<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 27, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: At this time, Venezuela is in the midst of great instability and distortions that are exerting pressure on internal and external markets. Political and social conflict, as well as the economic paralysis stimulated to a great degree by exchange and price controls, stand out. All these elements can be significantly endangering Venezuela's participation in foreign trade, given that our commercial partners could be taking measures to replace the absence of Venezuelan products in their respective markets.

The handling of economic policy, above all the intention of the Government to continue with a strongly restrictive policy toward the delivery of foreign exchange to economic sectors has had an effect on opinion. This is the case of the member countries of the Andean Community of Nations (CAN), who a few weeks ago gave a time limit to Venezuela to at least make the exchange system more flexible.

Simultaneously, these countries are trying to promote negotiations for a bilateral agreement with the United States, in the first place because of the delay in the agenda of the Americas Free Trade Treaty (AFTT) and perhaps because of the reduction of sales to Venezuela, the other member country, to avoid a contraction of markets for their products. This situation could be further affected by the perspectives of Venezuela's actions in the commercial sector, given its open refusal to advance negotiations to join AFTT.

Other commercial partners who seek commercial alternatives to reduce the negative consequences provoked by exchange control in Venezuela include the Group of Three (G-3), Colombia, Mexico and Venezuela. The need to compensate the absence of Venezuela in commercial trade could mean losses of more than $1 billion in Venezuelan exports.

The difficult environment in which Venezuela is operating, the high dependence on the petroleum sector, the existence of an anti-export bias and a lack of competitiveness of the non-petroleum sector are sufficient obstacles to assume a more open commercial policy, but the new exchange control measures could come to represent an important loss for Venezuela given that its commercial partners are looking for new markets.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 27, 2003 By: Patrick J. O'Donoghue

Opposition groups are still deciding on how to react to the government-opposition negotiators agreement expected to be signed this coming week. Minor Coordinadora Democratica (CD) political parties: Union, Movimiento al Socialismo (MAS), Alianza Bravo Pueblo (ABP) and Solidaridad have announced that they will accept the 19-clause agreement as it stands, even though they have reservations about particular clauses.

Proyecto Venezuela (PV) and Primero Justicia (PJ), which have distanced themselves from the CD, are coming around to Jorge Olavarria's opinion that an across-the-board recall referendum process should be accepted and that the agreement guarantees an electoral process.

Of the major parties, Christian Socialist (COPEI) has accepted whereas Accion Democratica (AD)  has been putting on airs, saying it is still discussing article by article. The Adecos have called in former Presidential Secretariat Minister and constitutional lawyer, Asdrubal Aguiar to advise them on each article of the agreement. 

The increasingly arrogant AD president, Henry Ramos Allup, who is on a roll since Saturday's allegedly successful "Assault on Catia," says AD will not sign any agreement without reviewing each point. Allegedly speaking for all opposition negotiators, Ramos Allup conforms that neither negotiators  nor CD nor anybody will sign a closed document. "If we sense that the government wants us to take it or leave it, then we will not sign." 

Other signs of inconformity among opposition parties have been appearing ... Primero Justicia (PJ)  has criticized Proyecto Venezuela (PV) leader, Henrique Salas Romer and CD leader Miranda State Governor Enrique Mendoza for promoting divisions in the opposition camp. 

PJ general secretary Jose Luis Mejias says PV had invited both men to a private meeting in November 2002, urging then to create a united front and to drop the personal confrontations ... "Venezuela does not want to see a struggle between the two persons or fights between AD, PV and PJ ... the country wants the opposition to unite."

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 27, 2003 By: Patrick J. O'Donoghue

Venezuelan Army Captain Michael O'Brien's defense lawyer, Gustavo Parilli complains that President Hugo Chavez Frias, the Defense Minister and Army C-i-C  are not complying with legally authorized measures to protect his client. 

Parilli, who is dismissed rebel General (ret.) Manuel Rosendo's lawyer, recalls that the 5th Caracas Control Judge ordered the government to introduce protection measures in favor of O'Brien Fossi after the events of April 11. 

General Manuel Rosendo used Captain O'Brien's version of a conversation between Jose Vicente Rangel and Libertador Mayor Freddy Bernal on April 11, alleging that Rangel had told Bernal to bring down Bolivarian Circles from the Caracas hillside slums with sticks and stones to prevent an anti-government crowd from marching on Miraflores. 

• Opposition media picked up on the Captain's allegations, which government sources say was gossip, to boost its take on the Llaguno Bridge shootings that occurred later in the afternoon.

O'Brien has kept his head down since the his superior, Rosendo used his aide's bit of news to defend his own actions on April 11 (2002) when as Armed Force Unified Command (Cufan),  Rosendo cut off communications with the President preventing the implementation of an emergency security plan called Plan Avila to counter disturbances. In view of posterior revelations of US government involvement in the coup, General Rosendo will have to clarify his April 11 disappearing act.

O'Brien's lawyer confirms that the lives of the Captain and his family are in danger. However, the lawyer did not offer details regarding if the government had withdrew protection and when ... it is also unclear whether O'Brien continues as an active service officer or has been discharged. 

What news agencies agree on is that there was a legal order banning the transfer of O'Brien from Caracas to any other part of Venezuela and that apparently the Captain has been asked to make another declaration on what he overheard on April 11 in the morning and has refused. Lawyer Parilli promises to take the Captains' case to the Inter American Human Rights Commission.

May 27 (<a href=quote.bloomberg.com>Bloomber) -- Mexico's peso was headed for its biggest decline in four months after yields fell to near record lows at today's government Treasury bill auction, prompting some international investors to sell pesos to seek higher returns for their dollars in other markets in the region.

The peso fell 1.8 percent to 10.4250 per dollar from 10.2423 yesterday at 4:15 p.m. New York time, its biggest one-day decline against the dollar since Jan. 21. Brazil's real reversed a plunge to trade little changed while other regional currencies declined.

Short term rates hit an all-time low of 4.90 percent two weeks ago, below the trailing 12-month inflation rate, making Mexican assets less attractive to overseas investors. Adding to the peso's decline, Mexico on Friday said its trade deficit widened in April from a year ago on declining exports, which account for a quarter of its $600 billion economy.

``The short term is getting very unappealing with yields at around 5 percent -- it's the very low interest rates,'' said Guillermo Estebanez, a currency strategist at Banc of America Securities Inc. in San Francisco.

Last week, traders reduced their long positions in peso future contracts to 20,812, after hitting an all-time high of 23,942 the week before. A high number means the peso may fall further if those contracts are unwound.

The long positions are a little lower, but still huge,'' said Estebanez. Anytime you're so long, you have the risk of a correction.''

The peso fell to a record low of 11.2644 on March and is the 10th-worst performer among the 59 currencies tracked by Bloomberg in 2003.

Brazil

Brazil's real pared declines to trade little changed after exporters took advantage of its 5.7 percent plunge against U.S. currency to sell overseas dollar earnings.

The real weakened 0.1 percent to 3.0280 per dollar, after extending yesterday's 3.8 percent decline by falling 1.9 percent to open trading today. The real has gained 17 percent against the dollar in 2003, the second-best performance of the currencies tracked by Bloomberg.

Investors sent the real into a tailspin yesterday that continued today after the central bank said it will end a commitment to refinance all dollar-indexed securities used to hedge currency risk when they mature. Once the real's losses over the two sessions neared 6 percent this morning, a number of exporters sold dollar-export earnings with the U.S. currency at its strongest level in three weeks, traders said.

We have an excess of dollars in the market because exporters' sales of the currency,'' said Joao Medeiros, a partner at currency broker Pioneer Corretora de Cambio SA. What we see is that in reality exporters are selling dollars above the 3-real level and aren't interested in anything lower than that.''

Policy Mix

The bank's decision may increase the demand for dollars and signal the government wants to stem the real's gains to safeguard export growth, which may contribute more than half of Brazil's 2003 expansion now forecast by the government at 2 percent. The policy shift also serves to highlight a growing divide within the administration of President Luiz Inacio Lula da Silva over the benefits and liabilities of the real's resurgence in 2003.

The real's strengthening against the dollar this year pits supporters of a stronger currency to slow inflation and the cost of servicing dollar-denominated debt against those who believe a weaker real will promote exports and growth.

Support for a stronger real follows its 35 percent decline against the dollar last year that sent the cost of imports soaring, fueling an acceleration of inflation to a seven-year high, which has only begun to slow under the weight of lending rates at a four-year high of 26.5 percent.

The stronger real and high interest rates have slowed a surge in Brazil's 12-month inflation rate to 16.8 percent that revived investor concern Brazil's roughly $350 billion in debt, about two- fifths of which is dollar-linked, might prove unsustainable.

Export Competitiveness

Against lower inflation and investor confidence, some exporters and members of Lula's government have argued that the government should work to strengthen the dollar to sustain a revival by the country's exporters dating to last year.

Exporters' overseas sales of automobiles, soybeans and other products increased as the real's decline against the dollar made their goods more competitive on overseas markets.

Increasing exports would also lessen the dependence of South America's largest economy on foreign investment. Brazil's exports make up about a sixth of its gross domestic product, compared with more than a quarter for Mexico and a third for Chile.

The central bank has done everything not to call it a floor, but there's no other way to interpret their decision,'' said Alexandre Vasarhelyi, head of currency trading at ING Bank NV's Sao Paulo office. This as an important signal that may trigger an increase in dollar-demand, because until yesterday the government's stance was always in favor of a strong currency.''

Brazil's benchmark 8 percent bond maturing in 2014 fell for the first session in a week, losing 0.63 cents on the dollar to 89.25 cents, according to J.P. Morgan Chase & Co. The yield rose to 10.66 percent.

Regional Currencies

Argentina's peso declined for the third day in four, losing 1.1 percent to 2.8650 per dollar from 2.8350 per dollar.

Chile's peso weakened for the first day in five, losing 0.8 percent to 710.65 per dollar, while Colombia's peso weakened for the sixth day in eight, shedding 0.3 percent to 2,866.30 per dollar.

Peru's new sol was little changed at 3.4920 per dollar. Venezuela fixed its bolivar at 1,598 per dollar earlier this year. Last Updated: May 27, 2003 16:16 EDT

Tue May 27, 2003 03:49 PM ET

NEW YORK (<a href=asia.reuters.com>Reuters) - World oil prices hit fresh five-week highs on Tuesday, as the prospect of less supply from OPEC producers threatens to cut further into low U.S. fuel inventories.

U.S. light crude rose 19 cents to $29.35 a barrel, after hitting a high of $29.63, the highest level since in over a month. London benchmark Brent rose 10 cents to $26.34 a barrel.

Prices rose on a renewed pledge from Saudi Arabia, the world's top oil exporter, that beginning in June it would abide by lower OPEC quota levels agreed to last month.

"The kingdom of Saudi Arabia will produce precisely according to its new quota of 8.256 million barrels per day (bpd) from June 1," a Gulf source told Reuters. "And it expects others to do so."

The Organization of the Petroleum Exporting Countries (OPEC) could make deeper cuts when it meets again on June 11 if Iraqi exports resume by then, cartel ministers have said.

U.S. inventories have failed to rebuild as much as expected following a harsh northern winter. Supplies could come under strain as U.S. gasoline demand, which guzzles around 12 percent of all world oil, peaks over the summer months.

"The biggest debate is how gasoline demand was over the weekend, with it sunny in some parts of the U.S. and rainy in the northeast," said Phil Flynn of Alaron Research.

Iraqi officials have said they hoped to resume exports in two or three weeks, with total production of 1.3 million to 1.5 million bpd by mid-June.

Exports from Iraq, normally around 4 percent of internationally traded oil and one of the top six foreign suppliers to the United States, have been halted since a U.S.-led offensive started in mid-March.

The U.N. Security Council's Thursday vote to lift 13-year sanctions on Iraq should allow exports to resume within the next few weeks, but looting and oil field damage will initially keep exports well below pre-war levels.

U.S. crude stocks are 12 percent below year-ago levels and gasoline inventories 4 percent below last year. The next U.S. inventory data will be released on Thursday.

Gasoline supplies from Venezuela, a key regional producer, have stayed well below normal since a two-month workers strike earlier this year.