Reuters, 05.26.03, 5:12 PM ET By Tomas Sarmiento

CARACAS, Venezuela, May 26 (Reuters) - Venezuela's small and long-dormant stock exchange broke the 10,000-point level on Monday, setting a record in an unexpected boom as local investors frustrated by tight currency controls sought alternative investment options. The Caracas stock exchange index <.IBC> rose 6.31 percent, or 618.98 points, to close at a record 10,429.27 points on the eighth day of a continuing rally. The index closed Friday at 9,810.29 points. It was the first time the tiny Caracas bourse, which had languished in the doldrums because of unrelenting political and economic turmoil in the world's No. 5 oil exporter, had broken above the 10,000-point barrier. The exchange has jumped 30.12 percent since the start of the year. Unable to turn savings into dollars because of foreign exchange curbs introduced more than 100 days ago, many Venezuelan banks, companies and individuals are now turning to the local exchange to try to gain a return on their swelling holdings in the local bolivar currency. "We're stuffed full with bolivars at the moment," said Geronimo Paolini of brokers Valores Vencred. However, the current boom in the Caracas exchange is purely locally driven as would-be foreign investors are unable to legally convert trading earnings back into dollars. Trading volume at the bourse, which is very small by regional standards, has averaged only around $110,000 a day so far this year. This compares with a daily average volume of $9 million three years ago, before Venezuela was seized by a fierce and often violent political conflict between opponents and supporters of leftist President Hugo Chavez. HIGH LIQUIDITY, LOWER RATES Nelson Ortiz, president of the Caracas stock exchange, said he expected the current boom to continue, fueled by increased bolivar liquidity and lower interest rates, which were the direct result of the currency controls. "Since the purchase of dollars has been blocked, money looks for another way out," Ortiz told Reuters in a recent interview. In Monday's rally, shares in Venezuela's biggest private steel-maker Sivensa <SVS.CR> surged 20 percent -- the maximum range allowed in a day's trading -- to 10.20 bolivars a share. Energy company Corporacion Industrial de Energia <CIE.CR> recorded a similar gain. Its shares closed at 13.2 bolivars. Shares in market leader CANTV <TDVd.CR> (nyse: VNT - news - people), Venezuela's leading telecommunications company which is controlled by U.S. telephone firm Verizon (nyse: VNT - news - people), climbed 12.9 percent to 3,500 bolivars. During months of instability last year, which culminated in a brief failed coup against Chavez, many investors had shunned the stock exchange, preferring instead to change bolivars into dollars and channel them out of the country. Capital flight accelerated during a crippling anti-Chavez strike in December and January which slashed oil output and exports but failed to force the populist president to resign. To stop this flight and a slide in the bolivar currency, the government halted currency trading in late January and fixed the exchange rate at 1,600 bolivars to the dollar. A state currency board, Cadivi, headed by an ally of Chavez, has been tightly controlling the allocation of dollars. Private business leaders say the curbs are starving the economy of hard currency, worsening an already deep recession. The economy contracted a record 29 percent in the first quarter of 2003 after shrinking nearly 9 percent last year. Copyright 2003, Reuters News Service

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

Venezuelan Consumer Protection Agency (INDECU) officials have swooped on an illegal storage unit in southwestern Apure State to seize some 40,000 tonnes of illegally hoarded frozen chickens withheld from by shadowy speculators despite widespread food shortages across sections of the country.  INDECU regional coordinator Ali Uvieda says the legally seized property will be sold at public auction and remaining funds ... less expenses and heavy fines ... will be held in escrow pending a full-blown tax investigation of the businessmen involved in the illegal hoarding.

State news agency VENPRES reports that a similar seizure recently took place in Tejerias (Aragua State) in cooperation with units of the National Guard (GN) to seize and sell 60,000 tonnes of hoarded foodstuffs.

INDECU had earlier issued warnings to Venezuelan cold storage company owners to put merchandise on the market or else... Where they have refused to comply with the law or sought to bribe officials, immediate action has been taken with requisite seize & sell court orders.  The action has caused furore among wealthier members of Venezuela's opposition who see the INDECU operations as repressive government action against what they claim to be free trade principles and private property.

Against widespread opposition claims of food shortages across the country, INDECU inspectors are discovering illegal hoards of foodstuffs on a daily basis.  Under Ministry of Production & Commerce (MPC) regulations, the owners are required to explain why their goods are not put on the market and if no distribution agreement is reached, a court application is made for seizures which are always executed under the inspection of a court-appointed officer and, where necessary, with the enforcement assistance of the GN.

Special attention is being given to storage units close to the capital, Caracas, where large amounts of generic medicines are alleged to have been hoarded pending expected price increases.  The Federation of Pharmacies alleges that shortages in basic medicines are the result of strict foreign exchange regulations but, already, specialist inspectors have turned up quantities of much-needed medicines for chronic illnesses like blood pressure, arthritis, diabetes, hormone treatments, anti-allergy and pediatric conditions which are selling at premium on a sophisticated black market.

Meanwhile, the Chavez Frias government has approved a budget of 3 billion bolivares to complete the decentralization of INDECU to southwestern Merida State where regional coordinator Jesus Briceno says he will be able to concentrate resources on cross-border smuggling operations from Colombia.  Some 400 inspectors are to be taken on nationwide within the next month to complete a process headed by nine regional directors.

Reuters, 05.22.03, 1:45 PM ET By Silene Ramirez

CARACAS, Venezuela, May 22 (Forbes-Reuters) - Venezuela's government, facing a barrage of complaints that tight foreign exchange controls are throttling the economy, said on Thursday it was correcting faults in the currency regime to speed up the allocation of dollars for essential imports.

The controls were introduced more than three months ago in Venezuela, the world's No. 5 oil exporter.

Private importers and exporters have said the painfully slow allocation of dollars by the state currency board Cadivi is strangling business activity, disrupting manufacturing and creating shortages in an economy that needs hard currency to import around 60 percent of its needs.

Business leaders say the dollar drought is threatening to ruin many companies. They accuse leftist President Hugo Chavez of using the controls in a political vendetta to punish firms that supported a crippling opposition strike against him in December and January.

In an interview on Thursday with state television, Finance Minister Tobias Nobrega acknowledged there had been problems in operating the foreign exchange controls.

"What we're talking about is improving the operation of the system, which has had faults and we have to admit that. The necessary decisions are being taken," Nobrega said.

He added the government had decided this week to reduce Cadivi's role, making it a "technical office" and transferring regulatory and decision-making powers to the cabinet.

But there were questions about whether the reforms would really streamline the system. Opponents of the currency curbs had warned the government from the start they would create bureaucratic bottlenecks and opportunities for corruption.

The complex procedures for companies to obtain dollars were also being revised, Nobrega said.

"What needs to be done at this stage is to unblock the whole issue of imports," he added.

THREAT OF SHORTAGES

Cadivi, headed by a retired military officer who is a political ally of Chavez, has so far only handed over a meager $12 million for imports and other priority purposes.

Importers, exporters and retailers say they are operating with dwindling inventories and warn the country faces shortages of essential food items and other goods unless the allocation of dollars is speeded up. The government says it is importing basic foodstuffs, such as flour and cooking oil, to prevent shortages from occurring.

Nobrega said the government had set an initial target of approving in a week pending requests from companies for dollars totalling $267 million.

Since the curbs were introduced, total requests amounting to only $205 million have been approved by Cadivi. This compares with the $40 million to $60 million the Central Bank had previously released into the economy every day when normal currency trading was permitted.

Former paratrooper Chavez, who survived a brief coup last year, decreed the draconian currency controls to halt heavy capital flight and a sharp slide in the bolivar currency triggered by the grueling two-month opposition strike.

The strike, which failed to force Chavez to resign and call early elections, slashed Venezuela's oil output but ouput has now recovered to pre-stoppage levels.

Nevertheless, Venezuela is suffering its worst recession in recent history and inflation and unemployment are rising.

Nobrega said the currency controls would not be lifted in the short-term. He added they would remain in place until the political atmosphere was calmer, government oil income was stabilized and permanent mechanisms were set up to control speculative capital movements.

<a href=www.vheadline.com>venezuela's Electronic News Posted: Thursday, May 22, 2003 By: Patrick J. O'Donoghue

The government exchange rate administering body (Cadivi) says it has authorized 658 applications for $ 2.8 million dollars to Venezuelan students overseas. 

Among the universities that have filled in all the requirements to authorize dollars for their students abroad are: Universidad de Carabobo (36), Fondo Nacional de Ciencia y Tecnologia (43), Universidad de los Andes (170), Universidad Central de Venezuela (93), Universidad Simon Bolivar (29), Universidad Nacional Experimental Politecnica (17), Universidad Centro Occidental Lisandro Alvarado (185) and Universidad del Zulia (85). 

Universities and research institutions must send all the details to the University Sector Planning Office (OPSU), which in turn checks the information before passing it on to Cadivi. 

Universities that have not sent in applications to OPSU are: Yaracuy, Romulo Gallegos, Francisco de Miranda y Tachira technical universities, Universidad de Oriente (UDO), Universidad Pedagogica Experimental Libertador and the Gran Mariscal de Ayacucho Foundation. 

• Applications from the Guayana, Maritima del Caribe y Los Llanos Ezequiel Zamora experimental universities are currently under review. 

Cadivi has called on universities and educational centers that have students studying abroad to speed up the red tape to alleviate the delicate situation Venezuelan students are confronting abroad as regards university enrollment, social security and residence fees.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, May 21, 2003 By: David Coleman

Venezuelan Guayana Corporation (CVG) executives have signed a joint venture between subsidiaries Proforca and Serfoca forming the Orinoco Paper Mill (OPM) to produce some 300,000 metric tonnes of Venezuelan newsprint for domestic and continental sales.

OPM is designed to begin operations within the next 120 days in the industrial zone at Macapaima in eastern Anzoategui State.  Announcing the JV, CVG president, Major General (ret.) Francisco Rangel Gomez stressed the importance of the project which he says will form "a vital part of regional development on the northern shores of the Rio Orinoco" and is seen as a principal objective of the State heavy industry conglomerate's expansion.

The new CVG newsprint unit will not only allow for the development of regional Venezuelan forestry activities but will represent an annual saving of 146 metric tonnes of newsprint which have hitherto been imported from abroad using much-needed foreign currency.  Recently implemented foreign exchange controls will encourage Venezuela's predominantly opposition-controlled print media to "buy domestic" and will substantially seal-off yet another mechanism by which Colombian drug cartels launder their North American earnings.

“The paper mill will have a 300,000 tonnes/year production capacity to satisfy not only local (Venezuelan) demand but also allow us to ship newsprint all across Latin America where there's an increase of 5% in newsprint consumption projected over the next 12 months ... Orinoco Paper Mill has been guaranteed supplies of Caribbean pine lumber from a designated 144,686 hectares (357,527 acres) of current forestry cultivation by CVG-Proforca."

Rangel Gomez says the pulp & paper production plan aims to create 6,000 new jobs ... 3,000 in construction and another 3,000 in direct and indirect jobs associated with manufacturing processes.

Serfoca general manager Urbicio Velazquez told reporters that the JV is seeking finance from the World Bank and Nordic Invests Bank of Finland for $650 million in short-term loans while the CVG is contributing the physical real estate and studying procurement of necessary heavy machinery for mill operations ... initial construction work will cost $6 million while associated public works and infrastructure will cost a further $92 million aimed at closing the financing by year's end 2003.