BY MARIA VICTORIA VALDES-RODDA -Granma International staff writer-

According to the Folha Agency, there was great support in San Paolo for Lula’s recent contribution to the 8th National Congress of the National Union of Brazilian Workers (CUT). This information corroborates the latest results of a poll regarding widespread popularity throughout the country for its leader five months after his investiture and despite initial hints of concern.

Lula stated at the last G-8 meeting that his Zero Hunger Program should be considered at worldwide level with the active participation of the rich countries.

During the meeting, the president – who is particularly identified with work-related problems – outlined an inventory of economic and financial topics, without leaving out the difficulties that he has encountered up to now. These include, he said, the complexities of achieving pre-election promises, although he was adamant that Brazil would once again prosper.

"You cannot judge how a child will grow up when she is still at her mother’s breast, and this is what is happening to us just a few months after the new government took power," he stated, frankly alluding to his counterparts and other political adversaries.

However, Luis Inacio Lula da Silva once again urged increased efforts and admitted that attaining the dream of a better nation will take time, "something that should not and cannot scare anyone."

Shortly after participating in the above-mentioned meeting with workers and the business sector, Lula took part in a debate with intellectuals who demonstrated similar concerns and also asked where the country was headed.

María Vitoria Benevides, a distinguished political expert, stated: "the soul of the nation will return when Lula assures us all that the economic policy is ready to change."

One of the principal doubts surrounds the materialization of the Zero Hunger Program that, while showing signs of appearing, is still insufficient.

"When Lula talks of projects, we know that he’s on the side of the people and this instils us with optimism, " the specialist emphasized.

The latest national survey reveals that 78% of Brazilians approve of the president’s undertakings during April and May although, Prensa Latina revealed.

Amongst the concerns that need to be resolved, economic growth, stimulating exports, job creation, and wage increases appear as priorities. Without a doubt, another of the most questioned challenges for the executive is the definitive approval by Congress (which already has support from the governors of the 26 states) of making pensions and retirement funds subject to taxation.

"The pension funds policy cannot change to prejudice people, but to improve the lives of pensioners. We are reaching a moment for discussion and rightly so, in order to bring about a pension funds policy that will guarantee the rational use of those monies," Lula highlighted when outlining his intentions last April 30 in parliament.

Housing Minister Antonio Patocci, author of the controversial measure, maintained that it was inevitable as, according to him and as reported by ANSA, there is no tangible possibility of reducing tax burdens.

Brazil has an anticipated social provision deficit of $30,000 million USD, implying that intended reforms cannot be put off, so as to avoid an eventual collapse in this sense. Nevertheless, certain renowned parliamentary voices within the ruling Workers Party are resisting the proposal to tax retirement funds and pensions. Once again Lula will have to explain, convince and do his sums.

More oil discovered in Brazil

PETROBRAS, the major state-owned oil company, announced on June 5 that the country now has a new crude reserve estimated at 500 million barrels, after the discovery of three deposits in the northern oil zone of Cuenca de Campos, off the southern coast of Espíritu Santo state, the BBC revealed.

At depths of 1,473 meters and 1,535 meters these underwater wells were detected following exploratory expeditions along the continental shelf of the above-mentioned region.

From now on, according to a Petrobas report, this discovery, together with other areas currently being prospected (Jubarte and Cachalote), ensures that the so-called South American Giant can count on a potential reserve of 2.1 billion barrels of crude, meaning that it now comes second to Venezuela in terms of oil volume.

June 13 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real rose to an 11-month high on investor expectations capital flows to South America's largest economy will remain strong as investors seek higher returns than available in Europe or the U.S.

The real rose 0.9 percent to close at 2.8385 per dollar from 2.8635 yesterday in Sao Paulo. The real has gained 25 percent this year, the best performance of the 16 most widely traded currencies. The Mexican and Colombian pesos gained.

Brazilian companies and the government have sold more than $8 billion of foreign-currency bonds this year, boosting demand for the local currency as the proceeds are brought into the country and exchanged for reais. About $1.5 billion was sold this week, and companies such as Gerdau SA and Cia. de Saneamento Basico do Estado de Sao Paulo are expected to sell soon.

The market is betting flows will continue -- the outlook for Brazil risk is improving,'' said Flavio Datz, a trader with Agora CTVM Ltda., a Rio de Janeiro brokerage. The government has done a good job to balance expectations, small rises are matched by small declines. We're at a kind of equilibrium.

International investors have helped push up prices on emerging market assets as declining interest rates in Europe and the U.S. plumb the lowest levels in decades.

Yields on European bonds fell to a three-decade low today on speculation a faltering economic rebound will prompt the European Central Bank to pare its benchmark interest rate in coming months. Yields on U.S. five-year notes fell to a 50-year low after reports showing declines in producer prices and consumer confidence added to speculation the Federal Reserve will cut interest rates.

Brazil's benchmark target overnight lending rate has been held at a four-year high of 26.5 percent for three months in a bid to slow inflation running at its fastest pace in seven years.

Ahead

The real rose in the futures market. The U.S. dollar contract for July 1 settlement, the most traded on Sao Paulo's BM&F commodities and futures exchange, fell 1 percent to 2.8610 reais to the dollar.

Interest rate futures fell for the fifth day in six. The futures rate on one-day bank deposits for January delivery, the most-traded the BM&F, fell 25 basis points to 23.16 percent from 23.41 percent yesterday. The contract indicates investor expectations for the end of December. A basis point equals 0.01 percentage point.

Brazil's 8 percent bond maturing in 2014 rose from yesterday's record closing high, adding 0.19 cent to 92.19 cents on the dollar, paring the yield to 9.90 percent, according to J.P. Morgan Chase & Co.

Mexico

Mexico's peso rose for the second day in three after Mexico's central bank took no action on interest rates in its regularly scheduled twice-monthly meeting on monetary policy.

The peso gained 1.1 percent to 10.5385 per dollar from 10.6595 yesterday in Mexico City and U.S. trading. The currency has declined 1.6 percent in 2003, the worst performance of the 16 most widely traded currencies.

Banks are playing a game with the central bank and interest rates,'' said Luis Garcia Pena, who manages $360 million in debt at Investra Consultores in Monterrey, Mexico. When interest rates fall, people sell off their positions and buy dollars.''

The central bank, which raises and lowers peso lending to commercial banks in an effort to influence interest rates, said that the daily money-market short will remain at 25 million pesos a day ($2.4 million), or 700 million pesos per month.

The currency rose in the futures trading, with the peso contract for September delivery, the most traded on the Chicago Mercantile Exchange, rising for the second day in three, adding 1.5 percent to 9.3875 pesos per dollar.

Colombia, Argentina

Colombia's peso rose for the first day in three, adding 0.4 percent to 2,821.40 per dollar from 2,833.10 per dollar yesterday.

Chile's peso was unchanged at 707.55 per dollar and Argentina's peso rose 0.3 percent to 2.8280 per dollar, boosting its gains against the dollar in 2003 to 19 percent, the second- best performance of the 59 tracked by Bloomberg.

Peru's new sol strengthened for a third day, gaining 0.2 percent to 3.4703 per dollar from 3.4783 per dollar yesterday in Lima, boosting its gains in 2003 to 1.3 percent. Venezuela fixed its bolivar at 1,598 per dollar earlier this year. Last Updated: June 13, 2003 16:22 EDT

June 12 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real fell for the second day in three on investors' expectations the government will reduce the amount of insurance it offers against declines in the real, prompting some investors to buy dollars.

The real fell 0.4 percent in Sao Paulo to 2.8635 per dollar at 3:47 p.m. New York time, after closing yesterday at its highest level since July 17. The real has risen 24 percent in 2003, the best performance of the 16 most widely traded currencies. Mexico's peso declined for the second day in three.

Brazil has insured investors against exchange-rate losses on $58.2 billion of investment by selling interest-rate swaps. At auctions yesterday and today, the central bank refinanced 90 percent of swaps coming due June 18. If it declines to refinance all the maturing contracts, investors may have to buy dollars to lock in a price for expected import and debt payments, causing the dollar to strengthen against the real.

We still don't know if they will refinance more, but with the real at its highest levels this year it makes sense that the government would start cutting its exposure to dollar risk,'' said Jose Roberto Machado Filho, superintendent of the Treasury desk at Banco ABN-Amro Real SA in Sao Paulo. Those who don't think they'll refinance 100 percent are buying dollars.''

Brazil sold $167.2 million of swaps at an auction today and $762.9 million of the swaps at an auction yesterday. It has about $1.1 billion of swaps and dollar-indexed bonds due next week.

Brazil's benchmark 8 percent bond due in 2014 rose 0.50 cent on the dollar to 92.13, paring the yield to 9.92 percent, according to J.P. Morgan Chase & Co.

Mexico

Mexico's peso reversed gains to fall as much as 1.3 percent amid investor speculation on whether Moody's Investors Service would upgrade the country's credit rating, likely boosting investment and reducing Mexican companies' borrowing costs.

The peso slid for the second day in three in Mexico City and U.S. trading, declining 0.8 percent to 10.6595 per dollar from 10.5730 yesterday. The peso has declined 2.7 percent in 2003, the worst performance of the 16 most widely traded currencies.

The market had discounted the upgrade yesterday before knowing the facts,'' said Omar Martin del Campo, a currency trader at Arka Casa de Bolsa SA in Mexico City. After the news was denied, the peso moved and it moved fast because there's little volume.'' Any buy or sell orders are moving the market more than usual because many foreign currency traders are at a convention in Puerto Vallarta, Martin said.

Rating

An upgrade by Moody's from Baa2 to Baa1, three levels above investment grade, would generate more investment in the country by making bonds issued by the Mexican government and some Mexican companies more attractive for investors.

Moody's in March raised Mexico's outlook to positive, which means it may raise its ratings, because of improved management of its $150 billion foreign and local debt.

Moody's in Mexico said it hadn't made any official statements. Sovereign analysts Mauro Leos and Luis Ernesto Martinez Sales were not in their offices in New York.

The peso future contract for June delivery traded on the Chicago Mercantile Exchange fell for the first day this week, declining 0.9 percent to 9.3650 cents per peso.

Colombia's peso extended its 1.2 percent June rally, rising 0.1 percent to 2,823.00 per dollar in Bogota trading from 2,827.00 per dollar yesterday. The peso has risen 1.6 percent this year, after a 21 percent slide in 2002.

Argentina's peso fell for a second day, losing 0.5 percent to 2.8375 per dollar in Buenos Aires from 2.8225 per dollar yesterday, paring its gains in 2003 to 18 percent, the second-best performance among the 59 currencies tracked by Bloomberg.

Peru's new sol strengthened for a second day, gaining 0.1 percent to 3.4805 per dollar from 3.4828 per dollar in Lima trading.

Venezuela this year fixed its bolivar at 1,598 per dollar.

Chile

Chile's peso had it biggest gain in more than two months as domestic pension funds sold dollars to invest in Chile's stock market.

The peso rose for a second day, adding 1 percent to 707.55 per dollar after yesterday's 0.4 percent gain to 714.35 per dollar yesterday in Santiago trading. The currency has risen 1.8 percent in 2003.

Chilean pension funds are selling dollars to fund increased investment in the domestic stock market, which has rallied 28 percent in local currency terms this year, said Eduardo Machuca, a currency trader at Santiago brokerage Intervalores Ltd.

Santiago's IPSA Index's gains this year make it the fifth- best performer in local currency terms among 61 tracked by Bloomberg.

<a href=www.falkland-malvinas.com>MercoSur Press Argentine and Brazilian presidents Nestor Kirchner and Luiz Inacio Lula da Silva announced this Wednesday in Brasilia the creation of a Mercosur Parliament and the expansion of regional integration to include the Andean countries, particularly Peru.

“We’re already working for the creation in a relatively short time, of a Mercosur Parliament, to be elected by direct vote”, stated Mr. Lula da Silva after holding a four hours meeting with his Argentine counterpart Mr. Kirchner and a small delegation of advisors.

“Lula and I have expressed the joint interest of Argentina and Brazil to expand Mercosur, particularly closer links with Peru, and agreements with other members of the Andean Community (Bolivia, Colombia, Ecuador and Venezuela)”, indicated Mr. Kirchner who insisted that “we must open doors to ensure a quick incorporation of the Andean nations”.

Mr. Kirchner visited Mr. Lula to formally establish a “strategic alliance” between Argentina and Brazil, plus strengthening Mercosur, as had been agreed by both leaders before the Argentine president took office.

“There’s much to work on in Mercosur”, highlighted Mr. Lula after the meeting adding that the “good relations between Argentina and Brazil is the cornerstone and best reason to ensure a successful Mercosur. This strategic model will encourage our South American brothers to really integrate, leaving behind electoral promises and showing facts”.

The Brazilian president anticipated that the four members of Mercosur, Argentina, Brazil, Paraguay and Uruguay, will coordinate international negotiations, “the governments of the four member countries will jointly face the challenges of the trade talks in the World Trade Organization, the Free Trade Association of the Americas and with the European Union”.

This was Mr. Kirchner’s first overseas trip since taking office May 25. The two leaders had met in early May when the Lula da Silva administration openly favoured Mr. Kirchner over Mr. Carlos Menem and again during the assumption ceremony.

“We could very well be announcing the beginning of a historic change and time, when the idea of a region of pompous speeches but little action, will definitively be buried”, stressed Mr. Kirchner who described Mercosur as the “central tool for the task of regional integration”.

Scoop, Thursday, 12 June 2003, 12:54 pm Press Release: US State Department

Santiago

Press Briefing

Secretary Colin L. Powell Hyatt Regency Hotel Santiago, Chile June 9, 2003

SECRETARY POWELL: Good evening ladies and gentlemen. It is a great pleasure for me to be back in Santiago, Chile. It is my first visit in almost twelve years. Last time here I was Chairman of the Joint Chiefs of Staff and I am privileged to be back now as Secretary of State. I was especially pleased to join my OAS colleagues here in Santiago for the 2003 General Assembly Meeting of the Organization of American States. I want to congratulate President Lagos and Foreign Minister Alvear for their gracious hospitality and for hosting what has turned out to be an outstanding meeting.

In the course of the day, in addition to my OAS activities, I had a very productive meeting with President Lagos and with Foreign Minister Alvear. We reaffirmed our common interest in reestablishing Security Council unity in New York, and expressed our mutual support for President Uribe s efforts in Colombia to bring peace and security to that troubled country which is under assault from narco-traffickers and terrorists.

In my meetings with President Lagos, we reviewed our work together in the Group of Friends for the OAS Secretary General in Venezuela and shared our satisfaction over the signing last Friday of the US Chile Free Trade Agreement.

Also, in the course of the day, I had the opportunity to meet with other friends in the region, including Brazilian Foreign Minister Amorim, Colombian Foreign Minister Barco, Peruvian Foreign Minister Wagner, Canadian Foreign Minister Bill Graham, and Bahamian Foreign Minister Mitchell. I am impressed by the depth of the determination of our hemispheric neighbors to strengthen democracy and prosperity throughout the Americas. As President Bush has said, this hemisphere is on the path of reform and our nations travel it together. We share a vision, a partnership of strong, equal and prosperous countries living and trading in freedom.

I commend the government of Chile for its leadership in promoting the virtuous circle of good governance, the rule of law, democratic values and sustained economic development. The idea of democratic opportunity also underlies President Bush s groundbreaking Millennium Challenge Account initiative. The Account will support dozens of countries that do govern justly, that do invest in their people, and which encourage economic freedom. Despite some tough times in the region, the level of commitment is very high to an agenda of good government, growth, and free trade. I heard that throughout all of the interventions that were made during the course of the day.

Indeed, one of our key objectives that flows from all of that is the establishment of a Free Trade Area of the Americas by January 2005. The bilateral free trade agreement that the United States and Chile signed on June sixth is an important way station on the road toward hemispheric free trade.

We also reviewed the role that regional cooperation can play in promoting and defending democracy and how the OAS has responded to democratic crises in Haiti and Venezuela.

The Cuban regime s appalling repression of human rights and civil liberties ensures that it will have no place--such activities will have no place--in Cuba s future and we hope that future is not difficult to achieve on the horizon that we see in front of us. Sooner or later the people of Cuba should enjoy the kind of freedom and democracy that is sweeping the rest of the hemisphere.

Meeting the expectations of our citizens is what the Declaration of Santiago and Democracy and the Public Trust, the declaration that we passed today, is all about. We promised our people that democracy and free markets would work, and here in Chile we can see the truth of that promise.

We come here to say that democracy can deliver. Good governance can make the fruits of democracy and free markets available to all the people. The United States will continue to be an active and determined partner at the OAS and within the inter-American system to realize the hopes of all the people of the Americas for a better future.

Thank you very much and I would be pleased to take your questions.

QUESTION: Mr. Secretary, you re going to Argentina tomorrow. Yesterday you said that the US is ready to help the new administration. Could you elaborate on that?

SECRETARY POWELL: I didn t have any specific programs that I was referring to. I look forward to meeting President Kirchner and describing to him what happened here at the OAS meeting. I will be anxious to learn from President Kirchner about his programs and some of the steps he has already taken since he has been in office, but I m not going with any specific new initiatives or programs in mind.

QUESTION (as translated): Now that we know that it is probable that weapons of mass destruction will not be found in Iraq, do you still think that Chile acted disloyally on the United Nations Security Council when it did not support the conflict and how to you evaluate the relations? Is Chile only a commercial partner or is it also a strategic partner on the Council? Thank you.

SECRETARY POWELL: I would never use the term disloyal, nor did I use it at the time of the debate, nor did President Bush ever use such a term. We were disappointed that Chile was not able to support us when we worked on that second resolution and we expressed our disappointment to President Lagos and to Foreign Minister Alvear at the time.

Since then, though, we have come back together to achieve unity on the Security Council on the most recent resolution that lifted sanctions from Iraq and there will be other actions coming before the Security Council that I hope that Chile will agree with the United States on.

Chile is a democracy. It is free to make its own choices. In this case we would have preferred it had made a different choice. But we were disappointed, we take that disappointment and we move on. And the President and I spoke--not about the past, except for just a few moments. We spent most of our time today talking about the future and what we are going to do together in the future. And not just on trade issues, but on strategic issues that affect all aspects of our relations here in the hemisphere: security, democracy, trade, human rights, narco-trafficking all of the issues that we have a common interest in.

With respect to weapons of mass destruction, in Iraq, we are quite confident of the information that we have been presenting to the world in recent years. I am very confident of the presentation that I made on the fifth of February.

But it is not just what President Bush and his Administration have been saying, the issue of weapons of mass destruction is a well-documented issue, to the extent that UN inspectors have verified that Iraq had weapons of mass destruction. They have used weapons of mass destruction in the past. I have no reason to believe they did not have weapons of mass destruction at the time that we took a decision to undertake military operations. We are still looking for elements of their programs and weapons from their program. The mobile biological labs that were recently discovered, in our judgment--and in the best judgment of our intelligence analysts--is that it has no other purpose but to serve as a facility to develop biological weapons.

The fact that we have not found any evidence that it actually had developed biological weapons in no means excuses it. It is something Iraq was not supposed to have, it did not declare it to the UN inspectors and they were in violation of their obligations. The Administration before ours--President Clinton and his Administration--held the same view with respect to Iraq. Many intelligence organizations outside of the United States have the same view.

And so we are sending in a more extensively equipped team of experts to continue to examine sites; to look at all of the documents that are now coming forward, that we have captured; and to interview a number of officials who are now in our custody. And I am quite confident that as we continue that work we will find more evidence of the presence of weapons of mass destruction and programs for weapons of mass destruction.

QUESTION: Mr. Secretary, Israeli soldiers dismantled some outposts today and some Israeli civilians came out and tried to stop them. Do you have any concern that if there is more such resistance, it could be a serious impediment to the roadmap?

SECRETARY POWELL: There are strong views about this issue and I am pleased that Israel is now discharging the commitment it made to the international community at the Aqaba Summit last week, and I hope that in discharging this commitment they will be able to remove these unauthorized outposts in a peaceful way, without there being any violence whatsoever, although we know that there will be demonstrations.

There are those who object to this. But, I think what we discovered in our meetings last week--both in Sharm al Sheikh and Aqaba--is that it is time for both sides to move forward. We have a road map, which gives them a way to go forward. Both Prime Ministers--Prime Minister Sharon and Prime Minister Abbas--are committed to moving forward, and I think that both Prime Ministers realize that, what is the alternative? We cannot stay where we are, and now that the international community has rallied behind the roadmap, both parties have accepted the roadmap.

President Bush has indicated that this will be a very high priority for him and he will be committed and he has charged me and Dr. Rice to make it a high priority for our staffs. We have to keep moving forward, even in the presence of violence, of the terrible kind we saw over the weekend, on the part of Palestinian terrorists, and even in the presence of demonstrations. Will it be difficult for Prime Minister Sharon? Yes, but I think he realized that when he made the commitment to remove these unauthorized outposts.

JOURNALIST (as translated): Good afternoon, Mr. Powell.

SECRETARY POWELL: Good afternoon.

QUESTION: The United States has set January of 2005 as the date that the Free Trade Area of the Americas will become effective. Taking into consideration that the negotiations with Chile took close to ten years, although its economy was the soundest of the continent, isn t it overly optimistic to think that in less than two years the agreement becomes effective, taking into account that there are certain obstacles? I d like to know what you feel are those main obstacles. For example, Brazil and Mercosur have not shown themselves very positive with respect to this agreement.

SECRETARY POWELL: It is a very ambitious objective. It is less than, or just two years away now. But nevertheless, we want to leave that timeline out there. We want to leave that achievement date out there so that people don t start leaning back. Even though it took a long time to finish the Chile Free Trade Agreement with the United States, that does not mean we can t move faster. There are issues with Mercosur, as you say, but when I return to Washington later this week, I plan to sit down with Ambassador Zoellick, our Trade Negotiator and get his best assessment. He is hard at work on it. I will come from this conference reinvigorated in the determination of my colleagues here to try to see if it can be achieved by 2005. It will be difficult, but I do not think that there is any need now--any reason now--to call off that date and not try to achieve it.

QUESTION: Sir, your reports today regarding al-Qaeda in Iraq, the interrogations of two top senior al-Qaeda members, apparently al Qaida and Saddam Hussein s regime. How do you respond to these reports and do you have any new information that al Qaida was involved with Saddam Hussein s regime, and is it possible that these leaders were simply playing mind games with the interrogators?

SECRETARY POWELL: I cannot answer the last part of your question, and it is hard to answer the first part as well. There will be a lot of interrogations over a long period of time and it would be well not to focus on two particular individuals and occasional reports of what happened in those interrogations as being definitive. In my presentation on the fifth of February before the UN, I used some rather well defined examples of al- Zaqawi and other connections that traced back to al-Qaeda. And so I think that it s best at this time for us to continue these interrogations and not respond to occasional reports that come out of those interrogations. This is going to take a long time, and I don t want to make an assessment now as to what might or might not develop from the interrogations.

QUESTION: Good afternoon, Mr. Powell. The United States recently went to war against Saddam Hussein s regime that was classified by your own government as a tyrant. What stops the White House from attacking Fidel Castro s regime, which you yourself today classified as the only dictatorship existing in the hemisphere? Is a preventive attack justified? And also, I would appreciate your clarifying you spoke today of the role that the OAS should play in what you defined as a democratic transition in Cuba. What does that mean in concrete terms, considering that this country, Cuba, is suspended by the OAS?

SECRETARY POWELL: No, we have there are no plans to take preventive or pre-emptive action with respect to Cuba. But the fact of the matter is, Cuba is the remaining totalitarian dictatorship in this hemisphere. And even though Cuba is not - does not have membership in the OAS, there is no reason that the Community of Democracies of the OAS should not speak out strongly for the Cuban people.

The Cuban people are not allowed to speak out for themselves. The Cuban people who desire to express a political view or to organize politically are thrown in jail, and not just thrown in jail for a day or two. They are being given sentences for fifteen to twenty to twenty-five years. How could we, as a Community of Democracies who has seen what we have been able to achieve in this hemisphere over the last fifteen or twenty years fail to speak out with respect to what Castro is doing to his people? And I think it is the responsibility of every nation that believes in democracy--when faced with this kind of a lack of respect for democracy, lack of respect for human rights, unwillingness to allow people to decide what kind of leadership they should have--I think if we would call ourselves a Community of Democracies that it is our obligation to speak out, and that is what I did today, and that is what the United States will continue to do. And I hope that all members of the OAS, either collectively as the OAS, or in their individual capacities, will speak out against this kind of behavior in the year 2003 in the western hemisphere. We have come too far not to continue the journey and help the people of Cuba ultimately to achieve a democratic system where they can decide who their leaders will be through a free, open democratic process.

QUESTION: Mr. Secretary, what did you make of the North Korean statement in which they go public on their intention to develop nuclear weapons? What effect will that have on the US strategy for dealing with North Korea?

SECRETARY POWELL: Well, they have said things like this before. They have said they have nuclear weapons and today they seem to be saying they would develop nuclear weapons. We believe that they have some small number of nuclear weapons. They certainly have the potential to have developed and produced some small number of nuclear weapons one or two. And they say that they are reprocessing, so they have been making these claims for some time.

They introduced a new element into their logic today when they said that they would also do this as a cost-saving measure to save money from their conventional forces. I ll have to reflect on that for a while before I give you a judgment as to what that means. It will not change our strategy. We believe that what North Korea is doing threatens the region. And we believe the region should come together and make sure North Korea knows that this will not be tolerated. And the region--along with the United States--has been coming together. Japan has spoken out strongly. South Korea has make it clear that they do not wish to see nuclear weapons in the peninsula. It is the policy of the Chinese government that the Korean peninsula should be de-nuclearized. Russia has joined in. Australia has joined in. The IAEA has spoken clearly on this. The issue is before the United Nations, and so we are all coming together to make it clear to North Korea that we will not accept a nuclearized peninsula.

This does not mean we are on our way to war. We are not. The President continues to believe that there is an opportunity for a diplomatic solution, a political solution, but it is a solution that must come in a multilateral forum. We cannot allow North Korea to dictate to us who they will speak to on this issue because too many nations are affected. They all have to be able to speak to this issue, and that is why we are continuing to press for a multilateral forum.

We started that with the Meeting of Three in Beijing not too long ago. Even though only three were in the meeting--the United States, North Korea, and China--South Korea and Japan were certainly represented by the United States in that meeting because we briefed them on everything that happened, everything that was going to happen before we went into the meeting, and everything that happened at the meeting was briefed to them after we came out. So we hope North Korea will come to the understanding that it must be multilateral and it must include Japan and South Korea at a minimum.

I hope North Korea will come to the realization that it is in their interest ultimately to include those other nations. Those nations come to help North Korea get rid of these terrible weapons and, at the same time, to help North Korea to deal with the problems that that country is having, that that society is experiencing. The multilateral forum will give North Korea an opportunity to engage with its neighbors and with the United States in a way that deals with this crisis and could benefit North Korea and the people of North Korea, especially, in the long term.

QUESTION (as translated): Mr. Secretary, the concept of hemispheric security that is under discussion currently in the OAS in the inter-Americansystem, isn t this very similar to the concept that existed during the Cold War in the region, and can t this be confused with the concept of the security of the United States?

SECRETARY POWELL: I think the issue of hemispheric security in the year 2003 is quite different than the concept of hemispheric security that was embedded in the Rio Treaty or that existed for the period of the Cold War when we were worried about Communist intrusions into the region from the Soviet Union or from its agents, principally Cuba. Now security has a new meaning. The global war on terrorism is the principal security threat. Narco-trafficking, criminal activities generated by narco-trafficking, those are the security threats we face, and these are the security threats we have to come together and deal with. One can ask, Well, don t those exist in singular countries and why does the whole Organization of American States have to come together? And the answer to that is that even though the activities may take place in one country or might be indigenous, it affects other countries. It spills over if it deals with narco-trafficking. Terrorism is a threat to every country in the region and therefore we should deal with it on a regional basis. So it is not just US national security that we are talking about--dealing with and talking about here it is the security of the hemisphere. And it is security that pulls us together to deal with these new kinds of threats. Narco-trafficking not that new a threat but we can deal with it on a better, a more informed, and a more effective basis if we see it as a regional problem. And similarly with the global war on terrorism, which I think affects each and every nation in the hemisphere.

Thank you. [End]

Released on June 10, 2003