www.upi.com By Owain Johnson UPI Business Correspondent From the Business & Economics Desk Published 3/11/2003 4:20 PM

CARACAS, Venezuela, March 11 (UPI) -- There is a Venezuelan joke that begins by noting that the best business in the world is a well-managed oil company. And the second best business in the world? A badly managed oil company of course.

Oil is Venezuela's economic lifeblood and whatever the standard of management has been at state-owned energy producer PDVSA, the country's huge reserves have generally provided Venezuelans with a higher standard of living than their regional neighbors.

PDVSA's activities typically account for around 80 percent of Venezuela's gross domestic product and for around 50 percent of government income, giving the company a strategic significance far beyond that of a normal commercial enterprise.

Recognizing the company's power, President Hugo Chavez has repeatedly tried to tie PDVSA more closely to his government and in the wake of the recent disastrous general strike he has finally got his way.

The majority of PDVSA's managerial and administrative staff joined the opposition-led general strike against the government in early December, and by mid-month the energy industry was paralyzed and PDVSA was forced to declare force majeure.

But predictions that Chavez could not survive a long-term oil strike proved unfounded. The former paratrooper refused to reach a compromise deal, and ordered PDVSA President Ali Rodriguez to import gasoline to keep the nation running.

Rodriguez used a mixture of loyal workers, contract workers and new hires to restart operations, and by late December PDVSA was starting to produce and export crude once again.

The payback began immediately. Rodriguez, a former leftist guerrilla and OPEC secretary-general, summarily dismissed 16,000 of PDVSA's 33,000 employees for 'deserting their posts' in order to participate in the strike.

The dismissed employees, who included virtually all the company's top executives, had an estimated average of 17 years' experience in the industry each, and their leaders were confident PDVSA could not operate without them and would soon recall them.

Earlier this month, though, PDVSA lifted force majeure on all its exports, apart from unleaded gasoline, lubricants and asphalt, and Chavez was able to announce that the company's crude production had reached 2.6 million barrels per day (bpd).

Sacked oil managers immediately poured scorn on the president's figures and placed production at 1.6 million bpd. But, as analysts noted, if PDVSA risked lifting force majeure, Rodriguez must be confident the company can reach its pre-strike production levels of 2.8 million bpd within the next few months.

The dramatic restoration of production at PDVSA has taken the wind out of the sails of the strikers, who now see little chance of returning to their posts until the fall of the Chavez government, an event that looks increasingly remote.

Rodriguez attributes his success at restoring production with vastly fewer employees to a combination of factors. PDVSA was overstaffed with middle managers before the strike, he believes, while loyal employees were determined to disprove allegations that they lacked the necessary skills to restore production.

Critics allege, however, that the restoration of production has come at the cost of lower safety standards. They also note that PDVSA has focused on easier wells, and has cut key maintenance, research and exploration divisions, harming its long-term prospects.

The Gente de Petroleo association of dissident oil workers believes PDVSA will inevitably be unable to maintain its current level of production since the current staff lack the know-how to tackle older and more technically challenging wells.

But for all their public confidence, many former company managers privately admit their surprise at how well the industry is performing without them.

They are also quick to express their anger at Venezuela's political opposition, which called off the damaging strike after failing to force Chavez from power, leaving the dismissed oil workers to carry the can.

"Are we disappointed? I think that's somewhat of an understatement," one former senior PDVSA manager said. "Everyone else has gone back to work, and we are the only ones still fighting for our industry and our country. We feel we are in danger of being forgotten."

Rodriguez has repeatedly ruled out an amnesty for the strikers and he has even thanked them for giving him the possibility of carrying out reforms that would otherwise have been impossible.

Meanwhile, the oil workers who struck in April to protest government intervention in PDVSA have, by striking again in December, effectively handed total control of their industry to Chavez loyalists.

With their opponents locked out, Chavez and Rodriguez are now free to carry out whatever actions they wish to PDVSA and the president has already spelled out his aim of setting the company at the service of his social reform project.

"The new PDVSA must never again be a nest to shelter the privileged elite. This company must be now and always the property of the Republic," he said at the recent inauguration of the company's new board.

"There will be no amnesty, selective or otherwise, there will be no forgiveness for anyone, for traitors. They are traitors and they cannot return nor will they," he added.

www.vheadline.com Posted: Tuesday, March 11, 2003 By: Patrick J. O'Donoghue

A plenary session of the National Assembly (AN) on Thursday will discuss the draft Women's Equality Law ... officially known as the Right of Women to Gender Parity & Equality Law.

• House Family, Women & Youth committee president Ivan Mastrangelo says last Thursday's session to discuss the bill was postponed because of lack of quorum.

Owing to the national stoppage, the draft law has received little publicity and many of the NGOs supporting or criticizing it, preferred to devote energies to marches and political campaigns for or against the government.

Mastrangelo admits the bill carries a lot of tricky topics ... such as abortion in rape cases, babies in-vitro, equal pay, just to mention a few.

The committee is recommending that the law be declared 'ordinary' and not organic, given the delicate nature of some subjects ... which Mastrangelo insists, will need legal interpretation.

www.vheadline.com Posted: Tuesday, March 11, 2003 By: Oliver L. Campbell

VHeadline.com guest commentarist Oliver L. Campbell writes: According to recent press announcements, CITGO is worth anything from 10 to 20 billion dollars.  This would seem highly unlikely since CITGO’S balance sheet at 31 December 2002 (given below) shows the Shareholder’s Equity is only $2.6 billions. Of course, the equity per the accounts is one thing and the value of the company is another.  However, the former must be multiplied by four to reach the $10 billion mark which  makes this figure look distinctly suspect.

CITGO Petroleum Co.   Balance Sheet 31 Dec. 2002 Assets  Less 6,986,912 Long term debt  1,109,861 Other liabilities 3,317,893   Th $ 2,559,158 Equals Shareholder’s equity Th $ 2,559,158

CITGOS’s net income in 2001 was $404 millions, but in 2002 it dropped to $158 millions. If you take the earnings of 2001 as being representative, then ten times those earnings would value CITGO at only $4 billions, which confirms the view that the valuation of $10 billions looks optimistic. However, there may be a buyer, particularly one with crude production, who will be willing to pay a high premium to buy into the USA market.  The major oil companies who already market in the USA may have no interest in CITGO because of monopoly constraints imposed by the government.

What PDVSA should be asked to explain is why CITGO is in so much debt. Gearing (leverage), the ratio of long term debt to capital, is 43 per cent without taking into account the $550 millions of eight-year senior notes which CITGO issued on 27 February 2003.

A comparison with a bond issue that TotalFinaElf intend to make shows just how poor  the credit standing of CITGO is:

                          CITGO Petroleum Co.	          TotalFinaElf Capital

      Amount    $550 millions $100 millions Maturity 8 years 5 years Coupon 11.375 % 5.0% Guaranteed by not guaranteed TotalFinaElf SA Debt rating B-Plus Standard & Poors AA Standard & Poors 

The benchmark for US government bonds is 3 % for 5 year issues, and 4 % for 8 year issues.  It is troubling that CITGO needs to pay twice as much for the funds as TFE (TotalFinaElf).  PDVSA must also feel uncomfortable that the 8 year senior notes are referred to as junk bonds.

Just why CITGO has to pay this exorbitant interest rate is not clear, but undoubtedly the recent political problems in Venezuela, the strike which temporarily disrupted crude oil supplies, and the high gearing have all contributed.  The following statement in PDVSA’S Annual Report for 2001 that The CITGO Petroleum Corporation and PDV Midwest Refining subsidiaries reported joint dividends of 478 million of dollars  shows PDVSA has left CITGO short of cash by extracting most of its profit as dividends.

It is also disturbing to read about the destination of the $550 millions from the debt issue since CITGO may use up to $500 millions to pay a dividend to PDV America, its parent company, to provide funds for the repayment of PDV America’s 7 7/8 % senior notes due August 1, 2003 …. PDVSA is known for being a very well run company, but to borrow funds at 11 3/8 % to pay off a previously incurred debt at 7 7/8 % is certainly not sound finance and shows a lack of good cash management. The Finance Director should be invited to explain how CITGO/PDV America have been allowed to get into such a state.

Oliver L Campbell, MBA, DipM, FCCA, ACMA, MCIM  was born in El Callao in 1931 where his father worked in the gold mining industry.  He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA).  In 1982 he returned to the UK with his family and retired early in 2002.  Campbell returns frequently to Venezuela and maintains an active interest in political affairs: "I am most passionate about changing the education system so that those who are not academically inclined can have the chance to learn a useful skill ... the main goal, of course, is to allow many of the poor to get well paid jobs as artisans and technicians."  You may contact Oliver L Campbell at email: oliver@lbcampbell.com

www.vheadline.com Posted: Tuesday, March 11, 2003 By: Robert Rudnicki

Venezuela's Ambassador to the Organization of American States (OAS) Jorge Valero has called for the current Friends of Venezuela group to be expanded to include, France, Russia and a number of Caribbean nations.

The group, currently made up of Brazil, Chile, Mexico, Portugal, Spain and the United States, met in Brasilia to renew their discussions and Valero made the call during his address to the representatives.

In January President Hugo Chavez Frias also called for the group's expansion, but this appeal fell on deaf ears.

Foreign Minister's from the six countries also held closed door meetings to discuss how best to end the current political unrest in Venezuela.

www.weeklystandard.com by Thor Halvorssen 03/11/2003 12:00:00 AM

LATE LAST YEAR, 16 U.S. congressmen voiced their approval for Venezuelan president Hugo Chavez. Representatives Barney Frank, John Conyers, Chaka Fattah, Jan Schakowsky, Jose Serrano, and others complained in a letter to President Bush that the United States was not adequately protecting Chavez against a groundswell of internal opposition to his increasingly authoritarian rule--an upsurge that might lead to his ouster. Elected to power in 1998, Lt. Col. Chavez has hijacked democracy in Venezuela and is openly moving the country toward totalitarianism. Beyond Venezuela's borders, he celebrates, protects, and does business with terrorists.

A day after the September 11 terrorist attacks, President Chavez declared that "The United States brought the attacks upon itself, for their arrogant imperialist foreign policy." Chavez also described the U.S. military response to bin Laden as "terrorism," claiming that he saw no difference between the invasion of Afghanistan and the September 11 terrorist attacks.

While the United States considers Saddam Hussein a threat to world peace, Chavez has hailed Saddam as his "brother" and business "partner." In the past two years Chavez has continued to cultivate relationships with the governments listed in the State Department's roll of state sponsors of terrorism--he has been particularly vocal in his support for the Iranian regime.

Last December a high-level Venezuelan military defector gave sworn testimony that terrorist links exist between al Qaeda and the Chavez government. The defector, President Chavez's personal pilot, alleges that one operation involved the transfer of close to $1 million in cash to Osama bin Laden.

In January, Judicial Watch, a public-interest legal organization based in Washington, filed a $100 million suit against Hugo Chavez on behalf of a victim and survivor of the September 11th terrorist attacks. The lawsuit alleges that Chavez provided material, financial, and other support and assistance to the al Qaeda terror network.

In February, a Venezuelan Muslim, Hasil Mohammed Rahaham-Alan, was detained in London's Gatwick airport for stashing a grenade in his luggage. He was apprehended after disembarking from a British Airways flight that originated in Caracas. The British Mail reported that al Qaeda operates a training camp on the Venezuelan island of Margarita. The Venezuelan ambassador in London has obtained a "legal stop" preventing the newspaper from commenting on the article.

Also, the congressional signatories turn a blind eye to mountains of hard evidence--most supplied by U.S. allies in the Colombian government--confirming Chavez's support for the FARC and ELN terrorist networks. The Colombian government declared that the head of the FARC terrorist group, Manual Marulanda, is hiding in Venezuela, and the Colombian embassy in Caracas was bombed a day after Chavez made a blistering speech attacking Colombia. The Financial Times reported last week that the perpetrators of the bombing may be FARC terrorists or even members of the Venezuelan secret police. Yesterday in Colombia, Venezuelan Foreign Minister Roy Chaderton gave a press conference where he unequivocally stated that the Chavez government will not refer to the FARC Colombian terrorists as "terrorists," because the Chavez government wishes to remain "neutral."

It is unthinkable that congressmen who enjoy access to detailed intelligence reports are willing so blithely to disregard the Chavez government's track record on matters that directly affect the national security of the United States.

These congressional Democrats are not alone in their misguided support for Hugo Chavez. For years, Representative Cass Ballenger (R-NC) has had a bizarre relationship with Chavez. Ballenger has emphasized that the "Venezuelan Caucus" he established with Rep. William Delahunt (D-MA) exists to "show friendship to President Chavez and to encourage him to embrace democracy." Ballenger and Hunt have embraced Chavez--and served as his U.S. tour guides. In return, Chavez has repeatedly used his friendship with the congressmen to prop himself up by showing strong support from and access to powerful members of the U.S. government.

To their credit, seven of the congressmen who wrote to President Bush have written another letter. On March 6 they wrote Chavez with some questions. They didn't ask about terrorism. Instead they inquired about the arrests and murders of members of the opposition to Chavez's rule. It's progress, of a sort. But we can do better.

Any congressional support of Chavez is particularly galling given that he is vocal about his loathing of the United States and American liberty. Yet unlike Chavez and his paid supporters, the great majority of Venezuelans have great affection for America and its freedoms. A recent Pew survey on "Global Attitudes" demonstrated that, although much of the world--and nearly all of South America--resents and despises America, Venezuelans rank among the greatest admirers of the United States and its people.

Congress should put President Chavez on notice that his dictatorial actions will not be tolerated It should also urge the Organization of American States to expel him, and impose immediate sanctions for his state sponsorship of terrorism. Any appeasement of Chavez sends a comforting message to the enemies of freedom. Additionally, it sends a dispiriting signal to the natural allies of the United States: the millions of Venezuelans who reject the grotesque tyranny of Hugo Chavez.

Thor Halvorssen is a human rights and civil liberties activist in Philadelphia. He grew up in Venezuela.