reuters.com Fri January 31, 2003 06:32 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Hundreds of thousands of Venezuelan opposition protesters clamored for elections Friday as envoys from six nations urged President Hugo Chavez and his foes to settle their political feud peacefully through the ballot box.

The demonstrators massed outside a Caracas hotel where envoys from the United States, Brazil, Mexico, Chile, Spain and Portugal met opposition negotiators at the start of a mission to try to solve Venezuela's political and economic crisis.

Two months into a grueling opposition strike that has pushed the world's No. 5 oil exporter deep into recession, the government said it had restored oil output to around half of pre-strike levels, regaining much-needed income flows.

The deputy foreign ministers from the six-nation "group of friends," formed this month to help solve the Venezuelan crisis, also held talks with left-winger Chavez about the political deadlock behind the strike.

The opposition stoppage is aimed at trying to force the populist president to quit and hold early elections.

The group has a mandate to back efforts by Organization of American States Secretary General Cesar Gaviria to achieve an agreement on elections between the government and opposition.

Outside the hotel, the huge crowd of protesters packed a highway, shouting "Elections now!" and "Not one step back!" and waving national flags. They called on the foreign envoys to press the government to agree to an early poll.

"They should do something so we can have elections, so all these marches are not in vain," 45-year-old housewife Jaini Fuentes told Reuters.

The demonstration was originally called as a massive show of support for 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.

CONSTITUTIONAL COURSE

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 plan to collect signatures backing the proposal in a nationwide action Sunday.

Foes of Chavez accuse him of ruling like a dictator and of trying to impose Cuba-style communism in the oil-rich nation. The 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.

Foreign Minister Roy Chaderton, a member of the government negotiating team, said after the foreign envoys' talks with Chavez that the opposition proposal was legal. But he made clear the government did not intend to encourage it.

"This government has no intention of trying to get rid of itself," he told reporters.

Chaderton said Chavez stressed to the foreign envoys that his government was democratically elected and legitimate. He also briefed them on the economic damage caused by the strike.

"He was combative," said one source who attended the meeting but asked not to be named.

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 on 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.

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.

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 on Friday the government could end up firing as many as 6,000 company workers.

(Additional reporting by Patrick Markey)

www.dailytimes.com.pk Kurt Weyland

Both sides will have to work hard if they want to win. The fractious opposition will need to go beyond rejection of Chávez, elaborate a programme for the country’s reconstruction, and unite behind an attractive candidate. President Chávez will need to clarify the content and meaning of his “Bolivarian Revolution”

Venezuela is mired in a dangerous stalemate. President Hugo Chávez clings to power despite the obvious failings of his government: severe economic deterioration and dangerous political polarisation. The opposition, tainted by their botched coup of April 2002, now seeks to force Chávez from office through a costly general strike.

Both sides justify their intransigence with one-sided interpretations. His sympathisers glorify Chávez as a defender of the poor besieged by a selfish, coup-plotting elite. His fiercest opponents demonise Chávez as an autocrat pursuing a Cuban-style revolution and destroying democracy. Both interpretations are flawed.

The Chávez government has not helped Venezuela’s poor in any significant way. On the contrary, his belligerent rhetoric and inept governance scared off investors, inciting economic decline and boosting unemployment and poverty. Now Chávez lacks majority backing even among the poor.

The opposition comprises most of Venezuela’s organised civil society, not only business, but also trade unions, professional associations, and NGOs. So Venezuela’s polarization does not pit “the poor” against “the oligarchy,” but a populist against civil society.

The opposition’s view — shared by rightists in the Bush administration — is equally unconvincing. Rather than initiating a revolution, Chávez merely spouts fiery rhetoric. While his democratic credentials are dubious, he has not acted in an openly authoritarian fashion. True, he has systematically concentrated power in his own hands and has undermined governmental checks and balances. But while harassing the opposition, he has not overturned the minimal principles of democracy. Indeed, he now invokes his formal democratic legitimacy to fend off demands for his resignation.

But Chávez’s insistence on the inviolability of the current constitution is hypocritical. Four years ago, Chávez deviated from the old constitution by using a plebiscite to engineer a new one, tailor-made for him. Now he invokes that charter to block calls for a plebiscite on his continuation in office.

The paradox here is that Chávez’s earlier example may provide the solution to today’s standoff. As Chávez used para-constitutional means to advance a desire for change in 1999, so the international community should not be confined by the present constitution in pressing to resolve a crisis that is ruining the country.

In fact, the Latin American members of the “group of friendly nations” trying to mediate this conflict can draw on interesting experiences to design such a solution. After all, confrontations like this are not unusual in Latin America’s rigid presidential systems. When chief executives with fixed terms of office lose political support, they cannot be removed through a no-confidence vote, as in parliamentary systems. Presidential systems therefore risk lengthy stand-offs that threaten democracy —as in Venezuela today.

But over the last decade, Latin American politicians have made presidential systems more flexible by finding innovative ways to remove unpopular presidents. One of Chávez’s discredited predecessors was impeached on flimsy charges of malfeasance; Ecuador’s Congress declared a disastrous chief executive “mentally incompetent”; in Peru, an autocratic president, after months of domestic and international pressure, was forced into exile.

While politicians interpreted the law with a good deal of creativity in these instances, they usually did so to ensure the survival of fragile democracies facing a crisis. As long as these manoeuvres do not proliferate and turn into easy ammunition for the opposition of the moment, they may provide a safety valve for presidential systems. International monitoring can also safeguard against frivolous use of such mechanisms.

It is to be hoped that the group of friendly nations can help design an innovative solution to Venezuela’s standoff. To be acceptable to both sides, such a solution must deviate from the favourite proposals of each. The opposition prefers an “up-or-down” vote on Chávez’s continuation in office, which it would most likely win — and which Chávez will never accept.

Chávez insists on the recall referendum mechanism included in his constitution, which the opposition cannot tolerate: removing the president in this way would require a larger absolute number of votes than Chávez garnered in the last election. But rising abstention makes this virtually impossible. Both proposals are thus politically unfeasible.

Only a democratic mechanism for conflict resolution that has an uncertain outcome has any chance of being adopted. That mechanism is an election, to be held as soon as possible (realistically, by this summer). Both sides will have to work hard if they want to win. The fractious opposition will need to go beyond rejection of Chávez, elaborate a programme for the country’s reconstruction, and unite behind an attractive candidate.

President Chávez will need to clarify the content and meaning of his “Bolivarian Revolution.” Since Chávez is a skilled campaigner and the opposition so far lacks unity, he will have a realistic chance of winning — which should make a new contest acceptable to him.

Pressure from the group of friendly nations may induce both sides to accept this last chance to avoid a political and economic meltdown. Elections can be made legitimate through a constitutional amendment shortening the presidential term, as proposed by Jimmy Carter in his recent mediation effort. Since this is designed to defuse an exceptional crisis, it would not become a precedent that encourages frivolous attacks on Latin America’s democratically elected governments. An election now in Venezuela will save, not undermine, democracy. —DT-PS Kurt Weyland is an Associate Professor of Government at the University of Texas. His book, “The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela” was published by Princeton University Press (2002)

31 Jan 2003 20:40

(Recasts throughout) By Tom Ashby

CARACAS, Venezuela, Jan 31 (Reuters) - Venezuelan state oil company chief Ali Rodriguez said Friday he had restored half of the OPEC nation's strike-hit output and would impose a radical restructuring on the world's fifth largest oil exporter.

Rodriguez said there would be no return for thousands of fired Petroleos de Venezuela (PDVSA) workers, whom he accused of sabotaging the country's oil industry and betraying the nation by trying to topple President Hugo Chavez.

PDVSA employees who were pardoned for their role in a failed coup attempt against Chavez last April had re-offended by organizing the strike, Rodriguez said.

"There has been a repeat of the behavior which definitely allows no going back," he told a press conference.

The PDVSA chief said he had fired almost every one of PDVSA's 700 senior executives for joining the strike. The total number of dismissed workers already topped 5,300 and could reach 6,000, he added.

Rodriguez, a former communist guerrilla, said PDVSA had grown fat during the past 20 years, consuming an ever larger share of oil income. He pledged to turn it into a vehicle for state revenue collection.

"PDVSA should be nothing more than an instrument to secure maximum benefit from the export of (oil) through its contribution to the treasury," Rodriguez told reporters.

He said production recovered to 1.5 million barrels per day (bpd), half of pre-strike levels, from a low of 150,000 bpd at the height of the strike.

He forecast output approaching normal levels of 3 million bpd by early March.

Almost two months into the opposition strike aimed at forcing left-winger Chavez to resign, the two sides have been providing conflicting accounts of the impact of the stoppage on South America's largest producer.

Strikers pegged output at 1.1 million bpd on Friday and said it would never reach pre-strike levels without a deal for elections that would also return them to their jobs.

They accuse Chavez of adopting dictatorial powers and leading the South American country towards Cuban-style communism.

DESTRUCTION

Striking PDVSA employees said Rodriguez was destroying Venezuela's economic powerhouse with his reforms.

"We are witnessing the destruction of PDVSA, which was ranked among the top global energy corporations before the strike," a dissident spokesman said.

They dismissed accusations of sabotage, saying they handed over installations in good working order and that unqualified strike-breakers had caused a spate of oil spills, computer crashes and refinery faults.

PDVSA's investment budget would be cut by 30 percent to adjust to the slump in export revenue, Rodriguez said, adding he would protect the key oil production budget.

He conceded that oil output capacity would probably suffer as a result of the cut.

Striking workers said Rodriguez planned to sell PDVSA's overseas businesses, which include the Citgo refining and marketing brand in the United States.

Rodriguez said some asset sales were planned as part of his restructuring, but declined to give details.

The PDVSA head questioned the motives of a strike that has pushed the country close to the brink of economic collapse and forced the government to impose currency controls.

"Can you imagine BP promoting a strike against the British Prime Minister because it doesn't like him? Or Exxon staging a strike against President Bush in the United States? Rationally it has no explanation," Rodriguez said.

"It is a case for psychiatric analysis. Maybe Freud has the answer," he added.

The strike has helped drive world oil prices up to two-year highs and sapped oil inventories at a time when Washington prepares for possible war with Iraq.

"MASSIVE" RETURN TO WORK

Rodriguez said a "massive" return to work by blue-collar workers and contractors at the oilfields meant output had risen much more quickly than he had expected.

Crude flows should reach 1.8-1.9 million bpd next week when four huge heavy oil upgrading plants, operated by foreign investors, are due to be restarted.

He reiterated PDVSA's aim to lift a force majeure on oil exports, a legal term meaning it can no longer fulfill sales agreements, by the end of February.

Striking PDVSA workers think he will have to keep some restrictions on exports all year, because of a complete collapse of PDVSA's trading and logistics team, and the computer systems used to execute sales.

Some of Venezuela's output was being shipped to storage tanks in the Caribbean for sale to customers still nervous about sending vessels to Venezuelan ports, Rodriguez said.

Before the strike, Venezuela pumped 3.1 million bpd of oil, and refined about one third of it. It supplied 13 percent of U.S. import requirements.

Rodriguez pegged refinery runs at 288,000 barrels per day, a quarter of normal levels, and said he would contract some foreign engineers from the United States to speed the recovery of halted units.

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.

www.whitehouse.gov SUBJECT: Presidential Determination on Major Drug Transit or Major Illicit Drug Producing Countries for 2003

Pursuant to section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 2003 (Public Law 107228) (FRAA), which was enacted on September 30, 2002, I hereby identify the following countries as major drug transit or major illicit drug producing countries: Afghanistan, The Bahamas, Bolivia, Brazil, Burma, China, Colombia, Dominican Republic, Ecuador, Guatemala, Haiti, India, Jamaica, Laos, Mexico, Nigeria, Pakistan, Panama, Paraguay, Peru, Thailand, Venezuela, and Vietnam.

The Majors List applies by its terms to countries. The United States Government interprets the term broadly to include entities that exercise autonomy over actions or omissions that could lead to a decision to place them on the list and, subsequently, to determine their eligibility for certification. A country's presence on the Majors List is not necessarily an adverse reflection of its government's counternarcotics efforts or level of cooperation with the United States. Consistent with the statutory definition of a major drug transit or drug producing country set forth in section 481(e)(5) of the Foreign Assistance Act of 1961, as amended (FAA), one of the reasons that major drug transit or drug producing countries are placed on the list is the combination of geographical, commercial, and economic factors that allow drugs to transit or be produced despite the concerned government's most assiduous enforcement measures.

Pursuant to section 706(2)(A) of the FRAA, I hereby designate Burma, Guatemala, and Haiti as countries that have failed demonstrably during the previous 12 months to adhere to their obligations under international counternarcotics agreements and take the measures set forth in section 489(a)(1) of the FAA. Attached to this memorandum are justifications for each of the countries so designated, as required by section 706(2)(B).

I have also determined, in accordance with provisions of section 706(3)(A) of the FRAA, that provision of United States assistance to Guatemala and Haiti in FY 2003 is vital to the national interests of the United States.

Additionally, the alarming increase in the quantity of illegal synthetic drugs entering the United States, especially ecstasy from Europe, is of particular concern. A significant amount of the ecstasy consumed in the United States is manufactured clandestinely in The Netherlands (in 2001, a total of 9.5 million ecstasy tablets were seized in the United States, and the Drug Enforcement Administration believes that the majority of tablets

originated in The Netherlands). We are working closely with Dutch authorities to stop the production and export of ecstasy, which we both regard as a serious threat to our citizens. We expect Dutch authorities to move effectively and measurably in the coming year against the production and export of this drug, including dismantling labs and proceeding against trafficking organizations. Early in the year, we plan to discuss specific steps we can take together to reduce drug trafficking.

Although the United States enjoys an excellent level of bilateral cooperation with Canada, the United States Government is concerned that Canada is a primary source of pseudoephedrine and an increasing source of high potency marijuana, which are exported to the United States. Over the past few years there has been an alarming increase in the amount of pseudoephedrine diverted from Canadian sources to clandestine drug laboratories in the United States, where it is used to make methamphetamine. The Government of Canada, for the most part, has not regulated the sale and distribution of precursor chemicals. The regulations to restrict the availability of pseudoephedrine, which the Government of Canada has just promulgated, should be stronger. Notwithstanding Canada's inadequate control of illicit diversion of precursor chemicals, I commend Canadian law enforcement agencies, which continue to work energetically to support our joint law enforcement efforts.

Under section 706 of the FRAA, you are hereby authorized and directed to submit this memorandum to the Congress, and to publish it in the Federal Register.

GEORGE W. BUSH