked away with a cool 56%.

February 2, 1999: Chavez was sworn in as the President of Venezuela.

His first Presidential address announced a national referendum would ask the people if the Constitution should be re-written for the 26th time. In April, 88% of voters answered a resounding YES. Elections were held for a Constituent Assembly in July. 119 out of 131 seats were won by Chavez supporters receiving a collective total of 91% of the vote.

The new constitution was approved by 71% of voters on 15 December:

• It radically restructured the judicial system to one much like that of the United States.
• It created a unicameral National Assembly.
• It bestowed rights on indigenous peoples.

The Constitution also changed the name of the country to: La Republica Bolivariana de Venezuela

Hugo Chavez Frias was to become the first elected President of the new Republic and of the new millennium. Along with candidates for the new National Assembly, he subjected himself to the polls after little more than a year in office to be sure the public had stayed with him through the profound new changes.

They had.

The above is a summary of information found in the following publications:

Inside South America   John Gunther 1967 (amazon.com) Venezuela a country study  Richard A. Haggarty, 1993. (amazon.com) The Street is My Home   Patricia C. Marquez, 1999 (amazon.com) In the Shadow of the Liberator  Richard Gott 2000 (amazon.com) Reinventing Legitimacy Eds. Damarys Canache & Michael R Kulisheck 1998 (amazon.com)

www.chattanoogan.com Irby Park posted February 25, 2003

Four things impacting interest rates have been perfect for low rates for the past nine years, but major changes could put upward pressure on rates in the next year to year and a half, said John Garrett, UTC Foundation professor of economics.

Speaking at the monthly luncheon of the Mortgage Bankers Association (MBA) of Chattanooga at The Loft, he cited the vital role education plays in economic development and then turned to a discussion of four things that impact interest rates.

The four, he explained, are monetary policy determined by The Fed and Chairman Alan Greenspan, fiscal policy of the government including what the government is spending and how much they’re borrowing, inflation which he described as “a real wild card” and the international value of the dollar.

“The economy doesn’t like it when the federal government goes from a big deficit to a big surplus,” the economics professor stated. With the government depressing the economy, he continued, The Fed kept lowering interest rates to stimulate the economy.

At the same time, the dollar was overvalued and attracted lots of overseas capital. The inflation rate dropped to 0.1 percent and was trending downward. With interest rates low and the economy prosperous, “it can’t get any better than this,” he said.

But in the last few months, the federal government has gone from a $200 billion-plus surplus to a $307 billion deficit in the fiscal year ending in October. This, he said, will “definitely exert upward pressure on interest rates” and push the economy up, stimulating inflation.

But the impact of these factors, he added, will likely be a year to a year and a half away. While looking at some of the things that can determine trends, he emphasized that it is “impossible to predict interest rates. Anytime you say it is going to be higher or lower next week, you have exactly a 50-50 chance” of being right.

However, looking at the various factors, it is possible to get a good idea of the long-term trends over the next few years.

While discussing government and fiscal factors impacting the economy, he said, “Lots of people have said lots of things about economic development in Chattanooga. I’ve watched them hire out-of-town consultants to do study after study and spend good money that really doesn’t return a lot.”

He said there is an abundance of economic literature that can provide help in planning economic development. One thing that stands out as a contributor to economic development is education.

“You get education right and your economic development comes automatically,” he said. He emphasized the need to get higher education right, and “not only higher education, but graduate education.”

Chattanooga, he said, is one of 256 recognized statistical metropolitan areas the federal government keeps track of and Chattanooga is in the bottom 2 percent in the number of college places available.

The labor force, he added, is in the bottom 10 percent in the number of college graduates in the local work force. UTC, he continued, does a fine job, but Chattanooga is not growing because the state is not putting the money into education here as much as in other areas of the state.

Chattanooga leaders, he said, don’t seem to recognize the relationship between education and economic development.

To produce a college graduate, he stated, costs $40,000 in state money. That graduate, over a lifetime, will realize increased earnings of about $3 million.

In discussing economic trends, inflation and interest rates, he described inflation and the value of the dollar as “wild cards” in determining interest rates.

Every year since 1983, he said, this country has built more international debt. The world loaned us trillions of dollars because the dollar was considered safe and “we pay back our debts with interest.” Foreign countries bought bonds and other U.S. assets.

However, it the dollar looks like it is getting weak, investors will move their investments to overseas markets. Money will flow out and the value of the dollar will drop.

This country for the past year has a $500 billion trade deficit. “Every year we set a new record,” he added. No one has ever had a trade deficit as big as the U.S. has had in the past four years.

Inflation couldn’t be any better than the present 0.1 percent, but gas prices are going up. Part of the gas price rise is blamed on problems in Venezuela, he said, but it is nothing compared to what will happen in case of war.

He said he heard one economist “guesstimate” that without a war the federal deficit could hit $450 billion, pushing the economy up and prompting The Fed to raise interest rates to combat inflation.

But he emphasized that there are a lot of factors that impact the economy and it’s impossible to predict what is going to happen with any accuracy.

www.pal-item.com Tuesday, February 25, 2003

Wholesale natural gas prices jumped nearly 40 percent and heating oil costs hit their highest level on record Monday, developments that point to increases in already bloated home-heating bills.

"I've never seen it this high," veteran oil dealer Blake Warfield of Richmond said. "It's been moving up little by little every day," Warfield said.

"And the cold weather compounds the problem."

Residential heating oil prices are up 50 percent from a year ago, when the average winter heating oil bill was $642, the U.S. Department of Energy says. Bills might approach $1,000 this winter.

Warfield Oil was charging $1.49 a gallon for oil this morning, the same as two weeks ago, but Warfield said he expects to increase prices this week to keep up with soaring wholesale costs.

A year ago heating oil was selling for $1.20 to $1.25 per gallon. In January 2001, oil was selling for 98.9 cents per gallon here.

Although natural gas prices are not as easy to track, consumers were reporting similar jumps before Monday's rise. The average household heating bill for natural gas users was $596 last winter.

"Higher natural gas and heating oil prices will cut more into consumer budgets," says Jim Williams of WTRG Economics, an energy consultant. "If you are old enough to remember, it is time to bring out that sweater that President Carter used to wear while encouraging us to turn our thermostats down."

In futures trading in New York, natural gas prices rose from $6.61 per million BTU to $9.14, the highest in more than two years. Heating oil hit $1.15 a gallon, surpassing the previous record high set in December 1979, before ending the day slightly lower.

Futures prices usually have an impact on retail prices later, and not necessarily by the same magnitude, but point to the direction of prices.

More than half of U.S. homes are heated with natural gas, while 8 percent are warmed with heating oil. Prices for electricity, which heats 30 percent of U.S. homes, also might rise, because natural gas and oil are among fuels used to produce it.

Richmond Power & Light fires its generators with coal.

The increased heating costs, which in part reflect higher demand during an especially cold winter in many parts of the country, act as a drag on the economy.

"We're in a weak recovery as it is, and this is just one more headwind in an economy that is facing many headwinds," says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.

Forecasts for another mass of cold air to sweep through parts of the East Coast and the Midwest later this week led traders Monday to bid up prices. Energy prices were already on the rise because of a strike in Venezuela that has drained oil off the international market and concerns that a war with Iraq would choke off oil supplies.

In other energy news:

• Crude oil prices rose to $36.48 a barrel Monday, up 90 cents from Friday's close.
• After rising for 10 weeks, the average price of a gallon of gasoline in the United States last week was flat at $1.66, the highest price since June 2001.

Heating help Residents who fit income guidelines can apply at Community Action for heating assistance. Proof of income and utility bills are needed. Yearly maximum income for a household:

• One person: $11,075
• Two people: $14,925
• Three people: $18,775
• Four people: $22,625

www.aberdeennews.com Posted on Tue, Feb. 25, 2003 H. JOSEF HEBERT Associated Press

WASHINGTON - The government's emergency oil stocks will not be used to dampen soaring energy prices, Energy Secretary Spencer Abraham told senators Tuesday, but the Bush administration will move quickly to draw on the reserves if severe supply shortages appear.

The emergency stocks "should not be used to address price fluctuations," Abraham told senators, worried about soaring fuel costs.

"We will and we can act quickly to use the Strategic Petroleum Reserve ... to offset any severe disruptions if it's needed," Abraham told a Senate hearing. He said, however, the 600 million barrels held in the reserve on the Louisiana-Texas coast would be used only "to provide energy security."

"We do not believe it should be used to address price fluctuations," Abraham said.

Appeals for government intervention grew louder Tuesday as spot prices of natural gas briefly soared to nearly double the record high of two years ago, in the midst of the California energy crisis, and the price of gasoline lingered at over $2 a gallon in many parts of the country. Heating oil supplies remained tight and prices high.

"People are being pinched like never before" by soaring gasoline and other energy prices, Sen. Ron Wyden, D-Ore., told Abraham. Wyden said consumers "are getting hosed because they're not getting any protection."

Likewise, Abraham dismissed a request by a group of New England heating oil companies that the government make available some of the 2 million barrels of heating oil kept in a Northeast reserve. "Two million barrels is not a lot," he said, and it should be kept in place "unless there's an emergency situation in terms of supply."

Abraham said it may be two to three months before Venezuelan oil shipments to the United States return to normal levels, although he suggested the political crisis bedeviling oil production in the South American country has passed. Venezuela has been a leading source of U.S. imports, accounting last year for about 1.5 million barrels a day. Most analysts place part of the blame for the low supplies of crude and petroleum products on the loss of Venezuelan oil imports.

Abraham, appearing before the Senate Energy and Natural Resources Committee, said he understood that "the crisis that has essentially shut down production (in Venezuela) has passed," but it would take 60 to 90 days before the country's imports would return to normal levels.

At a separate hearing later Tuesday, senators expressed dismay about the sudden spike in the price of natural gas, which is used widely across much of the country for heating and for producing electric power.

Natural gas prices have increased by nearly 40 percent since the first of the year and jumped dramatically this week. Contracts for gas delivery in March closed Tuesday at $9.58 per 1,000 cubic feet, an increase of almost $3 from last week.

Spot prices took an even sharper jump.

Guy Caruso, head of the Energy Information Administration, told senators the spot price of natural gas at the Henry Hub, a benchmark delivery point in Louisiana, soared briefly $18 and $20 Tuesday before dropping back to $12.20, the same as on Monday. The spot price two years ago, in the midst of California's energy crisis, reached a high of about $10 per thousand cubic feet.

Only a small fraction of the natural gas sold, between 5 percent and 10 percent, is bought on the spot market. Most gas is contracted in advance at lower rates. Still, the run-up caught energy analysts and industry executives by surprise.

"A lot of this is people speculating," Keith Rattie, president of Questar Corp., a natural gas producer based in Salt Lake City, told the senators. He added that much of the speculation is being triggered by higher than expected demand and low natural gas inventories in storage.

The EIA, the statistical arm of the Energy Department, reported last week only 1,168 billion cubic feet of natural gas were in storage as of mid-February, 27 percent lower than the five-year average at this time and 43 percent below what was in storage a year ago.

On the Net: Energy Information Administration: www.eia.doe.gov

www.stuff.co.nz 26 February 2003

CARACAS: Explosions have hit a Spanish Embassy building and the Colombian consulate in the Venezuelan capital Caracas, buckling their metal gates and shattering windows in neighbouring buildings, officials and witnesses say.

A guard was slightly injured at the Colombian consulate building yesterday, police said. There were no immediate reports of other casualties.

The explosions came just a day after President Hugo Chavez, whose self-styled "Bolivarian Revolution" aims to help the poor, accused the United States and Spain of siding with his enemies and warned Colombia he might break off diplomatic relations.

A Reuters reporter heard a loud explosion at a cooperation sub-office of the Spanish embassy in the east of the capital. The gate of the building had been blown off by the blast; across the street, windows of another building were smashed.

"It punched a hole in the wall surrounding the building," the reporter said.

Police and fire officials said there had also been an explosion outside the Colombian consulate building not far from the Spanish embassy site. The glass walls of the Colombian building were also shattered.

Officials could not immediately say what had caused the explosions. Leaflets scattered at the site of the Spanish embassy explosion referred to the "Bolivarian Liberation Front," a previously unheard of group.

Venezuela's political struggle between Chavez and his opponents often flares into violence and street clashes and media outlets critical of Chavez have been previously targeted by grenade attacks.

INTERNATIONAL CONCERN OVER ARREST

The Venezuelan leader's criticisms followed a flurry of international concern over the arrest of Carlos Fernandez, a prominent opposition businessman who was charged with rebellion for leading a two-month strike to pressure Chavez into accepting elections.

Chavez and his foes have been locked in a fierce deadlock over his rule since April when he survived a short-lived coup by rebel military officers. The president has recently hardened his stance against critics he brands "terrorists" trying to topple him.

The opposition strike severely disrupted the vital oil exports and production that account for half of Venezuelan government revenues and battered its teetering economy.

But Chavez has so far resisted calls for elections from opponents who accuse him of ruling like a dictator and inspiring supporters to violence with his fiery speeches laced with threats and class warfare rhetoric.

Venezuela's crisis has drawn in the international community with leaders who fear the world's fifth largest supplier of oil could slide into civil war as Chavez allies and enemies battle over his government.

The US, Spain and four other countries have backed efforts by the Organization of American States to broker a deal on elections to defuse the crisis. But the talks have been mired in wrangling and Chavez on Monday appeared to push away members of the six-nation group.

A grenade exploded in January at the Venezuelan residence of the ambassador from Algeria, which had offered to assist Chavez in his efforts to offset the impact of the strike.

That explosion followed bomb threats made against several foreign embassies in Caracas. The German, Canadian and Australian embassies were evacuated after receiving calls made in the name of a group claiming to be the Patriotic Committee for Venezuela.