www.vheadline.com Posted: Wednesday, March 19, 2003 By: Patrick J. O'Donoghue

Two senior Venezuelan NGOs, Cesap and Fudep report that 70% of community groups have disappeared over the past three years and blame the situation on a spectacular hike in public insecurity in Caracas Metropolitan area barrio slums.

Fudep leader Mari Gloria Olivo says things are so bad that people have to leave meetings at 6:00 p.m. to avoid being mugged … “before we could leave the barrio at 10:00 pm.” Olivo says the cycle can only be broken, if jobs and food come along … “what we are seeing is a complete breakdown of social relations.“

Cesap president Santiago Martinez argues that the social emergency is running at a greater rhythm than the political debate, and suggests five themes that need to tackled urgently: maternity and child care, a return of home creche programs (cuidado diario), nutrition and basic food health, employment and under-employment introducing creative temporary solutions, education for all, and insecurity and violence (trained police, disarming of civilians and elimination of paramilitary groups).

One local NGO has criticized the government’s public subsidized markets because it has put small barrio storekeepers out of business. “The once promising PROAL barrio stores selling cheap basic foodstuffs are not getting supplies ... which instead are going to the public markets.“

Fudep has received funding from the US Agency for International Development (USAID) to organize workshops for community organizations called “participative diagnosis of the social situation."

sg.biz.yahoo.com Thursday March 20, 6:25 AM By Dan Molinski Of DOW JONES NEWSWIRES

BOGOTA (Dow Jones)--As dollar restrictions in Venezuela continue and Colombian exporters wait to be paid $300 million for products already delivered to their neighbor, a trade group in Bogota is calling for a system of barter trade between the two countries.

"This is not some crazy idea," Maria Luisa Chiappe, president of the Colombian-Venezuelan Chamber of Trade and Integration, told Dow Jones Newswires Wednesday. "We're proposing a barter system through which Colombia will buy Venezuelan products and trade them for Colombian products, without cash changing hands."

The Venezuela government, led by President Hugo Chavez, halted foreign currency sales in January to stem a hemorrhage in international reserves and has since enacted tight restrictions on foreign currency sales.

The Venezuelan government has allowed importers of food, medical supplies and other necessities to buy dollars to pay for their goods. But importers of nonessential products such as clothing apparel and leather shoes have not been given access to greenbacks, so far.

Chiappe said she would present this proposal to the two countries' governments this week or next.

She added that the chamber will meet with textile and leather exporters Thursday to discuss the idea. In this meeting, they plan to discuss how products would be priced under a barter system. It's likely all product prices would be converted into dollars, Chiappe said.

Officials at Colombia's Trade Ministry were not available for comment.

Colombia exports more of its products to Venezuela than to any other country except the United States. Textile and apparel makers in Colombia send 20% of their products to Venezuela.

Colombia exported $1.1 billion worth of goods to Venezuela last year and imported $788 million worth.

Chiappe suggested the barter could involve Venezuela trading its iron and steel for Colombian textiles and apparel.

Barter Trade Unnecessary If Central Banks' System Works

Last week, the central banks of Colombia and Venezuela revived a long-standing agreement to act as a clearing house for exporters and importers to guarantee payments on shipments.

Chiappe said this plan, arranged by the Aladi Latin American Trade Grouping, may be all that's needed.

"The Aladi system is good, but the problem is we still don't know whether (Venezuela importers) who can't buy foreign currency, such as importers of clothing apparel, will be allowed to take part in this system, given Chavez' restrictions," Chiappe said.

If the Venezuelan government decides to authorize all its importers to take part in the Aladi clearing system, then the need for the barter system won't exist, Chiappe said.

"The Aladi system, indeed, would be better than the barter system, as it contains many guarantees and has the backing of the central bank of each country," she said.

Javier Diaz, president of Colombia's main exporters association, Analdex, said he also supports a bartering system if the Aladi system with the central banks doesn't work out.

"The bartering system would be more complicated than using the central bank as a clearing house," Diaz said. "Because as a Colombian exporter, I would have to look for an importer who needs goods from Venezuela."

He added: "But if bartering is the only way to keep our trade lanes open, then I'm all for it."

The last time Colombia utilized the bartering system was during an economic crisis more than 30 years ago, Diaz said. At that time, Colombia bartered its world-renowned coffee to the then-Soviet bloc nations of Russia, Czechoslovakia and Yugoslavia, and received automobiles in exchange.

In Argentina last year, barter clubs gained a following within the country as its currency lost value amid an economic meltdown.

-By Dan Molinski, Dow Jones Newswires; 571-600-1980; colombia@dowjones.com

www.upi.com By Gregory Fossedal Special to UPI From the Business & Economics Desk Published 3/19/2003 5:50 PM

WASHINGTON, March 19 (UPI) -- Vast changes are in store for the world economy in the coming weeks, as the United States and its allies prepare to invade and liberate Iraq.

Oil prices should continue to coast down toward $25 and even $20 a barrel -- albeit with a final spike if Saddam Hussein attempts to destroy his country's wells and lobs a pre-emptive chemical strike at U.S. troops or tankers, Israel, possibly even Saudi Arabia.

Business, investment and consumer decisions that have been put on hold for six agonizing months will go forward in April -- with an actual impact on the real economy.

It's time, then, for a review of the U.S.-led world economic turnaround that's about to begin, one that will have implications for every country from Africa to Russia, from the Americas to Southeast Asia.

Our guide for this tour de force is John Mueller, the co-creator of the "world dollar base," a measurement of dollar creation by not only the U.S. Federal Reserve Board but also by other central banks that buy and sell U.S. Treasury securities, and in so doing, "monetize" them.

He's well-placed to provide the kind of global perspective critical to understanding a global economy that runs on global dollars. Mueller isn't a household name, but he should be.

As the former economic counsel for the House Republicans (1981-87) and longtime adviser to Jack Kemp, Mueller designed perhaps the best flat-tax package ever conceived, the Kemp-Kasten tax bill, which essentially became law in 1986. He was also a force for getting House Republicans, and Democrats for that matter, to pay attention to Fed monetary policy throughout the 1980s.

He then transitioned to the real world to co-found a private-sector forecasting firm, Lehrman Bell Mueller Cannon, Inc., in 1988. (The firm is now incorporated as LBMC, LLC.)

At LBMC, he has compiled an enviable track record, particularly at projecting major turning points up to two years ahead. Most economic "forecasts," by contrast, amount to bean-count estimates for the coming three to six months and are usually little more than slightly adjusted extrapolations of recent trends.

Mueller's best calls include a 1989-90 "double dip" recession call, followed by a 1993-94 observation that welfare reform could significantly reduce the "natural" unemployment rate, and thus, combined with surging world dollar creation, lift stock markets and economic growth.

With the latter, Mueller provided insight into something few Republicans seem able to explain: namely, the Clinton economic boom of the 1990s.

In late 1997, Mueller did a careful study of demographic trends for a private-sector Social Security reform commission, which was weighing various options for privatization. While Mueller favors Social Security reform (in the form of a tax cut), he was rightly cautious about projections for never-ending stock market growth that would make privatization painless.

Noting the rapid aging of the U.S. population, he projected a generation of generally flat stock market returns, through about 2015.

Accordingly, Mueller was bullish on bonds from 2000 onward, and generally bearish on the stock market when his stock market buy-sell index turned negative. Along the way, he took first place in the group of 50 economists surveyed by The Wall Street Journal for his 1999-2000 interest rate calls.

Anyone who sold stocks and bought bonds in the spring or summer of 2000 was considered a nervous ninny at the time, but in retrospect, it was a heck of a call.

The firm's worst calls include a call for a 1995 slowdown and mild 1996 recession, when there was a non-recession slowdown, and a 2000-01 slow growth call, when there was a very mild recession.

Investors who traded those notions, however, didn't suffer severely if they were investing the firm's short-term buy and sell signals on the stock market. The same model had investors mostly out of the market in 2001-02, with one timely "buy" interval including the market surge months after the Sept. 11 attacks.

At present, Mueller sees a number of strong trends of note for global investors. Let's focus on just two, which are likely to be at the core of the world economy over the next 12 to 24 months.

First: A return to oil normalcy

For all the talk of supply shocks, the recent rise in oil prices has been (as are all prices) a tale of supply and demand. Mueller's oil model predicted a surge in oil prices in the second half of 2002, although Mueller would be the first to say that this demand-side surge was strongly aided by interrupted supplies from Venezuela, Nigeria, and the threat of war in the Middle East.

The same model now points to a return to oil normalcy at $25 a barrel and below by the summer -- a projection "the bottom line" highlighted several months ago in advising readers to sell off oil positions in the high $30s.

Even if Saddam destroys Iraq's ability to pump oil in the short term, there will likely be a release of supplies from the U.S. Strategic Petroleum Reserve to compensate. In the longer term, there will be not an embargo on Iraqi oil, but a liberation of it. Thus, the move in prices, eventually, could be even sharper.

On the demand side, such forces, Mueller's model suggests, are already in play. The spike in dollar creation lagged by two to three years peaked last fall and is coasting down.

Another result will be a greater boost to corporate profit margins in the U.S. and the world than after the first Gulf War, because of the greater squeeze on pricing power that took place this time around.

In the last Gulf War, producer input prices, measured by the Bureau of Labor Statistics' broad commodity index, rose 7 percent in the year leading up to war. The prices that producers charge, measured by the BLS's finished goods index, also rose 7 percent -- a relative wash for profits.

In the 12 months through this February, by contrast, prices for producer inputs rose 8.2 percent, while finished goods prices rose only 3.5 percent.

Thus, conversely, a return to oil normalcy will provide greater relief than in 1991. This assessment of the impact of oil price normalcy differs from that of many other economic forecasts.

The bottom-line implications of this forecast: Take profits in oil stocks and futures and oil-sensitive economies such as Russia, Indonesia and Mexico. Or, keep those positions, but hedge against oil price declines.

Buy U.S. cyclicals and technology and their Asian equivalents, as oil returns to normal. Japanese and Taiwanese technology stocks are a value play and a growth play.

And if (as we expect) there is continued and even heightened geopolitical unrest surrounding the North Korean nuclear program, you can short the South Korean market as an Asian-crisis hedge.

Second: The Bush recovery

Mueller agrees with the economic consensus that the U.S. first and second quarter will be weak. But he parts company with many in seeing a strong (4 percent) third quarter this year, surging toward 5 percent in third-quarter 2004 and 6.5 percent growth in the fourth.

None of which makes Mueller especially bullish on U.S. or other world stocks over the coming months. His model of price-earnings ratios on the U.S. market implies a range of as low as 700 on the S&P 500 index through summer.

If his short-term indicator is right, then rallies like the recent it-will-soon-be-over Iraq surge are a time to lighten up, at least into May and June.

The same model, however, implies an upside to the S&P 500 of perhaps 1,400 by late 2004, and of perhaps 2,500 on a revived NASDAQ market.

Assuming there is perhaps one more sell-off to test recent lows in the United States, Europe and Asia, this implies taking some profits, or putting on short-term-expiration puts, on rallies in March and April. By summer, Mueller would be fully invested -- expecting the biggest market gains in 2004 but wary of missing the rally by holding off too long.

The one caveat, Mueller says, is if the Fed cuts interest rates again, in the common but false assumption this will stimulate the economy.

At this point, Mueller said, further rate cuts have the primary effect of delaying an economic upturn as investors, employers, and consumers continue to wait for the bottom before locking in loans to expand output. A further Fed rate cut, say during the Iraq war, wouldn't reverse the long-term upsurge, but it might (like last fall's move, Mueller argues) delay it.

The bottom line implications: Sell U.S. bonds. Now.

Buy equities, especially in the technology and cyclical sectors in the United States and Asia, hedging on rallies over the near term. Utilities, as we've said before, should also be a value play, and many will actually provide an interest payout, through dividends, to match or exceed the rate on U.S. Treasurys.

Latin equities, in sympathy with the U.S. market, should be a strong buy around the third quarter -- especially as a new round of trade liberalization kicks in. Brazilian President Luiz Inacio Lula da Silva, initially an opponent of Bush's proposed pan-American free trade zone, has quietly toned down his opposition.

There's a second-order implication to all of the above that is political and long-term in nature, but no less important.

There will, at least in the United States, be a surge in Bush's job performance ratings, and, accordingly, in his ability to win domestic legislation. Assuming he shows the same confident stubbornness he did in dealing with the Democrats in Congress last November, and the United Nations this February, Bush will win a major tax rate cut, probably even the majority of the dividend tax cut he is seeking.

Deficit projections reaching into the heavens will prove, as in the 1980s, to be unduly pessimistic, especially in 2004 and 2005. If this is combined with the rapid establishment of self-rule in Iraq, and a Middle East economic boom built around U.S.-led free trade agreements, all these affects will reinforce one another, synergistically.

The prospects for Social Security and medical insurance reform, a Middle East Marshall Plan, and other Bush initiatives, should all rise.

The upshot would be a classic election-year bull market, and a likely Bush sweep at the polls in 2004. If the Mueller model pans out, Bush will have no need to rely on chads in Florida. The only political question, at that point, will be who Hillary Clinton and Jeb Bush will put on their respective party tickets in 2008.

It's possible to look this far out thanks to minds like Mueller's, which treat economics as a science, but a human one, and make actual predictions. It's part of what makes an encounter with this true forecaster both interesting and potentially profitable.

Harry Truman, tired of hearing his advisers answer questions by saying, "on the one hand," this, and "on the other hand," that, once impatiently asked his chief of staff to go out and "get me a one-handed economist." Mueller has only one hand, but it's highly skilled.

The bottom line is, sell oil and the countries that go up with it, get out of bonds, and buy into a long-term surge in equities starting, approximately, in May or June -- if Mueller is right. He usually is.

-0- (Gregory Fossedal is chief investment officer of the Democratic Century Fund, managed by the Emerging Markets Group. His firm may hold some of the securities mentioned his articles. Individual investors should contact their own professional adviser before making any decisions to buy or sell these or any related securities.)

www.townonline.com By Faith Tomei / FTOMEI@CNC.COM Wednesday, March 19, 2003

Chris Fay and Kristen Lindquist are juniors at Ipswich High School, but their teachers live in Temple, Ga., and Forks, Wash. David Dalton is the assistant principal at Ipswich High, but the students taking his course "Biotechnology: The Changing Face of Genetics" come from California, New York, South Korea and South America.

They're participating in the Virtual High School (VHS), an online school that offers courses in everything from "Calculus" to "Caribbean Art History." Fay is taking "Personal Finance" this semester, and Lindquist is enrolled in "Poetry Writing."

Instead of meeting teachers and classmates face to face, they meet them several times each week on the computer.

In addition to "Personal Finance," Fay has taken one-semester classes on "The Vietnam War" and "Pearl Harbor to the Atomic Bomb: The Pacific War, 1941-1945." He likes the flexibility of on-line classes.

"You can do your work whenever you want to," Fay says, explaining that the teacher gives assignments for the week each Tuesday. It's more like a college-style course, sometimes with 10 assignments, sometimes with five.

Fay can begin an assignment on a laptop computer in the school's Media Center and finish his work on his home computer later that day or on the weekend. He "talks" to his teacher, Bonnie Robinson, regularly.

He knows what she looks like because her photo is posted on the VHS course Web site, but he doesn't know the sound of her voice. He knows his classmates from their short resumes. Some choose to post their photos; others post cartoons, caricatures, pictures related to hobbies - whatever they feel like putting next to the descriptions they provide.

Conversations between VHS teachers and their students are in writing. Students can talk to each other as well with discussion threads. "The teacher opens the discussion; we respond. I can see what the other kids are saying, too," Fay explains.

Most classes have about 20 students; the cutoff is 26. Fay likes having discussions with students from all over the country. He's had classes with students from Colombia and Venezuela as well.

Lindquist says the students in her poetry class can talk to each other in what's called "The Coffee House." Fay's chat group is called "The Water Cooler."

This semester is the first time Lindquist enrolled in a VHS class. She likes the course content. "It's a class I couldn't get otherwise," she says, but admits it's an adjustment getting assignments once a week and not having a teacher to encourage and remind her to get the work done.

Lindquist enrolled in the class when she couldn't find a seventh period class at IHS that met her needs. She enjoys the freedom of accessing her class work from any computer. "I just type in the screen name and password," she explains.

Both Fay and Lindquist are comfortable with writing. Lindquist is currently composing a poem in iambic pentameter. Last year Fay took a political science class where he had to write "a huge essay" on the Israel-Palestine conflict.

This semester 13 IHS students are taking online courses; last semester 20 were enrolled. They're taking such specialized courses as "Pre-Veterinary Medicine," "Music Composition and Arranging," "Practical Law," "Career Awareness for the New Millennium," "Technology and Multimedia," "History: Same as it Never Was," "Writing and Telecommunications" and "Integrated Mechanical Physics."

VHS saves dollars, adds options

Ipswich High School is saving valuable dollars and at the same time offering more electives with the Virtual High School, says Principal Barry Cahill. For a $6,000 membership fee, they can sign up as many as 25 students per semester.

Ipswich is getting a real bargain, considering teachers' salaries and the limited classroom space at the high school with enrollment increasing. At the same time, it gives the students more course options.

IHS's full participation is contingent on supplying an online teacher. David Dalton is filling that need. In addition to serving as assistant principal at Ipswich High, he is the site coordinator for Ipswich High's VHS program as well. All Ipswich students who want to sign up for virtual courses go through Dalton.

Before enrolling a student, Dalton talks candidly to him or her about the pros and cons of taking courses by computer. It's important for virtual learners to be able to work and solve problems independently, be organized and able to manage their time well.

"It's not a model for everyone. Students sometimes start a class and drop it," Dalton says, noting that the number of students who start and don't finish online classes is high at most school sites. If a student doesn't do well in a regular classroom, he or she probably won't do well on line.

Students also have to be comfortable with waiting for feedback from their long-distance teachers, who may live in a different time zone or correspond with virtual students from home after a day of face-to-face teaching, Dalton says.

A student may post a question one day and receive a response 24 hours later - sometimes longer. With school vacations falling at different times, sometimes it can take almost a week to get feedback, he says.

This year freshmen enrolled in VHS courses for the first time. Dalton says they did well - two learning Java programming and a third learning what's involved in setting up a business.

Dalton, who taught biology classes at Ipswich High for several years before becoming athletic director, then assistant principal, says teaching in the Virtual High School is both rewarding and challenging. Before launching the biotechnology course, he had to complete 300 hours of graduate-level classes himself, learning how to design and teach in the Virtual High School.

For two years, he shared responsibilities for the class with a teacher at Cathedral High School who has left the teaching profession. This year he's on his own, monitoring the work of 20 students from different parts of the globe.

Before each semester begins, he works out the course schedule, determines how much each assignment is worth, sets up discussions and sets up online links to articles and Web sites for students to access.

His main requirement is that students have successfully completed a one-year biology class. Then he "meets" each student online, gradually learning the strengths and weaknesses, the study habits and personalities of those in his class.

"The virtual high school is a great neutralizer. I judge students on what they write, not what they look like. Sometimes I don't even know if I'm working with a boy or girl, with gender-neutral names like Chris," he says.

One bad thing about writing is that students can misinterpret that others' motives. Sometimes one student is offended by another's seemingly sarcastic tone. Often no sarcasm was meant, and they have to resolve the argument by asking questions like "What do you mean?"

"In the regular classroom, we rely on eye contact and body language when we're talking," Dalton says.

Dalton breaks his students into teams for some assignments, asking each group to respond to a question or situation separately, then sharing the results with the big group later. "I can keep track of the work of all 20 students, but they have access only to their team's work," he says.

A virtual class leads to good interactions between a teacher and the students, but it's more demanding than a face-to-face class. "I can speak to a team of five students in five minutes, but when I'm responding in writing, it's sequential - five times five," Dalton explains. He rarely gets to his online class during the day and does most of that work late at night or on weekends.

But it's a good learning experience, he says, one he's glad he's been part of.

news.ft.com By Alan Beattie in Washington Published: March 19 2003 22:18 | Last Updated: March 19 2003 22:18

From the point of view of the global economy, the timing of the Iraq war could scarcely be worse.

Depending on who you believe, looming war has either put on pause a recovery that was gaining pace, or fast-forwarded the process towards the second dip of global economic downturn.

But both optimists and pessimists concur that a war which increases uncertainty about the future, makes accurate assessments of current growth all but impossible, and pushes up oil prices, is the last thing the economy needs.

War will intensify the battles between optimists and pessimists. Keith Wade, chief economist at Schroders investment bank, says: "The crucial questions are: to what extent is the current weakness genuinely due to the effect of war fear; will uncertainty disappear along with Saddam; and what will be the cost?"

The US will remain the key both during and after conflict. Even without the effect of war, the eurozone, stymied by the fiscal confines of the stability and growth pact and more vulnerable than it thought to financial market weakness, has failed to take up the slack left when the US went into recession in 2001.

Japan has been unable to contribute much. The attention of its economic policymakers at present is concentrated largely on damage limitation, trying to prevent stock market falls ripping a fresh hole in the already tattered balance sheets of its banks.

But while the other two large economic blocs had clear weaknesses well before the build-up to war, opinions have remained divided over the US economy's underlying condition.

Optimists, including policymakers at the Federal Reserve who left interest rates on hold this week, say the US - having sputtered erratically in 2002 - was at the point of picking up sustained speed when war talk intervened. Corporations had substantially rebuilt their balance sheets, cutting net debt after the binges of the late 1990s and leaving themselves in a better position to invest again.

Pessimists point to remaining underlying imbalances in the US, notably the very low savings ratio among consumers. War could provide the trigger for the eventuality many economists have feared and long predicted: consumers finally throwing in the towel and deciding to retrench and pay down debt before business investment takes up the slack.

"Household sector finances remain on a knife-edge," says Andrew Cates at UBS Warburg.

Policymakers, in particular the Federal Reserve, will be watching two factors as evidence that the war factor is weakening the economy.

The most immediate and obvious transmission mechanism from conflict in Iraq to the global economy is the oil price.

Economies have become efficient in energy use in the past three decades but the immediacy of oil costs in taking chunks out of households' and companies' spending power means it will demand attention.

If the war seems likely to be lengthy, and pushes oil prices back up after recent falls, central banks will not hesitate to cut interest rates to offset its effects.

But opinions are also divided as to how far oil prices will go up during the conflict and then fall back if and when the Saddam Hussein regime falls. Many economists have looked back at the first Gulf war in 1991 for clues as to how oil prices are likely to react this time.

However, exact parallels are hard to draw. One positive implication for the current situation compared with the early 1990s is that the Iraqi invasion of Kuwait in 1990 came as a shoc k, driving oil prices higher because of uncertainty as well as supply disruption.

Given the protracted build-up to war, that extra surprise effect is unlikely to happen this time. In fact, recent falls in oil prices suggest traders are looking forward to the resolu tion of uncertainty that the war would bring.

On the negative side, there are several other reasons that oil prices should be high, including political unrest that has disrupted supply in Venezuela and Nigeria and the after-effec ts of an unusually cold winter in North America. Those Fed officials hoping for a quick drop in oil prices, to the low $20s range, when the war is resolved may be disappointed.

The second, and related, factor is consumer spending, above and beyond what amounts to a tax on consumers arising from the higher oil price. Falls in consumer confidence have yet full y to be reflected in actual behaviour. But a war could finally make concrete ethereal fears that have floated around the household sector for months.

Wars are convenient excuses for economic weakness. But no one can argue that they did not see this one coming. The test of policymakers to cope with external shocks to the global econ omy is on very public display.