Friday, April 25, 2003

GM restarts Venezuela assembly after forex squeeze

Posted by click at 8:52 AM in Political Vendetta

Forbes.com-Reuters Reuters, 04.22.03, 11:52 AM ET

CARACAS, Venezuela, April 22 (Reuters) - General MotorsCorp.'s (nyse: GM - news - people) Venezuelan unit, the biggest vehicle assembler in the South American country, has restarted production after a three-week halt caused by government foreign exchange controls, a spokesman said Tuesday.

"The plant has reopened; everything is back in business," General Motors Venezolana's marketing and sales director Peter Friedrich told Reuters.

He added that in talks with the government, the company had succeeded in ironing out the problems caused by the currency curbs which had forced General Motors to temporarily suspend assembly operations in Venezuela at the end of March.

Squeezed by a crippling opposition strike that slashed vital oil exports, leftist President Hugo Chavez's government halted foreign currency trading in January, tightly restricting the supply of U.S. dollars to the economy.

Venezuela's foreign-owned vehicle assemblers, along with other local manufacturers dependent on imports, had been unable to import essential parts due to the tight restrictions and more than two months of delay in the allocation of dollars.

The restart of GM's Venezuelan unit indicated that the government was moving, albeit slowly, to activate mechanisms to allocate hard currency to health, food and industrial sectors.

But private business leaders have fiercely criticized the forex controls, introduced to stem heavy capital flight and halt a sharp slide in the bolivar currency triggered by the opposition strike in December and January. They say many local companies will face bankruptcy because of the curbs.

Friedrich said the government had widened the list of imported car components for which dollars would be allocated, removing an obstacle that had hindered General Motors' assembly operations. The company was also registering itself on a list of importers and exporters authorized to receive dollars.

After losing exports for March and April, General Motors Venezolana expected to be able to complete its scheduled May exports of models to Colombia and Ecuador. "We are very optimistic that we can fulfill our schedule," Friedrich said.

STORM OF COMPLAINTS OVER CONTROLS The state currency control board Cadivi has said it will give priority in the allocation of dollars to essential food and medicine imports, and to inputs for strategic industries.

Venezuela's state news agency Venpres said Cadivi had so far authorized dollars to more than 100 companies, including the Venezuelan units of Swiss food maker Nestle SA <NESZn.VX>, U.S. food manufacturer Kraft Foods Inc. (nyse: KFT - news - people), U.S. cereal maker Kellogg Co. (nyse: KFT - news - people) and U.S. grains trader Cargill Inc.

But problems persist. Venezuela's No. 1 telephone companyCANTV <TDVd.CR> (nyse: VNT - news - people) said last week the lack of a working conversion mechanism under government foreign exchange controls meant foreign shareholders would probably be unable to receive in dollars their share of a dividend due April 23.

CANTV's main shareholder is U.S. telephone company Verizon Communications Inc. (nyse: VZ - news - people). Private sector business leaders have pilloried the currency controls as restrictive and unworkable, warning that the dollar drought will stifle business and swell Venezuela's jobless rate, which the government estimates at 16 percent. Private economists say the real figure is far higher.

Businessmen and economists have severely questioned the technical ability of the currency board Cadivi, which is headed by retired army officer Edgar Hernandez, a political ally of former paratrooper Chavez. Both took part in a botched coup attempt in 1992.

Despite the barrage of complaints from foreign and local businessmen, populist Chavez has effusively praised Cadivi, saying it was doing a "tremendous job."

The president said the controls were "here to stay," although some of his ministers have said they will eventually be lifted as the oil-reliant economy shows signs of recovery.

Opponents in the business community have accused Chavez of using the controls in a political vendetta to deny access to dollars to firms which supported the grueling opposition strike in December and January. The stoppage tried unsuccessfully to force him to resign and hold early elections.

Venezuelan Arabs Stung by U.S. Charges

Posted by click at 8:49 AM in Arab world and economy

<a href=asia.reuters.com>Reuters Tue April 22, 2003 11:58 AM ET By Pascal Fletcher

PORLAMAR, Venezuela (Reuters) - Half a world away from Iraq, Arab merchants in Venezuela's Caribbean island of Margarita swap gossip and finger prayer beads as they serve customers in this traditionally bustling free port.

Like Arab nations and communities around the globe, most of Margarita's well-established Muslim traders bitterly oppose the U.S.-British invasion of Iraq, seeing it as an unlawful and unjustified attack against their race and religion.

But the Lebanese, Syrians and Palestinians who have made this tropical resort and duty-free zone their home for decades are even more angry about what they see as another American affront, this time leveled directly against them.

Allegations by a top U.S. military chief that Margarita is a base for radical Islamic groups posing a potential terrorist threat have angered both the 12,000-strong Arab community and the government of Venezuela's leftist President Hugo Chavez.

"We have nothing to do with terrorism here. Pure business, that's what we do," Naim Awada, who emigrated from Lebanon 20 years ago, told Reuters in his clothing store in Porlamar.

All around him, shop names like Nabil Import, El Laden Mustafa and Flower of Palestine attest to the strong Arab presence on Margarita, an island of tourist hotels, arid hills and abundant beaches off Venezuela's eastern Caribbean coast.

Arab community leaders and Venezuela's government say the allegations by the Pentagon's top soldier for Latin America, Gen. James Hill, are really part of a wider campaign by foes of Chavez to try to discredit the populist president abroad.

They say Chavez' opponents, who have failed to topple him over the last year despite a short-lived coup and a crippling two-month anti-government strike, are seeking to paint him as a dangerous anti-U.S. maverick collaborating with terrorism.

The debate is more than just academic for Washington because Chavez, a former paratrooper and coup plotter elected in 1998, rules over the world's No. 5 oil exporter that is also one of the top suppliers of crude oil to the United States.

VISCERAL HATRED OF ISRAEL

In testimony to Congress in March, Gen. Hill, commander of the Miami-based Southern Command, said his country was concerned about what he called the "possible activities of radical Islamic groups on Margarita Island in Venezuela."

Probes into potential terrorism hot spots increased after the deadly Sept. 11, 2001, attacks against the United States.

Hill said money laundering and arms and drugs trafficking in Margarita and in the tri-border region between Argentina, Paraguay and Brazil were generating several millions of dollars a year in funds for militant Middle Eastern groups like Hizbollah and Hamas, considered "terrorist" organizations by Washington.

On the teeming boulevards of downtown Porlamar, Venezuelan Arabs do not hide their anger over the Iraq war, their visceral hatred of the governments of Israel and the United States or their sympathies for Hizbollah and Hamas.

"Of course, we back Hizbollah, but there is no terrorism here," said Ziad Faiad, 39, who came from Syria 14 years ago. "We don't back Saddam Hussein. We support the Iraqi people."

Many Margarita Muslims say they admire Hizbollah for its resistance to Israel in southern Lebanon and support Hamas as a legitimate defender of the rights of the Palestinian people.

"It is natural that people should identify with the religious leaders that they have," Abdallah Nassereddine, an Arab community leader and businessman, told Reuters.

"No Arab ever came to Margarita with a plan to act against the United States," added Nassereddine, who is president of Venezuelan-Arab Federation which represents most of the estimated 1 million Arab immigrants and their families.

He said the terrorism allegations had hurt the image of Venezuela's top vacation destination. Margarita's tourism is already in the doldrums because of the severe economic recession triggered by a year of domestic political turmoil.

On top of this, foreign exchange controls introduced in early February are squeezing the business of many Margarita Arab importers. "Sales are down 95 percent," Awada said.

EVIDENCE HARD TO FIND

Concrete evidence of the presence of Hizbollah and Hamas members in Margarita is hard to find.

The 1994 bombing of a Jewish center in Buenos Aires, which killed 85 people and injured 200, raised international alarm about the presence of Islamic militants in Latin America.

Three years later Venezuelan security police detained three Lebanese-born Arabs in Margarita in a probe of a suspected cell of members of Iranian-backed Hizbollah. But the suspects were freed and results of the inquiry were never made public.

Fears of a Venezuelan terrorist connection surfaced again in February this year when a Venezuelan Muslim, Hasil Mohammed Rahaham-Alan was arrested at London's Gatwick airport with a hand grenade in his luggage. He was held under Britain's anti-terrorist laws.

Non-U.S. security experts give some credence to U.S. allegations about the presence of radical Muslim groups in Margarita. "It may serve as an R and R (rest and recreation) facility and is certainly used for finance raising," said one European expert in Caracas, who asked not to be named.

Ariel Kurtz, whose Tel Aviv-based security consultancy SIA has analyzed the threat of radical groups like Hizbollah and Hamas in Latin America, said the accusations of fund raising and money laundering among Margarita's Arabs seemed credible.

But experts are skeptical about media reports of terrorist training camps being based in the western half of Margarita.

Barely an hour's drive from the high-rise hotels and apartments of Porlamar, the scrub and cactus-covered western Macanao peninsula is largely inhabited by poor fishermen whose seaside shacks lack basic amenities. The words "we want water" daubed on walls are a testimony to the peninsula's neglect.

DOMESTIC POLITICS A FACTOR

Gen. Hill's comments, magnified by heightened world tensions over the war in Iraq, have been seized on by domestic foes of Chavez, who cite them as evidence of the president's alleged anti-U.S. intentions and tolerance of "terrorism."

Chavez, who staged a botched coup bid in 1992, angered Washington in 2000 by becoming the first foreign head of state to visit Saddam Hussein in Baghdad since the 1991 Gulf War.

His critics accuse him of using his friendship with Cuban President Fidel Castro to try to install Cuba-style communism in Venezuela, and of cooperating with leftist rebels fighting the U.S.-backed government of neighboring Colombia.

Chavez, who despite his vocal condemnation of the war in Iraq has kept on shipping oil to the United States, denies the allegations, dismissing them as a "diabolical media campaign."

Interior Minister Gen. Lucas Rincon called on Gen. Hill to back up his accusations about Margarita with proof.

"If this gentleman has this information, well, he should pass it on and we will investigate," Rincon told Reuters.

But he said Venezuelan inquiries, which have included a probe of bank accounts in search of suspicious transactions, had not produced any evidence of terrorists on Margarita.

"We do not support, nor have we ever supported, terrorist groups ... If we manage to detect a terrorist, then of course we will act," Rincon said, angrily cutting short an interview.

Pressed for details to back up Gen. Hill's public accusations, a spokesman for the U.S. Southern Command in Miami said he could not give any more information as this could compromise ongoing U.S. intelligence investigations

Opec to Meet Thursday Over Oil Prices

Posted by click at 8:46 AM in OPEC

URL Daily Trust (Abuja) April 22, 2003 Posted to the web April 22, 2003

OPEC confirmed Monday that it will hold an emergency meeting April 24 in Vienna to discuss cutting supplies in response to a sharp drop in world oil prices.

Despite a halt in Iraqi exports due to the U.S.-led war on Baghdad, prices have slumped by 30 percent in a month on a rising tide of exports from U.S. ally Saudi Arabia and other cartel members. Check out allAfrica's debate on the election in Nigeria. Click here.

"It's definitely the 24th," an OPEC spokesman said, clearing up uncertainty over possible dates for the meeting.

Algerian Oil Minister Chakib Khelil said Monday that OPEC could stop prices falling further simply by improving compliance with its agreed ceiling of 24.5 million barrels per day (bpd), as the cartel is now pumping some two million bpd above that.

Other members could push for a cut in formal quota limits.

The Arab-dominated cartel will also discuss the return of Iraqi exports after the war, although this is unlikely to affect quotas yet.

OPEC President Abdullah al-Attiyah said last week that oversupply on world markets already topped two million bpd, and could reach four million with the return of Iraq in the months ahead.

Countering this view, Algeria's Khelil said any decision by OPEC now should take into account an expected demand rebound in the summer which could see prices rise again.

Commercial oil stocks worldwide are well below normal levels due to a series of supply interruptions from Venezuela, Nigeria and Iraq, although they have shown some signs of recovery in recent weeks.

Despite the sharp fall in prices, OPEC's reference price is now hovering around OPEC's target level of $25 per barrel, having topped $33 last month.

Saudi Arabia stepped in to cover for the Iraqi stoppage, and now accounts for three-quarters of OPEC's output above quota. Its view will be crucial.

Oil industry think-tank, the Center for Global Energy Studies, said Saudi Arabia could even seek to retain most of its recent output surge by negotiating cuts on the basis of current output, instead of quotas.

This would provoke a storm of protest from other members, who are all keen to protect their market share.

When Iraqi sales do resume, analysts believe they will rise gradually and take several months to regain their pre-war level of 2.5 million bpd.

OPEC will probably give Baghdad freedom to pump at will until it reaches its historical quota level above three million bpd, which Iraqi experts expect to take several years.

Before Iraq's invasion of Kuwait in 1990, Baghdad had the same quota level as Iran at 3.1 million bpd. Iran's quota has since risen to 3.6 million.

U.S.-backed Iraqi exiles formulating postwar oil policy for Iraq think it will take three or four years to regain output capacity of 3.5 million bpd, according to briefing papers obtained by Reuters.