By JUAN FORERO

BOGOTÁ, Colombia, May 23 — After six months of bitter negotiations, President Hugo Chávez of Venezuela and his adversaries have agreed to sign an accord that would lead to a referendum on his rule, officials on both sides said today.

The agreement, brokered late Thursday by the Organization of American States in Caracas, the capital, calls on both sides to spurn violence. It is likely to lead to a referendum this year after a new electoral board is chosen to oversee the vote. Advertisement

The pact, to be signed Wenesday, does not provide a complete framework for how a referendum would be held. But it offers the prospect of calming months of tumult in Venezuela, a major oil exporter.

Uncharacteristically, the two sides agreed with each other today and hailed the agreement, which is meant to help heal a nation badly divided over its president. Mr. Chávez, a former paratrooper whose support comes mostly from the country's poor masses, has made enemies with his leftist policies since his election four years ago.

"It is a reasonably good document," Alejandro Armas, an opposition negotiator, told reporters. He added, "From our point of view there is reasonable satisfaction for the objectives reached."

In Peru, where he was attending a summit meeting of Latin American leaders, Mr. Chávez said the pact showed "that the opposition at last understands there is a Constitution that must be respected."

Mr. Chávez was briefly toppled by a coup in April 2002. His adversaries, a coalition of businessmen, labor groups and private media companies, have staged four national strikes since December 2001. The latest strike, a two-month walkout that began in December and ended in failure for the opposition, devastated the economy and temporarily shut down Venezuela's oil industry.

Opinion polls show that Mr. Chávez would most likely lose a referendum. Since the last strike, the economy has contracted by 29 percent, and a majority of Venezuelans tell pollsters they want a change. Still, he has been able to remain in power, and he enjoys an important level of support among the poor.

Fri May 23, 2003 08:04 PM ET By Missy Ryan

CUSCO, Peru (<a href=reuters.com>Reuters) - The United Nations must be more aggressive in helping Andean nations quash drug trafficking and moving against rebel violence in Colombia, presidents at a Latin American summit said on Friday.

"The drug trade and terrorism threaten our democracies ... and we cannot ignore what is happening in Colombia," Peruvian President Alejandro Toledo said in opening a two-day meeting of the Rio Group, which includes 19 democracies from the Rio Grande to Tierra del Fuego.

"We must together ask the ... United Nations to speak out firmly against terrorism and drug trafficking, especially in Andean countries," Toledo added. "There are sister nations (to Colombia) ready to lend a hand in any way they can."

Toledo's invocation echoes a proposal from Ecuadorean President Lucio Gutierrez urging the Rio Group to push for a U.N. resolution seeking a cease-fire from the rebel group Revolutionary Armed Forces of Colombia, or FARC.

Thousands are killed every year in Colombia, the world's No. 1 cocaine producer, as security forces fight FARC rebels and other armed groups the government says are involved in the drug trade. The Andean region is also home to the world's second- and third-largest cocaine producers, Peru and Bolivia.

Earlier on Friday, Colombian President Alvaro Uribe said he welcomed the plan from Gutierrez. Ecuador, like Colombia's other neighbors Venezuela and Peru, has expressed worry about spillover from Colombian violence.

"The Ecuadorean president's proposal seems practical, for all the neighboring, allied and democratic countries to call on the United Nations to ... tell the FARC that a peace process is needed and that they should cease hostilities," Uribe said.

"If the FARC does not accept, we would have to seek another remedy, which should entail all nations helping Colombia defeat terrorism militarily, with authority," he said.

SUPPORT FOR PLAN UNCLEAR

The proposal on fighting drugs and violence was not on the summit's formal agenda, which officials have said will center on making governance more effective, strengthening democratic governments and curbing rampant social unrest.

But Chilean President Ricardo Lagos said the proposal was likely to be adopted at the summit. "The Colombia issue has been examined closely. ... This proposal would allow us to clear up in great measure an issue that is conflictive for all of Latin America," Lagos told reporters.

Officials say the summit -- which will address reforms for political parties and mechanisms to recycle debt service into public works investment -- must buck the trend of high-level meetings long on protocol and short on results.

"I come hoping this won't be just another summit where we make speeches, applaud, take a photo and say 'Ciao,"' said leftist Venezuelan President Hugo Chavez, who faces stiff political opposition at home. "This continent needs profound economic and social changes."

The United Nations says Latin America should grow close to 2 percent this year as it recovers from a grave economic crisis including a default and devaluation in Argentina and crippling strikes in oil-exporter Venezuela. Last year, the regional economy shrank 0.6 percent.

Posted on Fri, May. 23, 2003 EDUARDO GALLARDO Associated Press

CUZCO, Peru - Latin American leaders on Friday considered a plan for stepped up U.N. efforts to end to Colombia's four-decade guerrilla rebellion.

Presidents and government officials from 19 nations gathering in this historic city in the high Andes - the former center of Inca culture - focused on a peace proposal for Colombia that also included greater cooperation among Latin nations.

Colombian President Alvaro Uribe said the plan asks that the United Nations arrange a cease-fire between the government the Revolutionary Armed Forces of Colombia, or FARC, then bring the rebels into "serious peace talks."

"If the guerrillas do not accept (the plan), then let the entire world help us end this conflict. All countries could help Colombia to defeat militarily terrorism," Uribe said.

Peruvian President Alejandro Toledo, opening the Group of Rio summit, announced the plan as part of an all-out war against terrorism and drug trafficking, which he said seriously threatens democracy in Latin America.

The countries were represented by 11 presidents and eight vice presidents and foreign ministers.

Uribe warned that guerrilla violence was already spilling across the borders of Colombia's neighboring countries, especially Ecuador and Venezuela.

Toledo said his government supports the plan.

"You are not alone, my friend... Here you have sister nations that are prepared to help in whatever manner needed," Toledo said.

The audience of applauded his remarks.

slate.msn.com By Daniel Gross Posted Friday, May 23, 2003, at 3:15 PM PT

Last week, Kristin J. Forbes, a young Massachusetts Institute of Technology economist, was named to President Bush's Council of Economic Advisers. Professor Forbes has an impressive résumé, but one can't help but think that one article in particular helped put her over the top.

In her most prominent journal article, which appeared in the American Economic Review in 2000, Forbes concluded that "in the short and medium term, an increase in a country's level of income inequality has a significant positive relationship with subsequent economic growth." In other words, after employing various forms of regression analysis and crunching scads of data, Forbes presciently affirmed what President Bush and the Republicans who control Congress have long implied but never said: If you want to put a jolt into the economy, fix fiscal policy so that it widens the gap between rich and poor. By reducing marginal rates and cutting taxes on dividends, that's precisely what the most recent gimmick-laden tax bill will likely do.

But Forbes—who appears to be no relation to the better-known Forbes family of income inequality advocates—is an academic economist, not a think-tank jockey. Her argument, although easily caricatured, has less to do with partisan politics and more to do with an ongoing academic debate about the relationship between economic inequality and growth.

In the middle part of the 20th century, the prevailing presumption was that income inequality was good for growth. Putting more money in the hands of the rich, who saved more, would provide economies with the means to finance investment. Under the schemas of influential economists such as Keynes contemporary Nicholas Kaldor and Nobel Memorial Prize-winner Simon Kuznets, governments faced a tough choice in devising fiscal policy. They could either spread income out more evenly, which would harm growth, or stimulate greater growth by fostering greater inequality.

In recent decades, the accumulated knowledge about how economies performed in the post-World War II era started to undermine this view. Countries in East Asia—Japan, Korea, Singapore, etc.—charted impressive growth over long periods, even as the distribution of wealth remained relatively equal. And regions in which income inequality was both massive and stubbornly persistent—i.e., Africa and Latin America—were perennial laggards. Indeed, the very structures that calcified income inequality—dynastic landholding, corrupt governments, lack of investment in public education—seemed to militate against growth.

In the 1990s, a wave of empirical research found that, in fact, countries with high inequality over a long period of time have low growth. This paper by Harvard professors Alberto Alesina and Dani Rodrik is a good example of such work. When there's a lot of inequality, the median voter will be poor. As a result, populist backlash will pressure the government to enact redistributionist policies and tax capital, thus hurting investment and stunting growth. (See under: Venezuela.)

Forbes' article uses new data and different methodology to poke (tentatively) at this conventional wisdom. Alesina and Rodrik—and many other researchers in the 1990s—took a "cross-country" approach, examining the relative economic performances of high- and low-inequality countries over time. But Forbes chose instead to look at the performances of individual countries over time and investigate whether there was a correlation between periods of higher or lower inequality on the one hand and periods of higher or lower growth on the other. Of course, it's possible that the relationship she detects between growth and higher inequality is more coincidental than causal. As New York University economist Bill Easterly put it: "It's more likely that what she was finding was that there are long waves or business cycle waves—maybe during booms, inequality rises, and during recessions, inequality falls."

Forbes—whose dissertation committee included the avowedly anti-Bush economist Paul Krugman—says she isn't certain about the meaning of her results. She notes that "the relationship is far from resolved" and that it is "too soon" to reach "any definitive policy conclusions." Unfortunately, the Bush administration and its Republican allies suffer no such compunctions.