usinfo.state.gov 10 January 2003

QUESTION: Can you bring us up to date on Venezuela, the situation both with negotiations and also the situation as to availability of the --the oil issue?

MR. BOUCHER: I think with regard to discussions and negotiations, I'd just say that we've been consistently supporting efforts to reach a peaceful, democratic, constitutional, electoral solution to the ongoing political crisis. We believe that the national dialogue led bythe Organization of American States is Venezuela's best opportunity to move beyond the current impasse. Together with Brazil and a number of countries in the region, we're actively engaged through the Organization of American States to buttress support for the Secretary General and for his efforts to facilitate dialogue between the government of Venezuela and the opposition.

So those efforts continue on the ground with our ambassador. They consider -- continue in other capitals of South America, Latin America, where we're talking to other governments. And they continuein terms of the Secretary's contacts or the Secretary General of theUnited Nations and with members of the Organization of AmericanStates.

QUESTION: Anything specific on oil?

MR. BOUCHER: On oil, no, nothing new today. Nothing new or specific today.

QUESTION: I have a few questions on Mexico. I have several topics today.

QUESTION: Can we do a few more on Venezuela?

MR. BOUCHER: Let's finish up with Venezuela, then.

QUESTION: It's on Venezuela, too.

MR. BOUCHER: Oh, it's Mexico/Venezuela?

QUESTION: Yeah, sorry.

MR. BOUCHER: Okay, go ahead.

QUESTION: Please go ahead. I have three different questions.

QUESTION: No, go ahead.

MR. BOUCHER: Go ahead.

QUESTION: I understand that the Mexico and Chile are leading this coalition that the United States is trying to put together and I also understand that Lula does not agree, President Lula does not agree with the formation of this new coalition to promote new elections in Venezuela. Any comments on this?

MR. BOUCHER: I think you ought to see where do we come out on this. We had been looking at forming some kind of Friends of Venezuela or Friends of the Secretary General of the OAS group to support his efforts, to bring together a number of countries and strengthen the efforts of the Secretary General of the OAS in Caracas.

We don't have a particular set of countries in mind at this point. We have been talking to the Mexican Government. We've been talking to the Brazilians. We've been talking to others in the hemisphere and especially to Secretary General Gaviria, Secretary General Annan of the United Nations as well, about how an international grouping like this could buttress the efforts of the Secretary General of the OAS.

QUESTION: Does this constitute an expanded role for the US?

MR. BOUCHER: It constitutes another mechanism to support the efforts of the OAS Secretary General. As you know, we've been very active in supporting those efforts. We've been in direct contact with the parties down there. The Secretary himself has talked with Secretary General Gaviria, I think at least once, if not more often. We've had OAS meetings on the subject where the United States played an active role. Our ambassador in Venezuela has been very active. So I would say it's another one of the many active efforts by the United States to support a political solution in a effort led by the Secretary General of the Organization of American States.

QUESTION: Specifically, what would you like for these countries to do?

MR. BOUCHER: Well, as I said, this grouping would really try to strengthen the efforts in Caracas and strengthen the support of the Secretary General on the ground in terms of the contacts with both sides, in terms of the kind of positions that can be developed and considered and put forward. I think let's try to see if this forms, if this comes together, before I try to explain exactly in any more detail what it will do.

QUESTION: If this has been asked already, I apologize, but when and why did you guys change your mind?

MR. BOUCHER: I think we did discuss here before the issue of a friends group, and at that time we rejected the idea. It was, I think, to some extent a different idea. We felt that the effort and if -- the previous one. If you look back at what I had said at the time, I think I did put some emphasis on the fact that we need to support the efforts of the Secretary General of the OAS. And so the issue here is how can we best support the Secretary General of the OAS and the OAS-led effort. And as the ideas come back again, in terms of formation of a group in direct support of those efforts, it's an idea that we found more useful and supported.

QUESTION: Your understanding of the previous proposal, then, was that it would be a completely separate operation?

MR. BOUCHER: I think at that time intended to be an alternate.

QUESTION: And that was a proposal that was made by Chavez himself?

MR. BOUCHER: I don't remember exactly who it was. It came out around the time of the Brazilian inauguration.

QUESTION: What do you think of the fact of the general strike, which is having ruinous consequences for the Venezuelan economy? Is it time to back off?

MR. BOUCHER: I don't think we can tell one side or the other what their tactics should be, other than to say they should be peaceful, other than to say they both need to work closely with the Secretary General of the OAS, and to make clear that we do understand that the cost of the Venezuelan people and the hardship and difficulties to them has been great and that both sides should do what's in the interest of the Venezuelan people, which is to work with the OAS and to come to a negotiated solution. I'd remind you that we've also made clear the government has a particularly -- a particular responsibility for maintaining peace and avoiding violence.

Ma'am.

QUESTION: Venezuela, also. The United States has been working very much with several countries to resolve this matter peacefully. It seems that there's not solution on behalf of -- alternative solutions for Chavez. Is this becoming, strategically speaking, a problem for the United States now that you are facing the situation with Iraq and North Korea?

MR. BOUCHER: I would say that the evidence indicates that we're able to handle these situations at the same time. In fact, not only to handle the crises and the difficulties in the world, but also to proceed on broader agendas like free trade and democracy and fighting AIDS and reaching water agreements with Mexico. So no, it's not a strategic complication in that sense. It is a matter of considerable emphasis now for the United States and for the Secretary of State to follow this situation in Venezuela. Obviously, the turmoil down there does affect our interests. The effect on the oil markets, the effect on the region is great, and the fundamentals of the region, the Democracy Charter and supporting democracy in the region, is very important to us. So it is a si tuation where we do think that all the countries of the region have a very strong interest, strategic interest, in making sure that there is a democratic outcome.

QUESTION: Phil, if I may, please, I have two more questions.

(Laughter.)

QUESTION: I mean Richard. Sorry.

MR. BOUCHER: No, these are for Phil.

(Laughter.)

www.csmonitor.com Venezuela's private banks remain closed for a second day today as the president threatens to take them over. By Kris Axtman | Staff writer of The Christian Science Monitor

CARACAS, VENEZUELA – Four years after Venezuelan President Hugo Chávez was hailed as the model for a new wave of leftist leaders in Latin America, some of those following in his footsteps are learning that you can be radical - just don't wear it on your sleeve.

To his detractors, Mr. Chávez is seen as almost a dictator and a would-be communist. They point to his close relationship with Cuban President Fidel Castro and his occasional trips to Libya and Iraq. As a result, opponents are in the sixth week of a strike aiming to oust the controversial leader.

Observers say that Chávez's radicalism is more rhetoric than reality. But seeing the trouble that Chávez faces - the country's oil industry has ground to a halt, the nations banks have shut down, and the opposition is calling for a referendum on Feb. 2 - other left-leaning Latin leaders are concluding that the best way to bring the change is to work within the system instead of constantly railing against it.

"When he was first elected, Chávez was on the frontline of a new political experiment," says Alfredo Keller, a respected pollster in Caracas. But he has failed at balancing the demands of nationalization and globalization, he says - and the result is a country thrown into economic chaos.

This has meant that other leaders with similar leftist ideologies are having to reconsider how best to tailor their messages and policies in Latin America. The leaders include Brazil's new president, Luis Inacio Lula da Silva, who took office last week and Lucio Gutierrez, who swept Ecuador's presidential election in November. While they talk about distributing their country's wealth more equally, they also want to do so without disrupting their country's economic structure - something Chávez refused to do.

Along with appointing fiscal moderates to key cabinet posts, Mr. da Silva, for instance, allowed certain officials in the previous administration to keep their posts, and he traveled to Washington before meeting with any Latin American leaders.

As well, Mr. Gutierrez last week named a US-educated former bank vice president to be his finance minister, something that would be anathema to Chávez.

Still, to satisfy his constituents, the day after his Jan 1. inauguration, da Silva had breakfast with Chávez and dinner with Mr. Castro. Da Silva says he will consider sending technical workers to Venezuela to get the country's oil company running again.

"I think a lot of that seeming friendliness is driven by internal politics and posturing within Brazil," says Stephen Haber, a Latin American expert at Stanford University in Palo Alto, Calif. "After appointing fairly conservative, middle-of-the-road cabinet members, he had to placate the militant wing of his party. And siding with Chávez is low cost."

Dr. Haber says that this idea of a leftist alliance in Latin America is being overplayed, and is nothing like the unified left of the 1960s and '70s.

"The left has a long history in Latin America, and it exists for very good reasons. But this notion of a pan-Latin American left is not what is occurring now," he says.

What is occurring, he says, is a reaction to the free-market model of the 1990s, which many Latin Americans feel left them no better off. In fact, with the exception of Chile, per capita income has not risen since 1980.

That means people are voting their pocketbooks, removing leaders who couldn't make globalization work, and electing ones who stress more nationalistic ideas.

"Latin America is at a critical point right now in terms of the left. I think everyone realizes Chávez has failed, and they are now looking to [da Silva]," says Michael Shifter, senior fellow at the Inter-American Dialogue in Washington. "He represents an evolution towards a more moderate position, and is an important bellwether for the movement."

Still, Mr. Shifter says, it's going to be very difficult for these new leftist leaders to maintain the delicate balance between economic stability and a greater attention to social issues.

Chávez is proof of that. Under him, Venezuela's economy contracted 6 percent last year, and its currency hit a record low against the dollar this week. The country's banks are in the second day of a strike today, and Chávez continues to threaten to nationalize them.

Many experts, however, argue that his inability to arrest a worsening economy is more a result of his ineptitude and mismanagement than ideology.

But many Venezuelans hear only his radically leftist rhetoric, and can't separate his actions from his words. For instance, while he says he is opposed to globalization, Chávez hasn't done anything to disconnect Venezuela from the global economy, says Vladimiro Mujica, a professor at the Central University in Caracas and a representative of Citizens Assembly, a nongovernmental organization working with the opposition.

"Some people in the opposition like to raise the ghost of communism, but I don't think that is what we have," he says. "What we have is a very corrupt regime that is clinging to power." Opponents say that since taking office, Chávez has rewritten the country's Constitution to consolidate more power in his own hands.

Pollster Keller is one of many who accuse Chávez of using state funds to finance other leftist candidates in Latin America, such as those who were recently defeated in Nicaragua and Bolivia - the main funding coming from the state-run oil company, Petroleos de Venezuela, or PDVSA.

"He wants to use the money of PDVSA as a political weapon," says Jose Manuel Boccardo, a manager at the company before the strike. "He wants PDVSA to be the cash cow for his geopolitical strategy, and we don't want to be part of that."

Keller believes that Chávez won't step down voluntarily because "he is convinced he represents the head of the new left in Latin America."

The left has a strong base in Latin America. Keller points to meetings that took place in Sao Paulo, Brazil, in 1990 among the far left. At that time, 14 groups attended the Sao Paulo Forum, a left-wing discussion group which da Silva cofounded, aimed at building political strength. Today, there are 140 members of the Forum and polls show that 15 percent of the region is left-leaning. The Forum will reconvene in Porto Allegre, Brazil, at the end of the month.

www.forbes.com Reuters, 01.09.03, 5:28 PM ET By Susan Schneider

NEW YORK, Jan 9 (Reuters) - Venezuelan sovereign bonds careened nearly 3 percent lower on Thursday after bank workers joined a five-week strike waged by foes of President Hugo Chavez, boosting concerns that the escalating conflict will irreparably damage an already crippled economy.

Venezuela's spreads -- the premium investors demand over U.S. Treasuries to compensate for risk -- widened 0.62 percent to 13.3 percent, their widest point since Feb. 7, 2002, according to the J.P. Morgan Emerging Market Bond Index Plus. The nation's share of the EMBI-Plus plunged 2.85 percent on the day.

Venezuela's debt took a dive after bank workers said they would join the opposition's efforts to force Chavez's resignation or new elections with a 48-hour halt of banking services. The bank stoppage adds to a general walkout that has strangled the oil sector, the source of half the government's revenues.

News of the bank halt helped send the bolivar currency more than 5 percent lower on Thursday, adding to Wednesday's sharp plunge, and chipped steadily away at the value of Venezuela's bonds.

"The longer the strike at (state oil giant) PDVSA lasts, the more pressure it's going to put on the markets," said Ricardo Amorim, head of Latin American research at Wall Street research firm IDEAGlobal. "With the bank strike, the prospect for a solution to resume production at PDVSA looks further away."

Many large supermarkets also began a one-day stoppage on Thursday as part of the strike, which has already caused widespread gasoline shortages.

"They haven't seen any (government) reserve losses yet but they have to be losing money somewhere -- there's just no business going on," said an emerging debt trader. "It's going to be harmful to the economy."

Brazilian debt, meanwhile, shed 0.62 percent in terms of daily returns on the EMBI-Plus as the benchmark C bond <BRAZILC=RR> slipped 0.25 point to 69.25 bid.

Brazilian assets have soared in recent days as investors warm to new President Luiz Inacio Lula da Silva, a former labor union leader who struck fear in hearts of investors because of his one-time leftist rhetoric. With Lula now vowing to pursue reforms and keep spending in check, however, investors have snapped up bonds and pushed the currency higher.

The hefty gains in Brazilian assets prompted investors to take some profits on Thursday, traders and analysts said.

EMERGING ECONOMIES RUSH TO MARKET Mexico's bonds also slipped as the nation prepared to tap international markets with a $2.0 billion, 10-year global note, an increase from the previously planned $1 billion sale. The nation's share of the EMBI-Plus lost 0.3 percent on the day.

Mexico was expected to sell the debt on Thursday in a deal seen yielding around 2.5 percentage points above comparable U.S. Treasuries, said people familiar with the sale. With 10-year U.S Treasuries yielding 4.17 percent, the Mexican bonds would have a yield less than 7 percent.

Emerging economies like Mexico have rushed furiously to international markets this week to take advantage of improved sentiment toward the asset class. After a string of rocky months in 2002, emerging markets rallied in the fourth quarter, bolstered in part by investor cheer for Lula.

Turkey, too, took advantage of the window of opportunity on Thursday, selling $750 million in 10-year bonds. The issue was made at 98.522 percent of face value and a yield of 11.25 percent, according to the lead managers.

The Turkish and Mexican deals follow Chile's sale of $1 billion in 10-year global notes on Wednesday and the Philippines' auction of $500 million, a reopening of an existing bond maturing in 2013.

www.forbes.com Reuters, 01.09.03, 9:44 AM ET  By Andrei Khalip

RIO DE JANEIRO, Brazil9 (Reuters) - Latin America is treacherous territory for oil and gas investors, awash with fears about Venezuela's general strike and public unrest, economic crisis in Argentina and Brazil's new leftist government.

Sector analysts suggest investors "sit it out" until calm returns to the region, which partly opened to foreign investment in the past decade and is still considered less risky than the former Soviet Union and some Middle East countries.

"It was a time of big shocks last year in Latin America, but it is a big question whether we see any recovery now," said Matthew Shaw of Wood Mackenzie oil consultancy in Edinburgh. "It's time to wait and see, really."

The problems in the region, which in total produces more oil than world leader Saudi Arabia, add to the pressure most foreign companies are facing at home to cut unnecessary risks in a sluggish global economy.

Although some assets have become seemingly cheap, it is difficult for companies to evaluate actual opportunities because of uncertainties over the region's economic prospects and politics, he added.

"The lower ability to tolerate higher risks, less support for new ventures, resulted in many trying to sell down positions, especially in natural gas," said Jed Bailey, Cambridge Energy Research Association's director for Latin America, who also expected "a very tough" 2003.

With Venezuela's strike still crippling crude output in the world's fifth-largest oil exporter whose political future is murky at best, investors have plenty to worry about, even though higher world oil prices due to the strike will still bring a net benefit to those with diversified portfolios.

"There is concern about restarting production of heavy oil in Venezuela," said Myles McDougall of ABN Amro in London. It may take months to reestablish wellhead pressure and some wells may have to be redrilled in costly operations, experts said.

Heavy oil accounts for more than half of the Andean nation's output that slumped from 3.1 million barrels per day (bpd) in November to 600,000 bpd now. Some refineries in the U.S. Gulf Coast depend on this type of crude.

The strike, organized by the opposition seeking to oust Populist President Hugo Chavez, affected state oil giant Petroleos de Venezuela's credibility and raised concerns about its debt, threatening Venezuela's efforts to lure fresh foreign investment into its energy sector.

PROBLEMS DOWN SOUTH Despite a modest economic recovery in the past few months in Argentina, hit by its worst economic crisis ever, drilling activity is low and investors are bracing for a new bout of uncertainty ahead of early presidential polls in May.

A freeze on fuel prices and a 30 percent retention of export revenues in dollars are also hampering investment.

Brazil, the region's No. 3 oil producer after Mexico and Venezuela, has lived through a general crisis of investor confidence ahead of presidential elections last October that brought leftist Luiz Inacio Lula da Silva to power.

Analysts say the statements by his new energy officials have been moderate so far, suggesting that a free-market fuel pricing system and sales of exploration licenses to foreign firms would be preserved. But they said they needed time to evaluate whether that commitment would last.

Also, foreign firms have lost some of their enthusiasm about new oil concessions offered by the government since 1999, and are trying to reshuffle their portfolios after only a few small finds of heavy oil in deep-water offshore areas.

Analysts and company officials alike say the government must come up with tax breaks to maintain Brazil's oil appeal.

As for natural gas-rich but land-locked Bolivia, most analysts are skeptical that companies working there would be able to ship liquefied natural gas to the U.S. markets any time soon, due to Bolivia's political problems with sea access.

Meanwhile, slow growth of natgas consumption in neighboring Brazil has thwarted Bolivia's plans for bigger exports there.

Latin America's No. 1 oil producer Mexico offers a calmer picture, but there is also room for uncertainty, as the start of multi-service contracts that state oil monopoly Pemex is expected to award to foreign firms has been delayed.

Most experts singled out tiny Ecuador as the country with the steadiest oil development. Ecuador will be selling concessions for one of its big oil fields this year and should finish a 450,000 bpd pipeline to coastal ports for export.

Copyright 2003, Reuters News Service

www.nytimes.com From the Council on Foreign Relations, January 10, 2003

Julia Sweig, the Council on Foreign Relations' deputy director of Latin America Studies, says that strikes and demonstrations against Venezuelan President Hugo Chavez could continue for months and even worsen. Although President Hugo Chavez's popularity is at only 30 percent, Sweig says that unless the fractious opposition can unite behind one candidate, Chavez may well win the next election - whenever that occurs. The Bush administration would like early elections by next month, but Sweig says that August may be a more realistic goal.

Sweig, author of the new book Inside the Cuban Revolution, was interviewed on January 8, 2003, by Bernard Gwertzman, consulting editor for cfr.org.

Q. What's the situation like in Venezuela? A. It's extraordinarily chaotic and fluid. The strikes have now been going on for over a month, but they really have been coming in fits and starts for more than a year. They have been very dramatic in the last month because of the strikers' ability to shut down the oil industry. No one is talking about an imminent resolution.

Q. What's causing the constant eruption of street demonstrations? Is there a terrible dictator in charge? Are people seeking a change in government? And how does oil figure into all this? A. I don't think Hugo Chavez can be described accurately as a "terrible dictator." He's a democratically elected head of state, who, in 1992, launched a coup from his paratrooper barracks. It failed, but he became a national political figure overnight for his efforts against a government widely considered corrupt. He was sent to jail, then emerged in the mid-1990s with a new political party explicitly opposed to establishment parties.

Since taking power he has governed in a very clumsy and, some would argue, undemocratic, in-your-face, authoritarian way. When he was elected the first time, in 1998, he pulled in 56 percent of the vote, and in 2000, he won with 59 percent.

Q. And the previous political parties, which had dominated Venezuelan politics, more or less evaporated after the 1998 election? A. They did evaporate, and they have yet to reorganize and resurface. The opposition today is a very diverse amalgam that spans from Marxist on the one hand to Chamber of Commerce types on the other. It includes the traditional labor federation, which has played a very large role, as well as the management and workers in the oil industry.

Q. Let's focus on the oil industry. What caused the strike that began last month? A. I have to go back a bit to the April 2002 brief coup. The oil industry was very important in the coup. The oil workers joined a strike that led to a one-day overthrow of Chavez by the military. The workers' principal beef was that Chavez had put his own cronies into the governing structure and the top leadership of the state oil company, Petroleos de Venezuela [PDVSA]. The Chavez appointees were associated with leftist ideologies and were not people who had cut their teeth on what is described as a meritocracy within PDVSA. But public protests demanded Chavez' return and the military allowed him to return as president.

Underlying this conflict and PDVSA's involvement in opposition to Chavez is a debate that has been taking place in Venezuela-and I suspect in other oil-producing countries-about the role of the state in managing oil revenues and exploration and investment. For a time in the early 1990s, you had people running PDVSA who wanted a policy of "opening" the Venezuelan oil industry, which had been nationalized in the early 1970s. They no longer wanted Venezuela to adhere to OPEC [Organization of the Petroleum Exporting Countries] production quotas. The argument of the market advocates was "let a thousand flowers bloom." They said open up the industry, not only to foreign investment, but to Venezuelan capital and individual investment, which would reduce the role of the Venezuelan state in controlling the market and industry.

That argument is pitted against the people around Chavez, who believe that Venezuela should be a member in good standing of OPEC that should gain market share, not through production but by keeping prices up through production quotas. It's an oil industry debate, now taking place in Venezuela, but it has become highly symbolic of who controls oil revenue. And it is very, very politicized. Venezuela, of course, is a major oil producer, and is the third largest exporter to the United States.

Q. Chavez and his supporters want the state to continue to control the oil industry? A. That is correct. They say that in any joint venture, there should be a 51-49 split. They do not want Venezuelan private capital to have the right to invest in Venezuelan oil and they want to keep majority control in the hands of the Venezuela state.

Like many presidents before him, Chavez has called PDVSA a "state within a state," arguing it is a bloated, inefficient bureaucracy controlled by the nation's elite. Chavez, unlike past presidents, however, is willing to risk applying his ideological focus to PDVSA by using the spoils for social programs. This is anathema to PDVSA management as they have their own interests, contrasting ideology, and pride in being one of the most prestigious state-run, but autonomous oil companies in the world. The debate is whether making PDVSA an arm of the state's social program coffers would undermine the efficiency and profitability of the company.

Q. How did this affect the current efforts to unseat Chavez? A. When Chavez was reinstalled after the April coup, he pulled his cronies out of PDVSA. He brought the head of OPEC, who is a Venezuelan, back to run PDVSA, and attempted to make peace in the oil sector. But he failed. He failed less for oil-specific reasons than for the generalized polarized climate that he allowed to develop and which the opposition fomented as well. When the PDVSA workers got directly involved in the strike again in December, there was a mobilization in front of the PDVSA offices. Chavez's troops fired tear gas and wounded a few PDVSA employees. That particular moment unleashed the pent-up anger at Chavez and produced what you see today- a general strike that threatens Venezuela's existence as a reliable oil-producing nation for the first time ever.

Q. Describe the opposition. Who are they? A. It is a vague opposition, known as the Democratic Coordinator. There are three principal institutions: the PDVSA, the Confederation of Venezuelan Workers (CTV), and Venezuelan Chamber of Commerce. The opposition also includes individuals from the national assembly who have created their own political parties. For example, Primera Justicia, not well known until about two years ago, is a broad amorphous coalition. It does not have one, single leader. There is an enormous amount of fighting within the opposition. I think the moderates in both the Chavez government and the opposition have a hard time controlling their extremists. That's why the potential for violence is so strong.

Q. Can an election be held in August? A. Yes. Under the Venezuela constitution, a referendum on the presidency can be held in August, and Chavez says he will stand for reelection.

Q. But the opposition wants him out now? A. Yes. They want something to happen in February. You can call it a non-binding referendum, which is permitted under the new constitution, but the opposition wants it changed to a binding referendum-in effect a new election.

Q. What has the Bush administration said? A. The administration got stung badly by its apparent association with and support for the coup in April. After April, it took a low profile. It has attempted to let the Venezuelan actors on the scene play this out, while trying to signal it does not support coups and wants a constitutional, peaceful electoral solution.

Now, though, because of the war in Iraq and its timing, and the potential for great humanitarian toll in Venezuela, Bush administration officials have stepped up their statements a bit. And while they are supporting the OAS' [the Organization of American States] mediation [to try to resolve the crisis], they have said very clearly they want early elections, and they don't mean August. They are backing the proposal that some kind of electoral event take place in February, and they want the referendum to become, in essence, a presidential election, just as the opposition does.

A pro-government representative has drafted a constitutional amendment in the national assembly [that would allow elections to take place earlier than August]. The United States wants the national assembly to vote on the constitutional amendment, the Supreme Court to authorize its constitutionality, and an election to take place in less than a month. This seems like a very tall order. I think, this is due, in part, to the possibility of war with Iraq.

Q. You mean if there is a war in Iraq, there is concern about oil supplies? A. Yes. Venezuela is the third largest exporter of oil to the United States. Also, I think that neither the opposition nor the government can contain the peaceful protests between now and August, and if this drags on too long it will explode and explode violently.

Q. What are the odds of the crisis being resolved peacefully? A. It is hard to imagine a peaceful resolution, as the polarization is stark and neither the government nor the opposition seems ready to agree to a timetable for elections. The best option, and the one most likely to yield a fair and manageable outcome, is a recall referendum in August of this year. But the opposition is dead set against waiting. My sense is that a low level of violence could continue until August as long as the Venezuelan military stays out of the streets. If provocations from any side get out of control, the conflict could rapidly escalate into a very violent scenario.

Q. If there was an election in February, who would win? A. It is hard to tell. Perhaps, if a governor of a state which is in central Caracas, Enrique Mendoza, runs he could win. He is from the old political system but nevertheless well regarded. Chavez's popularity has gone down to about 30 percent. But that is higher than other presidents in Latin America. Chavez also could win if the opposition fails to get united behind one candidate.

Q. Who still supports Chavez? A. Chavez' 30 percent support of the population represents the poorest and the working poor, who for 40 years felt cut out of the political system in Venezuela. And the interesting thing is that Chavez has not really delivered much in the way of concrete economic or social benefits to the poor. But instead, Chavez has delivered a sense of empowerment. He has given them a voice and is viewed by them as one of them.

Q. Is his popularity in part based on race? A. Chavez is not of white European descent. He is mestizo. But I would not stress the racial element. If you look at the crowds protesting him, they are of all colors and backgrounds. His backers are the most disadvantaged, along with a whole cadre of trained leftist cadres, who are intellectuals, labor lawyers, union activists, even former guerrillas. You could rattle off a much longer laundry list of those who oppose him.

Q. Has the OAS meditation been effective? A. I think the mediation of [OAS Secretary-General] Cesar Gaviria has prevented violence from erupting in full force. He has been in Caracas for the last two months. He has not gotten the government and the opposition to agree to anything. But I think if he leaves the country and no one else more senior replaces him, the whole thing will blow up. He needs support from other states. There have been muted statements at best from the region. Besides the new president of Brazil, [Luis Ignacio] Lula [da Sliva], and Fidel Castro, no one is particularly fond of Chavez, but he was democratically elected.