www.forbes.com Reuters, 01.12.03, 7:23 PM ET By Hugh Bronstein

NEW YORK, Jan 12 (Reuters) - Latin American sovereign bonds were expected to trade flat this week while investors keep an eye on Venezuela, the market's wild card, where a six-week-old national strike has hobbled the world's No. 5 oil exporter.

As they have since the strike began on Dec. 2, investors are left guessing when the work stoppage will end and what fiscal wreckage will be left in its wake. The strikers are calling for fresh elections, hoping to put an end to the controversial presidency of Hugo Chavez.

Some analysts and investors on Sunday said the strike must be reaching a "breaking point," but Jim Barrineau, a vice president in emerging markets research at Alliance Capital Management, warned the market not to hold its breath.

"A negotiated agreement is probably still weeks away because I don't see where either side has room to compromise," he said. Venezuelan total returns have already dropped 7 percent in January while the market as a whole, as judged by JP Morgan's Emerging Markets Bond Index Plus, has risen 1.7 percent.

Barrineau said he expects the nation's bond prices to keep falling in the days to come. Other New York-based analysts were more optimistic.

"I think something is going to break in Venezuela over the next week or so," said Joe Portera, global fixed income director at MacKay Shields, a New York-based investment management company.

The United States on Friday said it supports forming a group of key regional nations who could nudge both sides to an electoral solution to end their bitter impasse. U.S. officials said they hoped to bolster talks brokered by the Organization of American States that have so far failed to reach an accord.

"I'm optimistic about the United States finally getting involved," Portera said. "We actually added a bit to our Venezuela bond holdings over the last week because we think things had gotten overdone in terms of selling."

As long as the situation does not worsen, Portera noted that the government appears to have enough reserves to keep paying its bond service on time.

Chavez, notorious on Wall Street for his failed economic policies and anti-capitalist rhetoric, was elected in 1998 vowing to wrest control from the country's corrupt elite and enact reforms to help the poor. But opposition has grown amid charges the president wants to establish a Cuban-style authoritarian state.

The country's constitution allows for a binding recall vote half way through a president's term, which in Chavez's case would be after August. Opposition leaders say that is too far away and they want to go ahead with a nonbinding referendum on Chavez's rule scheduled by electoral authorities for Feb 2.

But Chavez says the February poll would be unconstitutional and and that he will ignore its result, even if he loses. He says he will abide by the outcome of the later referendum.

Venezuelan troops fired tear gas on Sunday to force back tens of thousands of anti-government protesters in Caracas. Chavez threatened take over the country's banks, which last week held a 48-hour stoppage.

But the banks will reopen on Monday, continuing the restricted service hours they have adopted since the strike began on Dec 2. "The Venezuelan strike has played out in a way that has been more damaging than people expected," said David Roberts, senior international economist at Banc of America Securities.

"The pressures are so severe that the situation must be reaching a breaking point," he added.

BRAZIL SEEN STEADY TO HIGHER Investors will also keep an eye this week on Brazil, Latin America's biggest economy, where the new president, Luiz Inacio Lula da Silva, last week mapped out his strategy for reforming the country's public pension system.

"A few details are leaking out," Barrineau said. "It looks like it could be a pretty aggressive plan and that's one factor that could keep a good tone in the market."

Changes to the social security system could soothe worries about Brazil's $260 billion debt load.

Investors fled Brazilian bonds last summer when it started to appear likely that Lula, who had lost the previous three presidential elections, would win October's vote.

The former metal worker was notorious on Wall Street for suggesting years ago that the government default on its debt in order to redirect money toward the nation's poor.

But Brazilian total returns are up 6.88 percent so far this month as Lula's government has delivered market-friendly policy signals, including the pension reform effort.

www.washingtonpost.com Reuters Monday, January 13, 2003; Page A16

CARACAS, Venezuela, Jan. 12 -- Venezuelan troops fired tear gas today to disperse tens of thousands of protesters as President Hugo Chavez ordered a crackdown against a six-week-old opposition strike that is bleeding the economy.

Chavez warned opponents he would not let them disrupt schools, banks or food supplies with the strike, which has already crippled shipments by the world's No. 5 oil exporter.

"They want to break us economically. They are not going to do it. I swear it by God and my mother," Chavez said during his weekly television and radio show.

During his broadcast, Chavez signed a decree creating a special government commission to combat a tax rebellion announced by opposition leaders. By urging Venezuelans not to pay taxes, the strikers hope to cut government revenue already drained by the oil strike.

The president, elected in 1998, said the strike was costing the country tens of millions of dollars a day. Chavez, who has already fired 2,000 striking state oil employees, repeated threats to send troops to take over private factories and warehouses if they hoarded food supplies.

He also threatened to revoke the broadcasting licenses of private TV stations that criticize his rule. He described their hostile programming as "worse than an atomic bomb."

www.zenit.org Piden a los negociadores dar las respuestas que el país espera

CARACAS, 12 enero 2003 (ZENIT.org).- La Conferencia Episcopal de Venezuela (CEV) publicó este viernes un documento en el que alerta que la agudización de la crisis está poniendo seriamente en peligro a la misa República.

El comunicado fue hecho público con motivo de la reunión de representantes del episcopado con el secretario general de la Organización de Estados Americanos (OEA), César Gaviria, y los miembros de la Mesa de Negociación y Acuerdos. El país vivía el cuadragésimo día de huelga.

En el encuentro participaron monseñor Baltazar Porras, arzobispo de Mérida y presidente de la CEV, monseñor Ovidio Pérez Morales, arzobispo de Los Teques, y monseñor Ubaldo Santana, arzobispo de Maracaibo.

Monseñor Porras leyó el documento en el que se afirma que «el prolongado enfrentamiento político ha adquirido muy peligrosos niveles de crispación y violencia verbal, física y moral. Por lo mismo, mientras más se radicalice, como desgraciadamente se prevé, no dejaría vencedores ni vencidos, sino una gran derrotada: Venezuela».

En el documento, los obispos piden a los negociadores que «se consagren, con urgencia, a dar las respuestas que el país aguarda con angustia y esperanza».

Respecto a los objetivos que se trazó la Mesa de Negociación, el episcopado califica de «sabia» la decisión de encontrar una salida electoral, pues «la situación convierte en imperativo que sea el pueblo quien libremente decida su destino».

Asimismo, exigen «encarar» la violencia política, social y política que permanece impune, lo que, a juicio de los obispos, «ha llevado a la pérdida de confianza en la credibilidad de las instituciones judiciales y de los poderes públicos».

También se recuerda que propuesta, apoyada originalmente tanto por el Gobierno como por la oposición, de crear una Comisión de la Verdad que estableciese las responsabilidades y sanciones a los culpables de la violencia política.

La Conferencia Episcopal aprovechó para recordar las palabras que pronunció el papa Juan Pablo II el pasado 1 de enero, cuando señaló que «quienes ocupan puestos de responsabilidad y no acepten cuestionarse con valentía su modo de administrar el poder y de procurar el bienestar de sus pueblos, será difícil imaginar que se pueda progresar verdaderamente hacia la paz».

«Frente a una casa que se incendia no buscamos paliativos sino acuerdos efectivos y rápidos que den solución a este drama», señaló monseñor Pérez Morales, a la salida de la reunión.

El presidente Hugo Chávez advirtió este sábado ante miles de seguidores que no será derrotado en ningún frente de batalla porque le asiste la razón, la moral, la verdad «y, además, Dios está con nosotros. Porque ésta es la lucha de Dios, Cristo está con nosotros». Este tipo de citas religiosas impropias es común en su lenguaje, y en el pasado fue criticado por ello por los obispos.

El paro ha llevado a Venezuela a exportar menos de una quinta parte del crudo que tradicionalmente enviaba al extranjero --que antes de comenzar la acción eran 2,7 millones de barriles diarios (bpd)-- y ha reducido a niveles mínimos la producción petrolera.

www.zenit.org: 2003-01-12

CARACAS, Venezuela, JAN. 12, 2003 (Zenit.org).- Venezuela's escalating crisis is threatening the very stability of the republic, the Catholic bishops' conference warns.

The episcopal conference spelled out its fears in a document published Friday. Church leaders also expressed their concerns at a meeting with the delegates of the Table of Dialogue, a forum for representatives of the government and the opposition under the aegis of Cesar Gaviria, secretary-general of the Organization of American States.

As a weeks-long opposition strike against Venezuelan President Hugo Chávez continued, the bishops relaunched their appeal for the need to intensify negotiations.

Archbishop Baltazar Porras, chairman of the episcopal conference, underlined that the "prolonged political confrontation has reached dangerous levels of friction and verbal, physical and moral violence."

"An eventual ulterior escalation of the confrontation would not leave winners or defeated, but just one great loser: Venezuela," he said.

Tension escalated after Chávez announced that he had ordered his troops to prepare to seize control of the food supplies, according to the French press.

"I will not allow my people to die of hunger because of a strike," Chávez said.

abcnews.go.com — By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Venezuelan troops fired tear gas on Sunday to drive back tens of thousands of anti-government protesters as President Hugo Chavez ordered a crackdown against a six-week-old opposition strike that is bleeding the economy.

As the demonstrators in Caracas fled the clouds of gas, the leftist leader sternly warned opponents he would not let them disrupt schools, banks or food supplies in a strike which has already crippled shipments by the world's No. 5 oil exporter.

"They want to break us economically. They are not going to do it. I swear it by God and my mother," Chavez said during his weekly "Hello President" television and radio show.

Waving national flags, the opposition protesters marched toward Fuerte Tiuna military headquarters in Caracas as part of their determined campaign to try to force the populist president to resign and call early elections.

They found their path blocked by barbed wire barricades, armored vehicles and several hundred National Guard troops and military police, who fired a volley of tear gas canisters.

Several people were carried away, apparently overcome by the choking gas.

During his broadcast, Chavez signed a decree creating a special government commission to combat a tax rebellion announced by opposition leaders. By urging Venezuelans not to pay taxes of any kind, the strikers hope to cut government revenues already drained by the crippling oil strike.

The president, elected in 1998, said the strike was costing the country tens of millions of dollars a day. "We should prepare for difficult times," he said, adding that another government commission was drawing up budget cuts.

He condemned his opponents as "fascists and coup mongers" and described them as desperate. "They don't know what to do next," said Chavez, who survived a brief coup in April. He himself attempted a botched coup bid in 1992.

Chavez, who has already sacked 2,000 striking state oil employees, repeated threats to send troops to take over private factories and warehouses if they hoarded food supplies.

He also threatened to revoke the broadcasting licenses of private TV stations that criticize his rule, describing their hostile programming as "worse than an atomic bomb."

'DECLARATION OF WAR'

On Saturday, he warned the government would intervene in banks and schools shut by the strike.

"This was a declaration of war. Chavez is not interested in dialogue or reconciliation," glass artist Luz Marina Urrecheaga said on Sunday as she and other protesters harangued troops.

The strike has rocked Venezuela's oil-reliant economy and sent its bolivar currency tumbling. It has also jolted oil markets and the oil exporters' cartel OPEC agreed on Sunday to raise production by 1.5 million barrels per day to stave off a spike in prices threatened by the Venezuelan strike.

The marchers had headed toward Fuerte Tiuna in a repeat of a Jan. 3 protest that broke up in violence, leaving two Chavez supporters dead and dozens of other people injured.

The anti-Chavez demonstrators on Sunday mocked the troops, hanging women's underwear on the barbed wire to insult them. Angry Chavez supporters who turned out to confront the anti-government marchers were kept back by a cordon of troops.

As a result of the strike, Venezuelans have experienced unprecedented shortages of gasoline, cooking gas and some food items. Bank workers staged a 48-hour stoppage last week, but will reopen on Monday under restricted service hours.

Chavez, who survived a brief coup in April, says he is a champion of the poor and that wealthy and corrupt minority elites are trying to topple him. His foes accuse him of dragging Venezuela toward Cuban-style communism.

SUPPORT FROM U.S. REPRESENTATIVES

Chavez on Sunday read out a Jan 9 letter of support sent by 19 U.S. Congress members recognizing him as the legitimately elected president of Venezuela.

"If Abraham Lincoln or George Washington were alive and here today, they would be on our side," he said.

In their letter, the 19 members of the U.S. House of Representatives -- 18 Democrats and one independent -- told Chavez they strongly opposed attempts to remove him from office and condemned Bush administration officials who appeared to support the short-lived coup against him in April.

The authors of the letter included Reps. John Conyers of Michigan, Jesse Jackson Jr. of Illinois, Sheila Jackson Lee of Texas and independent Rep. Bernie Sanders of Vermont.

"Should an illegal coup take place again, we believe the world community should condemn such an action and make clear that Venezuela is served best only when governed by legally elected leaders," they said in the letter, made public Jan. 9.

Government and opposition remain deadlocked over the timing of elections and the United States, the biggest buyer of Venezuelan oil, is backing efforts to reach a negotiated deal in talks brokered by the Organization of American States.

The opposition plans to hold a nonbinding referendum on Chavez's rule on Feb 2. His current terms ends in early 2007.

He says a binding referendum on his rule cannot be legally held until August. If he loses, "I'll go," he said on Sunday.