<a href=www.vheadline.com>Venezuela's Electronic News Posted: Monday, April 28, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: The FTAA (Free Trade Area of the Americas) has awakened strong resistance in the current administration's regional integration strategy. The Chief Executive has gone so far as to propose that the South American countries first strengthen the trade ties among them and only then talk about the FTAA ... Chavez defined this idea as the Bolivarian Alternative for the Americas (BAA).

The principal justification for this posture is the inability of countries like Venezuela to become competitive by 2005, a period our authorities consider far too short ... this suggests the idea of the BAA as an alternative for free-market economics, whose promotion is insistently attributed to the FTAA initiative by our authorities.

Though the idea of strengthening trading ties among the Latin American countries seems necessary and positive, it goes no further than simple rhetoric because our country is now violating its commitments in the CAN (Andean Community of Nations) with the recent exchange control measures and elimination of tariffs for imports of certain top-priority products.

This is reflected in two recent CAN resolutions, dated April 23. In Resolution 714, CAN finds that the Republic of Venezuela's unilateral grant of a total import tax exemption for a list of products the Venezuelan government considers "essential or mass consumer goods" violates the country's obligations emanating from several provisions of the Andean Community's legislation ... CAN therefore gave Venezuela fifteen (15) business days from the Resolution's date of publication in the Official Gazette of the Agreement of Cartagena to put an end to these violations.

...and in Resolution 715, the CAN finds that the foreign exchange measures adopted by the Republic of Venezuela restrain Intra-sub-regional trade, in violation of Article 72 of the Agreement of Cartagena and Commission Decision 406, which governs imports of products originating in the Andean Community's member countries.

Hence, Venezuela has been given ten (10) business days to lift all restrictions on imports from the other member countries. Venezuela's reaction to these CAN resolutions will reveal just what kind of strengthening of trade ties the President is talking about.

Without a consolidation of the existing trade institutions, there is no point in forming the FTAA ... and far less in creating a BAA; the most important obstacle to an agreement of that kind would be an institutional weakness that prevents application of existing commitments.

Article in Spanish

<a href=ogj.pennnet.com>Oil & Gas journal By OGJ editors

HOUSTON, Apr. 28 -- Intevep, the research and development subsidiary of Venezuela's state oil firm Petroleos de Venezuela SA, is evaluating its strategy regarding how to best fulfill the needs of the Venezuelan oil industry.

Argenis Rodríguez, adviser to Intevep Pres. Fernando Puig, told OPEC News Agency that Intevep's s 2003 research budget is $77.5 million.

"PDVSA's technological arm is more alive that ever," Rodríguez said during a recent visit to the 195,000 b/d Puerto de la Cruz refinery. He discounted suggestions that Intevep might disappear or be annexed by the Science and Technology Ministry.

Despite Venezuela's general labor strike, Intevep maintained constant support to the country's refining complexes, Rodríguez said.

<a href=ogj.pennnet.com>Oil & Gas Journal By an OGJ correspondent

RIO DE JANEIRO, Apr. 28 -- Brazil's President Luiz Inácio Lula da Silva and Venezuela's President Hugo Chávez reported that negotiations have been renewed to establish wide-ranging partnerships between state-owned oil firms Petroleo Brasileiro SA (Petrobras) and Petroleos de Venezuela SA.

The former administration of President Fernando Henrique Cardoso had started more modest negotiations, but they were never formalized.

The announcement was made after a meeting between the two presidents Friday in Recife, the capital of Brazil's northeastern state of Pernambuco. Chávez's visit to Brazil was his third since Lula took office on Jan. 1, but was the first meeting specifically used to discuss business, and not politics.

For years, Brazil was little more than a customer for Venezuelan oil, but after the meeting, the presidents stated they had "interests in common in the oil sector" and they "intend to expand cooperation."

Commercial partnerships The commercial alliance ratified a mutual cooperation agreement between the two countries for the development of the petroleum industry. It was decided that the areas of cooperation would occur in refining and commercialization of heavy crude, exploration and production in Venezuela, technological exchange of ideas, and joint activities in the areas of petrochemicals and natural gas.

"We want to refine oil in or as close to Venezuela as possible in the Caribbean, in the Andes, or here in Brazil," Chávez said, adding, "We can refine all this oil here and sell gasoline not only in South America but also in the Caribbean and Africa."

Brazil's Foreign Relations Ministry said that under Lula's administration, negotiations took place in Caracas during Mar. 27-8. On Apr. 14, a Venezuelan mission headed by Venezuela's Mines and Energy Minister Rafael Ramirez, including PDVSA Pres. Alí Rodríguez Araque, met with Brazil Mines and Energy Minister Dilma Roussef and Nestor Cerveró, Petrobras's international director, and inked a protocol of intentions to expand business in the sector.

Representatives from PDVSA and Petrobras organized groups to carry the decisions made at the meeting. The exchange of ideas and information will enhance the potential and synergies already identified by the two companies, according to a Petrobras source.

New refineries Petrobras also announced the construction, either alone or in partnership with PDVSA, of a new refinery in northeast Brazil with an output of 150,000 b/d of oil. The refinery is expected to cost some $2 billion.

The refinery is a long-standing economic development idea to meet the needs of Brazil's north and northeast, a vast poverty-stricken region with a population of 40 million.

The refinery is expected to come on stream in 2007. According to Rogerio Manso, Petrobras director of supply, the refinery will be the first in Brazil to have the capacity to process heavy crude oil, which is currently being exported.

Eleven of the 13 refineries in Brazil are owned by Petrobras and were built at a time when Brazil imported most of its crude from the Middle East; most of the oil produced in Brazil is heavy.

Even before the construction of the refinery, Petrobras intends to increase its refining capacity by 200,000 b/d by 2007, with investments of some $5.5 billion to upgrade refineries already operating.

Brazil processes some 1.62 million b/d of crude oil and Petrobras is working to increase this figure to 1.82 million b/d of refined products by 2007. Petrobras is importing about 190,000 b/d of oil products.

Line of credit Brazil's National Economic and Social Development Bank (BNDES) has opened a 2-year, $1 billion line of credit for Venezuela to use to purchase from Brazil oil platforms, turbines, locomotives, machinery, engineering services, and irrigation technology, plus other equipment.

The BNDES had previously provided financing for construction works such as an Orinoco River bridge in Venezuela.

Last December Petrobras shipped 82 million l. of gasoline to Venezuela, as requested by the Venezuelan government, by outgoing President Cardoso, to ease the fuel's shortage caused by the months-long PDVSA strike.

Venezuela's economy has slipped into sharp recession after a year of political conflict between Chávez and opponents demanding early elections in the world's fifth largest oil exporter. The nation's economy contracted nearly 9% in 2002 and many economists are forecasting a double-digit contraction for this year after a grueling opposition strike disrupted the oil shipments that account for half of the government's revenues.

The BNDES loan is based upon a solid collateral: Venezuela's vast oil reserves, analysts reported.

The Venezuelan and Brazilian governments are negotiating other deals for the downstream sector. Either Petrobras purchases or associates itself with one of PDVSA's refineries in the US or PDVSA associates itself with a Brazilian refinery.

The state of Pernambuco itself has inked a protocol of intentions with PDVSA to build a $2 billion refinery with an output capacity of 200,000 b/d.

Sources close to Brazil's mines and energy ministry told OGJ that Venezuela is interested in closing partnerships worth some $3 billion within Brazil's petrochemical sector, which is on firmer ground than Venezuela's.

The two governments also are discussing the possibility of Venezuela transporting natural gas to Carajas in Brazil's northern state of Para. Brazil is one of the world's largest exporters of iron ore, most of which comes from Carajas through Cia. de Ferro Vale do Rio Doce.

28 Apr 2003 20:23:21 GMT

CARACAS, Venezuela, April 28 (Reuters-Alertnet) - More than 1,000 family members of inmates have shut themselves in three Venezuelan prisons to demand better conditions and speedier trials for their relatives, officials said on Monday.

The protest by wives and children of prisoners in the already overcrowded Tocuyito, El Rodeo and Coro penitentiaries, all located west of Caracas, followed several weeks of sometimes violent demonstrations over prison conditions.

The family members entered the three jails during normal visiting hours Sunday. They remained inside the prisons and are refusing to leave until prison authorities, magistrates and journalists came to the jails to hear their complaints.

Prison officials said most of the relatives appeared to be taking part in the protests voluntarily, but some were being kept inside against their will.

"Everything's calm for the moment," said Ramon Torres, director of the El Rodeo jail in Miranda State, where 286 women and 50 children were occupying part of the prison.

More than 600 relatives staged a similar protest in Tocuyito prison in Carabobo state and several dozen more were inside the Coro jail in western Falcon state.

"We are trying to make sure the children get food and water. Otherwise everything is normal," Torres told local television.

Venezuela's jails have a reputation for poor conditions and frequent violence. An inefficient justice system keeps many inmates behind bars in overcrowded facilities for months, and sometimes years, before they are brought to trial.

At least 18 inmates have been killed and dozens injured in prison riots in the last three weeks. These include 12 inmates hacked and shot to death in an April 18 clash between rival gangs in Yare prison, one of the country's biggest.

More than 240 inmates were killed and 1,249 injured in prison violence between October 2001 and September 2002, according to Ministry of Interior and Justice statistics.

A recent U.S. State Department human rights report found 48 percent of all prisoners in Venezuela were in pretrial detention. The report said prison conditions were harsh with 22 of the country's 30 jails suffering from overcrowding.

The usual suspects Apr 28th 2003 From <a href=www.economist.com>The Economist Global Agenda

CONSIDERING the mess that Argentina’s Peronists and Paraguay’s Colorados have made of their countries, and given the grinding poverty, high unemployment, endemic corruption and decrepit public services that each country has suffered under the misrule of its main political party, one might expect that voters would relish an opportunity to dump them and give a chance to someone new. Indeed, until recently, Argentina’s streets were resounding to the chants of protesters shouting “¡Que se vayan todos!” (“Kick out the lot of them!”) But in Sunday’s elections, Argentines and Paraguayans decided to stick with the devils they know. Argentina’s flamboyant ex-president Carlos Menem came top in his country’s first-round presidential vote, and will go into the second round with Néstor Kirchner, a rather colourless candidate from a rival faction of the Peronist party. In Paraguay, where there is only one round of voting, the Colorados’ candidate, Nicanor Duarte Frutos, was elected president, maintaining the party’s 56-year grip on power.

Many Argentine voters seem to have bought Mr Menem’s proposition that they should forget all the various scandals of his ten years in power, in 1989-99, and overlook his spending-and-borrowing binge, which contributed to Argentina’s subsequent debt default and economic meltdown, and instead remember the economic boom that the country enjoyed while he was running it. With his playboy image and his glamorous new wife—a former Miss Universe—Mr Menem personifies those good times, which Argentines yearn to have back. Until their country’s economic collapse, they lorded it over their South American neighbours, revelling in their higher incomes and “European” lifestyles. But now, so far has the country fallen that almost 60% of Argentines live in poverty (defined as a monthly income of less than 750 pesos, or $242, for a family of four) and around a fifth of the workforce is unemployed.

While Mr Menem did not achieve his dream of sailing to a first-round victory (which would have required at least 45% of the vote, whereas he only got 24%), his showing in the polls is rather better than might have been expected in mid-2001, when he was briefly put under house arrest, accused of involvement in an alleged scheme to sell illegal arms to Croatia and Ecuador in the early years of his government (Argentina’s Supreme Court later freed him). In late 2001, Mr Menem’s incompetent successor, Fernando de la Rúa, resigned amid violent public unrest, after which Argentina defaulted on about $60 billion of foreign debt and the peso collapsed. Following various short-lived caretaker presidents, Mr Menem’s arch-rival within the Peronist movement, Eduardo Duhalde, was chosen as president by the Congress. Mr Duhalde put up Mr Kirchner, hitherto a little-known provincial governor, as his chosen successor, but could not unite the Peronist party around him. Other factions of the party, founded in the 1940s by Juan Domingo Perón and his wife Evita, backed either Mr Menem or a third Peronist candidate, Adolfo Rodríguez Saá, who had a brief stint as stand-in president in 2001.

In total, 19 candidates stood for president, including Ricardo López Murphy, a free-market economist who was briefly Mr de la Rua’s economy minister until his cabinet colleagues decided they lacked the stomach for his tough remedies (a pity, because they might have averted Argentina’s collapse and the suffering that resulted) and Elisa Carrió, a congresswoman standing on an anti-corruption ticket. Now Mr Menem and Mr Kirchner must scrabble for the unsuccessful contenders’ votes in the run-off on May 18th. Though Mr Menem got the most votes, he also suffers from a higher rejection rate than any of the other main candidates.

Argentina’s business leaders—who had given generous backing to Mr Menem’s campaign—will be relieved that Mr Rodríguez has been knocked out of the contest. He had called for the abandonment of the free-market reforms brought in by Mr Menem and a return to the traditional Peronist policy of heavy state intervention, including the renationalisation of Argentina’s utilities and railways. Mr Kirchner spouted some leftish-sounding rhetoric during the campaign but is believed at heart to be a centrist. His flagging campaign was lifted towards the end by gaining the backing of Roberto Lavagna, Mr Duhalde’s economy minister, who has begun restoring some signs of life to Argentina’s moribund economy.

Mr Menem insists his free-spending days are over, and pledges tough controls on the government’s finances. However he is also promising big cuts in tax rates—value-added tax would fall from 21% to 13%—which he says will be paid for through a crackdown on tax exemptions and evasion. He also pledges to honour all of Argentina’s debts, though he will ask lenders for more time to pay, and lower interest rates. Amid rising optimism about the prospects for an economic recovery and a market-friendly election winner, Argentine shares and bonds have risen sharply.

In Paraguay’s election, Mr Duarte, despite coming from a party that has misruled the country for half a century, has projected himself as a bringer of change, a firm leader who will clamp down on corruption and revive the long-stagnant economy. That he won, with about 37% (with more than nine-tenths of the votes counted), is more down to a divided and feeble opposition and the strength of the Colorado party machine. He will take over from President Luis González Macchi, who barely survived impeachment earlier this year over fraud accusations. Mr Duarte’s main opponent, Julio César Franco of the Liberals, had been ineffectual as Mr González’s vice-president, and got only 24% of the vote on Sunday, with Pedro Fadul, a pro-reform businessman, coming third with 22%.

In all, those hoping to see new faces and sweeping changes will have been disappointed by the outcomes of the Argentine and Paraguayan elections. But things could have been worse. Both elections were free and fair, despite each country having only a short democratic history and a past marred by military dictatorships. Following Brazil’s successful election last October, which led to a smooth transition from centre-right to centre-left administrations, it may safely be concluded that democracy has firm roots in South America, even though it faces challenges in some parts of the region, such as Venezuela. This should come as some comfort to America as it struggles to introduce the concept to the Middle East. Furthermore, despite much rhetoric critical of “neoliberal” reforms, there seems little sign of going back to the failed statist policies of the past.