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The Central Bank of Venezuela (BCV)has forecast a partial recovery of the local economy,indicating the worst of the crisis in the country is over.

"We're better off.I don't believe a fall like that of January-March could take place again,"BCV President Domingo Maza said in an interview published on Tuesday in the El National daily.

Venezuela's GDP dropped 8.9percent last year and again plummeted 29percent in the first quarter of this year."Decrease in the productive activity was so deep in the first quarter of 2003that it is difficult to expect a worse situation for the remainder of the year,although this does not mean we haveto expect a positive balance in the gross domestic product (GDP)variation by the end of the year,"he said."Should an agreement be reached between the government and the opposition,a suitable environment could appear for the recovery of productive sectors,"he added.There has been speculation that the GDP could contract 10to 15percent by the end of this year,while some Venezuelan businessmeneven predicted a GDP drop of 25percent in the short-and mid-term.

Maza did not comment on the speculation.Chairman of the National Industry Council Lope Mendoza charged in a statement on Tuesday that the authorities had not adopted proper measures to curb the GDP contraction.

Wed May 28, 2003 01:31 AM ET By Missy Ryan

LIMA, Peru (<a href=reuters.com>Reuters) - Unpopular President Alejandro Toledo on Tuesday declared a state of emergency across Peru, promising to send out the armed forces to help rein in a wave of violent strikes that has crippled transit and public services in a new challenge to a stormy presidency.

"We have decided to declare a national state of emergency for 30 days so that people can exercise their personal liberties and travel freely," Toledo said in a televised address.

"The country cannot be shut down. Democracy with order and without authority is not democracy," said Toledo, elected in 2001 on promises he would restore transparency and true democracy to Peru following the corrupt, authoritarian regime of ex-President Alberto Fujimori.

But the U.S.-educated leader's presidency has been far from rosy as social unrest mounts from poor Peruvians who complain he has not delivered on campaign promises. Toledo's approval rating now stands at an all-time low of 14 percent.

This week, thousands of farmers and health workers joined teachers who have taken to the streets, marching angrily through the capital, occupying state buildings in provincial cities, stranding passenger buses and trucks loaded with food as they block key highways with rocks and burning tires.

Millions of children have been barred from classrooms for more than two weeks, while patients stayed away on Tuesday from state hospitals as the strikes, which seek a raft of demands like salary hikes and tax cuts for farm goods, drag on.

Toledo also said he would send out armed forces and police to resume order and would reopen schools shut by striking teachers who are asking for a raise of 210 soles ($60) to their average monthly wage of 700 soles ($200).

But the government, which hails headline growth that has made Peru the fastest growing economy in Latin America, says it does not have the cash to meet that and other demands without endangering International Monetary Fund-endorsed pledges of fiscal discipline. It has offered teachers 100 soles ($29).

FIRST NATIONWIDE STATE OF EMERGENCY

"If the government doesn't change its policy of kneeling down before the IMF ... if it does not look the Peruvian people in the face ... it's going to have to go," said Jorge Vargas, a high school teacher from the northern city of Chimbote, part of a crowd of hundreds of teachers protesting outside Congress.

Following Toledo's address, legislator Luis Iberico, part of Toledo-friendly party FIM, said that the teachers' strike would be declared illegal on Wednesday.

Mauricio Mulder, a leading lawmaker for top opposition party APRA, said "I don't understand why the government is now throwing in the towel."

This is the second time Toledo has declared a state of emergency. He made the same decree in June 2002, but that measure was limited to the southern city of Arequipa amid fatal protests against the privatization of two power firms.

Peru's biggest umbrella union, CGTP, said this week it was considering calling a massive general strike in July against market-friendly economic policy.

Some analysts have warned that Peru, which is seen as wedded to an IMF-endorsed fiscal plan, must tread carefully if it is to avoid scaring off desperately needed foreign investment with strikes and protests. But others say that Peru is a safe haven among Latin American countries, like Colombia, Argentina and Venezuela, which face more serious violence and economic woes.

Even officials admit that despite a strong economy, people have yet to feel growth where it counts -- in their wallets.

Insight on the News Posted May 28, 2003 By By James Miskel

NO: Syria is surrounded by U.S. allies and poses no threat to the region or to the United States.

There are many good reasons for not seeking a regime change in Syria. So many good reasons, in fact, that one wonders whether the idea really is being seriously pursued or merely being trumpeted on the assumption that the regime in Damascus will be more likely to play ball with the United States if it thinks the idea is being seriously pursued.

Given the obvious power and effectiveness of the U.S. military as demonstrated in Afghanistan and Iraq - two locations where many in the West and the Middle East mistakenly were confident that the military would find the going slow and the casualties high - thoughtful people in Damascus and indeed throughout Syria would be justified in worrying that when the next shoe drops, it will land on them. Thoughtful people in Washington will, however, eventually conclude that, absent an unlikely provocation by Syria, the costs of dropping that shoe on Damascus will outweigh the benefits.

So much remains to be done in both Iraq and Afghanistan to solidify the achievements of Operation Iraqi Freedom and the ousting of the Taliban that it makes no sense to undertake another "makeover project." Winning the peace in Iraq and Afghanistan is turning out to be an extraordinarily expensive and time-consuming enterprise, and there is a lot riding on it. Two things in play are American prestige and credibility in the region. If we do not win the peace by institutionalizing representative governments and reviving the local economies, reform in this volatile and important region will be set back - regardless of the regime presiding in Damascus.

There continues to be fighting in both Iraq and Afghanistan. Indeed, the pace of military operations in Afghanistan actually seems to have been picking up in the last month. It has been 15 months since the Afghan Interim Authority headed by Hamid Karzai took over from the Taliban regime, and in another 15 months there probably still will be fighting outside Kabul and its environs.

Pacification may or may not take as long in Iraq, but it would be wise to assume that it will take at least 15 to 30 months after the Iraqi interim authority is installed. Unfortunately, there also are signs that enthusiasm for the reconstruction effort in Afghanistan already may be flagging. U.N. reports indicate that only 20 percent of the aid requirements for the current fiscal year have been met by international donations. Adding a third makeover project in Syria will only make the funding problem in Afghanistan worse and could draw resources away from the reconstruction efforts in Iraq.

So, why throw a third ball into the air while we still are struggling to juggle reconstruction balls in Iraq and Afghanistan? With three balls in the air, the odds of one or all of them being dropped would escalate sharply. A far better approach would be to concentrate on the job at hand in Iraq and Afghanistan. Syria should be put on the U.S. military's back burner until after reconstruction in Iraq and Afghanistan is solidified.

Another consideration is that a forced regime change in Syria will confirm many of the reservations that governments in the Middle East and elsewhere have about how the United States uses its awesome military power. International anxiety about American motives and power would not (and should not) worry us overly much if Syria were posing a clear and present danger to the United States or its allies. But that does not seem to be the case today.

Actually, Syria lately has been behaving more responsibly than it has in the past when it stoked the fires of civil war in Lebanon and aggressively promoted anti-Israeli terrorism. If press reports are to be believed, Damascus has been cooperating in the war on terrorism and has begun to turn back fleeing Iraqis at the border. The cooperation selectively may be targeted at terrorists whom Damascus is willing to throw overboard in order to protect its key client groups, such as Hezbollah. It is, however, enough of a step in the right direction to warrant forbearance at least until after other ways of influencing Syria have been attempted.

Forcing a regime change in Syria while Damascus actually is helping round up terrorists would send a very peculiar signal to the rest of the world about the benefits of cooperation with the United States. There are a number of nations that are working with us in the war on terror despite the rampant anti-American sentiment within their borders. This is the burden of leaders in Pakistan, Yemen and Saudi Arabia.

Regime change in Syria could well make genuine cooperation by such countries more difficult by fueling anti-Americanism. It also could lend weight to the arguments of those among the leadership who resist the political risks of cooperating with the United States in the first place.

Having a more pliant regime in Damascus probably would improve our ability to fight the global war on terrorism, but this would be true only if that new regime were capable of policing terrorist groups. That's the rub. No new regime will be as effective as the current one in doing this job.

Now that Saddam Hussein's regime in Iraq has fallen, Syria is politically, economically, and geostrategically isolated. Its isolation has given it the look of a country that virtually was designed for containment and nonmilitary forms of pressure. This means that many if not most of the important benefits that could accrue from regime change in Damascus very well might be achieved through other, lower-cost means.

Geostrategically, all of Syria's most powerful neighbors are U.S. allies (Turkey, Israel and now Iraq). To make matters worse from the Syrian perspective, U.S. military forces already are in Turkey and probably will be stationed nearby in Iraq for a considerable period of time. Syria's small coastline also can be intensively patrolled by the dominant naval force in the Mediterranean, the U.S. 6th Fleet. Thus, in a very real sense, Syria virtually is encircled by U.S. military and intelligence assets. Under these circumstances there is very little that Syria can do directly to threaten U.S. interests or destabilize its neighbors without running the risk of quick detection and decisive retaliation. Classic deterrence theory suggests that this threat of retaliation will keep Syria in its box at least until postwar reconstruction is completed in Iraq and Afghanistan and the United States stands down military deployments in the region.

Neither of Syria's other two bordering nations, Jordan and Lebanon, have enough strategic independence after the fall of Saddam in Iraq to defy U.S. efforts to hem in Syria, and neither is economically robust enough to prop up Syria in the face of sanctions. Turkey is Syria's principal source of the single most important economic commodity - water. Water scarcity already is a problem in Syria and the shortage will only get worse as the population continues to grow and urbanize.

Syria's political ideology - the Ba'ath Party's fusion of socialism, secularism and pan-Arabism - has been a desiccated husk for decades. Ba'athism is a spent shell, and there is no reason to worry that it somehow might catch fire across the region and inflame opinion in neighboring countries. In terms of President George W. Bush's argument that the West is not at war with Islam, there even could be a benefit to having an indigenous secular regime in Syria instead of another U.S.-imposed secular regime.

The existence of a Kurdish minority in Syria is another reason for a go-very-slow approach to regime change. Perhaps not as restive as their brethren in Iraq and Turkey, Syrian Kurds nevertheless may view a change in Damascus as an opportunity to begin asserting claims for autonomy and perhaps even support for joining an independent Kurdistan. Either way, it would be an unwelcome complication to the evolving situation in Iraq and an unnecessary irritant in U.S. relations with Turkey. Equitably accommodating Iraq's Kurdish minority without destabilizing Kurdish areas in Turkey could become the central challenge for the new regime in Baghdad. Meeting that challenge will be difficult enough without adding Syrian Kurds to the mix.

As important as the Middle East is, it is not the only region where there are security threats and foreign-policy issues. North Korea's nuclear programs, tensions between India and Pakistan, the ongoing turmoil in Colombia and Venezuela, and U.S. relations with NATO all warrant our attention. Now is not the time to dive deeper into the Middle East pool, particularly since it is possible that nonmilitary measures will be enough to deter Syrian adventurism until the day when the regime change occurs naturally, in response to domestic pressures. For the foreseeable future, the first priority of the United States should be to ensure that reconstruction in Iraq and Afghanistan succeeds. Events in Iraq will be strategically decisive in determining the course of U.S. relations in the Middle East. In comparison, events in an isolated and ideologically bankrupt Syria are a sideshow and should be treated as such.

Finally, it might be wise to reflect on the lessons learned in Operation Iraqi Freedom before launching a military campaign against Syria. A pause in operations also would give the United States an opportunity to replenish military supplies and equipment so that we do not end the next war (wherever it is fought) with nearly empty lockers.

The U.S. military is better than any other armed forces at adapting new tactics and technologies on the basis of "the last war." It is one of our competitive advantages, and we should use it. Syria will, of course, also try to draw lessons from the war in Iraq, but given its poor economy and strategic isolation, dramatic improvements in its military capabilities over the short term are exceedingly unlikely. The truth is that there are no quick fixes available to Syria. Accelerating the acquisition of weapons of mass destruction or increasing support for international terrorism once might have been perceived as quick fixes by the Syrian leadership - as they once were by the Iraqi leadership - but in today's environment they are too risky.

There are no substantial military risks to deferring action. We can afford to wait.

Miskel is a professor of national-security affairs at the U.S. Naval War College in Newport, R.I., and teaches courses on the Middle East at Providence College. He served on the National Security Council staff during the Reagan and George H.W. Bush administrations. This essay reflects his personal views, not the positions of the Naval War College or of the U.S. Navy.

Tuesday, May 27, 2003
(05-27) 16:18 PDT MEXICO CITY (<a href=www.sfgate.com>SFGate.com-AP) --

Mexican stocks closed higher in line with U.S. gains Tuesday, although trading volume was concentrated in a handful of companies.

Mexico's key IPC index ended up 104.53 points, or 1.6 percent, to 6,650.31. Volume totaled 112.8 million shares traded worth 1.5 billion pesos.

U.S. markets surged, making up for lost time due to the Memorial Day break Monday. Trading activity slowed to 10.9 million shares on the Mexican Stock Exchange, the bourse's lowest level year-to-date.

Financial group BBVA-Bancomer's B shares, which slipped 2 percent to 8.99 pesos, accounted for about 30 percent of the session's activity Tuesday.

Exchanges of phone operator Telmex's L shares, which rose 2.8 percent to 15.64 pesos, represented another 20 percent of trading volume.

Other gainers included media group Televisa's CPOs, which advanced 3.8 percent to 15.72 pesos.

Merrill Lynch raised its recommendation on Televisa shares Tuesday to "Neutral" from "Sell," citing the company's improved operating performance and cash management outlook.

However, the investment bank still prefers the stock of media competitor TV Azteca over that of Televisa. TV Azteca's CPO shares gained 4.5 percent to 3.92 pesos.

SAO PAULO, Brazil (AP) -- Brazilian shares made a strong showing Tuesday as the market digested a change in the central bank's debt management policy and New York markets registered large climbs.

The main Ibovespa index finished Tuesday's session up 3.1 percent to 13,246 points. Trading volume was a fairly heavy 724 million reals.

The market more than recovered from a 2.2 percent decline registered Monday following the central bank's announcement that it would no longer roll over all dollar-linked debt and forex swaps as they mature.

Brazilian stocks were also buoyed by strong gains on the New York exchanges.

Shares of long-distance carrier Embratel climbed 3.3 percent to 5.27 reals, Tele Centro Oeste rose 5.8 percent to 5.61 reals, and market bellwether Telemar ended the day 4 percent higher at 36 reals.

BUENOS AIRES, Argentina (AP) -- Argentine stocks rose slightly Tuesday edging near to their high point of the past five years, with the market remaining calm that new President Nestor Kirchner's government won't bring abrupt changes to the country.

The large-cap Merval Index edged up 0.3 percent, or 1.71 points, to 664.31 points, while the broader General Index gained 0.4 percent, or 110.91 points, to end at 29,972.03 points. Volume traded was a modest 37.6 million pesos.

That leaves the Merval near its highest point in the last five years when it reached 670.3 points on April 23.

Analysts say investors are seeing various signs that the Kirchner government -- which took over on Sunday -- is set to largely continue the economic policies of its predecessor.

On Tuesday, Economy Minister Roberto Lavagna -- who served in the same post in the previous administration -- announced his new team, keeping on many of the officials who had served him first time round.

Lavagna defended the creation of a new committee that will oversee the restructuring of Argentina's banking system. The Economy Ministry and the central bank will both serve on the committee, but the former will have the deciding vote for the first year, fueling concerns over an erosion in the monetary body's independence.

Financial stocks, which had risen Monday following the publication of the decree that established the committee, fell back Tuesday. Banco Frances slid 2.9 percent to 5 pesos and Banco Bansud lost 1.2 percent to end at 1.67 pesos.

SANTIAGO, Chile (AP) -- Share prices on the Santiago Stock Exchange closed slightly higher Tuesday, helped by gains in Coca Cola bottler Andina.

Chile's blue-chip Ipsa index ended up 0.2 percent at 1,205.09 points, while the Inter-10 index of more liquid, internationally traded shares rose 0.3 percent to 117.58. Volume plunged to 9.92 billion pesos.

Top gainers included Andina, whose B-shares surged 4.2 percent to 979 pesos on speculation it might buy Peruvian peer Embonor.

Banco Santander Santiago rebounded from Monday's declines, rising 1.8 percent to 13.90 pesos.

Utilities holding Enersis headed the other way, giving up in profit-taking after a sharp rise Monday. It lost 0.5 percent to 63.30 pesos.

CARACAS, Venezuela (AP) -- Venezuelan shares ended higher Tuesday following a 10 percent jump in the market's biggest stock, CA Nacional Telefonos de Venezuela, whose investors resumed conversions to American Depositary Receipts Monday for the first time in almost four months.

The transfer agent for CANTV, as the company is known, suspended conversions after the government declared capital controls in February, awaiting clarification of the new rules.

The IBC General Stock Index, of which CANTV accounts for 40 percent, closed 6.5 percent higher at 11,105 points, the highest since September 1997.

Total trading was equivalent to about US$1 million, of which CANTV accounted for about 75 percent.

Posted on Tue, May. 27, 2003 By Kevin G. Hall Knight Ridder Newspapers

BUENOS AIRES, Argentina - Cuban dictator Fidel Castro's ability to draw more than 10,000 Argentine supporters to an off-the-cuff outdoor speech on a cold night illustrates the aging communist strongman's resurgent appeal in Latin America.

In the 1990s, when Latin American nations undertook free-market reforms that yielded economic booms, most leaders kept their distance from Castro. But most countries in the region are now in economic crisis, poverty is rising and Castro's identification with efforts to lift the poor is back in vogue.

Leftists wary of privatization and unbridled open markets now rule in Chile, Brazil, Venezuela and Ecuador. Politicians described as center-left and populist rule in Peru, Paraguay and Argentina. Only war-ravaged Colombia and Bolivia have clearly conservative presidents.

Castro stole the show at Sunday's inauguration of Argentine President Nestor Kirchner. Two years ago in Mexico, Cuba's human rights record earned him cold shoulders from regional leaders. But on Sunday, Argentine lawmakers received Castro with thunderous applause, overlooking his recent jailing of prominent artists and dissidents and the summary trial and execution of three ferry hijackers.

On Monday night, Castro was to deliver an address at the University of Buenos Aires law school, known for promoting human rights in a country where 30,000 are believed to have been killed by military dictatorships in the 1970s and 1980s.

Hordes of listeners - thousands more than the law school's auditorium could hold - overran security guards and trampled those inside. That forced the postponement of what was to be the first address by Castro on the native soil of Cuban revolutionary icon Ernesto "Che" Guevara. The event was moved outside onto university steps, where hours later thousands arrived to hear a trademark fiery Castro speech that lasted more than two and a half hours.

What is Castro's appeal? One explanation is the failure of U.S.-espoused economic reforms to narrow social gaps, followed by the election of a new batch of leftist leaders in South America who are friendly to Castro's social views.

"The neo-liberal idea has received a colossal blow," Castro said Monday night, wearing a suit but no overcoat despite temperatures in the high 40s. Now 76, Castro was overcome by emotion several times during a rambling speech that ranged from blasting President Bush to eulogizing Guevara, who was killed in Bolivia in 1967.

Carlos Manfroni, a conservative Argentine political analyst, blames rampant corruption for the failure of the economic policies of the 1990s to improve the lot of the poor and for the gains of Castro supporters in South America.

"When countries fail because they cannot combat corruption effectively, this discredits the free market and leads to nostalgia for positions that are more statist and protectionist," he said. "This is what opens the microphones again for the left."

To most Americans, Castro is associated with Cuba's Cold War alliance with the Soviet Union and exiles fleeing his regime on makeshift rafts. In Latin America, he's revered for standing up to the United States and for providing universal access to health care and higher education.

"People are blaming the United States for their bad economic situations," said Yosdany Piloto, a Cuban living in Argentina who was upset by Castro's warm reception.

"They (the students) should go live in Cuba to see what it is like," he said.

Castro reminded his large crowd Monday that life is tough in the United States. He said the cost for getting a medical degree in the United States now was estimated at about $200,000, while Cuba has granted 10,000 scholarships for Third World students to study medicine under its respected health-care system.

By offering free medical training, "Cuba has saved Third World countries some $2 billion," Castro boasted to the cheering crowd.

Venezuelan President Hugo Chavez, Castro's closest Latin American ally and a political protege, called this week in Argentina for creating a new political and economic bloc in Latin America.

One of the first tests of whether that bloc can be formed may be the ongoing talks to create a Free Trade Area of the Americas by 2005. All nations in the hemisphere except Cuba began negotiating the trade pact in 1994, but Brazil, Argentina and Venezuela now have signaled they may want to strengthen regional economies before concluding a trade deal with the United States.

U.S. Trade Representative Robert Zoellick is in Brazil this week, in part trying to determine whether Brazil and its allies intend to stick to the timetables agreed to back in 1994.