Posted on Wed, Jan. 08, 2003 By TIM JOHNSON and ANDRES OPPENHEIMER Miami Herald

BEING REASSIGNED: Otto Reich failed to win Senate approval as the State Department's top official in charge of Latin American affairs. MIGUEL ROJO/AFP FILE

WASHINGTON - The Bush administration is expected to announce a reorganization of its Latin America policy team that will include the appointment of diplomat Otto Reich as a ''presidential envoy'' to the Americas, thus avoiding a confirmation battle with the Senate, administration officials said Tuesday.

The Cuban-born Reich, who had to step down last month as the State Department's top official in charge of Latin American affairs after failing to win Senate confirmation, would move to the White House and report directly to National Security Advisor Condoleezza Rice, the officials said. The announcement could be made as early as this week, they said.

Replacing Reich at the State Department's top job in charge of Latin American affairs will be Roger Noriega, another political appointee currently serving as ambassador to the Organization of American States, the sources said. It was unclear whether Noriega himself would have difficulty being confirmed.

Noriega is a former Latin American affairs staffer for former Sen. Jesse Helms, R-N.C., who retired last month.

Reich and Noriega are considered hard-liners on Cuba, and on several other Latin American issues. Reich, a former ambassador to Venezuela, had been effectively vetoed in the Senate by Sen. Christopher Dodd, D-Conn., and other Democrats who oppose the U.S. embargo on the island.

Ever since Reich's tenure at the State Department came to an end recently -- when he was obliged to step down by law because of a failure to win Senate approval -- it was unclear whether a new confirmation effort would be made this year.

The Bush administration decision to place Reich in a position that does not require Senate confirmation avoids the necessity of another battle in the Senate, where the outcome was uncertain even though Republicans control the chamber in the new Congress.

But Reich supporters saw it as a positive move nonetheless. ''It's a victory of the hard-liners,'' said one U.S. official.

Secretary of State Colin Powell is said to have wanted a career diplomat, U.S. ambassador to Colombia Anne Patterson, for the State Department Latin American affairs job. Well-placed State Department sources said Powell did not want to risk a fight with Congress -- where the administration will need every possible vote in the event of a war on Iraq -- over a lesser issue such as the Reich nomination.

The new position for Reich would amount to a somewhat diminished version of a ''presidential envoy'' office for Latin America created during the Clinton administration, and abolished by Bush.

Clinton tapped his boyhood friend and former chief of staff, Thomas ''Mack'' McLarty, to the Latin envoy post in 1996, giving him virtual Cabinet-level rank and an office in the West Wing of the White House. McLarty served until 1998.

Reich will have a small office and staff in a building adjacent to the White House, and will report to Rice, officials said. But supporters say he may play a powerful role because he will work close to Rice, and thus have potentially easy access to the Oval Office.

Press offices at both the State Department and White House said they could neither confirm nor deny any change in Reich's status.

Since the sudden end of Reich's State Department job, when he was given a temporary slot as Powell's ''special envoy'' to Latin America, Powell has kept him at arm's length.

Reich did not accompany Powell on a trip to Colombia Dec. 3-4, nor was he present at a White House meeting in mid-December with incoming Brazilian President Luiz Inácio Lula da Silva, who now heads South America's most powerful nation.

''Otto wasn't even in the room. He was the most senior official to have met with Lula but he wasn't asked to come,'' said a colleague ''disappointed'' at White House treatment of Reich.

On Monday, Reich did not attend a meeting Powell held with Oswaldo Payá, Cuba's leading opponent to Fidel Castro. But Reich met with Payá separately because he had a long-scheduled speech at the time of the meeting, said an official familiar with Reich's schedule.

Indeed, Reich's future in the government has been the subject of such a tug of war between the White House, the State Department and Congress, one source continued to express a measure of skepticism over the new appointment Tuesday.

''Until I hear somebody announce it standing on a podium with a seal on it, I won't believe it,'' said a close friend of Reich, who spoke on condition of anonymity. ``We've heard so many things.''

Powell and the White House had sounded out Reich about taking several lesser jobs, sparking angry chatter on Spanish-language radio stations in Miami and complaints from leaders in the Cuban-American community that one of its most prominent members was being treated poorly by the Bush administration.

Reich was first asked if he wanted to represent the United States in Geneva as its human rights representative, a position that normally serves to criticize the Cuban government's poor human rights record, sources said. Later, he was approached about serving in the National Security Council to replace Elliott Abrams as senior director for democracy and human rights, after Abrams left to become director of Middle Eastern affairs. Reich declined both jobs because he considered them a step down.

Another staffer said Reich supporters want the White House to assign Reich policy issues that he can handle separately from John Maisto, the career diplomat who is assigned the Western Hemisphere portfolio at the National Security Council.

''You have to give him specific assignments like free-trade issues, or hemisphere security issues, or Cuba and Venezuela,'' said one staffer, who declined to speak on the record.

By Brian Ellsworth UPI Business Correspondent From the Business & Economics Desk Published 1/8/2003 6:28 PM

CARACAS, Venezuela, Jan. 8 (UPI) -- Venezuela's government could soon be facing a serious cash flow shortage after being crippled by over a month of an opposition-led strike.

While the $1.5 billion dollar decline in petroleum revenue has severely damaged the finances of the world's fifth-largest exporter, a steep decline in tax revenue threatens to worsen the government's fiscal crisis.

The government has already confirmed a 12 percent decrease in this year's expected tax revenues, which make up roughly half of government funding. Finance Minister Tobías Nóbrega indicated that the current budget projections for 2003 may have to be trimmed by as much as 10 percent.

"The government was only able to collect 17 percent of its expected revenue for the month of December," said David Moran an economics professor at Metropolitan University in Caracas. "If this continues until February, the government will be facing a serious cash flow problem."

Adding to the complications, strike leaders have called for "tributary disobedience" by opposition sympathizers, who have been instructed to avoid paying sales tax. On Tuesday, thousands of opposition demonstrators marched to the offices of the country's tax collection service, tearing up tax collection forms and demanding that the government not be paid another penny.

In some of the country's supermarkets shoppers refused to pay sales tax, which last year was raised from 14.5 percent to 16 percent, leading to confrontations with storeowners who refused to exonerate the payments.

Attorney General Isaías Rodríguez warned citizens to pay their taxes and said the government may detain strike leaders for inciting tax evasion.

Regional governments complained Tuesday that the central government has not made payments on time. One governor said he was considering calling a financial emergency, and that 350,000 regional government workers may not receive their paychecks next week.

The Finance Ministry hopes to refinance bonds held by private sector banks to postpone payments. But the banking sector is unlikely to cooperate, since bank leaders announced Wednesday that they were shutting down their offices, electronic banking services and automatic teller machines for 48 hours to show solidarity with the strike.

Opposition leaders called a national strike in early December to force President Hugo Chávez into resigning or calling early elections. The petroleum industry, the backbone of the country's economy, joined the strike by shutting down refineries, paralyzing crude oil production and anchoring petroleum tankers. Most expected the strike would after several weeks, but more than a month after it started, there is no end in sight.

The government claims to have complete control over the industry, though the U.S. Energy Information Administration calculates that Venezuela is only producing 600,000 barrels per day. Countries from Chile to Jamaica have reported fuel interruptions as a result of the strike.

In addition, the U.S. Energy Department allowed oil companies to defer delivery of crude to the country's strategic reserves. Venezuela usually produces 2.8 million barrels per day.

Economic indicators continued to spiral, as the exchange rate closed on Wednesday at Bs. 1646 per dollar -- 13 percent higher than the closing rate the day before. This will make bond payments more expensive, since the government recently dollarized some bonds as part of a debt swap in November meant to solve short-term liquidity problems.

In addition, Venezuela's annual inflation rate for 2002 reached a five-year high of 31.5 percent as international reserves continue to dwindle.

The petroleum strike has weakened the financial position of the state oil giant PDVSA, who's bonds ratings have slipped to BB. Petroleum experts say that PDVSA debt, now at roughly $7 billion, has doubled in the last four years because President Chávez has made PDVSA borrow to shore up government finances.

The opposition called a similar petroleum strike in April of 2002, when political violence led to Chavez' brief ouster. An interim government dissolved the country's legislature and supreme court, provoking outraged Chavez supporters and loyalist troops to return him to power two days later.

QUESTION: On a related matter, OPEC is meeting at the week end to discuss the possible increase in output to compensate for the reduction in output in Venezuela. Do you -- does the United States have any views on whether an agreement to increase output would be a good thing?

MR. BOUCHER: We've seen a number of statements from members of OPEC about possibly increasing production and that would be a positive development. Obviously they're going to have to get together and decide, but we're also in touch with various countries involved.

QUESTION: Can you tell us what countries?

MR. BOUCHER: No, I think I'll stop at that.

QUESTION: OPEC members?

MR. BOUCHER: Yeah.

QUESTION: Yeah? And putting -- saying that you think it would be a positive thing if --

MR. BOUCHER: Our view is that it would be a positive development if a -- the various ideas that have been discussed of that production, if those were carried out, that would be positive. And we've made that view known.

09 Jan 2003 01:29 www.alertnet.org

(Adds currency reference, paragraphs 2,6, traders', analysts' comments, paragraphs 15-17) By Pascal Fletcher

CARACAS, Venezuela, Jan 8 (Reuters) - Venezuelan bank workers on Wednesday called a 48-hour shutdown of banking services this week, escalating a five-week opposition strike that has already crippled the country's vital oil exports.

The bank stoppage call spooked Venezuela's currency market, sending the local bolivar tumbling against the U.S. dollar.

Union leaders said the action by employees at private and state banks across the South American nation would halt services to the public on Thursday and Friday.

"We are calling for a complete banking stoppage," Jose Elias Torres, president of the bank workers' union federation Fetrabanca, told a news conference in Caracas.

Fetrabanca called the work stoppage in support of the grueling strike launched by opposition leaders on Dec. 2 to press leftist President Hugo Chavez to resign and hold early elections. The ongoing shutdown has crippled oil output and shipments by the world's No. 5 petroleum exporter.

The Venezuelan Central Bank's bolivar reference rate <VEBFIX=> against the U.S. dollar closed 5.7 percent down at 1,507/1,510.50 bolivars. The local currency's interbank rate <VEB=> <VEB2=> slid by nearly 10 percent against the U.S. greenback to an average low of 1,585 bolivars, traders said.

As the opposition's economic offensive against the populist president increased, so too did tension on the streets.

National Guard troops fired tear gas on Wednesday to keep back stone-throwing Chavez supporters who besieged the National Electoral Council in Caracas, where opposition leaders were holding a news conference. No injuries were reported.

The pro-Chavez demonstrators chanted "Chavez is not resigning" and "The banks belong to the people."

LINES AT BANKS

The 48-hour banking strike heralded fresh disruptions for the Venezuelan public, already coping with a scarcity of gasoline and shortages of some food products caused by the general strike. Private banks had already been restricting their daily services to three hours a day during the strike.

After the stoppage was announced, lines formed at banks in Caracas as clients rushed to withdraw cash before the weekend.

"It's madness. People have needs and in those two days (Thursday and Friday), they might have to get cash," said 30-year-old administrative assistant Mauro Rodriguez.

The opposition has set its sights on a Feb. 2 referendum scheduled by electoral authorities to vote on whether Chavez should resign. But the poll is nonbinding, and the president, who was elected in 1998 and whose term ends in early 2007, says the proposed election is unconstitutional.

More than five weeks into the strike, Venezuela's economy is reeling from the oil shutdown. Oil sales account for half of government revenues and 80 percent of all export revenues.

Local currency traders said the bank strike call, combined with the deteriorating economic situation, was unnerving local banks, companies and savers. "That frightened a lot of people who went out and converted their bolivars into dollars, in case the situation gets worse," one trader said.

Analysts questioned whether the government, losing millions of dollars every day through the oil strike, would be able to meet future domestic and external debt payments.

"I see things going down, down, down, down," Michael Gavin, Head of Latin American Economic Research for UBS Warburg, told Reuters. "I think it's tough to see how they get through the first quarter," he added.

CHAVEZ FIGHTING BACK

But local experts said that beyond the nuisance to the public, the overall economic impact of the two-day bank stoppage would be limited. "It's more a symbolic shout than anything else," one, who asked not to be named, told Reuters.

Former paratrooper Chavez, who survived a coup in April and refuses to quit, has vowed to beat the strike and act against any attempt by his foes to close down the banking sector.

Venezuela's Central Bank said it would continue its operations but it was not clear whether the inter-bank foreign exchange market would be running on Thursday and Friday.

Stepping up their economic war of attrition against Chavez's government, opposition leaders have also called on Venezuelans to stop paying taxes. As a result of the strike, the government is reducing by half its original 2003 growth forecast of 2.5 percent to 3.5 percent. It has said it will announce tough belt-tightening measures.

And Chavez is fighting back, sacking striking oil executives in the state oil giant PDVSA and sending troops and loyal personnel to re-start refineries and export terminals.

The government insists strike-hit oil operations are being restored to normal. The strikers say the shutdown is holding.

The oil industry disruption has hit shipments to the United States, which normally obtains more than 13 percent of its crude imports from Venezuela. A senior U.S. official said on Tuesday the United States would buy its oil elsewhere.

Many major industries and shops remain closed and many private schools and universities are not starting classes.

By James Anderson Associated Press Writer Wednesday, January 8, 2003; 2:27 PM

CARACAS, Venezuela –– Venezuela's bankers said Wednesday they will close for two days to support a 38-day-old strike seeking President Hugo Chavez's ouster.

Chavez has gone so far as to threaten nationalizing striking banks, which have opened just three hours a day since Dec. 9, a week into the strike. Thousands line up each morning outside Caracas banks splattered with graffiti reading "I want my money!" and "Banker Thieves!"

Jose Torres, president of Fetrabanca, the umbrella group for bank workers unions, said banks will close Thursday and Friday. Local banks include subsidiaries of Citibank, Banco Santander Central Hispano and Banco Bilbao Vizcaya Argentaria S.A.

The action underscored intransigence by both sides in Venezuela's crisis despite international pleas to help Organization of American States Secretary General Cesar Gaviria find a solution.

National guardsmen fired tear gas Wednesday to disperse pro-Chavez street activists throwing objects at the National Elections Council building, where opposition leaders were holding a news conference.

The strike leaders are calling for a Feb. 2 nonbinding referendum on Chavez's rule and want him to schedule elections in 30 days if he loses the referendum.

Chavez insists the constitution only requires him to respect a possible recall referendum next August, the midpoint of his six-year term.

Colombian President Alvaro Uribe urged Venezuelans to avoid the violence that has plagued Colombia for 38 years. "You should listen to us Colombians, because here we have suffered so much," Uribe said.

The strike briefly sent international oil prices above $30. The state oil company is seen as gradually picking up activity but is still operating well below normal. Crude output is estimated at around 400,000 barrels per day, compared to the pre-strike level of 3 million barrels a day. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Chavez has managed to somewhat stabilize domestic gasoline supplies through imports. Caracas streets were jammed with traffic Wednesday, and many businesses were open. However, international franchises, large malls and many factories were closed, emptying industrial parks. Public schools opened for the new year on Monday but some private schools have delayed classes.

Three Venezuelan navy ships were collecting Colombian rice, beans and other staples to alleviate strike shortages in Venezuela.

Late Tuesday, Energy Minister Rafael Ramirez vowed to crush the strike by decentralizing Venezuela's state-owned oil monopoly, where 30,000 workers are on strike.

Chavez's government will cut jobs at the Caracas headquarters of Petroleos de Venezuela S.A., a hotbed of dissent where 7,000 are employed, Ramirez said. His government is systematically firing strikers at the giant company, the world's fifth-biggest oil exporter.

Paul MacAvoy, an economics professor at Yale University who has followed the industry for 30 years, said he's never seen a restructuring plan like the one proposed by Chavez.

Since production, refining and distribution operations are scattered, a single operational headquarters – rather than two separate ones, as proposed by Chavez – is the industry norm, he said.

"This looks like a political ploy to show (Chavez) supporters the company is being dismantled for their benefit," said MacAvoy.

The strike has all but shut Venezuela's oil industry, which contributes half of government income. Other revenue is down because thousands of businesses closed, affecting tax collection. The government is cutting its $25 billion 2003 budget by 10 percent.

The head of Venezuela's tax authority announced Tuesday a 12 percent cut in expected 2003 collections. More may come if businesses adhere to opposition calls for a tax boycott.

Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said the planned shake-up of the state oil monopoly "could become a problem rather than create more efficiency. ... This is certainly not a move seen in a democracy. It looks like something done under a controlling state."

"It's a step backward, costs and inefficiency will rise," insisted state oil company executive Gonzalo Feijoo, who was fired by Chavez. "The headquarters in the capital is of utmost importance to the organization."