<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, June 04, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write:  According to information published in official media, Finance Minister Tobias Nobrega is overseas negotiating for public credit to try to improve the condition of Venezuela's fiscal accounts.

The problems experienced in the early months of the year provoked a reduction of fiscal revenue equivalent to 5% of GDP. Today, unlike the first months of the year, the National Treasury is in better shape due to the recovery of oil production plus the spending of only 60% of budgeted outlays. The latter is due mainly to lengthy time lags in making transfers to the universities and the state and local governments.

However, the officials responsible for carrying out fiscal policy in Venezuela should act cautiously. It is necessary to recall that the foreign exchange restriction is choking private enterprise, resulting in a nominal reduction of non-oil tax collections in comparison with last year. On the other hand, there are strong pressures on the spending side, including a higher level of government purchases to import essential consumer goods, and debt service obligations that must be fulfilled in 2003.

As of the end of the first quarter the outstanding balance of internal public debt came to 13.3 trillion bolivares (not including Treasury Bills). This figure reflects a 6.9% nominal growth vs. the end of 2002. When Treasury Bills are included, the domestic public debt reaches 15.1 trillion bolivares, far higher than the 2.2 trillion figure in 1998.

Note that in spite of the exchange controls, the authorities have found it very difficult to make new short-term debt placements on the internal market through public offerings. The Treasury offered 2.4 trillion bolivares of such debt in the first quarter and could only place 39.7% of it (981.6 billion). The same is true of its attempt to place 560 billion bolivares of National Public Bonds (NPB); only 67.4% of that volume (377.6 billion) could actually be placed.

Will the country be in a position to increase its overseas debt in view of all these considerations? Clearly, any external debt placement would have a very high cost given Venezuela's country-risk rating, because the economic agents predict a deep contraction of the economy, high inflation, and rising unemployment, all of which will make it harder for the government to generate more fiscal revenue from internal sources. Moreover, it is facing strong pressure to increase spending, because debt service represents a high proportion of the total budget.

Finally, it is important to note that this external borrowing policy could be implemented under circumstances in which one of the chief sources of "stable" funding, the internal tax base (made up of private-sector taxpayers) is being strangled by the control policies.

IRNA
Iran intends to increase its aluminum producing capacity from the current 140,000 to more than 1 Mt/y within 10 years and to this end is seeking the help of Venezuela's state-owned heavy industry giant CVG.

By CATHERINE WILSON <a href=www.heraldtribune.com>Herald Tribumne.com-AP Business Writer

A former jewelry company president received a 14-year prison sentence Friday for scamming 16,000 people in a $90 million work-at-home fraud that capitalized on a photo taken with President Clinton and used a Hispanic TV psychic as a pitchman.

About half of the money has been recovered, and the victims have been repaid about 30 percent of the money they paid Unique Gems International Corp. Officials say it was the biggest credit-card fraud of its time.

Former Unique Gems CEO Enrique Pirela said through tears that he was "truly repentant," his attorney said higher-ups are still active overseas, and an unmoved victim said Pirela deserved worse.

"This was a very extensive, very damaging crime," U.S. District Judge Ursula Ungaro-Benages said. "This program preyed on the naive hopes of some of the less sophisticated people in the community."

Famed Spanish-language psychic Walter Mercado promoted the company's hematite necklaces as a cure for cancer, sexual dysfunction and poverty, said Lewis Freeman, the court-appointed receiver who has worked for years to track down Unique Gems' money.

The Democratic National Committee handed over $15,000 to Freeman out of profits from a 1996 Clinton fund-raising dinner attended by 30 people from Unique Gems at the posh Biltmore Hotel in Coral Gables. The White House protested when the company used a Clinton-Pirela photo in widely circulated brochures.

The fraud, which operated internationally from 1995 to 1997, was a classic Ponzi scheme paying the first batch of necklace assemblers with money from newcomers.

People deposited $3,000 for necklace kits worth $100 and returned the completed necklaces to the company. They were told they could move up to "authorized merchants" earning commissions from a stable of "assemblers." The merchants needed to turn in $5,000 a month to keep their supervisory status.

Investigators who found 372,000 stockpiled necklaces said Unique Gems sold only $1,400 worth and consigned 2,900 for sale. Some had no clasps and were too small to fit over the head.

Assemblers given beads worth a penny from Thailand were told a necklace took 20 minutes to an hour to complete and would sell for $60.

Two people indicted with Pirela, Carlos Rodiles and Kazimierez Pac, are believed to be fugitives in Spain, and a third is thought to be dead.

Defense attorney Ruben Oliva considered Pirela "more of a puppet" used by others who were "very, very cunning, wily criminals who operated at the international level. ... Certainly he was not part of that group that continues to operate."

Pirela, 55, a flea market manager before joining Unique Gems, fled to Venezuela amid death threats when the company collapsed. He was arrested last year when he returned to the United States for a son's wedding. He could have faced 20 years in prison on his guilty plea to money-laundering conspiracy and fraud conspiracy.

"This man right here put my family through misery," Nelson Bauza told the judge, saying he lost his life savings, including his children's college fund. "He's evil. He knew exactly what he was doing."

Marianne Artega said she unwittingly set her "naive" father up with Rodiles, a former boss. She became a merchant but moved out of town and changed her name when the fraud was uncovered and assemblers threatened her baby.

As part of his sentence, Pirela was ordered to pay $30.2 million restitution, but any money will be repaid from his minuscule wages for prison labor.

A civil suit is pending against Wachovia Bank for handling $89 million in Unique Gems money, which Freeman said flowed at the rate of more than $1 million a day to the small European banking haven of Liechtenstein.

Another suit by the receiver seeks damages from a freight forwarder who imported the beads in an alleged money-laundering scheme.

Information from:

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, May 22, 2003 By: David Coleman

CVG Alcasa and Switzerland-based Glencore AG say that, after several months work on the construction of a 5th aluminum reduction train, a Memorandum of Understanding has been signed by both companies in a first factory expansion phase.  Venezuelan Guayana Corporation (CVG) president, Major General (ret.) Francisco Rangel Gomez views the news as "a tremendous advance for CVG Alcasa which has worked doligently to overcome a strong economic recession over the last space of years."

"CVG Alcasa was created with 5 trains in mind, but only four were constructed and then trains 1 and 2 had to be closed five years, when they (the previous government) tried to privatize it ... only two trains were left in production and it was not sufficient to achieve break-even."

The newly-announced Train 5 plans will have an important and positive impact on the southeastern Guayana region of Venezuela since it will require the participation of regional small-to medium supply industries and will generate a considerable number of jobs in road construction ... CVG president Rangel Gomez estimates some 3,000 jobs during the construction development and 270 more permanent jobs on top of 2,700 workers currently employed at CVG Alcasa whose president, Dixon Rosillon says the company now faces the real prospect of economic recovery to become a profitable force in the international market for aluminum and products.  Rosillion sees full production phased in over the next 36 months after the construction work begins early next year on completion of environmental impact and other studies and recommendations.

Glencore International AG director general Michael Ambrusten says the signing of a Memorandum of Understanding is an important first stage from which will derive contract definitions and other processes to begin construction of the new Train 5.  Last February, CVG Alcasa had announced that it would enter into a joint venture led by Glencore also with the participation of French Pechiney and US Fluor Daniel.

Rangel Gomez says "CVG Alcasa is currently producing 210,000 tonnes of aluminum per year and the incorporation of Train 5 will add another 240,000 tonnes to arrive at 450,000 metric tonnes per year ... bringing additional revenues in the order of US$350 million ... it is yet another example of renewed faith in foreign investment in Venezuela ...  we're talking of an investment in the region of $650 million where Alcasa itself will contribute $105 million with the remaining capital from Glencore to build what is today recognized to be the largest aluminum reduction facility in Latin America.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 20, 2003 By: Patrick J. O'Donoghue

UK Foreign Affairs Latin American Department chief, John Drew has met Venezuelan Executive Vice President Jose Vicente Rangel to discuss the political situation and trade openings. 

Drew, who was accompanied by UK Ambassador John Hughes, says Tony Blair's government has great interest in Venezuela ... Rangel's vision of Venezuela has helped him understand better the process of dialog based on the 1999 Constitution, especially the recall referendum process. 

Avoiding the pitfalls into which his predecessor Ian MacShane hopelessly fell during the April 11, 2002 coup attempt, Drew insists that the British government respects Venezuela's political process, which is the exclusive reserve of Venezuelans. 

Drew also told journalists that he is optimistic about Venezuela's future and that he would personally invest in Venezuela. if he were a rich man. Although he did not elaborate on UK business interests in Venezuela, he did reaffirm the UK's interest in taking part in joint ventures in natural gas projects. "Venezuela is one of the most interesting and important countries in the region and I return to the UK with a wider vision of what is happening here."