Caracas, May 20 (<a href=quote.bloomberg.com>Bloomberg) -- CA Nacional Telefonos de Venezuela lost Globalvest Management Co.'s Graham Makohoniuk as an investor after saying it wouldn't be able to pay dividends to foreign shareholders because of currency restrictions.

``We thought that it would only be followed by more bad developments,'' said Makohoniuk, whose Virgin Islands-based firm manages $500 million in Latin American equities. Globalvest had owned American depositary receipts of Nacional Telefonos, the country's largest telephone company.

The firm's sale of its holding illustrates the difficulty that Venezuelan companies have faced in attracting investors ever since President Hugo Chavez limited businesses' access to dollars in February, after a two-month national strike.

Six of the 13 companies whose shares trade in the U.S. as ADRs had to stop making dividend payments to overseas investors because they couldn't get the dollars. The others didn't provide any payouts, or else they also would have been affected.

FTSE Group, whose indexes track the performance of stock markets in 49 countries, removed Venezuela this month from its All- World Index, a benchmark for global fund managers.

The straw that broke the camel's back was the exchange controls,'' Peter Wall, the senior vice president of business development for FTSE Americas, said in an interview. Countries have to meet some standards of investability, and one of those is the relatively free flow of capital out of the country.''

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Chavez imposed the restrictions in an effort to protect foreign-currency reserves after the strike curbed exports from Venezuela, the U.S.'s fifth-largest supplier of crude oil. The walkout, aimed at removing him from office, followed a failed two- day coup in 2002.

Since Chavez took office in February 1999, the country's economy has fallen into recession twice, the bolivar has lost about 65 percent of its value and the benchmark IBVC stock index has dropped 33 percent. This year, the economy will contract 17 percent, according to the International Monetary Fund.

Nacional Telefonos has been most hurt by the exchange limits because it is the country's most-traded stock, accounting for 85 percent of trades on the Caracas Stock Exchange on some days.

The company's ADRs, each representing seven shares, fell to $10.21 yesterday from a record $49.38 in September 1997, a year before Chavez was elected. This year's trading has averaged 222,400 daily, about one-quarter less than the average for all of 2001.

This year, the ADRs have closed as much as 17 percent below the value of the underlying shares. The discount compares with an average 1.4 percent premium last year before the beginning of the strike, which closed the country's stock exchange.

`Waiting for Dollars'

Nacional Telefonos has deposited bolivars with Bank of New York, manager of its ADR program, for a dividend payment to the holders of record on April 9. The company needs permission from Venezuela's foreign exchange commission to convert them to dollars and pay shareholders.

``We are waiting for dollars to be approved,'' Chief Financial Officer Armando Yanes said two weeks ago in a conference call with analysts.

The commission hasn't made the U.S. currency available for dividend payments. Only importers of food and medicine have been able to buy the currency. Finance Minister Tobias Nobrega said yesterday that he asked Chavez to ease the limits on buying dollars to help companies speed imports.

Mercantil Servicios Financieros, the holding company of the country's largest bank, has also been unable to make cash payouts as a result. So have Banco Venezolano de Credito, the country's ninth-largest bank, paper manufacturer Manufacturas del Papel CA, and container maker Dominguez & Cia. Steelmaker Siderurgica Venezolana Sivensa has paid a share dividend.

`Difficult to Receive'

Dividend payments are a key reason for buying shares of Nacional Telefonos, said Miguel Octavio, executive director at BBO Financial Services Inc., whose mutual funds hold the stock.

Payouts during the past 12 months total 16.5 percent of the ADRs' current price. That's about four times the yield on Verizon Communications Inc., the biggest U.S. local-telephone company and owner of a 28.5 percent stake in Nacional Telefonos.

Nacional Telefonos may pay a dividend of about $1.70 on each U.S.-traded share this year, Octavio said. The telephone company promised to pay out half of its free cash flow, a profitability measure, as dividends after an unsuccessful takeover bid by AES Corp. two years ago.

``Exchange controls make it difficult to receive the dividend,'' said Urban Larson, who manages about $250 million of Latin American stocks at Baring Asset Management in Boston. Larson sold all his Nacional Telefonos shares in February 2002 and the rest of his Venezuelan stocks last year.

Investors have shunned Venezuelan companies that don't pay dividends, such as Corimon CA, the only company besides Nacional Telefonos to trade on the New York Stock Exchange.

`Catalyst Is Diminished'

Corimon lost its listing this month after its market value dropped below a $50 million minimum. The paintmaker's ADRs fell to about $6 at the time of the delisting from a high of $47.45 on Feb. 21, 2001.

The companies that aren't paying dividends are paper maker Venepal SACA, textile maker Sudamtex de Venezuela CA, ceramic maker Ceramica Carabobo CA, power company CA Electricidad de Caracas, real estate developer Mantex SACA and real estate company Fondo de Valores Inmobiliarios SACA.

Venezuela's ouster from the FTSE All World Index has given international investors even less reason to invest in companies based there.

``There is no denying that the propulsion, the catalyst is diminished'' when a country is removed from an index, said Bill Rudman, who helps manage as much as $70 million in Latin American equities at WestLB Asset Management in London.

Rudmman's funds use indexes from Morgan Stanley Capital International, an FTSE competitor, as benchmarks. MSCI is now ``monitoring the situation,'' said Remy Briand, a member of the firm's index committee.

Venezuela is still part of MSCI'S All Country World and emerging markets indexes. Money managers who oversee $3 trillion globally use MSCI's indexes as a benchmark. The total exceeds the $2.5 trillion for FTSE's measures. Last Updated: May 20, 2003 00:01 EDT

Iraqi role in OPEC at issue in oil prices

Posted by click at 2:43 AM in OPEC

By Jeffrey Sparshott THE WASHINGTON TIMES

    Price stability in crude-oil markets will remain the priority for Saudi Arabia and other major producing nations as Iraq resumes output and considers its future in OPEC.

    "A steady price within a certain range: That's the biggest concern we have," said Nail Al-Jubeir, spokesman for the Saudi Arabian Embassy in Washington.

    The chief U.S. adviser to Iraq's Oil Ministry this weekend said that withdrawal from the Organization of the Petroleum Exporting Countries might be in Iraq's best interest as the country looks to increase production.

    Oil-cartel quotas might prevent Iraq from selling enough oil to meet reconstruction-revenue needs, said Philip J. Carroll, the U.S. adviser who oversees reconstruction of Iraq's oil industry.

    Iraq has the world's second-largest proven oil reserves, second only to Saudi Arabia.

    "It is going to take some time to adjust if Iraq goes out [of OPEC], but it will not affect the overall issue," Mr. Al-Jubeir said.

    Saudi Arabia is by far the oil cartel's biggest producer. In April, the Middle Eastern kingdom produced 9.6 million barrels per day, the highest level since the OPEC quota system was instituted in 1982, according to the U.S. Energy Information Administration.

    Iran was a distant second in OPEC production at 3.75 million barrels.

    Higher OPEC production offset losses from the war in Iraq as well as political turmoil in Nigeria and Venezuela — all members of the 11-nation oil cartel.

    Since then, OPEC leaders have called for lower production to maintain prices in a $22 to $28 per-barrel range. At a meeting last month, members agreed to reduce production by 2 million barrels a day to 25.4 million, effective June 1.

    Crude closed at $28.83 per barrel on the New York Mercantile Exchange yesterday, down from $29.14 Friday. OPEC price targets are based on an average of crude-oil-pricing data from several countries, and the OPEC calculation is generally lower than public trading figures.

    Iraq, one of the organization's founding members, has not been a factor in OPEC production quotas because of U.N. restrictions and because, since the war started in March, the country's oil exports have essentially stopped.

    Analysts say it will take time for Iraq to have a government capable of deciding on OPEC membership and, regardless, the country is more than a year away from making a dent in OPEC's quota.

    Oil production has resumed, but Iraqi fields are pumping only 310,000 barrels daily.

    "I don't see Iraq pulling out [of OPEC] any time soon," said Robert E. Ebel, director of the Center for Strategic and International Studies energy program.

    "I think they would consider [leaving] only when they believe continuing membership would constrain growth ... . That's not likely to come until later this decade," he said.

    Iraq is about 1½ years from reaching 3.5 million barrels per day of oil production, Mr. Ebel estimated.

    Iraqi exports are likely to reach 1.5 million barrels per day during the third quarter, the Energy Information Administration estimated.

    Under a U.N. oil-for-food program, Iraq was selling roughly 2 million barrels of oil per day in the months before the U.S.-led invasion.

    Output in 1990 was about 3.5 million barrels per day, but oil fields have been damaged by war, neglect and looting.

    More likely than a withdrawal from OPEC would be a temporary suspension from participation, said James Dobbins, director for international security at the Rand Corp., a policy think tank.

    "Iraq is not going to have a government capable of making a decision like that for a year or two," he said of leaving the organization.

    OPEC also is trying to coordinate with major oil producers outside of the cartel.

    The group invited Russia, Norway, Mexico and four other producers to its next meeting, June 11, in Doha, Qatar.

    OPEC members are Venezuela, Algeria, Libya, Nigeria, Saudi Arabia, Kuwait, Iraq, Iran, United Arab Emirates, Qatar and Indonesia.

Marwan Asmar: Khatami's Middle East tour augurs well for the region

Posted by click at 2:38 AM Story Archive May 26, 2003 (Page 7 of 8)

<a href=www.gulf-news.com>Gulf News Online, Dubai |  | 20-05-2003

The visit of the Iranian president to the region speaks volumes for the potential changes that the area  may be facing in the very near future. Mohammed Khatami's tour of four Arab states - Lebanon, Syria, Yemen and Bahrain - is significant, coming as it does immediately after the war on Iraq and the American occupation of the country.

Not wanting to face the same fate as Iraq and its old regime, Iran and its "moderate" leadership are now even more keen to play the game of politics to reach a diplomatic solution vis-à-vis the United States. Dubbed as one of the "axis of evil" powers in early 2002, Iran, under Khatami, is trying to avoid confrontation with Washington by attempting to steer a middle-of-road course for the country.

The rapid changes in the geopolitical arena in the last couple of months and the installation of American troops right on her very doorstep is making Iran nervous at being "encircled" by U.S. forces.

Iranians are seeing that the "regime change" applied to Iraq could very  well become a realistic option if the biggest power in the world feels it needs to flex its muscles even further.

That's why the 61-year-old president, who is a reformist by nature, and despite the conservative elements in his country who continually seek to put the brakes on his more liberal policies - is taking no chances. He has repeatedly said Iran does not have weapons of mass destruction and that its current nuclear and biological weapons programme is for humanitarian purposes only.

Because of the new and tense international situation, Khatami now wants to use his reputed political and diplomatic acumen to arrive at some kind of an understanding with the United States and not give it the pretext to attack his country.

Despite the acknowledged meetings between U.S. and Iranian officials  - a situation that goes back to America's war in Afghanistan - Tehran continues to flinch at U.S. intentions in light of the fact that relations with America have been cut off since the 1978 Iranian Revolution.

And so his regional visit must be seen in the context of trying to project a more moderate image and to take stands and stances not previously expected.

Despite supporting liberation movements, Hezbollah and the Palestinian issue, Khatami, for instance, has repeatedly said his country is against terrorism and does not condone it.

While commentators may have initially suggested his visit to Lebanon and Syria was intended to beef up his country's support to these states vis-à-vis Israel and the U.S., and underlines its relationship with Hezbollah, Khatami has tried to deflect the innuendos levelled at his country of supporting terrorism.

He stressed, for instance, that his country's support for Hezbollah is no more than symbolic, an organisation dubbed as "terrorist" by the U.S.

During his three-day trip to Lebanon, he was quoted as urging restraint. "From his public statements [he] implicitly urged the resistance to abstain from giving the U.S. any reason to act against Hezbollah or countries supporting the resistance," wrote the Lebanese The Daily Star. "Tehran's support to the resistance is more of a moral nature," one Iranian source explained and "does not involve giving any direct orders [to Hezbollah] of any kind".

Since his election as president in 1997, Khatami has tried to steer his country on a moderate course, slowly moving away from the revolutionary rhetoric of the 1980s which was an extension of the 1978 revolution. He has the ability to weave together the Islamic ideals of the state with pragmatism and belief in the over-encompassing term of cultural politics.

In the 1980s and 1990s, he was involved in the press and, as a minister of culture, chaired the "War Propaganda Headquarters" during the Iran-Iraq war and later served as a member of the "High Council for Cultural Revolution."

Could this have stood him in good stead, especially when he became president? As recognised by a lot of people around the globe such as UN Secretary-General Kofi Annan and Nelson Mandela, Khatami proved to be a different kind of "Islamic politician". He is slick and modern; not the archetypal kind.

He might be banking on these qualities to steer him through the shaky regional and international system.

His trip to Bahrain is seen as further emphasis of Iran's return to the traditional, pragmatic form of diplomacy in the form of normal relations between states.

His visit is particularly significant since it opens up a new chapter in relations with the two countries. These have been effectively frozen since the early 1980s. It is also a signal to the rest of the Arab world about fostering new relations, especially since Bahrain holds the presidency of the Arab League, and of the fact that the country is a major Western ally.

In that respect also, Khatami might be recognising the "winds of change" in the area and of realignments and the imposition of external powers.

This week's visit is the first by an Iranian leader in 25 years, which means Khatami is not only determined to establish better relations in the region but also recognises the new status quo with the end of the old regime in Baghdad, while stressing that the United States must not continue to stay as an occupying power.

His Majesty Sheikh Hamad bin Isa Al Khalifa, King of Bahrain, visited Tehran last August, the first in over two decades.

Rather than indulging in diplomatic niceties, something that is rare in today's harsh political realities, Khatami, a scholar, who studied at Qom, the country's highest religious education centre, has turned out to be a shrewd tactician, rather than merely sticking to the precepts of Islam. He has a BA and an MA.

He is a popular politician who received 70 per cent of the votes. He is outgoing, charming, easy to talk to and travels on public buses. This is something not expected from a man brought up in the strict religious institutions of his country, that were later to serve as the basis of the Iranian Revolution.

This, however, doesn't lessen his "Islamic fervour" - it merely shows the religious leader-turned-politician as someone with cold logic who is prepared to understand the dangers of a unipolar world and deal with it.

This stems from his own personal philosophy of "opening up" and detente, a characteristic and an essential part of Iran's foreign policy.

His popularity was extended abroad during his many trips overseas. He has visited China, Russia, France, Germany, Venezuela, Cuba and Japan, among others. His European trips started from Italy in 1999, where he spoke to the Italian parliament and had an audience with the Pope-thus stressing his belief in religious tolerance-and delivered a lecture at the University of Florence.

In the Arab world, relations between Iran and the rest of the region became much more warm and cordial, with trips either by Khatami or his Foreign Minister, Kamal Kharrazi, to various countries in the region. Contacts were established in Algeria, Egypt, Saudi Arabia - Khatami personally visited the Kingdom - and the GCC countries.

Even on the dispute with the United Arab Emirates over the three islands which Iran occupies, Khatami told Sheikh Hamad in Manama on this latest visit that he is prepared to settle the issue peacefully with the UAE.

It is these factors built over the last couple of years which Iran might be banking on in the new strategic relations in the region. U.S. Secretary of State Colin Powell has recently said America has no intention of attacking Iran but, with different views coming out of Washington, his statement can be interpreted one way or the other.

Colombian president under fire for failed security measures, constitutional referendum

Posted by click at 12:56 AM in Colombia

By Cesar Garcia, Associated Press, 5/19/2003 22:35

BOGOTA, Colombia (AP) President Alvaro Uribe's attempt to control a violence-plagued state bordering Venezuela by giving authorities special powers has failed, two top officials concluded Monday in separate reports.

The reports by Inspector General Edgardo Maya and government Human Rights Ombudsman Eduardo Cifuentes found that violence was increasing in oil-rich Arauca state, which is being fought over by two leftist rebel armies, a right-wing militia and government troops.

Uribe created the special security zones in September, giving military and civilian authorities special powers, including to search and detain suspects.

But there have been 13 bombing attacks this year alone in Saravena, one of three towns covered in Arauca state by the security zone, Cifuentes noted. Another town, Arauquita, has suffered eight attacks this year. And the police have only arrested 69 suspected rebels and seized 17 arms since the security zones which expired this month were created.

''The central objective of re-establishing security was not achieved,'' Cifuentes said.

Even after the zones were decreed, the governor of Arauca state a former military commander appointed by Uribe himself resigned for his safety. The president of Arauquita's city council was murdered and the town's mayor resigned because of rebel threats.

Maya pointed out that in the five months before the special zones were created, there were 23 homicides in Saravena. In the first five months of the zone, there were 30.

Uribe, a hard-liner who took office in August on a law-and-order ticket, did not immediately respond to the findings.

Also Monday, leftist rebels in northern Colombia kidnapped dozens of workers from the El Cerrejon mine one of the world's biggest coal mines but were forced to let them go when army troops backed by warplanes converged on the scene.

The rebels, who have waged war in this South American country for almost four decades, kidnap thousands of people each year for ransom. They also capture politicians, police and soldiers in hopes of exchanging them with the government for jailed rebels.

Also Monday, Colombian authorities charged 147 soldiers with stealing money they seized from a rebel hideout, the president's office announced.

Officials have arrested 40 soldiers, including three officers, and arrest warrants have been issued for another 107 soldiers, the presidency said.

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