Monday January 6, 11:07 PM

An ongoing 36-day-old strike general strike "had us worried for a little bit," but never shut production, Bezzara told Dow Jones Newswires in a telephone interview. Production during the year was a record 436,000 tons, he said.

Bezzara said a severe shortage of natural gas, due to the strike that began Dec. 2, shut production briefly at Bauxilum, the country's only supplier of alumina, the main raw material in aluminum production.

But Venalum has a constant 30-day supply of alumina in storage, while its sister aluminum producer Alcasa has a 10-day supply and Bauxilum, itself, had a 15-day supply, he said.

Gas supplies were returned to minimal required levels a few days after Bauxilum shut down, after an agreement was reached between the government and dissident managers at PdVSA Gas, the natural gas arm of state oil monopoly Petroleos de Venezuela SA (E.PVZ).

PdVSA officials agreed to maintain minimal gas levels because of the damage a total shut down would inflict on heavy industries in the region, Bezzara said.

Venalum, for instance, would take up to two years to restart if it ever shut down completely, he said.

That's because the company is currently operating 905 production cells, and a restart would have to be done at a maximum rate of two per day, he said.

The aluminum producers will likely be the last to suffer if there is a complete gas shut down because they don't use as much gas as do some of the other industries in the region, Bezzara said.

Venalum needs only about 6 million cubic feet per day of gas, Alcasa needs about 5 million cfpd, while Bauxilum needs about 50 million cfpd. Steel producer Sidor needs about 200 million cfpd, he said.

Japan's Showa Denko holds 7% in CVG-Venalum, Kobe Steel Ltd. (J.KOB) and Sumitomo Chemical Co. Ltd. (J.SUC) each hold 4%, Mitsubishi Materials Corp. (J.MMT) holds 3%, and Mitsubishi Aluminum Co. and Marubeni Corp. (J.MRB) each have 1%.

Luiz Inacio Lula da Silva, the leftist populist who was inaugurated Wednesday as president of Brazil, has been hinting that he doesn’t intend to diverge much from the free-market economic policies that have brought his country eight years of steady growth and stability. Maybe that’s because he doesn’t need to look too far for cautionary lessons.

To the south, Argentina’s corrupt and spineless political elite has spent a year in a futile quest to evade the consequences of its bad financial management during the 1990s, even as the country’s living standard has plummeted.

To the north, an even worse Latin-American nightmare is underway: Venezuela, ruined and riven by the disastrous attempt of populist President Hugo Chavez to remake the country with half-baked socialism, is mired in a political standoff that risks civil war.

Da Silva may have been elected with the votes of Brazilians disillusioned with what Latins describe as the “liberal” economic model of private ownership and free trade; but Brazil’s neighbors are vividly demonstrating how perilous it can be to depart from that model, in the absence of a coherent alternative.

For all the region’s current troubles, nothing approaches the chaos that now afflicts Venezuela. A national strike called by the opposition to Chavez entered its second month Wednesday, with no end in sight. Intended to force the President to resign or agree to early elections, the stoppage has succeeded only in crippling Venezuela’s oil-exporting industry, the world’s fifth largest, which supplies the United States with 15 percent of its imported oil and 10 percent of its gasoline.

World oil prices have risen above $31 a barrel, Venezuelans have had to wait in long lines to fuel their cars, and the government has lost some $1.5 billion in revenue -- and yet the gulf between Chavez and the more than 60 percent of the population that opposes him only grows deeper.

Sadly, neither side is committed to preserving Venezuela’s battered democracy. Chavez, a former coup plotter who was first elected in 1999, helped bring on the crisis with a series of constitutional rewrites and referendums that extended his term to 2007 and concentrated power in his hands; opponents, who include both business and labor leaders, talk of an electoral solution but clearly hope to force the President from office, either through street demonstrations or a military coup.

As the strike drags on, and the risk of violence increases, the crisis is exposing the weakness of institutions and leadership in the American hemisphere.

Last year the much-derided European Union managed to arrest the implosion of Macedonia, another polarized country, with an aggressive and well-coordinated intervention.

But in Venezuela the only help has come from the secretary-general of the Organization of American States, Cesar Gaviria, who has tried to broker a compromise but lacks the resources or the clout to do so on his own.

The Bush administration, distracted by Iraq, has conspicuously stumbled in trying to address Venezuela; other Latin-American nations that could play a role, including Brazil, have been largely passive.

There is not much tradition of collective action in the region, and history has given US intervention a mostly bad reputation. But Venezuelans are stalemated; if nothing is done, a country that is a vital oil supplier and has preserved a democracy through four decades may plunge into anarchy.

If the Bush administration will do nothing, perhaps da Silva can take the lead. The Washington Post

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Reuters, 01.06.03, 11:07 AM ET

NEW YORK, Jan 6 (Reuters) - Merrill Lynch cut its allocation of Venezuelan bonds to underweight from market weight in its model portfolio on Monday as a five-week-old strike by foes of President Hugo Chavez strangles the country's oil production, pummeling the economy.

The investment bank said in a research report that the opposition, which is demanding new elections or Chavez's resignation, and the president remain far away from a solution to the conflict, which keeps pressure on the fragile economy as businesses remain shut and the production of its top revenue source -- oil -- stifled.

Merrill said that no change at the presidential level until August appears to be the most likely scenario for now. Chavez says the constitution does not allow a binding referendum on his rule until August, which marks the halfway point of his current term due to last until 2007.

"In this scenario oil production and economic activity take time to recover and the economy suffers significantly," said Merrill Lynch.

"While our base case scenario does not include an external debt payment crisis, we have to acknowledge that risks are higher." Merrill said the strike has already cost Venezuela's fragile economy an estimated $2 billion to $3 billion. The investment bank said it expects Venezuela's gross domestic product to have contracted 9.2 percent in 2002, due partly to the strike.

The investment bank said it shifted the money from the Venezuela reduction to Ecuador, an oil producer that is benefiting from higher world crude prices.

Ecuador bonds got a boost on Friday when the incoming government of Lucio Gutierrez named respected economic consultant Mauricio Pozo as finance minister, an appointment seen by analysts as opening the doors for Ecuador to clinch a much-needed International Monetary Fund deal.

Tensions remain high in Venezuela following street clashes and shootings in the capital in the past few days, confrontations that left two dead and wounded dozens.

On Monday, Venezuela's share of the J.P. Morgan Emerging Market Bond Index Plus slid 0.75 percent on the day in midmorning New York trading, while Ecuador's portion leaped 4.34 percent in terms of daily returns.

Vienna, Jan 6, OPECNA/IRNA -- The departure of Algerian experts to assist the Venezuelan national oil company, Petroleos de Venezuela S.A. (PDVSA), is a 'coincidence' and not tied 'directly or specifically' to the events facing the Venezuelan oil industry, according to Algerian Energy and Mines Minister Dr Chakib Khelil.

Khelil was quoted by the OPEC News Agency as saying here Sunday    that PDVSA had asked, a long time ago, for assistance from the Algerian national oil and gas company, Sonatrach, within the framework of a mutual assistance accord binding the two firms.      
        
Khelil noted that such action was normal between the two          

companies, whose countries were both members of OPEC and committed to stabilizing the oil market.

He pointed out that such assistance would apply to the research,  

exploration, production, and marketing of hydrocarbons, including
transportation, and stocks.

www.irna.com

Monday January 6, 11:50 PM

LONDON (Dow Jones)--Oil output from the Organization of Petroleum Exporting Countries, excluding Iraq, fell by 1.639 million barrels a day in December to 22.604 million b/d largely due to a strike in Venezuela that has reduced oil production by two thirds, a Dow Jones Newswires survey found Monday.

Total OPEC output was down 1.705 million b/d in December at 24.914 million b/d compared with 26.619 million b/d in November.

A crippling general strike in Venezuela, now entering its sixth week, reduced December oil output in the country to 0.933 million b/d - a decline of 1.964 million b/d compared with November, the survey showed.

However, other OPEC members continued to produce over their individual quotas despite the Dec. 12 agreement to rein in output over the group's official 21.701 million b/d ceiling, which is valid until Jan. 1. OPEC's official target from Jan. 1 is 23 million b/d.

According to the survey, the OPEC-10 were 0.903 million b/d over their 21.701 million b/d output target in December.