Reuters, 06.18.03, 5:01 PM ET   By Jose Maria Amarilla ASUNCION, Paraguay (Reuters) - South American leaders vowed Wednesday to make the moribund Mercosur trade bloc a common market by 2006 in an effort to counter U.S. dominance in Americas-wide free trade talks. Galvanized by the new presidents of Brazil and Argentina, the bloc is also looking to expand after four years of near paralysis triggered by Brazil's currency crises in 1999 and 2002 and Argentina's economic collapse last year. "Strengthening Mercosur is essential for carrying out negotiations with other countries and trade blocs," Brazilian leader Luiz Inacio Lula da Silva said. "In this way, South America's strong presence in the world will be guaranteed." Mercosur -- or the Southern Cone Common Market -- was founded in 1991 by Argentina, Brazil, Paraguay and Uruguay. Bolivia and Chile are associate members of the world's third-largest trade bloc comprising 240 million people. The bloc functions as a customs union. People and goods do not move freely across borders, and constant disputes arise over a few remaining tariffs, dumping and farm subsidies. Argentine President Nestor Kirchner -- who took office three weeks ago vowing to favor Mercosur over the United States and Europe -- said Venezuela, Colombia, Peru and Ecuador should be incorporated into the bloc. Venezuelan President Hugo Chavez, a guest at Wednesday's summit, backs the same goal. South American leaders want to bolster Mercosur to present a strong front in talks on the Free Trade Area of the Americas, the 2005 launching of which is U.S. President George W. Bush's top policy priority in Latin America. "We should not allow ourselves to be guided by imposed, predetermined timetables, but rather by the outcome of mutually beneficial negotiations," said Kirchner, Argentina's sixth president in 18 months. On Tuesday, South American economy ministers and central bank presidents renewed calls for working toward common macroeconomic goals adopted in 2000, before Argentina's economic crisis sent shock waves throughout the region. And Argentina proposed the creation of a monetary institute to coordinate policies and eventually design a single regional currency along the lines of the successful euro.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, June 18, 2003 By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: In late March 2003 a plan was put forward in the Venezuelan Agrarian Corporation (CVA), by its president Freddy Gil, to create firms to process corn, chicken, milk, and fruits, among other food products. This initiative was intended to offset the effects of the general strike of late 2002 and early 2003, plus the impact of the foreign exchange restrictions on the different sectors of the national economy.

The plan is now again under discussion at the CVA, and the creation of two soy milk plants has been announced, as well as the possible construction of several parboiled corn flour processing plants. Gil revealed a plan to create seven mini-plants over the next 16 months, with a total investment of 34 million dollars contributed by international financial institutions and raised by borrowing under the "Umbrella Act," according to a report carried by the El Universal newspaper in today's edition (Wednesday). But access to financing could prove more difficult than expected, given the perception overseas of high risk in the Venezuela economy and the National Treasury's cash shortage, not to mention the major expansion of public debt since 2001.

Though the new companies' equity structure is not yet clear, the strongest critique leveled against projects of this kind has to do with the well-known inefficiency of State-owned enterprises, with their high transfers and labor costs, low profit margins, and incorrect allocation of resources. As a result, privatization is constantly proposed as the answer to those inefficiencies. The intention of creating an intensely interventionist State is becoming clearer all the time, and that trend impairs the markets' natural dynamics. The end result is a steady decline of supply of goods and services, since the small amounts of available resources are channeled to the most inefficient producers.

Before embarking of projects of this kind, the government should start worrying about how to restore regular commercial activities, overcome the paralysis of the foreign exchange market which is strangling national industry, and allow production to meet the needs of a depressed local market and thereafter market surplus output abroad, thereby spurring the economy's growth by making use of the advantages of foreign trade.

YOLANDA OJEDA REYES EL UNIVERSAL

Venezuelan President Hugo Chávez attended a presidential summit of the Southern Common Market (Mercosur) for the second time as a special guest. This move shows that Chávez is determined to speed up Venezuela's incorporation to the regional trade bloc, leaving aside his country's historic integration with the Andean Community of Nations (CAN).

During President Rafael Caldera's administration, Venezuela took the first steps towards integration with Mercosur, but economic analysts warned that the southern giant could gobble Venezuela's industrial sector. At the time, the country needed an increased industrial maturation. Now, such considerations are not included in Chávez' agenda. Under his rule, politics has prevailed over the opinion of experts warning that an integration pact with Mercosur may be harmful for Venezuelan companies.

International analyst Elsa Cardozo states that Brazil is basing its relationships with Venezuela on two grounds: geopolitics and economy. Regarding the economic field, President Luiz Inácio Lula da Silva's administration is actually pondering the strengthening of Brazilian economy as a result of a wave of imports made by Venezuela from Brazil "in order to finish up the Venezuelan private sectors, which will have a favorable impact on the trade balance" of Brasilia.

In this sense, healthy moves to make the Venezuelan industries rebound "are not included in the model of President Chávez." Cardozo believes that a likely association between Argentina and Brazil -which represent 90 percent of Mercosur- may lead to a conjuncture favoring Venezuela's entry to the regional bloc. "They are thinking in business terms: how much am I going to sell to Venezuela?" She also believes that before attending Mercosur summit in Paraguay, Chávez' administration conducted a fierce campaign to show off its bonds with Brazil.

President Chávez has a negative opinion about CAN. Recently, the body's secretary general suggested that, given the slowly progress in negotiations with Mercosur, CAN may rather start talks with the United States. Chávez did not love the idea. But that is not the only reason for Chávez' attitude against CAN. When his government chaired CAN, Venezuela sought its integration with Mercosur unilaterally, leaving Colombia -a long-time trade partner- aside.

"He (Chávez) lost interest in CAN long time ago. He is interested in Mercosur, but not for economic reasons. He is looking at a geopolitical integration, because he believes that a Latin American integration made this way may be helpful to stop the progress of globalization and neoliberalism."

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, June 18, 2003 By: Patrick J. O'Donoghue

The United Nations High Commissioner's Office for Refugees (UNHCR) representative Maria Virginia Trimarco says she hopes the Venezuelan government will appoint the committee that will regularize the migratory status of at least 2,000 Colombians that have fled to Venezuela escaping political violence. 

"We expect the government to name members of the committee on Friday coinciding with World Refugee Day."

Executive Vice President Jose Vicente Rangel had promised to help the UNHCR in implementing the Venezuelan Refugee law passed in 2001, which stipulates the conformation of the committee with representatives from the Defense and Foreign ministries, as well as other relevant institutions. 

Trimarco highlights the plight of Colombians living in border areas and warns that the situation will become worse ... "we also hope that the committee will deal with a large number of Colombian citizens living illegally in Venezuela."

According to Trimarco, Ecuador and Costa Rica have the best legislation on displaced persons ... "those governments have also implemented and acted on the law."

June 18 (<a href=quote.bloomberg.com>Bloomberg) -- Petroleos de Venezuela SA, the state oil company, will resume exports of reformulated gasoline from its Paraguana refinery on Sunday, almost seven months after they were halted because of a nationwide work stoppage.

A shipment of 300,000 barrels will be sent to the U.S. east coast, said a Petroleos de Venezuela spokesman at Paraguana, the world's largest refinery complex. The shipment was supposed to go out a month ago but was repeatedly delayed because of planned maintenance at the Puerto La Cruz refinery, said the spokesman.

The shutdown of the Puerto La Cruz refinery meant that the gasoline that had been slated to be shipped was kept back for domestic use, the spokesman said. The Puerto La Cruz refinery resumed production last week.

Exports from Paraguana, which includes the Amuay and Cardon refineries, were slashed in December when a nationwide strike began. The refinery resumed operations in April, two months after the end of the strike, which was aimed at ousting President Hugo Chavez.

Paraguana exported about 3 million barrels of gasoline, all conventional unleaded, in April and May. Reformulated gasoline, which is especially blended to reduce tailpipe emissions, is more difficult to produce.