<a href=reuters.com>Reuters Wed April 16, 2003 04:48 PM ET (The following statement was released by the rating agency)

NEW YORK, April 16 - Standard & Poor's Ratings Services said today that it affirmed its 'CCC+' corporate credit rating on Venezuelan state oil company Petroleos de Venezuela S.A. (PDVSA) and revised its outlook on the company to stable from negative.

"The outlook revision follows a similar change to our outlook for the ratings on the Bolivarian Republic of Venezuela, which reflects improving liquidity for the country as a result of recovering oil production against a backdrop of continuing, albeit diminished, economic pressures, and political turmoil. Future ratings changes on PDVSA will be linked to those on Venezuela," said Standard & Poor's credit analyst Bruce Schwartz.

As Venezuela recovers from the political and economic strife that has affected the company during the past year, Standard & Poor's expects that the government will continue to use its authority to exploit PDVSA's financial resources to effectively consolidate the debt management of the republic with PDVSA. This interrelationship has the potential to diminish PDVSA's access to international capital markets and trade credit on favorable terms. Mechanisms to extract cash from PDVSA include royalties, taxes, dividends, use of PDVSA's cash balances to support the bolivar (the Venezuelan currency), and the slow payment on government receivables held by PDVSA.

Standard & Poor's also said that although PDVSA has increased production to between 2.4 million barrels per day and 3.1 million barrels per day from less than 500,000 barrels per day at the peak of the strike, which is much more rapid than had been expected, questions remain about the long-term impact of the strike on PDVSA's production capacity.

Furthermore, Standard & Poor's is concerned about the strike's impact on PDVSA's ability to finance both sustaining capital expenditures and growth initiatives. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

<a href=reuters.com>Reuters Wed April 16, 2003 03:30 PM ET By Hugh Bronstein

NEW YORK, April 16 (Reuters) - Venezuelan sovereign bond prices shot higher in an otherwise flat market on Wednesday after Standard & Poor's brightened its outlook on the credit ratings of the politically troubled country.

In revising its outlook on Venezuela's long-term ratings to "stable" from "negative," S&P cited improved cash flow in the South American oil-exporting nation -- thanks to recovering crude output.

"That was the big thing today," one emerging debt trader said. "Besides that, the market was just chopping around in a pretty tight range."

Venezuelan total returns rose 1.8 percent in a market that as a whole drifted down 0.03 percent, according to JP Morgan's Emerging Markets Bond Index Plus.

Ricardo Amorim, head of Latin American research at IDEAglobal, said he disagreed with the move by S&P. He noted that Venezuela's upcoming bond swap will leave investors with longer-dated paper, exposing them for a longer period to a country prone to political convulsions.

A year ago, President Hugo Chavez was temporarily forced from office by a coup. And government fiscal accounts bled profusely in December and January when an opposition-led strike brought the nation's key oil sector to its knees.

Chavez's foes accuse him of trying to set up a Cuban-style socialist state.

"If investors accept the swap and lengthen the maturity of the debt they hold, they would potentially have to stick longer with Chavez," Amorim said. "Venezuela is also vulnerable to drops in oil prices, which I expect to happen when Iraq starts to increase its oil production."

Venezuela has said it plans to offer a voluntary, external debt swap during or after the second quarter of this year.

Meanwhile, Amorim characterized Wednesday's overall lull as but a pause in the 11 percent total return rally seen marketwide since the year began.

"The market is a little down today after some profit taking. But I don't believe this is a change in the trend," he said.

With little money to be made in the anemic U.S. stock market or in low-yielding U.S. Treasury bonds, Amorim said, "There will continue to be flows toward emerging markets, in particular toward higher-yielding emerging markets."

<a href=reuters.com>Reuters Wed April 16, 2003 12:00 PM ET (The following statement was released by the rating agency)

NEW YORK, April 16 - Standard & Poor's Ratings Services said today that it revised its outlook on its long-term rating on the Bolivarian Republic of Venezuela to stable from negative. Standard & Poor's also affirmed its 'CCC+' long-term and 'C' short-term foreign currency sovereign credit ratings on the republic. (Standard & Poor's does not rate Venezuela's bolivar-denominated debt.)

"The stable outlook balances improving liquidity stemming from recovering oil production against continuing, albeit diminished, economic pressures and political turmoil," said sovereign analyst Richard Francis. "Oil-based revenue, which normally accounts for nearly 50% of total government revenue, fell by an estimated 50% in the first few months of this year during the strike, but are expected to rebound to 40% of total revenue for 2003 as a whole," he added.

According to Mr. Francis, international reserves are also rising as sustained production surpasses 2.5 million barrels of oil per day. Reserves reached US$15.5 billion on April 14, 2003, up from US$14.1 billion a month earlier (and US$15.8 billion in early December 2002, before the strike began). "However, the level of international reserves could come under renewed pressure going forward, as Petroleos de Venezuela S.A. (PDVSA) uses the Macroeconomic Stabilization Fund (FIEM) to finance crucial investment, as capital controls are eased, and as debt payments ramp up, especially in June," Mr. Frances noted. "The central government's external debt service is modest in April and May, but rises to nearly 50% of average monthly current account receipts in June," he said.

Standard & Poor's said that, despite the pick-up in oil production, near-term challenges include political paralysis and weakened institutions, continued contraction in the nonoil sector, rising inflation, and higher unemployment. Failure to reach a political solution to the conflict over President Hugo Chavez's tenure and social unrest continue to constrain investment and economic growth. The economy is likely to contract by nearly 15% in 2003 (because of the sharp decline in the early months), on top of the 9% contraction in 2002.

"The strength of the emerging recovery, at present only in the oil sector, depends to a large extent on political factors," said Mr. Francis." A sharp fall in oil production or oil prices, heightened social unrest, or financial sector difficulties could put renewed pressures on the ratings. On the other hand, diminished political tensions, along with sustained oil output, could lead to improvements in creditworthiness," he concluded. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 15, 2003 By: Oscar Heck

VHeadline.com commentarist Oscar Heck writes: According to a recent article in the Boston Globe: “Enrique Salas Romer, who lost to Chavez in the 1998 election and may run again, says the opposition coalition is now focusing on a single theme -- the economy. Unemployment is close to 30 percent, according to unofficial estimates … “We're now entering a new phase in which the debate will center around human rights -- mostly the right to eat,'' Romer said.”

What a farce!

Typical of the Venezuelan opposition! I hope that no one will believe statements such as: “…human rights -ú the right to eat.”

The vast majority of the Venezuelan middle and upper classes (the majority of the opposition people) really couldn’t care less about poorer Venezuelans!

I will explain: Romer is equating “the right to eat” with “human rights.” Fulfilling a “dream” such that every Venezuelan has enough to eat, is the typical and historical middle-to-upper class tactic to justify their “civilized” and “acceptable” control of Venezuelan society!

It has “always” been enough (for the upper classes - the 20%) that the 80% has enough to eat … and nothing more! Nothing more!

Chavez is trying to make sure that the poor have:

• access to food at good prices (by-passing speculators)
• access to good education (with filled stomachs)
• the ability to start their own businesses (not having to depend on a “boss” who pays minimum wage)
• dignity, not to get pushed around with lies and threats from the upper classes
• the ability to complain and report corruption and abuse
• and much more…

The above list (what Chavez is attempting ... but much being sabotaged by opposition people) represents only a partial list of what the ruling classes do not want.

• They do not want the 80% to be well-educated, otherwise they will have to share real jobs with “others” who are not part of the “mafia” families (e.g. PDVSA’s surplus employees).
• They do not want the 80% to know how to defend themselves, so that they can keep on abusing them under threat of dismissal or death (e.g. forcing employees to sign papers in support of the mafia-organized stoppage).
• They do not want the 80% to feel dignity, otherwise the will have to import maids (slaves?) from some other country (and pay higher wages!).
• They do not want the 80% to learn how to start their own businesses, otherwise the “cheap labour” work force will diminish, forcing them to pay higher wages and lowering their profits from 3000% to 1000% !

As for a political platform based on “the economy” ... this is another joke.

Who ruined the economy? Chavez?

No, it was the opposition themselves, including Romer, a staunch supporter of that “criminal” opposition. Now “they” want to propose ideas to “fix” the economy? I would not trust these guys for a second!

The opposition wants a referendum. If Chavez loses the referendum and elections are called, it is almost sure that Chavez will win (with an estimated vote of 40-45%). What will the opposition mafia do then?

• Will they continue to use illegal, unethical, immoral and criminal methods to continue trying to oust a democratically elected leader from power?

My prediction is, yes. They seem to have learned very little in the last year: a failed USA-backed coup, a failed two-month CTV/Fedecamaras-led stoppage of Venezuelan industry, a failed attempted shut-down of the Venezuelan banking system, a failed teacher’s stoppage in January 2003, a futile call for an unofficial referendum do dissolve the present government … and finally, the falling-apart of collaborative relations between different sectors of the opposition.

Oscar Heck Oscar@vheadline.com

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Our editorial statement reads: VHeadline.com Venezuela is a wholly independent e-publication promoting democracy in its fullest expression and the inalienable  right of all Venezuelans to self-determination and the pursuit of sovereign independence without interference. We seek to shed light on nefarious practices and the corruption which for decades has strangled this South American nation's development and progress. Our declared editorial bias is pro-democracy and pro-Venezuela ... which some may wrongly interpret as anti-American. --  Roy S. Carson, Editor/Publisher  Editor@VHeadline.com    © 2003 VHeadline.com All Rights Reserved.  Privacy Policy Website Design, hosting and administration by: Integradesign.ca 

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 15, 2003 By: VenAmCham

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: Venezuela's economic policy seems to be turning in circles as far as foreign exchange management is concerned. That conclusion springs from statements by Planning Minister Felipe Perez, who announced that the government will return to a band system in the third quarter of the year and will combine that measure with as tax on foreign exchange transactions.

The band system would be very similar to the one applied by the Central Bank (BCV) up to February 2002. A central parity rate would be set, around which the bolivar could fluctuate freely according to supply and demand, subject to daily review and adjustment based on the average market rate in the 45 previous days; the fluctuation limit would be 7.5% above and below the central parity rate. There would be no quantitative restriction on foreign exchange purchases, but there would be a 5% (Tobin) tax on such purchases.

Unfortunately, this return to the band system occurs only after the failure of the floating exchange rate and exchange control arrangements, following a year of high macroeconomic volatility that has yielded Venezuela the worst macroeconomic performance in its contemporary history, in economic growth terms.

The question is whether the authorities can lift the exchange and price controls (and the interest rate controls to be imposed in the near future), since the economy's fragile state would only stimulate the economic agents to seek refuge for their assets in a hard currency like the US dollar.

There is already so much pressure on the economy that this announcement seems extremely difficult to bring to fruition. Though foreign reserves have grown quite substantially during the period of exchange controls, the country's fiscal problems and economic deterioration have been very serious, suggesting that the demand for dollars will surge once the controls are lifted.

It should also be noted that this goal is in open conflict with that of keeping interest rates relatively low; to induce the exchange rate to fluctuate within the band limits it will be necessary to spend reserves and raise interest rates enough to encourage the economic agents to hold bolivares.

Maintenance of relatively low interest rates is of key importance, especially in today's fiscal scenario, since the authorities have been making strenuous efforts to swap bonds nearing maturity and avoid an "unsustainable" spiral of internal indebtedness. To accomplish that, both interest rates and the volume of new borrowing must be lower.

In pursuit of that goal, the Finance Ministry held the seventh internal debt swap auction last Thursday, placing 58% of the offered bonds; it offered 803 billion bolivares and was able to swap 465 billion bolivares of those securities. The most striking thing about the auction is that nearly half the debt was taken up by State agencies; in addition, the average yield on the new securities came to 44%.

There is no question that the intention of lifting the controls and returning to a band system would run up against the obstacle of the country's grave fiscal problems, management of which requires low interest rates. But low interest rates would undermine the band' credibility and might drag the country to a new stage of this economic policy circle in which we would again be offered a floating exchange rate or an exchange control system as a solution to the problem.

Read Complete Article in Spanish

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Our editorial statement reads: VHeadline.com Venezuela is a wholly independent e-publication promoting democracy in its fullest expression and the inalienable  right of all Venezuelans to self-determination and the pursuit of sovereign independence without interference. We seek to shed light on nefarious practices and the corruption which for decades has strangled this South American nation's development and progress. Our declared editorial bias is pro-democracy and pro-Venezuela ... which some may wrongly interpret as anti-American. --  Roy S. Carson, Editor/Publisher  Editor@VHeadline.com