The New Herald Posted on Thu, May. 29, 2003 BY RICHARD BRAND rbrand@herald.com

BACK ONLINE: The El Palito oil refinery in Venezuela is running again, loading tankers with gasoline, jet fuel and kerosene destined for foreign and Venezuelan pumps. The refinery is run by Asdrubal Chavez, a cousing of president Hugo Chavez. KIMBERLY WHITE/BLOOMBERG NEWS

EL PALITO, Venezuela - When President Hugo Chávez put his first-cousin Asdrúbal in charge of the El Palito oil refinery here in December during the height of a national strike, opponents cried nepotism and promised the move would backfire as reports of accidents mounted while a skeleton crew tried to resurrect Venezuela's third-largest refinery.

Four months later, El Palito is back online, loading tankers with gasoline, jet fuel and kerosene destined for foreign and Venezuelan pumps. The quick turnaround, accomplished with only 950 workers at a facility that once employed 2,200, has stunned many oil industry analysts who believed the process would take far longer.

The recovery at El Palito under Chávez has been mirrored across Venezuela's petroleum industry, at refineries, shipping centers and oil wells that are the lifeline of this oil-rich but politically divided nation.

Yet the extent of the recovery is in dispute. Officials at Petróleos de Venezuela, the state-run oil monopoly, say crude output has returned to prestrike levels of 3.2 million barrels per day. Analysts put that figure at closer to 2.6 million, a discrepancy worth billions of dollars a year.

''What is clear is that they have been able to materially increase their production,'' said Bruce Schwartz, an oil industry analyst at Standard & Poor's in New York. ``We were surprised at how fast PDVSA was able to restore production.''

Sitting in his new office overlooking a massive seaside complex of metal pipes, spires and choking clouds of sulfur smoke, Asdrúbal Chávez is triumphant.

``They said we would take six months, a year to recover. We did it in two and a half months.''

El Palito's two piers can accommodate four tankers between them. On a recent Saturday, workers loaded 300,000 barrels of jet fuel onto the Maltese-flagged Trogin, carrying a Russian crew. The load was worth an estimated $7.2 million and the refinery's most valuable shipment since the strike, said El Palito spokesman David Palm. The contents were bound for Canada's eastern coast.

Venezuelan national guard troops provide security over operations at El Palito.

''They said I wasn't qualified to run the refinery,'' Chávez said. ``But that was all a campaign of lies.''

For a president pitted against striking workers seeking a referendum on his rule and a divided military that had attempted to oust him months earlier, placing a trusted cousin at the helm of the El Palito, which provides gasoline to 10 critical states, seemed a smart strategic choice. After all, Asdrúbal, whose uncle is the president's father, had worked as a chemical engineer at El Palito for 21 years.

The two are apparently close. Asdrúbal boasted of playing pick-up baseball games with the president when they were young. Asdrúbal also said the president, who enjoys painting nature scenes on paper -- not canvas -- recently gave him several paintings as a present, and he displays them at home.

''We're chums,'' Asdrúbal said.

Asdrúbal is not the first of the president's relatives to rise to prominence. Older brother Adan Chávez is director of the National Land Institute. Ex-wife Marisabel, before the split, was a delegate to the constituent assembly that rewrote the nation's constitution in 1999. And father Hugo Chávez de los Reyes is the governor of Barinas, the family's home state.

After the national strike that brought Venezuela's oil economy to a grinding halt ended in February after two months, most anti-Chávez oil workers were fired, leaving PDVSA with 22,924 employees compared with 40,133 in prestrike days.

Among those who left were at least 10,949 analysts, 2,024 metal workers, 3,434 technicians, 649 executives and 154 tanker crewmen, said Edith Gómez, the new director of hydrocarbons at the energy ministry.

''There was an excess of personnel at PDVSA,'' Gómez said. ``We are adjusting without them.''

Gómez's plush, wood-paneled office in the penthouse of PDVSA headquarters belonged only months ago to a PDVSA executive who left in the strike, she said. The building's lower floors hold rows of empty offices, desks cleaned out. The ministry and PDVSA headquarters now share the same downtown Caracas address.

The departure of skilled workers and managers may pose safety risks for remaining employees, analysts say. Already, reports of fires, injuries and oil spills -- many denied by PDVSA officials -- have cast a cloud over recovery efforts.

''There have been clearly difficulties restarting PDVSA's refineries in that there have been fires and outages that have occurred,'' Schwartz said. ``It may be in part due to a less skilled workforce as a number of skilled managers were dismissed.''

Many of Venezuela's two million unemployed see opportunity in PDVSA's reduced workforce. El Palito refinery alone has received 25,000 résumés from people seeking employment, though Chávez acknowledges that ''only a few hundred have the skills we are looking for: engineers, human resources, lab technicians.'' Some of those will be hired.

The rest are from men like Alexander Vargas, 30, a welder who says he has been unemployed for 17 months. Since April, Vargas has joined dozens of people who make a daily pilgrimage to the chain-link entrance of El Palito, hoping the gates will swing open and somebody inside will offer him work.

''They need people inside,'' Vargas said, ``so I will continue waiting.''

Wednesday, May 28, 2003
(05-28) 22:45 PDT (AP) -- CHRISTOPHER TOOTHAKER <a href=www.sfgate.com>Associated Press Writer

CARACAS, Venezuela (AP) -- No live coverage of political violence. Limited daytime newscasts about terror attacks. No radio stations devoted exclusively to rock or other "foreign" music.

Venezuela's news executives say all this could happen if President Hugo Chavez succeeds in enacting a law that imposes harsh restrictions on what and when Venezuelan television and radio stations can broadcast.

Ruling party lawmakers defend the proposed law, saying it will protect children from violence and end what they call "selective censorship" by the news media, which they accuse of supporting the opposition. The also contend it will make broadcasters accountable to citizens.

"This project is a weapon to defend us as a people and guarantee public freedoms," said Juan Barreto, a member of the committee which drafted the bill and a journalism professor at the Central University of Venezuela. It upholds "freedom of expression, which doesn't belong only to channels and journalists but also to the people," he said.

Many press rights advocates, however, disagree. They say the law, now before the Chavez-dominated Congress, will allow an increasingly authoritarian government to silence opposition ahead of a possible recall vote on Chavez's presidency.

Chavez designed the Law for Social Responsibility in Radio and Television to bring "the news media to its knees," said Victor Ferreres, president of Venevision television.

"We would have to broadcast a blank screen and ignore almost everything that is occurring in the news" to comply with the law, Ferreres claimed.

Chavez has long accused Venezuela's news media of conspiring to topple him. Most broadcasters slanted coverage of a brief 2002 coup against Chavez, and many supported an opposition general strike this year.

Among other provisions, the law would ban "rude" and "vulgar" language; prohibit images and sounds related to alcohol and drug consumption, gambling and sex; and ban "psychological" or physical violence, all between 7 a.m. to 7 p.m.

Similar limits would apply to early morning and evening newscasts.

Sixty percent of all programming must be produced within Venezuela, and of that, more than half must be created by "independent producers" approved by Conatel, the state media watchdog.

Broadcasters say the law will allow censors hand-picked by Chavez to crack down on the mostly opposition news media. Violators can be punished with $37,000 fines or have their broadcast licenses revoked.

Advertisers, too, can be held liable -- a provision critics say is meant to starve stations of publicity at a time when Venezuela's news media are confronting an economic crisis.

Congress is expected to pass the bill by simple majority vote within weeks. Six of nine members of a committee to enforce the law would be appointed by Chavez.

"If there is a terrorist attack this morning, I'd have to tell listeners we have to wait to inform them during the news at 11 (p.m.) because it could be labeled 'violent content,"' said Leopoldo Castillo, a talk show host with Globovision television news channel.

Deputy Willian Lara, a Chavez confidante, said the law won't stop TV and radio from broadcasting news.

"The news can be reported like it is now, only the grotesque images are restricted," he said.

Critics are wary.

The legislation "is completely incompatible with international standards" of press freedoms, said Jose Vivanco, executive director of the Americas Division of Human Rights Watch. Definitions are so cloudy that some of Venezuela's prized daytime soap operas could be banned, he said.

Opposition groups pushing for a referendum on Chavez's presidency later this year are organizing marches against the law.

A leftist former army paratrooper, Chavez was elected in 1998 and re-elected to a six-year term in 2000.

Reuters, 05.28.03, 6:38 PM ET By Ana Isabel Martinez

CARACAS, Venezuela (Reuters) - Venezuela's CANTV is stirring up the Caracas stock exchange and not just because the nation's largest telecommunications firm is the traditional market leader.

Shares of CANTV, whose main shareholder is U.S. firm Verizon Communications, skyrocketed this week when investors discovered a lucrative loophole allowing them to skirt the nation's currency controls by buying the firm's stock.

A senior Caracas Stock Market source told Reuters that the Bank of New York Monday restarted conversions of the firm's local bolivar currency shares into dollar-denominated American Depositary Shares.

"From Monday, they have been converting them. The Bank of New York notified trading houses which are in the market," the source told Reuters on the condition of anonymity.

Since February when the government implemented the forex controls, the bank halted conversions while it studied whether the transactions would be legal under the new currency restrictions.

CANTV shares have risen 57 percent this month to historic highs and the stock has gained 18 percent this week alone.

The shares closed Wednesday on the Caracas bourse trading at 3,785 bolivars, down 1.7 percent from the previous day's close. The bolivar is set at 1,600 to the U.S. dollar under the current fixed exchange rate.

Buying the ADS shares (American Depositary Shares) of CANTV allows investors to convert bolivars into dollars and that creates a type of parallel currency market that the government has so far sternly rejected. Under the forex controls, many in the private sector have complained that the curbs are starving the economy of hard currency.

NO AUTHORIZATION

One senior CANTV source, who asked not to be identified, said that the firm was not involved in the conversions. A Bank of New York spokesman in New York said that the bank had not issued any statement regarding such transactions.

The state currency control board, Cadivi, said that it had not authorized the conversions.

"We have absolutely not authorized this kind of transaction...This is a very rigid currency control," Adina Bastidas, one of the Cadivi directors, told Reuters.

Still, the exchange control regime as it stands does not expressly forbid this type of transaction, which offers a discreet loophole with which to circumvent the tough curbs.

The official system only demands that ADS shares issued up to the date the controls were implemented should be registered with the Venezuelan securities and exchange commission. Shareholders must also apply to Cadivi for the currency to convert the stock, earnings and interest.

But Finance Minister Tobias Nobrega Wednesday acknowledged that the CANTV conversions were not illegal because they were not regulated under the controls. He said the government would make an announcement about the issue within the next few days.

Traders estimate that the exchange rate implicit in the transactions stands at around 2,300 bolivars to the U.S. dollar, well above the official 1,600 bolivar fixed rate. The scarcity of dollars has created a thriving black market trading at about 2,500 bolivars to the greenback. (Additional reporting by Silene Ramirez)

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

Trinidadian author and investigator Daurius Figueira is scheduled to blow the gaff on Venezuelan trans-shipments of Colombian cocaine in a Trinidad radio broadcast scheduled for Sunday.  A specialist on narcotics investigations, Figueira says he has given key information to Trinidad & Tobago Special Branch police on how the drug shipments are controlled by his country's corrupt elites to fund a local cell of the Al Qaeda terrorist network.

In an interview with Newsday reporter Nalinee Seelal, Special Branch official Frank Diaz denied discussing details with Figueira and claimed that no reports had been forwarded to him, otherwise they would be thoroughly investigated.

Figueira, however, says that the Jamaat Al Muslimeen ... led by Imam Yasin Abu Bakr ... is not linked to Al Qaeda but that there are clear links with the Indo-Muslim community ... he claims that Al Qaeda members are not interested in toppling the T&T government but they concentrate on the drug trade, until assignments are shifted.

Figueira have preliminary details about the T&T branch of the Al Qaeda network at a crime conference saying that Al Qaeda is carrying out a thriving trade with drugs in T&T with the connivance of "some businessmen and politicians."   He said that Special Branch police had listened to what he had to say two months ago ... but they have not contacted him since then.

"I have a network of persons who carry out intelligence and information gathering operations in T&T but we don't know who is who since some of the most influential persons here are linked to Al Qaeda."

Figueira, who converted to Islam in 1990, claims that Al Qaeda members can be found in key offices throughout Trinidad, and their mission is to ensure that the large shipments of drugs from Venezuela and Colombia which pass through Trinidad & Tobago are chanelled to buyers ... "local Al Qaeda members are often visited by operatives from Saudi Arabia and Pakistan, but they have not visited T&T since the 9/11 World Trade Centre bombings."

Darius Figueira says that Al Qaeda has recruited Trinidadians to go to Muslim countries for studies and that the terrorist network is also involved in the import of guns which are sold to criminal elements. He says that T&T has become a narco-democracy since nothing is being done to put a stop to the drug trade because Al Qaeda had penetrated all the key organizations in the country.

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