Source LONDON (AFP) Apr 02, 2003

The United States did not launch the war in Iraq to control Baghdad's oil supplies, an influential British research institute said on Wednesday, rejecting suggestions that oil was the prime motivation for Washington's drive to topple President Saddam Hussein.

"The present US-led military campaign against Iraq is not a war for Iraq's oil," the Royal Institute of International Affairs (RIIA) said in a study on Iraq's oil.

Analysts at the RIIA said that even with sustained investment over several years, Iraq's total oil production could only ever be raised to six percent of the world's total, three times less than Saudi Arabia's total production potential and half the size of Russia's.

The institute also rejected the idea that ensuring a cheap and secure flow of oil to markets was the prime driver behind the US action, noting that Washington did not intervene to stop strikes earlier in this year in Venezuela, which drastically slowed down Caracas' oil production.

"Arithmetically, Venezuela's oil is more important to America's oil security than Iraq's, taking up a share of 14 percent of imports against Iraq's seven percent," it said.

The authors of the study, Valerie Marcel and John Mitchell, went on to dismiss concerns that the United States will allow its own oil giants to carve up Iraq's oil fields for themselves after the war.

"American companies have voiced their preferences in Washington, but so far, American foreign policy has not done very much for the oil majors.

"US sanctions against Iran and Libya have barred access of American companies to those markets, while European and other countries have had a freer hand to invest in these oil rich countries," it noted.

By contrast, the first Gulf War of 1990-1991 -- prompted by Saddam Hussein's invasion of Kuwait -- was largely a war about controlling oil supplies, the RIIA said.

"By invading Kuwait, Iraq controlled the production of 5 million barrels of oil a day, doubling its reserves. Iraq's own oil is much less important," the analysts said.

Many opponents of the US-led invasion of Iraq have accused Washington of launching the war in the hope of benefiting from a lucrative new source of oil supplies.

Thursday April 3, 11:05 PM (This article was originally published Wednesday) By Charles Roth Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Notwithstanding the way the war in Iraq has been whipsawing global financial markets recently, emerging market assets appear well positioned to ultimately ride the volatility higher in the months ahead.

Emerging market fund managers and strategists say cheap stocks and high-yielding bonds, coupled with solid economic growth prospects, all bolster the case for the asset class.

"If we get some form of (Iraq) resolution over the next couple months, then we will see a huge rally in all markets," said Allan Conway, head of global emerging markets fixed-income and equities at WestAM in London.

After a great run last year and so far this year, emerging market bonds still remain attractive. But the asset class's equities look set to offer the wildest ride, with the war and its aftermath driving the swings.

Once U.S. forces take Baghdad, from which they are now within 30 miles, according to the Pentagon, stocks are expected to soar.

"Then the question will be how sustainable is the rally? For that we'll have to look at the global economy," Conway said, adding that indicators point to weakness in the U.S., the European Union and Japan.

While emerging market stocks aren't likely to fly as high as developed market equities, they won't give as much back, he said, explaining that "valuations are extremely attractive" compared to the fair value or still-rich levels at which much of Wall Street still trades.

Tim Love, emerging market strategist at Deutsche Bank in London, agreed. "We're very bullish on a relative basis as they (emerging market stocks) enter their fifth year outperforming" the Morgan Stanley Capital International's All Country World Index, he said.

In addition to lower volatility, emerging market stocks "still have extreme support from valuations...indicative of the positive upside yet to go in the asset class," he added.

Brad Durham, a managing director at Massachusetts-based Emergingportfolio.com Fund Research, which tracks fund flows, pointed to data indicating that the forecast average emerging markets 2003 price-to-earnings ratio is 8.3. That's markedly cheaper than the double digit ratios at which most of Wall Street's stocks trade.

Even if U.S. economic growth accelerates in the second half, as anticipated, faster growth in emerging markets should provide a more solid foundation for appreciation in their asset prices.

WestAm's Conway, whose fund manages $750 million in fixed-income and equity investments across emerging markets, said most emerging market economies will expand between 3.5% to 6% this year. The World Bank expects developing countries to grow 4% in 2003, up from 3.1% in 2002. The range clearly outstrips the consensus 2.6% U.S. growth forecast, as well as the World Bank's 2.3% global growth projection for 2003.

A Wall Street-based trader of American Depositary Receipts from Asia said a number of Asian stocks are poised to rise on the back of several factors: robust growth in places such as China, India and Thailand; budget surpluses; improved corporate governance; hefty international reserves; falling dollar-denominated debt levels; and a willingness of Asian monetary and fiscal authorities to employ counter-cyclical measures to ramp up economic growth. At the same time, inflationary pressures remain benign.

One possible damper on growth, particularly in Hong Kong, Vietnam, Singapore and ultimately perhaps even China may be the recent outbreak of severe acute respiratory syndrome, or SARS, a highly contagious, little understood and potentially fatal illness.

Overall, Love said Deutsche Bank finds the Asia story compelling, and recommends adding weight in Asian equities.

WestAm's Conway, though, is less bullish on Asia, with an overweight only in Thailand, which is so far this year the only Asian equity market to post a gain in dollar terms - rising 5.5% on the MSCI index.

Outside Asia, Conway's overweight equity positions include Brazil, Chile and Russia.

Brazil has indeed turned into a popular play thanks to dirt-cheap valuations, its large market and the view that leftist President Luiz Inacio Lula da Silva, who took the helm at the beginning of the year, is sticking to orthodox economic policies.

"There's lots of positive news out of Brazil," said Tim Ramsey, an emerging market strategist at Bear Stearns in New York. "It should outperform in a resolution of the war in line with U.S. objectives."

Ramsey is recommending the South American giant's industrial exporters and sectors in which the government has a "lighter regulatory touch" such as the wireless telecommunications sector.

Views are more mixed, though, on Mexico and Russia, two other emerging market giants.

Conway is underweight Mexico, while Love likes the outlook for the country.

Love points out that despite its recent strengthening, Mexico's currency is still undervalued, which should help its exporters and producers for the domestic market. And market capitalization is less than 20% of gross domestic product, compared to 70% at its peak, he said.

Others, such as Bear Stearns' Ramsey, note that while Mexican stocks may be cheap historically, they don't have many drivers for growth, with structural reform initiatives stalled by divided legislative and executive branches, and likely continued political infighting even after July mid-term elections.

And without faster growth in the U.S., which absorbs more than 80% of Mexican exports, the country's stocks, which trade at a 2003 forward-looking P/E of 11.2, or more than double Brazil's forecast P/E this year, may not see as much upside as other emerging market stocks.

Russian equities, despite giant gains last year, are still attractively valued. But like the country's bonds, performance hinges predominantly on the price of oil. Love is neutral Russian stocks, while Bear Stearns' Ramsey is "very wary" in a "climate in which oil prices are falling."

As U.S. forces advance on Baghdad and oil fields in Iraq are increasingly secured, oil prices have tumbled to nearly $28 a barrel for May delivery from a high of almost $40 a barrel in the prelude to the war.

Falling oil prices could also spell trouble for sovereign credits such as Venezuela, Colombia, Ecuador and Nigeria, and don't much help Mexico, which sources about a third of its public income from oil and related taxes.

But lower energy costs, in addition to facilitating growth in the U.S. and Europe, will also help oil importers such as Brazil, Chile, Turkey and Northeast Asia. For these countries, cheaper oil may ease inflationary pressures, and could even prompt monetary authorities to lower interest rates, which would make corporate borrowing and debt servicing easier. That, in turn, should help stocks.

If it appears that emerging market stocks are on the whole poised to gain near term, the asset class's bonds will likely still garner plenty of investor attention.

After gaining 14% last year, and 8.4% so far this year, the spread on the J.P. Morgan EMBI Plus, at about 650 basis points over U.S. Treasurys, may not contract much more near term. But, WestAm's Conway said, with yields running around 10% compared to U.S. Treasurys, "they're pretty attractive."

And spread contraction is still probable in Brazil, Ecuador, Nigeria and Argentina, he added.

-By Charles Roth, Dow Jones Newswires; 201 938 2226; charles.roth@dowjones.com

<a href=usinfo.state.gov>News from the Washington File 02 April 2003 (Promotion of democracy, security and development are priorities) (6970)

The United States Agency for International Development (USAID) works with other U.S. agencies and departments to promote political and economic freedom for all nations, particularly among those in the Western Hemisphere, says USAID Assistant Administrator for LatinAmerica and the Caribbean Adolfo Franco.

"The United States is committed to helping build a hemisphere that lives in liberty and trades in freedom," Franco said in April 2 testimony before the Senate Foreign Relations Committee.

Noting that President Bush has said that the strength of the hemispheric commitment to democracy, security and market-based development will shape the region's future, Franco outlined USAID'sefforts to bolster these commitments.

Through its programs that help governments strengthen democratic processes, promote equitable economic growth and improve health and education standards, USAID is bolstering the region's will to reform, Franco said. In turn, these reforms will move nations in the hemisphere toward eligibility for additional development assistance under the auspices of the Millennium Challenge Account.

USAID efforts to strengthen democracy in Latin America and the Caribbean include anti-corruption, rule of law, municipal governance and civil society strengthening programs, Franco noted. "USAID-supported training and technical assistance help strengthen the capacity of national and local government to demonstrate that responsible leaders can deliver benefits to communities," he added.

Sustained development, Franco said, depends on "market-based economies, sound monetary and fiscal policies, and increased trade and investment." He indicated that through support for legal, policy and regulatory reforms, USAID has worked with regional governments to enhance the environment for trade and investment -- the "twin engines for economic growth and poverty reduction."

Franco said that USAID support for trade capacity building in Latin America and the Caribbean has increased from $5 million in 2001 to more than $23.5 million in 2002, with plans to increase future funding. Among the current examples of USAID trade capacity building assistance he cited was support for eight Caribbean nations that are preparing national trade capacity building strategies.

Franco said USAID's Bureau for Latin America and the Caribbean has also placed great emphasis on health and education in the region -- two of President Bush's other stated priorities.

The USAID official noted that there has been significant progress in raising hemispheric vaccination coverage and in reducing or eliminating major childhood illness. He said USAID assistance has also fostered greater discussion of the region's HIV/AIDS problem.

Because "diseases do not respect geographic boundaries," Franco said USAID health care assistance to Latin America and the Caribbean is "critical" to the health and security of the United States itself.

Addressing the state of education in the region, Franco said the quality and relevance of primary and secondary schooling "continue to cause concern."

Franco explained that USAID education and training programs "aim to improve the poor state of public education systems," adding that "USAID will continue to provide support for education reform, enhancing the skills of teachers and administrators and improving training for application in the workplace." In part, this will be accomplished through continued support for the newly-launched Centers of Excellence for Teacher Training.

In addition to the aforementioned regional efforts, USAID also works with other U.S. government agencies to address issues confronting fragile democracies in the hemisphere. Franco identified problems in Venezuela, Colombia, Bolivia, Guatemala and Haiti as being of particular concern.

Read the following Link for the <a href=usinfo.state.gov>complete text.

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CMSM criticizes U.S. embargo against Cuba as hampering flow of ideas

WASHINGTON (CNS) -- The U.S. economic embargo against Cuba is preventing the free flow of information and new ideas into the communist-ruled Caribbean nation, said Trinitarian Father Stan De Boe, justice and peace director of the Conference of Major Superiors of Men. Father De Boe, part of a delegation of religious men and women from the Americas who visited Cuba in March, said religious leaders in Cuba want an end to the embargo for more than economic reasons. The embargo further isolates the population from the ideas and events of the outside world, he said. "It keeps information and new ideas from flowing into the country," Father De Boe told Catholic News Service in a telephone interview. Information is limited in Cuba under the regime of President Fidel Castro, which controls the mass media allowing the government to control the thoughts of Cubans about world events, he said.

Mexico trip eye-opening for students, staff from U.S. Catholic school

SPRINGFIELD, Mass. (CNS) -- When anyone in the tiny town of Jaxe, Mexico, receives a phone call, an announcement is made over the town's intercom system and the person receiving the call is asked to report to the town's only phone to take it. In an age where every teen seems to have a cell phone, that was a real eye-opener for the 13 high school students from Cathedral High School in Springfield who traveled to Mexico earlier this year. The trip was organized by Kevin McCarthy, director of guidance at the school. He and the principal, Sister Denise Granger, a Sister of St. Joseph, accompanied the teens. McCarthy remembers the impact volunteering for a month in Venezuela and six months in India had on him many years ago. The "spirit and energy" from the experience "stayed with me constantly so I approached Sister Denise," he said in an interview with The Catholic Observer, newspaper of the Springfield Diocese.

Church-run university slips through cracks to educate Cubans

HAVANA (CNS) -- Catholic schools are illegal in Cuba, but Spanish Dominican Father Jesus Espeja provides an informal university education for 900 students. His Fray Bartolome de las Casas Center in downtown Havana has managed to slip between the cracks of the Cuban government's desire for monopoly control of education and its inability to provide a wide range of educational services. "The center is well received by the government. There is no trouble so far. We're considered a service to the future of Cuba," said Father Espeja, director of the center. He said some government ministries sent workers for computer training and English courses. Yet, he acknowledged that the center is in a precarious position as the government can close it down at will. The church is prohibited from operating Catholic schools but can teach religion on church grounds. The center gives certificates to students who successfully complete courses, but these are not recognized by the government.

Hong Kong, Singapore church activities curtailed due to SARS

HONG KONG (CNS) -- Catholic Church services during Holy Week in Hong Kong will be curtailed as an increasing number of people are infected with a deadly pneumonia virus. To curb the spread of the disease, called severe acute respiratory syndrome, or SARS, the Hong Kong Diocese has suggested that the foot-washing rite during the Holy Thursday liturgy be suspended, Father Thomas Law Kwok-fai told UCA News, an Asian church news agency based in Thailand. Father Law, who heads the Diocesan Liturgy Commission, said the diocese also suggested that there be no baptism by immersion during the Easter Vigil April 19. However, a decision on canceling the Palm Sunday procession April 13 had not yet been made, he added. In Singapore, where four people have died of the syndrome, Archbishop Nicholas Chia ordered the suspension of catechism classes and children's liturgy programs, as well as holding hands while praying the Our Father during Mass. The Singapore Archdiocese also suggested canceling baptism by immersion during the Easter Vigil.

<a href=reuters.com>Reuters Wed April 2, 2003 04:42 PM ET (The following statement was released by the rating agency)

NEW YORK, April 2 - Standard & Poor's Ratings Services said today that it raised its long-term local currency sovereign credit rating on the Republic of Trinidad & Tobago to 'A-' from 'BBB+', and its long-term foreign currency sovereign credit rating to 'BBB' from 'BBB-'. At the same time, Standard & Poor's raised its short-term foreign currency sovereign credit rating on the republic to 'A-2' from 'A-3'; the 'A-2' short-term local currency rating remained unchanged, and the outlook is stable.

According to sovereign analyst Lisa Schineller, the upgrade reflects continued improvement in Trinidad & Tobago's external debt and liquidity indicators and expected implementation of plans to rationalize inefficient public sector entities. "The country's external financial position continues to strengthen, owing to current account surpluses of 6%-10% of current account receipts and significant inflows of foreign direct investment (FDI)," said Ms. Schineller. "The public sector is a net external creditor, with net assets projected to reach 17% of current account receipts in 2003. The gross external financing requirement is projected at only 8% of reserves in 2003," she added.

Standard & Poor's said that the republic enjoys a booming energy economy, supported by significant FDI that has averaged 7% of GDP since 1998. The broad-based energy matrix, coupled with increased trade and financial integration with the U.S. and other Caribbean economies, underpins trend GDP growth of 4.25% and has allowed the country to effectively weather a cyclical downturn in global demand. Trinidad & Tobago is the global leader in exports of ammonia and methanol globally, and will shortly become the fifth-largest exporter of liquefied natural gas. "Geopolitical concerns in the Bolivarian Republic of Venezuela and the Middle East have boosted Trinidad & Tobago's reputation as a secure energy supplier, and has raised its profile in the U.S. as a vital geopolitical interest," noted Ms. Schineller. Ms. Schineller said that, equipped with a solid mandate and congressional majority, Prime Minister Patrick Manning's government has presented an agenda to tackle inefficient public entities and reduce fiscal rigidities. The administration has initiated a politically difficult restructuring of the loss-making, state-owned sugar producer Caroni and plans to rationalize operations at other state entities. "These actions are important to continued credit improvement, as several of the state-owned entities are producing increasingly large deficits," advised Ms. Schineller. "Trinidad & Tobago's interest burden of 16% of general government revenue is currently more than twice that of the 'BBB' median. Encouragingly, the government has begun to exercise call options on its expensive local currency debt and to issue lower-coupon debt via a series of local auctions," she added.

Broad policy continuity underscores the republic's stable macroeconomic environment-despite a political impasse in 2002 that contributed to a slowdown in growth and investment. Notwithstanding the government's inability to advance policy initiatives, the central bank and finance ministry were able to maintain sound economic management. There was neither a notable instance of politically motivated violence nor any attempt to use extra-constitutional means to resolve the conflict, which highlights the strength of Trinidad & Tobago's institutions and the political maturity of its population.

"The stable outlook reflects the expectation of continued, strong economic growth underpinned by the energy sector, and for a healthy and improving external position," said Ms. Schineller. "Balancing these positives are continued challenges posed by high structural unemployment, increasing public security concerns, and pressures on the fiscal accounts stemming from inefficient public entities," she concluded. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.