Venezuela's "friends" lobby for electoral solution

www.forbes.com Reuters, 01.31.03, 2:52 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - A six-nation "group of friends" pressed Venezuelan President Hugo Chavez and his foes Friday to settle their differences through the ballot box as the government said it was restoring vital oil output slashed by an opposition strike.

Envoys from the United States, Brazil, Mexico, Chile, Spain and Portugal talked with Chavez about the political deadlock behind the two-month-old strike, which has pushed the world's No. 5 oil exporter deep into recession.

The deputy foreign ministers from the "group of friends," formed this month to tackle the Venezuelan crisis, were also meeting opposition leaders as part of their mission to help secure a peaceful solution through elections.

The opposition strike has slashed oil production and exports, rattling global energy markets jittery over U.S. preparations for a possible attack on Iraq.

Facing plummeting oil revenues and capital flight that is bleeding foreign reserves, the government prepared emergency financial measures, including heavy budget cuts and foreign exchange controls to be introduced next week.

But the government said Friday it had brought crude oil output back up to 1.5 million barrels per day, almost half of pre-strike levels. Striking oil employees say the output level is lower but acknowledge it has been rising.

Thousands of anti-government protesters marched in Caracas Friday in support of Venezuela's private media, most of which are fiercely critical of Chavez. He accuses them of bias, while they charge him with trying to curb press freedom.

Opponents of Chavez, who was elected in 1998 and still commands significant support among the nation's poor majority, propose a constitutional amendment to trigger an early election. They accuse Chavez of ruling like a dictator and trying to impose Cuba-style communism in the oil-rich nation.

The populist president, who survived a coup in 2002 and whose term ends in early 2007, has condemned the strikers as "coup mongers" and says he will not negotiate with them.

STRIKE SUPPORT CRACKING The slow recovery in the oil industry comes as support for the strike in other sectors is clearly cracking.

Private banks have resumed regular operating hours, most shops have reopened and vehicles and pedestrians have returned to the streets of Caracas, although there are still shortages of gasoline and some food items.

The "friends group" aims to help Organization of American States Secretary-General Cesar Gaviria create a climate of confidence between the government and opposition to hammer out a deal on elections.

"The importance of the group of friends is to act as observers and guarantors," Janet Kelly, a politics professor at Caracas' IESA Business School, told Reuters.

Opposition leaders are demanding that more than 5,000 employees fired from the strike-hit state oil giant PDVSA be restored to their jobs as part of any election deal.

Chavez, who accuses the strikers of "sabotaging" the oil industry after backing a brief military coup against him last year, has so far ruled that out. He has condemned the strikers as "traitors" and said they should be jailed.

PDVSA President Ali Rodriguez said Friday the government could end up firing as many as 6,000 company workers.

Strike leader Carlos Fernandez, who heads the anti-Chavez business federation Fedecamaras, accused the government of trying to squeeze its opponents in the private sector with the currency controls, which will initially involve a single fixed exchange rate, to be adjusted monthly.

"They are going to use these measures as a form of repression," he said, predicting the government would try to stop its business foes from having access to dollars.