www.kansascity.com Posted on Wed, Mar. 19, 2003
FABIOLA SANCHEZ Associated Press

CARACAS, Venezuela - Hundreds of opponents of President Hugo Chavez rallied Wednesday to show support for a strike leader who dodged charges of treason and rebellion by winning asylum in Costa Rica.

Supporters of Carlos Ortega cheered and waved Venezuelan and Costa Rican flags in front of the Costa Rican embassy in Caracas.

The labor leader slipped into the embassy Friday after hiding from authorities for two weeks. He is waiting for the government to give him safe conduct to Costa Rica, which granted him asylum for "humanitarian reasons."

"I'm here to show him my solidarity," 78-year-old Maria Diaz said at the rally. "He fought against a dictatorship, and I am thanking him for that."

Ortega led a two-month strike designed to force Chavez's resignation or early elections. The strike fizzled last month without achieving its goal but crippled the world's No. 5 oil exporter and cost Venezuela $6 billion. Venezuela was one of the largest U.S. suppliers before the strike.

Opponents accuse Chavez of trampling on democratic institutions and alienating investment with leftist policies. The president says his foes want to oust a democratically elected leader and restore power to two corrupt political parties that ruled Venezuela for four decades.

Foes are pushing to hold a referendum that would end Chavez's rule next year. But the fractious opposition is struggling to recover from the failure of the strike.

The showing of hundreds of people at Wednesday's protest was disappointing for a movement that drew up to 1 million people to marches last year.

Strike leaders urged Chavez's opponents not to give up, saying the president was moving to crack down on adversaries.

"The word is street, street, street and more street. Not one step back!" said Horacio Medina, an executive fired from the state oil monopoly, Petroleos de Venezuela S.A., for leading the walkout.

Medina and six other former executives emerged from hiding Tuesday after a judge threw out warrants for their arrest on charges of interrupting and damaging the country's fuel supply. Prosecutors have said they will appeal that ruling.

Co-strike leader Carlos Fernandez, president of Venezuela's largest business association, is under house arrest pending trial for rebellion and instigation.

With Ortega gone, the opposition would lose one of Chavez's boldest foes and one of the few survivors of the political order the president has striven to dismantle.

Ortega, 56, dealt one of the first blows to Chavez by winning the presidency of Venezuela's largest labor union two years ago, frustrating Chavez's attempt to seize control of one of the opposition's only strongholds.

Oil production is recovering. The government says output is 3 million barrels a day - almost what it was before the strike - while fired executives put the figure at 2.4 million barrels.

But problems persist. The government said it would try Thursday to restart the main gasoline producing unit at the El Palito refinery, which has been down for a week because of a mechanical failure. Delays in restarting it could force Venezuela to continue importing gasoline to prevent shortages.

www.miami.com Posted on Wed, Mar. 19, 2003
By MARIKA LYNCH mlynch@herald.com

CARACAS - Jose Luis Rosal fell off the back of a pick-up truck, scraped his cheek, and needed 15 stitches in the crown of his head. Three days later, though, the 20-year-old waited seven hours outside a Caracas hospital for an X-ray to see if he had a skull fracture.

The hospital in his hometown, located an hour outside the capital, turned him away because they didn't have the materials to make an X-ray, his sister said.

Venezuela's chronically strapped hospitals have been further pinched since the government stopped selling U.S. dollars needed to import supplies, medicine and other goods.

The government imposed the currency controls two months ago, after a national strike that failed to oust President Hugo Chávez and all but shut down the oil industry -- the country's primary source of foreign exchange. With the national currency, the bolivar, dropping in value and fearing capital flight, the government imposed the controls to keep dollars in the country.

But since Venezuela relies on imports for most goods, imports bought with U.S. currency, the lack of dollars is being felt throughout the country.

Pharmacists say they have a stock for three more weeks, and then ''the Venezuelan health system could collapse,'' Edgar Salas Jimenez, president of the Venezuelan Pharmaceutical Association, said.

Manufacturers and distributors are running through inventory, but goods from toilet paper to electronics could become scarce, they warn. Meanwhile, farmers say their crops will be thinner this year, without the proper imported fertilizers. Then they'll have to scrounge for packaging material to wrap what is produced.

Big business, shopkeepers, and street sellers like Fortunata Humani, who sells bikinis and lace panties from a sidewalk stall, expect to be affected. Wholesalers already warned Humani their imported inventory is sparse. Humani, 46, says she may have to start sewing her own clothes from home, if she can find the material.

The Venezuelan economy, private analysts say, could shrink up to 30 percent this year, and the currency controls will be a factor.

''They are destroying the entrepreneurial fever of the Venezuelan people,'' economist Orlando Ochoa said of the controls. ``What little there is left.''

The effects also could reach Florida. Close to $3 billion in Venezuela-bound exports -- from machinery to medicines and clothing -- passed through Miami-Dade and Tampa's ports in 2001, according to business development group Enterprise Florida. Also, under the measure, Venezuelans aren't allowed to use credit cards abroad, which curtail shopping in South Florida malls. Business travelers will be allowed to get dollars, but only $1,000 a trip, allowed three times a year.

This week, the government said it will start selling $645 million a month, to go toward a list of priority goods, mostly foods and medicine. The government is also artificially setting their prices, to keep them down.

But a newly created government agency will decide who gets the greenbacks, and only a fraction will actually be given to private importers, said Jose Piñeda, head economist for the Venezuelan American Chamber of Commerce and Industry. The government will use some, he said, to import food and distribute it to the poor at markets, he said.

Venezuela has imposed currency controls twice in the past two decades, and both periods ended with high inflation, Piñeda said. This time, though, the economy has already been weakened by the two-month strike, and the effects could be worse.

Business leaders want a parallel dollars market, where they can buy currency at a higher rate than the established 1,600 bolivars to the dollar. So far the government has avoided the idea. Some businesses are already turning to the black market, where one dollar is sold for 2,800 bolivars.

Business leaders, most of whom are opposed to President Chávez, also fear the government currency agency will use its power to punish people who supported the country's strike. The worry isn't without warrant. Chávez has said that ''Not one dollar'' will go to the ''coup-plotters,'' his name for those who tried to force him out through the strike.

First elected in 1998, Chávez was briefly ousted by a coup last April. A coalition of union, oil and business leaders failed to push him out, or call new elections, through a strike that ended in February.

Venezuela's newspaper owners fear that newsprint will not get on the import list, for political reasons. Their newspapers have been highly critical of Chávez. Newsprint first appeared on the list for a day, then was quickly removed. But officials have since said it will be restored.

On average, local newspapers have enough in stock to keep printing through April and into May.

But if that doesn't come through, ''we're going to be the first country in the world without a newspaper,'' said Miguel Henrique Otero, publisher of the daily El Nacional.

www.upi.com By Sam Vaknin UPI Senior Business Correspondent From the Business & Economics Desk Published 3/19/2003 2:22 PM

SKOPJE, Macedonia, March 19 (UPI) -- If the looming war was all about oil, Iraq would be invaded by the European Union, or Japan -- whose dependence on Middle Eastern oil is far greater than that of the United States. The United States would probably have taken over Venezuela, a much larger and proximate supplier with its own emerging tyrant to boot.

At any rate, the United Sates refrained from occupying Iraq when it easily could have, in 1991. Why the current American determination to conquer the desert country and subject it to direct rule, at least initially?

There is another explanation, insist keen-eyed analysts.

Sept. 11 shredded the American sense of invulnerability. That the hijackers were all citizens of ostensible allies -- such as Egypt and Saudi Arabia -- exposed the tenuous and ephemeral status of U.S. forces in the Gulf. So, is the war about transporting American military presence from increasingly hostile Saudis to soon-to-be subjugated Iraqis?

But this is a tautology. If America's reliance on Middle Eastern oil is non-existent, why would it want to risk lives and squander resources in the region at all? Why would it drive up the price of oil it consumes with its belligerent talk and coalition-building? Why would it fritter away the unprecedented up-swell of goodwill that followed the atrocities in September 2001?

Back to oil. According to British Petroleum's Statistical Review of World Energy 2002, the United States voraciously -- and wastefully -- consumes one of every four barrels extracted worldwide. It imports about three-fifths of its needs. In less than 11 years' time, its reserves depleted, it will be forced to import all of its soaring requirements.

Middle Eastern oil accounts for one-quarter of U.S. imports, Iraqi crude for less than one-tenth. A back of the envelope calculation reveals that Iraq quenches less than 6 percent of America's Black Gold cravings.

Compared with Canada (15 percent of American oil imports), or Mexico (12 percent) Iraq is a minor supplier. Furthermore, the current oil production of the United States is merely 23 percent of its 1985 peak -- about 2.4 million barrels per day, a 50-year nadir.

During the first 11 months of 2002, the United States imported an average of 9,000 bpd from Iraq. In January 2003, with Venezuela in disarray, approximately 1.2 million bpd of Iraqi oil went to the Americas, up from 910,000 bpd in December 2002 and 515,000 bpd in November.

It would seem that $200 billion -- the costs of war and post-bellum reconstruction -- would be better spent on America's domestic oil industry. Securing the flow of Iraqi crude is simply too insignificant to warrant such an exertion.

Much is made of Iraq's known oil reserves, pegged by the U.S. Department of Energy at 112 billion barrels, or five times the United States' -- not to mention its 110 trillion cubic feet of natural gas.

Even at 3 million bpd -- said to be the realistically immediate target of the occupying forces and almost 50 percent above the current level -- this subterranean stash stands to last for more than a century.

Add to that the proven reserves of its neighbors -- Kuwait, Saudi Arabia, the United Arab Emirates -- and there is no question that the oil industries of these countries will far outlive their competitors'. Couldn't this be what the rapacious Americans are after? -- wonder genteel French and Russian oilmen.

After all, British and American companies controlled three-quarters of Iraq's mineral wealth until 1972 when nationalization denuded them.

Alas, this "explanation" equally deflates upon closer inspection. Known -- or imagined -- reserves require investments in exploration, development and drilling. Nine-tenths of Iraq's soil is unexplored, including up to 100 billion barrels of deep oil-bearing formations located mainly in the vast western Desert. Of the 73 fields discovered, only 15 have been developed.

Iraqi Oil Minister Amir Rashid admitted in early 2002 that only 24 Iraqi oil fields were producing.

The country has almost no deep wells, unlike Iran, where they abound. The cost of production is around $1.00 to $1.50 per barrel, one-tenth the cost elsewhere.

Texas boasts 1 million drilled wells, Iraq barely has 2,000.

The Department of Energy's report about Iraq concludes: "Iraq generally has not had access to the latest, state-of-the-art oil industry technology (i.e., 3D seismic surveys), sufficient spare parts, and investment in general throughout most of the 1990s."

It has reportedly been utilizing questionable engineering techniques such as over-pumping, water injection and old technology to maintain production.

The quality of Iraqi oil deteriorated considerably in the past decade. Its average American Petroleum Institute gravity declined by more than 10 percent, its water cut (intrusion of water into oil reservoirs) increased and its sulfur content shot up by one-third. Iraq's oilfields date back to the 1920s and 1930s and were subjected to abusive methods of extraction. Thus, if torched during a Gotterdammerung, they might well be abandoned altogether.

According to a report published by the United Nations two years ago, Iraqi oil production is poised to fall off a cliff unless billions are invested in addressing technical and infrastructure problems. Even chaotic Iraq forks out $1.2 billion annually on repairing oil facilities.

-0- Part 2 of this analysis will run Thursday. Send your comments to svaknin@upi.com

sg.biz.yahoo.com Thursday March 20, 1:40 AM

WASHINGTON -(Dow Jones)- Improving policies in Latin America should promote a modest recovery in economic growth this year and next, barring a decline in the U.S., the Institute of International Finance said Wednesday.

Excepting a 10% collapse in Venezuela's gross domestic product, Latin America as a region should expand its economy by 2.4% in 2003 and another 3.2% in 2004, the IIF said.

"The commitment to sound macro policies, both monetary and fiscal, coupled with flexible exchange rates have provided some flexibility to respond to a slowing world economy," IIF Managing Director Charles Dallara told reporters.

The group, representing some of the largest banks and financial institutions around the world, also predicted a moderate recovery in net private capital flows to the region to $36 billion in 2003, before rising to $42 billion next year. In 2001, net private flows to Latin America dropped to a historic low of $28 billion.

The forecasts assume the U.S., the largest trading partner for most countries in the region, will experience an average rise in economic growth of about 2.4% for the year, reflecting 1.5% in the first half and almost 4.0% in the second. Oil prices have been penciled in at an average of $28 a barrel for 2003.

Dallara acknowledged the fate of the predictions depends first and foremost on the outcome of an impending U.S. war with Iraq and its impact on oil prices and investor and consumer confidence. "Today is an especially dubious time to be sharing exact forecasts, but the trends are there," he said.

IIF Chief Economist Yusuke Horiguchi reckons a $10 increase in the benchmark average for crude oil shaves 0.6% to 0.7% off of the forecast for U.S. GDP. The effects of higher-than-expected oil prices on the economies of individual Latin American countries differs as many are oil producers. On balance, the effect of higher oil prices is negative for the region because the resulting slower economic activity in some trading partners hurts non-oil exports and offsets revenue gains, the IIF said.

For example, an average oil price of $40 per barrel would raise Mexico's oil earnings by $6.0 billion, but reduces its exports to the U.S. by $9.0 billion, resulting in a net loss, IIF Director for Latin America Fred Jasperson said.

Still, most countries are better positioned to handle the economic uncertainty thanks to more responsible fiscal and monetary policies and flexible exchange rates, Dallara said.

In Brazil, which faced a crisis in market confidence during presidential elections last year, the new government is building credibility and shows a "very real" commitment to pension reform -a key factor in controlling public spending, Dallara said. The IIF predicts 2.0% GDP growth there for 2003.

Mexico has maintained public deficits and is reducing debt as a share of GDP, and is expected to continue a program of tax and energy reforms, the IIF said, predicting growth this year of 2.5%. Peru, the star performer in the region with a forecast for 3.8% GDP growth this year, should continue to do well as long as newly autonomous regional governments don't destabilize public finances.

The IIF sees growth picking up in Colombia to 2.0% this year and then rising to 3.0% next year.

Even Argentina should see a rebound of 3.3% this year, following four years of recession. The outlook there depends on the outcome of presidential elections next month, and whether the winner garners support from the legislative elections in October, the IIF said.

Venezuela, locked in escalating political violence and an imploding economy, is suffering an even greater output drop than the 8.9% contraction in 2002, the IIF said. A possible drop in oil prices following a quick U.S. war with Iraq would only worsen the situation there.

On the whole, the region is improving, the IIF said. External debt is declining to an expected 186% of exports this year from 227% in 1999, according to the IIF. The interest service ratio has fallen to 13% of exports. The trade surplus is expected to exceed $40 billion, or 2.5% of GDP while the current account deficit is dropping to under 1.0% of GDP. Foreign reserves have risen to the highest level ever, the IIF said.

-By Elizabeth Price, Dow Jones Newswires; 202-862-9295; elizabeth.price@dowjones.com

12:00 2003-03-19

On the verge of an armed conflict in Middle East, the South American country will play a decisive role to stabilize the oil market

Venezuela, the fifth largest world's oil exporter, will play a strategic role if finally Washington decides to attack Iraq. The South American nation is now prepared to pump over its official quota, after general strike cracked one month ago.

Venezuelan Vice President Jose Vicente Rangel said on Tuesday that the country was currently producing 3.1 million barrels of oil per day (bpd). Speaking to reporters during a visit to Brazil, Rangel said Venezuela's oil industry was returning to normal after the stoppage started Dec. 2 by foes of President Hugo Chavez.

This is of very much interest for Washington as Venezuela is the main US oil supplier and the crisis with Iraq could make prices go haywire. This week, US officials admitted that the country could sell its strategic reserves to keep the prices stable. However, if Venezuela comes back to its pre-strike levels it would not be necessary.

Rangel said since Saturday, Venezuela stopped importing fuel and has returned to refining petrol for export. "We are already producing the petrol that the country consumes, since Saturday we are not importing petrol and products are already being refined for export," Rangel said. According to Venezuelan officials, the OPEC has allowed Caracas to pump over the traditional quota of 2.82 million barrels a day. The country has installed capacity for 4 millions bpd and says now is in 3.1.

However, dissident former employees of state oil firm Petroleos de Venezuela (PDVSA), thousands of whom were fired by Chavez for their participation in the strike, say the government has only been able to restore oil production to 2.4 million bpd.

Despite the controversy on figures, it is clear that Washington will try to restore good relations with Venezuela, at least during wartime. With the above in mind, Caracas is now of strategic interest for USA, as Bush has found an unexpected crucial allied in Chavez. Venezuela's oil production is of most importance to keep markets calmed while his Army leads the military adventure in Iraq.

Hernan Etchaleco PRAVDA.Ru Argentina