June 23 (<a href=quote.bloomberg.com>Bloomberg) -- Siderurgica del Orinoco, Venezuela's biggest steelmaker, reached an agreement with the government and bank creditors to reduce its $1.88 billion in debt by more than half, enabling it to turn around its money-losing operations.

Sidor said in a press statement the government will increase its share in the company to 40 percent from 30 percent as part of the accord. The company's overall debt will fall to about $791 million with the agreement, a company spokesman said.

The agreement also clears the way for $133.5 million in new investment in the steelmaker.

The company defaulted on its debt in December 2001 when it missed a $31.3 million interest payment, after its financial condition worsened because of declining global steel prices. The agreement caps about 18 months of talks.

Before the agreement, Sidor was 70 percent-owned by Argentina's Siderar, Mexico's Hylsamex, Tubos de Acero de Mexico SA, Brazil's Usinas Siderurgica de Minas Gerais and Venezuela's Siderurgica Venezolana Sivensa SA. The government owned the remainder.

Reuters, 06.21.03, 12:01 PM ET

CARACAS, Venezuela, June 21 (Reuters) - Venezuela's government expects the economy to contract 10.7 percent this year, a worse outlook than previously forecast, according to an interview with Finance Minister Tobias Nobrega published on Saturday.

Nobrega, who earlier estimated the economy would slide about 8.9 percent this year, told El Nacional newspaper he believed the worst was over for the battered economy of the world's No. 5 oil exporter.

"For our projections and programming, we are working with a contraction of about 10.7 percent of gross domestic product. We have bad news in that it will be a year of contraction, but the good news is that we have to say the worst is over," Nobrega told the newspaper.

The finance minister was also quoted as saying the government could consider a devaluation of the local bolivar currency in the third quarter as the current fixed exchange rate was undercut by black market rates against the dollar.

Venezuela's economy contracted 8.9 percent last year and nearly 30 percent in the first quarter of this year after a two-month opposition strike severely disrupted vital oil output and shipments.

Most analysts paint a more pessimistic picture as political conflict over the government of leftist President Hugo Chavez undermines the economy. The International Monetary Fund has said it expects Venezuela to post a 17 percent economic contraction for the year.

In February, the government introduced strict currency controls to halt capital flight and shore up the bolivar. The local currency has been set at a fixed rate of 1,600 bolivars to the greenback, but on the black market the U.S. currency trades at about 2,600 bolivars.

"In the third quarter we could evaluate the possibility of modifying the regime, but without altering the currency controls," Nobrega said.

The government has said the currency curbs and price controls on basic goods will not be lifted in the short term. Private business leaders say the controls are sinking the economy deeper into recession by limiting access to dollars needed for imports and external debt payments.

Copyright 2003, Reuters News Service

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, June 20, 2003 By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: Venezuelan families are being more and more adversely affected by the kind of economic management to which we are being subjected. According to information published in the El Nacional and El Universal newspapers, the National Association of Supermarkets and Similar Businesses (ANSA) reported that supermarket sales were up 15% in nominal terms between May 2002 and May 2003. In real terms, however, consumption at supermarkets contracted by 16.1%, because the cumulative inflation rate between May 2002 and 2003 was higher, amounting to 35.1%.

Furthermore, comparing real growth in the first quarter of 2003 with that of the same period of 2002, we find that consumption was 26% lower this year, a plunge provoked by the period's intense political, economic, and social instability. Nevertheless, the industry organization indicated that most member establishments abided by the controlled prices, despite that policy's impact on their profit margins.

ANSA also pointed out that, though there were no serious cases of supply shortages, the variety of consumer goods on supermarket shelves has diminished, especially for the products subject to regulation. The outcome is the appearance of a black market where the goods in question are being sold at double their controlled price, which only intensifies the distortions in the price formation system.

Among the most dramatic consequences of the economic situation into which we have been dragged by an accumulation of inefficient economic policies is the decline of real salary levels. The Venezuelan public's loss of purchasing power as a result of rising inflation, unemployment, and the economic crisis as a whole has forced families to reduce their consumption of essential goods. And the prospects for a 50% inflation rate and an unemployment rate over 25% by the end of the year will only make things worse.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, June 18, 2003 By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: In late March 2003 a plan was put forward in the Venezuelan Agrarian Corporation (CVA), by its president Freddy Gil, to create firms to process corn, chicken, milk, and fruits, among other food products. This initiative was intended to offset the effects of the general strike of late 2002 and early 2003, plus the impact of the foreign exchange restrictions on the different sectors of the national economy.

The plan is now again under discussion at the CVA, and the creation of two soy milk plants has been announced, as well as the possible construction of several parboiled corn flour processing plants. Gil revealed a plan to create seven mini-plants over the next 16 months, with a total investment of 34 million dollars contributed by international financial institutions and raised by borrowing under the "Umbrella Act," according to a report carried by the El Universal newspaper in today's edition (Wednesday). But access to financing could prove more difficult than expected, given the perception overseas of high risk in the Venezuela economy and the National Treasury's cash shortage, not to mention the major expansion of public debt since 2001.

Though the new companies' equity structure is not yet clear, the strongest critique leveled against projects of this kind has to do with the well-known inefficiency of State-owned enterprises, with their high transfers and labor costs, low profit margins, and incorrect allocation of resources. As a result, privatization is constantly proposed as the answer to those inefficiencies. The intention of creating an intensely interventionist State is becoming clearer all the time, and that trend impairs the markets' natural dynamics. The end result is a steady decline of supply of goods and services, since the small amounts of available resources are channeled to the most inefficient producers.

Before embarking of projects of this kind, the government should start worrying about how to restore regular commercial activities, overcome the paralysis of the foreign exchange market which is strangling national industry, and allow production to meet the needs of a depressed local market and thereafter market surplus output abroad, thereby spurring the economy's growth by making use of the advantages of foreign trade.

June 17 (<a href=quote.bloomberg.com>Bloomberg) -- Ford Motor Co., the world's second- largest carmaker, may pull operations out of Venezuela because difficulty importing parts will probably force the company to suspend production a third time in seven months, the carmaker's regional president said.

We are concerned about our ability to produce cars in Venezuela.'' said Richard Canny, Ford's president of South American operations, in an interview at a press conference in Sao Paulo. We will probably have to shut down the factory again in the coming weeks.''

Restrictions on dollar sales have cut off Ford's access to currency to buy parts to assemble cars. The government limited dollar sales in January to brake a fall in international reserves when investors lost confidence in the bolivar following a two- month national strike.

Ford shut operations at its factory in Venezuela during the strike and again for several weeks in February and March because of a lack of imported parts.

The strike in December and January, aimed at ousting President Hugo Chavez, lowered oil production by as much as 95 percent contributing to a 29 percent contraction in the economy in the first quarter.