By Bradley Brooks <a href=www.upi.com>UPI Business Correspondent From the Business & Economics Desk Published 4/8/2003 2:35 PM

RIO DE JANEIRO, Brazil, April 8 (UPI) -- Bombs fall in Baghdad, bonds rise in Brazil?

To the surprise of many Latin America watchers, the region's biggest economies -- forecast to be among the globe's hardest hit by a war in the Middle East -- have seen a resurgence in activity.

Spreads on bonds -- a measure of investor confidence -- have narrowed, local currencies are rising against the dollar, and in some cases there have been rallies in equities since the Iraq war began March 20.

Emerging market bond funds took in $948 million -- a record inflow -- in the first quarter of this year, according to a recent report by Emerging Portfolio.com, which tracks 171 dedicated emerging market bond funds globally.

That translates into an 11.4 percent gain in total assets for those funds in the first quarter, and Brazil has been right at the top in attracting investors, analysts say.

"In the inevitable emerging market portfolio manager's search for valuations, Brazil certainly looks compelling," said Brad Durham, research director at Emerging Portfolio.

"It is the (lowest) valued emerging market in the world, at about five-times the forward looking price to earnings ratios."

The biggest reason Latin America is faring well during a time of conflict is that the expected sharp rise in oil prices briefly came and went once coalition forces secured oil fields in southern Iraq, analysts say.

Brazil and Chile, South America's biggest and its most stable economy, respectively, were thought to be most vulnerable to a spike in crude prices. Both have chugged along nicely since.

Additionally, analysts say that while it might be early to sound the all-clear, risk aversion on the part of emerging-market investors hasn't risen too much since the war began.

"It's related partly to a long period of neglect by investors," said Durham.

The Economic Commission for Latin America and the Caribbean, or ECLAC, a U.N. think-tank, said Tuesday foreign direct investment in the region dropped for the third year running in 2002.

Investment plunged 33 percent of $56.7 billion, down from $84 billion in 2001, ECLAC noted. The net inflow of FDI into Latin America was less than 2 percent of gross domestic product.

ECLAC -- which didn't include in its report a forecast for 2003 -- blamed the weak FDI on a global fall in equities, as well as the political troubles in Argentina, Venezuela and in the run-up to Brazil's election last October.

While unstable equity markets shouldn't necessarily have a damning effect on the region's bonds, when it comes to emerging markets, investors tend to generalize between asset sectors, analysts say.

That plays into the investor neglect Durham notes.

Brazil, he says, is an extremely high-beta country, meaning that when emerging markets are up globally, it outperforms them, and when markets are down, it falls harder than the rest.

"But I think sentiment has been so bad for so long for Brazil that it may be somewhat resilient in the current climate, if the government stays the course," Durham said.

Attractive bond yields have won out over potential turbulence in the eyes of investors socking money into Brazil.

The country's benchmark bond due 2014 has seen its spreads over U.S. Treasurys drop to 900 basis points of late as investors take heart in the new government's austerity.

Which has been a rather quick turnaround for Brazil, which late last year had a higher country-risk rating than Nigeria.

Even in Argentina, still trying to recover from its default in December 2001, bond spreads have dropped by 10 percent since the war began in Iraq.

Investors there have been pushed by apparent progress on salvaging the country's banking sector and signs that Argentina is finally talking about re-scheduling its defaulted debt with foreign bond holders.

Further cheering sentiment in Argentina has been the final lifting of controls that saw citizens' bank accounts locked away from them for more than one year.

That has resulted in a Argentine peso dipping below 3 to the dollar for the first time in a year.

Brazil's Economy Minister Antonio Palocci tried to cool the optimism -- and thus the expectations -- saying Tuesday the new government has far to go before it escapes economic danger.

"What cannot be assumed is that the (austerity) measures we're going to take are no longer necessary, for example the tax and pension reforms," Palocci said.

"This is the risk, that we neglect our agenda."

Brazilian President Luiz Inacio Lula da Silva told citizens in an address on Monday that the austere measures being taken are painful, but ultimately worth it if they lead to economic stability and prosperity.

"We took tough measures which cost me sleep on quite a few nights: increase the interest rate and cutting spending. But the sacrifice so far has not been in vain," Lula said.

Reuters, 04.08.03, 7:05 AM ET(Recasts, PVS SINGAPORE) By Jonathan Leff

LONDON, April 8 (Reuters) - Oil prices moved sideways on Tuesday as expectations of a swift end to the U.S.-led war on Iraq and a possible output cut from the producers' cartel OPEC pulled the market in opposite directions, dealers said.

The 11-member oil exporters' group is set to hold an emergency meeting on April 24 to discuss output cuts after prices slumped 30 percent in the past month, threatening to dip below the group's $22-$28 preferred price range.

U.S. light crude recovered an overnight fall to trade up four cents at $28 a barrel, down from nearly $40 at the end of February, while London benchmark Brent blend traded six cents up at $24.64. On Monday Brent hit a four-month low of $23.40.

"The market is supported by this talk that OPEC might cut production. This is the first we've heard from them for some time and it gives prices an excuse to retrace losses," said an IPE Brent broker from the London exchange floor.

"The war is still a very bearish factor, but without OPEC I think the rug would be pulled out from under us."

OPEC, which controls 40 percent of global crude exports, has lifted production this year to cover supply losses from a two-month strike in Venezuela and to prevent any spike in prices if Iraqi crude exports were cut off by a U.S.-led war.

But prices have actually plunged by as much as a third since just before the war began 20 days ago, prompting cartel officials to start talking of a potential cut in production.

"Currently oil is in oversupply in the market. But we will see the development of the price," Indonesian Mines and Energy Minister Purnomo Yusgiantoro told reporters.

The lynchpin will be powerhouse Saudi Arabia, which had hiked output to a 21-year high in March to compensate for stoppages from Iraq, where U.N.-supervised exports of about 1.7 million bpd closed before the start of hostilities March 20.

A Gulf source familiar with Saudi thinking told Reuters on Tuesday OPEC was ready to keep prices near its target $25, but did not say whether it was considering a cut in the formal output ceiling, now at 24.5 million barrels per day, or remove excess output above that level, now running at two million bpd.

U.S. BATTLES FOR BAGHDAD

The war in Iraq remained a bearish factor for prices, as dealers looked forward to the return of Bagdad's supplies to world markets and the development of the country's massive reserves, second only to Saudi Arabia's.

A short-lived war may mean minimum damage to Iraq's oil infrastructure, allowing supplies to flow sooner.

U.S. tanks fought an intense battle with Iraqi soldiers in the heart of Baghdad on Tuesday and officials said U.S. aircraft had dropped four 900 kg (2,000 pound) bombs in a residential area, specifically tageting Saddam and his sons Uday and Qusay.

The British army said it had taken control of Basra, Iraq's second city, while U.S. forces increased their presence in Baghdad.

Oil prices have also come under selling pressure as recent data on the U.S. economy have raised concerns that it may be heading into recession, which would choke demand for petroleum.

<a href=www.rpp.com.pe>AFP

El presidente Hugo Chávez evocó a "Dios y Alá" para pedir por la paz en Irak y volvió a abogar por la resolución pacífica de los conflictos internacionales.

En su programa "Aló presidente", el mandatario pidió "a Dios y a Alá, el misericordioso, que le lleve paz al mundo árabe, sobre todo, por los niños y las niñas de Irak".

El mandatario fustigó la ofensiva bélica impulsada los últimos días por Estados Unidos Gran Bretaña en Bagdag al resaltar que "no tienen por qué sufrir los inocentes". Por ello, reiteró que Venezuela apoya la resolución pacífica de los conflictos en el mundo.

Chávez también criticó la labor de los medios de prensa internacional, en especial la cadena estadounidense de noticias CNN, de querer hacer ver un solo lado de las noticias.

Señaló que los medios querían "meter por un tubo" a las personas con sus informaciones, pero con la presión internacional por las muertes de civiles en Irak, se vieron obligados a "abrir el compás" en sus labores periodísticas.

"¿Cuántas veces no se ha utilizado la información para mentir, desinformar, contra-informar?", se preguntó Chávez, quien aclaró que sus críticas las hace como un simple "lector", "observador" y "analista".

La Libertad Digital Carlos Sabino

Banderas de Irak han aparecido en Caracas en manifestaciones y actos públicos. No las enarbolan pacifistas convencidos –de esos que en cualquier lugar del mundo repudian por principio todas las guerras– ni miembros de alguna colonia árabe que viva en nuestro suelo. Los que agitan esos símbolos son venezolanos que defienden a Saddam Hussein y a su régimen, que se sienten identificados con su modo de gobernar y sus objetivos políticos. Ellos son los mismos partidarios de Chávez que suelen disolver actos de la oposición, a veces a balazos, con el apoyo de la policía política y de ciertas alcaldías, los llamados “círculos bolivarianos” que ha organizado directamente Diosdado Cabello, actual ministro de infraestructura y ex ministro del interior.

El hecho muestra una coincidencia de actitudes y de valores políticos que el propio presidente se ha encargado de destacar. En el régimen iraquí Chávez encuentra tal vez la mejor expresión de lo que él quiere para Venezuela, un sistema de gobierno dictatorial, apoyado en el ejército, pero que recurre a comandos y organizaciones paramilitares para aterrorizar a su propia población; un régimen benevolente frente a los terroristas de todo el mundo, que sataniza a los Estados Unidos, que posee una economía dirigida y controlada por el estado; un sistema, en fin, donde las elecciones se ganan no ya por el 99,99% de los votos, como en los antiguos países comunistas del este, sino por un todavía más impúdico y directo 100%. Cuando Chávez visitó Irak hace un par de años y viajó en el propio automóvil del dictador árabe se convirtió en el primer mandatario en visitar a ese régimen proscrito, mostrando una identidad de propósitos que no puede ser disimulada. Como dice el periodista Orlando Urdaneta: “Saddam Hussein no sube a cualquiera en su Mercedes Benz”, recordando a Hussein al volante y Chávez a su lado, de paseo por Bagdad.

Mientras la guerra prosigue su sangriento curso en el Medio Oriente aquí, en pleno Occidente, el gobierno venezolano realiza acciones en la retaguardia que pueden llegar a tener importancia internacional. No sólo se ha negado a calificar como terroristas a las guerrillas colombianas de las FARC y el ELN –prestándoles asistencia encubierta en múltiples formas–, sino que ya ha comenzado a organizar sus propios contingentes guerrilleros. El periodista Roberto Giusti ha denunciado esta semana que el FBL (Fuerzas Bolivarianas de Liberación) agrupa ahora a más de 1.000 irregulares dotados con armas modernas que actúan en al menos tres estados venezolanos y controlan una superficie de unos 60.000 kilómetros cuadrados.

En tanto los partidarios de Chávez se organizan de este modo, el gobierno ha cesado la entrega de dólares que tiene represados en el Banco Central con el claro fin –abiertamente reconocido por el presidente– de castigar a los empresarios venezolanos que él califica como golpistas y que organizaron junto a otros muchos sectores, a fines del año pasado, un inmenso Paro Cívico que detuvo a Venezuela por casi dos meses.

Pero todo esto se hace, insidiosamente, tratando de mantener una fachada de aparente legalidad que confunde, como es natural, a muchos observadores extranjeros mal informados. El gobierno parece aceptar la oposición interna, aunque trata de destruirla de modo encubierto, y afirma que respetará la constitución al pie de la letra, a pesar de interferir en todo lo que puede para que no se desarrollen las consultas electorales que ésta permite realizar para revocar el mandato del presidente y de otros importantes cargos.

Venezuela, por obra de este singular caudillo, va aproximándose así peligrosamente al candente foco de los conflictos internacionales de hoy. Nos aguardan meses peligrosos, conflictivos, en los que se tratará de imponer una dictadura proclive al terrorismo y a la confrontación. Sólo nos resta aguardar que la derrota de Saddam Hussein nos sirva para debilitar el poder de quienes quieren ser sus émulos en este rincón del mundo.

Carlos Sabino es corresponsal de la agencia © AIPE en Caracas.

By Mike Ceaser THE WASHINGTON TIMES

     PERIJA MOUNTAINS, Venezuela — Illegal drug cultivation is said to be increasing amid these dark green mountains since Venezuela's abandonment more than a year ago of its eradication program. T

     The Perija range, which straddles the Colombian border near the Caribbean coast, has long been a source of concern for drug-control officials because its steep, remote slopes offer prime conditions for cultivating and hiding illicit crops.

     For more than a decade, the Venezuelan military with United States cooperation carried out annual eradication campaigns involving hundreds of soldiers who chopped down and yanked out clandestine fields of marijuana, opium poppies and coca, the raw material for cocaine.

     But last year, as Venezuela experienced social and political upheaval including an aborted military-led coup in April, the country carried out no eradication.

     "[The mountains] are full" of drug crops, said a national guardsman in the town of Machiques who participated in past eradications but requested anonymity. "The places we destroyed have regrown."

     In fact, drug acreage in Venezuela is tiny compared with the numbers in Colombia, Peru and Bolivia, long centers of illegal drug exports. In 2001, Venezuela eradicated 117 acres of coca and 96 acres of poppy crops, while the other three eliminated tens of thousands of acres. Still, nobody is certain how much illegal drug cultivation exists in Venezuela, since it has no monitoring program.

     In 2002, Colombia's eradication program, part of the U.S.-funded $1.9 billion Plan Colombia, achieved its first-ever coca-acreage reduction, cutting coca cultivation there by 15 percent. But the advance was partially nullified by higher output in Peru and Bolivia.

     For critics of drug eradication, the shift of cultivation to other countries is the inevitable "balloon effect," in which a reduction in one place encourages production elsewhere. Small coca plots have also been discovered in Ecuador.

     "You can achieve a short-term reduction in a limited area ... but it pops up somewhere else," said Adam Isaacson, who directs the Colombia program at the Center for International Policy in Washington.

     Though there are no numbers on illegal drug acreage in Venezuela, recent reports agree that plantings in the Perija range have increased.

     The U.S. State Department's International Narcotics Control Strategy Report for 2002, issued last month, said that during the 2001 eradication effort, coca fields as large as 20 acres were found in the Perija range for the first time. Also, the report said, "three cocaine base labs in this region were discovered for the first time ever in Venezuela, indicating what could be a troubling new trend."

     Cesar Romero, a ranger in Perija Mountains National Park, said that in the last few years rangers have more frequently encountered drug cultivation during patrols. Last September, he stumbled onto a harvested poppy field covering about six acres.

     "It is increasing," he said.

     Like other areas where drug cultivation has flourished, the Perija mountains are lawless and impoverished. Except for occasional military patrols, the central government is nearly absent. The poor inhabitants have few saleable crops, since fruits and vegetables would spoil during the long mule trips to towns.

     State lawmaker Javier Armata, who represents the Yupa tribe in the legislature of Zulia, which contains the Perija range, said Colombian guerrillas pay indigenous people with cash, food and medicine for planting drugs.

     "[The guerrillas] say drug planting is the best way to earn money," said Mr. Armata. Still, according to military officers and news reports, most drug cultivation in the mountains is done by Colombian peasants.

     While Colombia's eradication has sharply reduced drug acreage in its southwest, coca farming has surged in the east, bordering Venezuela. And Colombia's political violence has sent thousands of peasants, some of them drug farmers, fleeing to Venezuela seeking refuge. There are also reports of drug cultivation on Venezuela's flatlands south of the Perija range.

     Gen. Alberto Jose Gutierrez, commander of an infantry division whose responsibility includes part of the Perija range, predicted that Plan Colombia would lead guerrilla groups to move to Venezuela.

     "They will try to enter our territory," he said. "But we have taken measures. We have our frontier posts."

     Gen. Gutierrez said the government's eradication program had ended before his transfer to the region and that he did not know the reason why. The military's central command in Caracas did not respond to requests for comment.

     The eradication halt is not the first time Venezuela's President Hugo Chavez has opted out of the U.S.-backed drug war. Shortly after becoming president in 1999, he banned U.S. anti-drug overflights, citing national sovereignty.

     While border military regiments are short of fuel and other supplies necessary for carrying out eradication expeditions, some here suspect a political motivation in the drug-eradication halt.

     The Chavez government faced great political turmoil over the past year. Last April, Mr. Chavez was kidnapped by military officers aligned with his political foes, and released after two days of international pressure. In December, leaders of the interests that Mr. Chavez unseated by a popular landslide in national elections four years earlier shut down Venezuela's oil industry — the country's main income-earner — in a crippling general strike that collapsed less than two months ago.

     Fernando Villasmil, president of the Zulia state legislature, says the Chavez government has drastically reduced the military's presence along the frontier, leaving an opening for guerrillas.

     "If [the government] doesn't take radical measures, [the drug crops] will expand in size," he said. "We will change from being a transit country for drugs into a producer country."