May 28 (<a href=quote.bloomberg.com>Bloomberg) -- Colombia's economic grew at its fastest pace in five years in the first quarter, boosted by a surge in construction that has been fueled by low interest rates.

The $82 billion economy grew 3.8 percent in the quarter from a year earlier, compared with 2 percent in the fourth quarter, the national statistics agency reported in Bogota. A median of eight economists surveyed by Bloomberg had projected growth of 2.78 percent. Colombia's economy grew 5.9 percent in the first quarter of 1998.

``People aren't afraid of taking out loans anymore because interest rates are stable,'' said Oscar Ivan Rodriguez, a car salesman at Chevrolet dealership Continautos SA, who says his sales doubled from a year ago.

Interest rates near historic lows have helped spur construction and purchases of big-ticket items such as homes and cars. Falling unemployment in turn has boosted retail sales, increasing orders for manufactured goods and helping to spur economic growth.

Construction grew 15.8 percent in the quarter, the agency said.

The peso fell 0.4 percent to 2,879 in early trade and has declined the same amount so far this year.

The benchmark interest rate -- the average of 90-day deposit rates on which most rates are pegged -- averaged 7.7 percent in the first quarter, from 11.1 percent a year earlier.

``I sold three properties in February compared with only one a year ago as people are buying again because of the low rates and government incentives,'' said Enrique Mendoza, a real estate salesman at Ospina & Cia Ltda real-estate agency.

Prices, Subsidies

Along with the low interest rates, construction is also getting a boost from prices near decade-old levels, a shortage of available units, government subsidies for low-cost housing and tax breaks for high-income home purchases.

Building approvals rose 34 percent in February to 872,601 square meters (1,047,121 square yards) from a year ago, while approvals for the 12 months through February gained 20 percent from the same year-earlier period. Construction has been rising since 2000, even as it hasn't recovered to 1995 levels.

Retail car sales rose 34 percent in March from a year earlier, as low interest rates and promotions offered by dealers boosted purchases. Car loan rates are about 21 percent, down from about 30 percent a year ago.

Continautos' Rodriguez says he sold about 30 vehicles in the first quarter, double what he sold last year, thanks to the low rates and promotions his company was offering. Of those, nine were sport utility vehicles, compared with none a year ago, as theft of the four-wheel drive vehicles dropped off as the government stepped up its war against leftist rebels.

`Highly Prized'

Nobody wanted to buy them when they were being stolen and taken to the former demilitarized zone, as they were highly prized'' by the rebels, said Rodriguez. Now the security measures in place are giving people confidence to travel by road again and investment in general is picking up.''

The army's February 2002 invasion of a former demilitarized zone used for peace talks was the prelude to a general government crackdown on the Revolutionary Armed Forces of Colombia's four- decade insurgency that has led to a decline in kidnappings, increased security on highways and greater investor confidence in the nine-month-old administration of President Alvaro Uribe.

Another sign of restored confidence is the strength of the peso, which is unchanged for the year, compared with a 21 percent decline last year. The 10 percent coupon global bond due in January 2012 rose in February and March and reached a historic high of 114.8 on May 12, with its yield down at 7.6 percent.

Industrial Production

Industrial output, excluding coffee processing, rose 5 percent in February from the year-earlier month, an eighth consecutive month of gains. Output of building materials has helped lead the rise in industrial output. Industrial sales rose 5.7 percent.

``The strong use of installed capacity in factories and the high energy usage growth of 4.3 percent in April from a year ago, indicate that industry should do well,'' said Felipe Gomez, head of research at Suvalor brokerage in Medellin.

Exports to Venezuela, the No. 2 trading partner, have been slashed two-thirds due to a strike and currency controls in the neighboring country. Still, Colombia has countered that effect by increasing exports to the U.S. and other markets. Last Updated: May 28, 2003 13:12 EDT

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, May 28, 2003 By: David Sheegog

Date: Wed, 28 May 2003 10:17:28 -0500 From: David Sheegog davidsheegog@hotmail.com To: Editor@VHeadline.com Subject: Oliver Campbell deserves credit

Dear Editor: Oliver Campbell deserves credit for giving credit to PDVSA for restoring production from Venezuela's oil fields ... his caution against listening too much to "experts" should also be taken to heart.

There is an iron law of petroleum production, however, that is missing from his article, and that is: peak of production follows peak of discovery.

That has happened already in the United States, where peak discovery was in 1939 and peak production in 1970.

Once a net exporter of petroleum, the US now imports 56% of its consumption.  Peak production has happened as well to three out of four of those which Campbell mentions ... the North Sea, Libya, and Prudoe Bay ... it will happen in Nigeria and Venezuela. Peak of world discovery was 1973. (Statistics are from the US Energy Information Agency)

The importance of this fact is that, if a major oil producing country, such as Venezuela, intends to have a vibrant economy after peak of oil production, planning for the eventual depletion of it's oil reserves is extremely important work for everyone: the government, the private business sector, and all other institutions and individuals that can contribute to a country's long range planning.

That work was not done ... still isn't being done in the US, with the result that this country is now, by far, the largest end-user (and waster) of petroleum in the world on an absolute and per-capita basis. We have an economy that is addicted to oil ... cheap oil ... and the "planning," if you can call it that, is to use our incredible military strength to insure that we keep getting it.

An immoral approach by most anyone's standards, and one not possible for the rest of the world.

The task before all of us in the developed and developing world is to envision the world without cheap oil. That world will have to look and function differently than the one we live in today.

Mr. Campbell, is right that improved recovery methods have made it possible cost-effectively to extend the life of many reservoirs. I witnessed that in my native Oklahoma; however, there are now more capped wells than producing wells here. When it takes more oil-produced energy to pump oil from a well than is recovered, then all the improved recovery in the universe can't make it cost-effective to remove that oil.

Energy economists refer to this as EROEI (energy-return-on-energy-invested).

The energy cost of deep sea production and other difficult extraction zones has already prohibited some of them from being developed. Another iron law of petroleum production is that the easiest and cheapest to produce fields will be developed first ... they have been already.

Venezuela, like the United States, has been fortunate to have abundant oil and gas resources. But those resources are finite. Whether the world has another 40 or 100 years of usable petroleum is less moot now than it was when the first predictions were "40 more years" as Mr. Campbell remembers. Improved science in geology, exploration, reservoir engineering, secondary recovery technology etc. have given us a much clearer picture of the world's petroleum reserves and how long they will last.

Peak world oil production will come within the next twenty years ... the depletion curves on any and all fields look much steeper in descent than production curves going up simply because we've become so much better at extraction, as Mr. Campbell points out.

With proper planning, the remaining oil could be made to last a very long time ... but that planning is mostly not being done, except in a handful of places, Denmark, Netherlands, Iceland, Cuba, that I am aware of.

• President Chavez Frias deserves credit for his initiatives to diversify the Venezuelan economy as well as for his efforts in restructuring PDVSA to enable it to get back most of it's lost production so quickly.

In the long, long haul the restructuring of Venezuela's economy to be more self-sufficient and energy efficient is the more important ... as it is for the whole world.

David Sheegog davidsheegog@hotmail.com Oklahoma, USA