Reuters, 03.31.03, 12:09 PM ET By Pascal Fletcher

CARACAS, Venezuela, March 31 (Reuters) - General Motors Corp. (nyse: GM - news - people)'s Venezuelan unit, the largest vehicle assembler in the South American country, has temporarily halted production because of tight foreign exchange controls that are squeezing the local car industry, a spokesman said on Monday.

General Motors Venezolana, C.A. suspended work late last week at its plant in Valencia, west of Caracas, and the stoppage would last until April 21 while the company attempted to resolve the problems caused by the currency curbs.

Since President Hugo Chavez's government halted foreign currency trading in January, foreign-owned vehicle assemblers have been unable to import essential parts due to the restrictions and a two-month delay in the allocation of dollars.

"We have really been hurt by this delay," General Motors Venezolana's Marketing and Sales director Peter Friedrich told Reuters. As a result, the company had lost exports for March and April and had suspended investment plans for 2003 until the situation in the Venezuelan market became clearer.

Another important local assembler, Ford Motor de Venezuela, S.A., a unit of Ford Motor Co. (nyse: F - news - people), said it was also concerned about the restrictive currency control environment.

"It's tight," said Ford Venezuela's Public Relations manager Ricardo Tinoco.

Ford's assembly plant, which has scaled back operations to only three days a week, could continue to run through April. But if the government does not release dollars "very, very shortly," Tinoco said Ford might also have to consider alternative measures for the necessary auto parts imports.

The shortage of hard currency only worsens an already bleak sales outlook for Venezuela's vehicle producers following more than a year of political turmoil and a two-month opposition strike that pushed the struggling economy even deeper into recession.

Car sales in January and February totaled 8,212 units, a drop of 77.4 percent from the same period last year.

The Venezuelan Automobile Chamber (CAVENEZ) is predicting a 30 percent decline in sales this year, which plummeted about 41 percent in 2002. Some Caracas car dealers are only selling a handful of cars a month compared to sales of 100-120 units a month in 2001, a year that saw an all-time sales record for the local market of 217,000 units.

NO "LUXURY" IMPORTS

But after 65 days during which not a single dollar was made available for business in Venezuela, the government currency control board Cadivi announced Friday it had started releasing foreign currency for essential imports like food and medicine.

Companies in this oil-dependent economy that relies on imports for 60 percent of its goods and products have been forced to survive on their fast-dwindling inventories.

But vehicle makers complain that the government, in its application of the currency controls, has only posted dollar import authorizations so far for a so-called family car program, covering cheaper vehicles sold at fixed prices.

Dollars for the parts imports for high-priced vehicles have not been authorized, let alone released.

Chavez, a left-wing populist first elected in 1998, has made clear he will use the currency controls to curb what he calls "luxury" consumption, concentrating instead on importing basic necessities for poorer sectors of the population.

But Friedrich said the dollar import restrictions meant General Motors in Venezuela had been unable to export its Chevrolet Trail Blazer and Astra models to markets in Ecuador and Colombia, and this was bad news for the local economy.

"The government hasn't done its homework," Friedrich said.

His company had also experienced bureaucratic problems in formally registering on the list of importers and exporters requiring dollars to conduct business.

Private sector business leaders have pilloried the currency controls as restrictive and unworkable, warning the dollar drought will put many companies out of business and swell Venezuela's jobless rate, which the government estimates at 16 percent. Private economists say the real figure is far higher.

Product shortages could also arise in sensitive areas like food and pharmaceutical sectors, critics of the controls say.

Businessmen and economists have severely questioned the technical ability of the currency board Cadivi, which is headed by retired army officer Edgar Hernandez, a political ally of former paratrooper Chavez who took part with him in a botched coup attempt in 1992.

Opponents of Chavez, still bitter over the failure of the recent strike to dislodge him from office, accuse the president of using the curbs to starve his foes of dollars in a political vendetta.

But in a television broadcast Sunday, Chavez brushed aside the heavy criticism of the currency controls and said the commission administering them was doing a "tremendous job."

"These measures are here to stay," he said.

<a href=www.menafn.com>NewsStand - Monday, March 31, 2003 Agence France-Presse LONDON, March 31 (AFP)

LONDON, March 31 (AFP) - Stock markets slumped in Asia and Europe on Monday, while the dollar tumbled and oil and bond prices rose on growing concerns about how the war in Iraq is unfolding.

Markets shuddered at a warning from US Secretary of Defense Donald Rumsfeld over the weekend that "the most dangerous and difficult days are still ahead of us," in stark contrast to the upbeat US comments heard at the start of the war.

Dealers also took fright at a boast by authorities in Baghdad that thousands of Arab volunteers were primed for suicide missions against coalition forces, after a suicide bomber killed four US soldiers over the weekend.

"With the Iraq campaign likely to be longer, and more expensive, than some initially hoped, equity investors have adopted a more sombre attitude," said Nomura Securities strategist Anais Faraj.

"The rally since March 12 looks to be from the same stable as the other squeezes that have punctuated the three-year bear market," he added.

On European markets, the British FTSE 100 index dropped 2.3 percent to 3, 624.7 points, the German DAX 30 lost 2.9 percent to 2,447.5 points and the French CAC 40 gave up 3.3 percent to 2,642.7 points in early trading.

The stock market rout started in Asia, where some major markets, including Hong Kong and Singapore, were also laid low by the rapid spread of the deadly virus Severe Acute Respiratory Syndrome (SARS), which hit aviation and tourism stocks.

Stocks in Japan and South Korea both plunged 3.71 percent, with Tokyo's Nikkei 225 down 307.45 points at 7,972.71 points and Seoul's composite index down 20.63 points at 535.70.

"The war does not seem to be developing as planned," said Masafumi Okamoto, a dealer at Jyujiya Securities in Tokyo.

"There are growing fears that the war will last longer than expected. Investors cannot buy stocks actively amid such fears," he said.

Rising concerns about the progress of the war in Iraq also pounded the dollar, allowing the single European currency to rally to a two-week high of 1. 0898 dollars from 1.0783 late on Friday in New York.

The dollar fell to 118.90 yen from 119.75 on Friday.

"The dollar has been undermined against the euro and the yen by the belief that war in Iraq will be prolonged and complicated," said Derek Halpenny, economist at Bank of Tokyo-Mitsubishi.

"The suicide attack that killed four US soldiers with a promise of more to come and the news that an attack (by ground forces) on Baghdad may not take place for weeks has fuelled this belief," he added.

Oil prices edged up slightly here on concerns about disruption to supplies from Iraq and Nigeria, which has been shaken by civil unrest.

The price of reference Brent North Sea crude oil for May delivery rose 20 cents per barrel from the previous closing to 26.55 dollars in early trading.

"There is still enough oil coming from Saudi Arabia and even Venezuela to keep the market supplied, but with Iraq out and the conflict in Nigeria still continuing the market is tightly balanced," said Deutsche Bank analyst Adam Sieminski.

Gold prices rose, with the spot price on the London Bullion Market up 3.7 dollars from the previous closing price at 335.55 dollars.

Bond prices gained. The yield on the 10-year German government bond dropped six basis points, or 0.06 percentage points, to 4.06 percent. Bond yields and prices move in opposite directions.

Web source 10:30 AM EST Monday

Miami-based Panamerican (NYSE: PB) said it entered into a Bridge Credit Agreement with ING Bank N.V. for a loan of $150 million for a four-month term.

The proceeds of the loan will be used to pay the principal of the 8 1/8 percent Senior Notes due April 1 issued by Panamco in an aggregate principal amount of $150 million.

Once the acquisition of the company by Coca-Cola FEMSA is completed, the loan will be repaid.

ING Capital LLC acted as the sole arranger and administrative agent in connection with the loan.

Panamco is a large soft drink bottler in Latin America and one of the three largest bottlers of Coca-Cola products in the world, the company said. The company produces and distributes a majority of the Coca-Cola soft drink products in its franchise territories in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and Brazil, along with bottled water, beer and other beverages in some of these territories.

On March 28, Panamco filed with the U.S. Securities and Exchange Commission a proxy statement regarding the proposed business combination transaction with Coca-Cola FEMSA. Panamco is seeking shareholder approval of the proposed transaction.

Shares of Panamco were down three cents to $21.67 in morning trading. The 52-week low was $7.45 on Oct. 23. The 52- week high was $21.70 on March 28.

Source Monday March 31, 11:42 PM

CARACAS (Dow Jones)--General Motors Corp. (GM), Venezuela's biggest automobile manufacturer, has stopped producing vehicles at its local plants due to the lack of foreign currency to buy raw materials, local daily El Nacional reported Monday.

Ford Motor Co. (F) may have to shut production by the end of April, and the report said Toyota Motor Corp. (TM) is similarly affected.

Rafael Ortega, public relations head for GM, which sold 38,044 units last year, declined to comment on the story, saying he had to wait for authorization by Luis Costa, a director in charge of communications with the government.

But Ricardo Tinoco, spokesman for Ford, which sold 17,971 vehicles in 2002, told Dow Jones Newswires his company will decide in the next 10 days if it will have to halt production.

Toyota's General Manager for Marketing and Planning, Enrique Pinochet, was quoted in El Nacional as saying: "we'll produce in April, we have imported materials for April and May...(but) what's short is local materials because those producers haven't received dollars to buy their raw materials."

Pinochet couldn't be reached for comment. Toyota sold 20,934 units last year.

Ford's Tinoco said his company "has been having very open conversations with the government...nonetheless there still has been no dollars issued, but they keep saying dollars will be available."

Venezuela halted foreign exchange sales Jan. 21 as a precursor to capital and import controls which the government announced about three weeks later.

But the new exchange control commission, Cadivi, said last week - more than two months after the initial halt - that it has only just released about $5 million for imports and about $30,000 for students living overseas.

Venezuela's imports usually run about $1 billion a month, and account for some 60% of consumption.

Cadivi officials couldn't be reached for comment.

The currency and import controls are a bid to protect international reserves which stood at $13.5 billion March 27, according to the central bank.

Reserves were severely affected by a two-month general strike that began Dec. 2, which all but shut down Venezuela's vital oil industry, among many other sectors.

Opposition leaders are demanding President Hugo Chavez agree to early elections, blaming his left-leaning policies for the country's deepening economic crisis.

The economy contracted 8.9% in 2002, amid 17% unemployment, and 32% annualized inflation sparked by a 46% loss of value of the bolivar. The currency lost a further 25% this year before currency sales were halted.

Meanwhile an unofficial parallel market has developed with the bolivar trading at between VEB2300 and VEB2800 per dollar versus VEB1598 set by the government.

Chavez has said the problems are due to an "economic coup" led by his opponents.

El Nacional Website: www.el-nacional.com

• By Jehan Senaratna, Dow Jones Newswires; 58212 564 1339; jehan.senaratna@dowjones.com

By Peter Behr Washington Post Staff Writer Monday, March 31, 2003; Page A22

The rebound in crude oil prices last week, triggered by Iraq's resistance to U.S.-led forces, has slowed the flow of oil imports to U.S. refineries and the production of gasoline, leaving motor fuel stockpiles at historically low levels as the summer driving season approaches, energy analysts warn.

The uncertain course of the war and the accompanying gyrations in oil prices are making U.S. energy companies wary about rebuilding depleted fuel inventories with high-priced crude. The companies also are worried that a sudden favorable turn in the war could caused oil prices to plummet.

"If we ever get past this crisis, crude prices will drop like a rock," said Mary Rose Brown, vice president and spokesman of Valero Energy Corp. in San Antonio, one of the largest U.S. refiners. "Does it make you more cautious? Yes. Any barrel you buy today that would have been be cheaper next month -- that would be a stupid move."

The caution is widespread among refiners, too. In the week ending March 21, U.S. refineries produced less gasoline and other products than the week before, even though oil is available.

But if gasoline inventories are not in better shape when gasoline demand picks up on Memorial Day, pump prices could stay high through next fall, the Energy Information Administration warned last week.

A big increase in crude imports is needed to refill gasoline stockpiles, the EIA said. "However, the evidence so far suggests that either this is not happening, of that if so, the pace is barely perceptible," it warned.

Gasoline inventories in the United States have been falling since early this year, following a strike in December that closed down Venezuela's oil fields, a crucial source of both oil and gasoline imports. As of mid-March, U.S. gasoline inventories were 6 percent below levels a year ago and pump prices have risen as inventories shrunk.

Motorists got a bit of relief after oil prices plunged in energy markets' optimistic reaction to the onset of the Iraq war on March 20. The cash or spot prices of a benchmark U.S. crude brand, West Texas Intermediate, stood at $37.87 a barrel on March 12, but by the war's second day, had plunged to $27.18, the EIA said. Gasoline prices followed with a small downward move, with the national average price for regular brands dropping from $1.72 in mid-March to $1.69 at the end of last week.

But the end of last week, crude oil prices had climbed to $30.16 a barrel on U.S. markets, and gasoline prices generally follow the direction of oil prices. In trading early today, U.S. light crude rose 13 cents, to $30.29 a barrel.

With an uncertain war timetable, U.S. refiners cannot reliably predict when oil prices and gasoline prices might drop. That makes them unwilling to take the risk of increasing their import purchases on a large scale, even though there is plenty of oil around, said Jeff Goetz, director of Poten & Partners, a New York-based marine consulting group that tracks oil tanker shipments. "There's enough oil."

The Iraq war did not cause an immediate oil shortage, even though the conflict cut off nearly 2 million barrels of daily crude oil supplies, or about 3 percent of the world's needs.

In February, Saudi Arabia and other Persian Gulf producers increased oil production to counter a sharp increase in crude prices caused following the Venezuelan strike. Now that additional oil, equal to 1.5 million barrels of daily supply, is arriving at refineries along the Gulf of Mexico, completing a 45-day voyage from the Persian Gulf.

But all the cargoes are not being snapped up by refiners, industry analysts and officials said. Many refiners apparently are buying enough to serve motorists' current needs, but not enough to rebuild stocks. "They are looking to buy the oil when they need it," Goetz said. "When they are uncertain about the future, they hold back."

A refiner that bought a supertanker's cargo of 2 million barrels of oil at $30 a barrel could lose millions if gasoline prices fall before that tanker cargo can be refined into gasoline and the fuel is distributed for sale to service stations. "The risk of oil prices going from $40 to $25 [a barrel] are much higher than going to $60," he said.

Valero lines up two-thirds of the oil it needs through advance contracts. The rest is purchased just as it's needed, on the spot market. "There are a lot of cargoes on the water, and a lot of oil headed this way that doesn't have a buyer," Brown said.