José M. Barrionuevo Barclays Capital Director of Emerging Markets Strategy New York, April 3, 2003

Summary: Venezuela's willingness to pay its external debt is tied both to the country's sharp financing constraint and to Mr. Chavez's ability to resolve the political crisis this year. The authorities' willingness to pay has dropped markedly after the sharp drop in reserves in Q1, and they are unlikely to be willing to lose much more in dollar reserves as the year progresses. In this setting, investor participation in a debt exchange should remain limited as long as the political crisis remains unresolved.

With or without elections, Venezuela's ability to pay will be greatly hampered by falling oil prices after a successful resolution of the Iraqi War, suggesting a high chance of debt default in Q4. Given the remarkable inability of the Venezuelan opposition to unify and present a sole candidate, Mr. Chavez does stand a chance to win and stay in office through 2007, assuming the Supreme Court rules that he can run. As long as Mr. Chavez perceives that he can win a presidential election, every effort will likely be made to avoid default. Regardless of the political outcome, the likelihood of default continues to grow in Venezuela (ability to pay). Its timing, however, remains underpinned by the government's ability to solve the political crisis (willingness to pay).

Read complete report..Emerging_Call (application/pdf, 122 KB)

from Barclays Capital Markets-Ve03Apr3

José M. Barrionuevo Barclays Capital Director of Emerging Markets Strategy New York, April 10, 2003

Summary: Venezuela's DCBs implied market default probability is 57%, in our view, compared with the 24% implied by current market spreads. We recommend investors to further reduce exposure to Venezuela and to consider a trade that sells Venezuela DCBs and buys '27s. The key implication of Mr. Chávez's comments regarding the need to restructure external debt this year is that Venezuela's debt default probability is rising rapidly now. Despite a probable further 31% devaluation this year, dollar reserves should decline by a total of USD 3bn in 2003. With dollar reserves falling below USD 12bn this year, default is now a strong possibility in September, when reserves will hit this threshold. Default could happen as early as June if oil prices drop more rapidly. With domestic debt issuance nearing a limit as inflationary pressures from the equivalence of debt and money financing emerge, for the first time external debt default is a serious choice in Venezuela.

Read complete report..Venezuela's_Default_Story (application/pdf, 355 KB)

from Barclays Capital Research-Ve03Apr10

<a href=www.bnamericas.com>Bnamericas Friday, April 04, 2003 16:32 (GMT-0400)

German engineering company Siemens expects to start construction on line 1 of the Maracaibo metro system in western Venezuela's Zulia state by May or June this year, a company official told BNamericas.

The company had expected to commence construction by April, but "infrastructure-related details" have slightly delayed proceedings, the official said, declining to elaborate.

Meanwhile, Venezuela's government has been conducting preliminary works for the line, such as drainage and installation of electrical systems. Siemens has had no problems dealing with the country's government, the official said when asked whether recent political strife has impacted project plans.

The German firm signed a US$150mn contract in early 2001 to build the first 6.4km of line 1. Though Siemens has said it would like to participate in further Maracaibo metro contracts, the government has not published bidding schedules for additional works.

The 12.6km line 1 will take an estimated 2.5 years to build and includes 13 stations.

Line 2 will stretch 12km and should be ready by December 2008, according to state-owned metro company Metromara, which will operate the system. Line 3 will run 19km and is scheduled for a December 2012 finish. The final section, 17km-long line 4, should be ready by 2016.

By Randy Woods BNamericas.com

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, April 04, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: 2003 looks like a very difficult year for Venezuela and Venezuelans. A workshop organized by VenAmCham (the Venezuelan American Chamber), brought together several experts on the financial, economic, political, labor and petroleum areas, who presented their views to over 100 businessmen and women as well as top managers from both the public and the private sectors.

The chief economist of VenAmCham, Jose Gregorio Pineda, presented the key financial indicators for the year, as follows:

1. An external debt payment of some $4 billion,
2. A government moratorium on the payment of the internal debt,
3. A decline of about 15 points in the GDP, some $15 billion,
4. An inflation rate at year's end of about 40%,
5. Devaluation of 100%,
6. A GDP per capita only comparable to the level of 1960,
7. Total Investments representing only 12% of the GDP, as compared to 30% in the 1970´s,
8. Exchange and price controls probably resulting in pronounced economic recession.

Economist Maxim Ross predicted a fiscal deficit of between $12 to $22 billion, depending on the performance of PDVSA during the year, most probably closer to the last figure. He made emphasis on the close relation between economic performance and the evolution f the political process. He claimed that, unless the government changes this year, the economy would collapse, leading to violent social upheaval.

Manuel Diaz and Arelis Diaz predicted an unemployment rate of about 27%. This would be the largest ever recorded in the country. Minimum salary would remain at about $120 per month, lower than in Colombia and Ecuador, the other Andean countries.

I, myself, participated in the event giving the petroleum outlook ... I forecast a daily average production of some 2.3 million barrels for the year, about one million barrels less than during a normal year. The exports of hydrocarbons would be at around 1.5 million barrels per day, of which one million barrels would be crude oils and the rest products. These export volumes would be about one million barrels per day lower than normal. As a result, fiscal participation of the government would only be of about $6 to $7 billion, as compared to the $12 billion obtained last year.

Worse still, the reliability of Venezuela as a reliable oil supplier to international clients has been severely eroded. Our main client, the US, no longer considers us reliable and has had to resort to Mexico and Saudi Arabia to fill the temporary gaps of supply from PDVSA.

These predictions could, of course, be off the mark ... they represent the educated guesses of the speakers concerned. It's interesting to note, however, that a survey taken among the participants did not show significant variations. At any rate this information should be compared to that obtained from other sources.

This outlook is closely dependent on the political process. If Chavez leaves the Presidency before the end of the year, there will be a transition period, with a new government in charge, which would last until 2006. This government would find the country in social, economic and spiritual ruin and would face a very hard task of national reconstruction, one for which very few people will give them credit. The new government can only offer Venezuelans "blood, sweat and tears," giving the sorry conditions existing in the country. An immediate program of reconstruction would have to put in place including, among other items:

The immediate return of the professional managers and technicians to PDVSA ... an opening to private investment ... the end of the romance with Cuba and the Colombian guerrillas ... the end of the hostile attitude towards the US ... the implementation of a large construction program in the public sector ... intensive tourism promotion ... the disarmament of the Bolivarian circles and the dismantling of the corrupt bureaucracy installed by Chavez ... the rapid shift from "buhonerismo" to organized employment ... a deep cleaning of Venezuelan cities ... in short, a major shift of direction in the life of the Nation, which has been in a tragic course for disaster.

Yes, 2003 is going to be a very difficult year for us.

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email gustavo@vheadline.com

Reuters, 04.04.03, 12:06 PM ET CARACAS, Venezuela, April 4 (Reuters) - Car sales in Venezuela fell 60.9 percent in March from year-earlier levels as the country's economic crisis eroded business, the Venezuelan Automobile Chamber said on Friday. A total of 4,664 cars were sold in March, compared with 11,929 units in March last year. Accumulated sales to March were 12,876 units, a slide of 73.3 percent from the same period last year. Car sales have dropped as Venezuela has struggled with deep recession and political instability. A two-month general strike in December and January battered sales further and tight currency curbs introduced in February have also cut into business. The companies affiliated with the chamber, known as CAVENEZ, are DaimlerChrysler AG's (nyse: DCX - news - people)<DCXGn.DE> DaimlerChrysler de Venezuela, Fiat SpA's <FIA.MI> Fiat Automoviles, Fiat affiliate IVECO Venezuela, Ford Motor Co. (nyse: DCX - news - people), General Motors Corp.'s (nyse: DCX - news - people) General Motors de Venezuela, AB Volvo <VOLVb.ST> affiliate Mack de Venezuela, Mitsubishi Motors Corp.'s <7211.T> MMC Automotriz and Toyota Motor Corp.'s <7203.T> Toyota de Venezuela. The figures represent the total vehicle sales in Venezuela and also include car models made by non-members of CAVENEZ, such as Mazda Motor Corp. <7261.T> and Volkswagen AG <VOWG.DE>.