<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 03, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write:  May saw an upturn in the Consumer Price Index for the Caracas Metropolitan Area (CPI-CMA) ... its 2.3% increase put the cumulative inflation rate for the first five months of the year at 13.8% and the annualized rate (over the last 12 months) at 35%. The Wholesale Price Index, which measures the value of goods and services at wholesale, rose 3.1% in May, to make for a 62.3% surge in the January-May 2003 period. At the same time, the Workers' Documentation & Analysis Center (CENDA) announced that the cost of its staple food basket rose 8% from April to May.

All this is paradoxically happening at a time when price controls are in force.

The government, for its part, announced this week that it will authorize price increases for some regulated products ... and said that, as it analyzes the situation of each segment of agriculture, it will continue relaxing its price controls.

There is not the slightest doubt that price and exchange controls have provoked serious distortions in the Venezuelan market. Producers find it very difficult to produce because of the lack of foreign exchange to acquire inputs, and price controls cause "formal" merchants to prefer reducing supply of goods as a way to avoid losses or penalties for selling at prices above the regulated levels.

Historically, price controls have proved to be inefficient ways to prevent the generation of inflationary processes; not only do they distort the allocation of resources, but they merely postpone inevitable price adjustments, making things worse in the long run.

The causes of inflation lie in the inconsistencies among monetary, fiscal, and exchange policies ... fiscal pressures generate a monetary financing of budget deficits, which results in an excessive expansion of liquidity and successive devaluations of the currency, which in turn drive up prices.

All this leads us to believe that, if there is no change in these policies, and if additional devaluation, rising budget deficits, and excessive liquidity expansion are not avoided, the price control system will accomplish nothing but repress price adjustments that will have to happen sooner or later. But if there is an improvement on those fronts, the future price deregulation will have a smaller impact, because the incentives for a massive acceleration of price growth will be smaller. Decontrol will then only affect the price level, but not its rate of growth.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 03, 2003 By: Patrick J. O'Donoghue

The Venezuelan Attorney General's Office has issued a statement about rebel National Guard (GN) General Carlos Alfonzo Martinez' alleged lack of collaboration, claiming that he has refused for the fourth time to be interviewed by a state prosecutor. 

125th Caracas State prosecutor, Gilberto Venere was sent to interview the General and investigate if the latter's human rights were violated during his long arrest process ... the General is still under house arrest at his Fuerte Tiuna residence. 

• Alfonzo Martinez and his lawyer, Emilio Tapia allegedly told the state prosecutor that he, the General, would not make any declaration as a victim of injustice. 

The General was placed under house arrest in December after he attempted to pull rank and convince National Guard soldiers (GN) not to obey orders from superiors to disperse an opposition gathering in front of the GN Command in Caracas declared a security zone. 

The General stands accused of inciting to rebellion and attempting to get the Armed Force (FAN) to join the national stoppage. The Supreme Tribunal of Justice (TSJ)  ruled two weeks ago that Alfonzo Martinez remain under house arrest awaiting a decision on whether he must undergo a trial.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 03, 2003 By: Patrick J. O'Donoghue

Executive Vice President Jose Vicente Rangel and government negotiators have held a press conference, insisting that the government is serious about the recall referendum and that it has its doubts whether the opposition is just as serious. 

Calling the current stage of relations a "fourth coup," Rangel accuses the opposition of distorting the facts and points to Proyecto Venezuela's (PV) propaganda slogan "Vote Yes on August 19!" as an example. 

Rangel says the claim is fraudulent and contentious  ... "there won't be any election or recall referendum on August 19 ... it will depend on a trustworthy National Electoral College (CNE) , collection of signatures by people wanting a recall referendum and revision of signatures ... finally, the CNE must convoke the referendum and fix the date." 

Government negotiators, Nicolas Maduro and Aristobulo Isturiz see the opposition's tactics as a "social  coup" because opposition deputies are calling on people to take to the streets and threatening insurrections, if the recall referendum doesn't come off on August 19.  Isturiz contends that the "social coup" is working at half steam with opposition media highlighting social problems, such as street children, external debt and inflation. 

Vice President Rangel comments that the opposition message is that if the government fails to comply with the referendum, then there will be an insurrection ... "we have our doubts as well about opposition compliance." 

Movimiento Quinta Republica (MVR) deputies, Omar Mezza and Calixto Ortega have been appointed as government representatives on the agreement liasion committee.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 03, 2003 By: Patrick J. O'Donoghue

Venezuelan human rights group (PROVEA) general coordinator, Carlos Correa has once again criticized the media content law (officially called the Social Responsibility on TV and Radio Law) because he says it promises disproportionate penalties and regulates the greater part of print & broadcast media. 

Correa says PROVEA has been doing its homework and has not discovered any other country in the world where TV and radio concessions have been revoked on the grounds typified in the draft law. 

Referring to the so-called Public Demonstration Law, Correa says that although PROVEA has not studied the draft proposed by Venezuelan Procurator General, Marisol Plaza, PROVEA maintains that  demonstrations and protests are "an inalienable right and must be guaranteed by the Venezuelan State."  

On the thorny issue of reinstatement of Petroleos de Venezuela (PDVSA) workers dismissed for their participation in the national stoppage, PROVEA has lodged a complaint at the Supreme Tribunal of Justice (TSJ) about what it considers a highly discriminatory measure against former PDVSA employees. PROVEA leader, Marino Alvarado says it's the biggest dismissal in Venezuela's history and a grave concern for PROVEA. 

"We hold President Chavez Frias responsible for the way workers have been discriminated against ... we are aware and know of circulars sent to PDVSA subsidiaries and contractors banning them from hiring dismissed workers." Alvarado reveals that the measure has been extended to include dismissed workers' families. 

• PROVEA wants the government to drop a petition to eliminate Hydrocarbons Law Article 32 concerning labor stability introduced by PDVSA president, Ali Rodriguez Araque.

Movimiento Quinta Republica (MVR) is said to be investigating claims that PDVSA-East directors have re-employed former PDVSA staff that joined the stoppage and thrown out workers, who were part of anti-stoppage contingency plans.

Oil Workers Federation (Fedepetrol) and the Venezuelan Confederation of Trade Unions (CTV) have rushed to the Supreme Tribunal of Justice asking it to throw out the government's petition to declare Article 32 null and void ... Article 32 states that State sector oil workers (except members of boards)  enjoy stability at work and can only be fired for causes highlighted in the Labor Law.