Posted: Tuesday, March 04, 2003 By: Robert Rudnicki

Petroleos de Venezuela's (PDVSA) efforts to recover production of gasoline have been hampered by the company's inability to restart a catalytic cracking unit at the Paraguana refinery. An attempt to restart the unit was made over the weekend, but this failed as problems persisted in being able to establish a stable gas supply and to overcome the effects of sabotage.

However, the unit is expected to be up and running by the end of next week, and once this happens production should stand at 140,000 barrels of gasoline per day, in addition to the 60,000 being produced at the Cardon plant this would lift levels to 200,000 barrels per day, almost enough to cope with domestic demand.

The Venezuelan government has been forced to import significant quantities of gasoline from overseas to meet domestic demand, and although long queues were evident across the country, it now seems that supplies have stabilized and shortages have all but disappeared.

www.vheadline.com Posted: Tuesday, March 04, 2003 By: Robert Rudnicki

According to reports in the US media, the leader of the Revolutionary Armed Forces of Colombia (FARC) Manuel Marulanda Velez is currently in hiding in the jungle in Venezuela near its border with Colombia.

The article in the El Nuevo Herald newspaper, which cites intelligence sources for the information, claims that the FARC leader entered Venezuela through Vichada State.

The information has allegedly been corroborated by Colombian Federation of Municipalities president Gilberto Toro who said "this is not a report that the Venezuelan authorities should discard, on the contrary they should investigate."

Toro called on President Hugo Chavez Frias to launch an investigation so there would be no repeat of what happened with Peru's Vladimir Montesinos, who Venezuela repeatedly denied was in the country, but proved to be there all the time.

www.usatoday.com Posted 3/3/2003 11:16 PM By Barbara Hagenbaugh, USA TODAY

WASHINGTON — As gasoline prices soar, service station owners say they are seeing an increase in the number of drivers who are skipping out on the bill.

Last week, a Shell gas station clerk in New Port Richey, Fla., was injured after he grabbed onto a car door to stop a motorist who was running out on a $16 bill. Karam Zaki, 34, was dragged 450 feet while being kicked by the driver before swinging off the car. The driver has not been caught. (Related story: Gas goes above $2 a gallon in Calif.)

Case Marshall, owner of 16 Pit Stop Convenience Stores in upstate New York, says he has seen a rise in "drive offs," but the increase has been nowhere near as steep as it was in 2001, when gas prices were also elevated. That's perhaps in part because of steps he's taken to thwart thieves, including requiring cashiers to turn on the pump every time a new driver shows up. Recent numbers are not available, but pump-and-runs cost owners more than $1,000 per station in 2001, according to the National Association of Convenience Stores — costing the industry more than $100 million.

Station owners say they always see an increase in gas theft when prices are high. While some drivers may be squeezed so tight they can't afford the higher gas costs, owners say others, thinking gas sellers are jacking up prices unfairly, may be taking it out on them. Some elected officials and AAA have questioned if there is price gouging going on, a claim station owners angrily reject.

"Everybody wants to blame us," says Bill Douglass, who owns 10 Lone Star convenience stores in Texas.

"There's a perception out there that when the price of gasoline goes up, we're just making that much more money," says Jim Tudor, president of the Georgia Association of Convenience Stores. "That's nowhere near the truth."

Retailers say they have not raised prices as quickly as their gas costs have increased. Prices have gained over the past several months as the cost of crude oil, which accounts for half of the cost of gasoline, has skyrocketed because of worries about a war with Iraq, a strike in oil-producer Venezuela and low supplies. Station owners say after paying for gas, taxes, staff and other costs, they are hardly making money.

To deter theft, some station owners require customers to pay before pumping, and others have installed security cameras. Some states and localities have enacted laws in recent years to increase fines for driving away without paying or allow law enforcement officials to take away drivers' licenses.

www.nytimes.com By DAVID GONZALEZ

MARACAIBO, Venezuela, Feb. 28 — In this sun-drenched city built on oil and agriculture, government workers complain of missed paydays and stalled projects. Beyond the high-rises and office towers, impoverished families live in dank, crumbling shanties along bumpy dirt streets.

These scenes in the western state of Zulia make the billboard outside the government-run oil company seem like a cruel taunt, particularly given that Venezuela's journey to becoming the world's fifth-largest oil exporter began here in 1914.

"Social Investment Fund," the sign proclaims. "Improving the Life of All Zulianos."

Complaints that the central government has exported not just oil from the region, but increasingly its attendant profits as well, have turned many residents against President Hugo Chávez, whom they have accused of withholding $500 million from their state budget over the years.

Only one of the state's 21 mayors supports Mr. Chávez, while the governor, Manuel Rosales, has easily rallied tens of thousands of people against him.

In Mr. Chávez's struggle to overcome the devastating effects of a two-month nationwide opposition strike, Zulia, the country's most populous state with 3.2 million residents, is a crucial battleground. Mr. Chávez must not only boost oil production, but also his support in this state whose people tend to vote as a bloc.

Two weeks ago, with the strike faltering, he set his sights on removing Mr. Rosales, urging people to demand the kind of recall referendum that his own critics have sought unsuccessfully against him.

Yet even among the poor, the very group that Mr. Chávez says benefits most from his Bolivarian Revolution, disenchantment has grown.

"The economy is fatal, and since Chávez came to power it has gotten worse, because there is no work," said Addis Atencia, who shares a compound of five shanties with nearly three dozen adults and children. "In a country that produces petroleum, how can you live like this?"

Zulianos consider themselves a breed apart, which is evident in their accent, culture and temperament. The differences are a result of having been cut off from the capital, Caracas, for years, and of frequent contact with foreigners through the port here. For years before the bridge spanning Lake Maracaibo was built in the 1960's, residents intent on going to Caracas had to get a visa, since the ferry stopped first on the Dutch island of Curaçao.

When Mr. Chavez introduced reforms, including one allowing squatters to occupy fallow farmland, Zulianos reacted with a strike in September 2001. For many the reforms were another insult after years of seeing no returns on the revenue Zulia produced for the country.

"Zulia paralyzed the state and lit the fuse that led to a national strike," said Tomás Guanipa Villalobos, the local leader of the Primero Justicia political party. "Zulia has suffered the most under Chávez. The money which was generated by oil was not invested into making Venezuela truly productive."

Roads on the outskirts of Maracaibo are potholed, while signs heralding a commuter rail station rise above empty lots where work has stopped. The public hospital in the Veritas neighborhood looks rundown, paint flaking from its walls and weeds blocking one entrance even as patients stream into the building. A state medical supply store is shuttered.

Mr. Guanipa said that rather than tackle problems like those, Mr. Chávez devoted most of a brief visit here last month to lambasting the governor and the opposition as coup plotters.

"He said nothing about any program of investment to elevate Zulia," Mr. Guanipa said. "He spent hours urging people to eliminate the enemy. It was the politics of revenge, and that is very dangerous. It will get worse unless we get out of this fast."

The government insists that production has improved among the oil rigs on Lake Maracaibo, where soldiers patrol the lake and shores to prevent sabotage. It estimates that production nationwide is now back up to 2.1 million barrels daily after being paralyzed by the strike. Venezuela produced 3.1 million barrels a day before the strike.

Alexis Arellano, the coordinator of the oil company's Tía Juana district, said he was now able to pump almost 800,000 barrels daily, despite having dismissed 60 percent of his work force during the strike.

Combined with joint ventures that were not affected by the strike, he said regional production hovered at a little more than one million barrels daily.

"They said it was impossible to increase production," he said. "The people who stayed with us see it as a personal challenge to keep on operating and make the company grow."

But former executives dispute the government's figures and insist that actual production is half of that claimed.

"If they are producing a million barrels a day with so many less people, then they should have fired us," joked Tarciso Guerrero, who used to manage the gas facilities. "They are only saying they reached a million to show the country that everything is normal."

Outside the oil company's Miranda Building, lines of job applicants file past a ragtag group of "Commando Reservists," Chávez supporters who have guarded the area since December, a battered bus their headquarters and dormitory.

The mood has been tense, especially after two people were injured this week when unknown assailants tossed a grenade and fired a dozen shots while the Chávez supporters slept by the sidewalk.

"We are defending these trenches because this institution is ours," said one of the group, Leonardo Sencial. "Without this we are nothing. If they try to take it away, we will take to the streets as the president said."

reuters.com Mon March 3, 2003 08:01 PM ET (Updates with more quotes) By Ibon Villelabeitia

BOGOTA, Colombia, March 3 (Reuters) - Colombia is on track to meet its IMF targets and achieve growth of 2 percent in 2003, but a possible U.S. war in Iraq and fallout from Venezuela's crisis could threaten well-laid financial plans, the government's economic team said on Monday.

In an interview with Reuters -- the first with foreign media -- Finance Minister Roberto Junguito and two of his top aides said external shocks could derail efforts by Latin America's fifth-largest economy to hold back spending, narrow a budget deficit and boost investments.

"We have to guarantee conditions for a stable exchange rate, stable interest rates, a sustainable fiscal situation, but positive results depend on several factors, including the international climate. How fast the economy grows depends a lot on investors," Deputy Finance Minister Juan Ricardo Ortega said.

"If the U.S. economy slips and the Venezuelan economy slips, you are not going to grow and 2 percent growth is an optimistic figure," Ortega said.

The government is forecasting growth in gross domestic product of 2.0 percent in 2003, compared with 1.6 percent growth in 2002.

President Alvaro Uribe, who took office in August, has pushed key austerity reforms to taxation, pension and labor laws through Congress aimed at reducing the country's budget deficit and boosting investment to fight a four-decade guerrilla war and the poverty that feeds it.

DEBT ANXIETY EASING

Colombia is saddled with public debt accounting for 60 percent of the country's gross domestic product -- up from just 30 percent in 1996. But Uribe's austerity agenda, coupled with pledges to crack down on violence, have eased investor anxiety.

The government says Colombia's consolidated budget deficit should fall to 2.4 percent of GDP in 2003, compared with 4.0 percent in 2002. These figures have been set as targets under a $2.1 billion loan agreement Colombia signed with the International Monetary Fund in January.

After receiving good marks from Wall Street, the government has won almost $10 billion in loans from multilateral lenders including the World Bank, Inter-American Development Bank and the Andean Development Corp.

"This is proof we are doing our homework and that we are transmitting a sense of calm to the markets to the effect that the public debt is sustainable," Junguito said.

But Junguito said Colombia's economic performance is largely tied to that of the United States.

"For us the most important thing is that the United States has good growth. We don't do well if the United States does not have adequate growth. The reason we are not exaggerating our 2003 economic forecast is because it is coherent with a sluggish world economy and we are choosing to be extraordinarily conservative."

Andres Felipe Arias, director of macroeconomic policies, forecast that Colombia will lose $800 million in exports in 2002 and 2003 due to a political crisis in neighboring Venezuela, which is Colombia's No. 2 trading partner.

MORE SECURITY

Apart from easing the country's debt burden, Colombia is trying to improve security to lure foreign investment. The war claims the lives of thousands of people every year and spooks investors. Uribe, elected on pledges to crack down on leftist rebels, wants to boost military spending by $1 billion.

"There's a link between security, a fall in country risk and investment," Junguito said. "The issue of credibility has two fronts. Security and economic measures to stabilize debt create the confidence to attract foreign and domestic investment."

Colombian debt, classified as "junk", has gained in value under Uribe. Sovereign bonds rose 6 percent in December, according to the J.P. Morgan Emerging Market Bond Index Plus.

Uribe plans to hold a referendum by May in which he hopes voters will approve a freeze on public spending for two years and cut higher-than-average state pensions.

Junguito, who says a yes vote would save the government 0.7 percent of GDP in 2003, said he hoped Colombia returns to investment grade rating by international agencies by the end of Uribe's four-year term in 2006.

"I don't like to make projections but that is what we are hoping for," Junguito said.