May 26, 2003 By <a href=www.busrep.co.za>IOL Business Report-Reuters

Caracas - Venezuela's economy had plummeted 29 percent in the first quarter, squeezed by an anti-government strike and tight exchange controls, the Central Bank of Venezuela said on Friday.

Analysts said it was the worst economic collapse ever recorded in Venezuela, the world's fifth-biggest oil exporter, and probably the steepest quarterly contraction seen in Latin America.

"It's unprecedented and reflects a destroyed economy," said independent economist Alexander Guerrero.

The central bank said Venezuela's strategic oil sector, which accounts for half of government revenues, shrank by 46.7 percent in the first quarter while the non-oil sector contracted 20.9 percent.

In December and January President Hugo Chavez toughed out a general strike aimed at forcing him out of office.

Crippling work stoppages temporarily slashed oil output by state oil firm PDVSA, choking off government revenues and triggering heavy capital flight.

This forced the government to impose foreign exchange controls, reducing imports and exports.

"Firstly, it was the effect of the PDVSA strike and secondly, the impact of the exchange controls," said Jose Cerritelli, an economist with Bear Stearns in New York.

He noted, however, that the government had since managed to restore strategic oil production.

The first-quarter gross domestic product (GDP) shrinkage followed a record decline of 16.7 percent in the last quarter of 2002. In the whole of last year, when Venezuela was rocked by months of political turmoil culminating in a short-lived failed coup against Chavez, GDP fell nearly 9 percent .

In its quarterly report, the central bank said the capital portion of the balance of payments registered a deficit of $1.5 billion in the first quarter against a $2.4 billion deficit a year ago.

The current account surplus stood at $1.9 billion compared with a $209 million surplus last year.

Although expected, the GDP collapse is a blow for Chavez, who since his election in late 1998 has struggled to implement his self-styled revolution, an antipoverty programme based on government spending and a bigger role for the state in the economy.

His foes, who include business leaders and dissident military officers, accuse him of squandering the nation's oil riches and trying to implant Cuban-style communism.

Analysts said the crucial oil production recovery could slow the economic nose dive.

The International Monetary Fund has predicted Venezuela's economy would shrink 17 percent in 2003. Finance minister Tobias Nobrega sees a decline similar to last year of around 9 percent.

Importers and exporters say the state's painfully slow allocation of dollars is strangling business activity, disrupting manufacturing and creating shortages.

Nobrega said on Thursday the government would correct faults in the currency regime.

The central bank report said the worst-hit sector in the first quarter was construction, which fell 64 percent. Manufacturing shrank 35.1 percent. - Reuters

<a href=www.iht.com>Bloomberg, AP Saturday, May 24, 2003   Venezuela's economy shrank 29 percent in the first three months compared with the year-earlier period, the country's central bank said Friday. The bank said a two-month strike that paralyzed oil production played a major role in the contraction. The oil sector, which makes up roughly a third of economic activity in Venezuela, contracted by 46.7 percent while the non-oil sector shrank by 20.9 percent, the bank said. Economic activity in the construction sector shrank 64 percent, manufacturing industry by 35 percent and commerce by 33 percent, the central bank said. The economy contracted by nearly 9 percent in 2002 after growing 2.8 percent in 2001. (AP) Inquiry at Ericsson Nine former executives at the wireless equipment maker LM Ericsson AB could face charges for obstructing a tax audit in 2001, a Swedish investigator said. The police believe some employees obstructed the audit by not accounting for 2.5 billion kronor ($317.8 million) paid to marketing consultants. Police have not released the names of the nine, but an investigator said the inquiry centered on Ericsson's leadership in 1998 and 1999. (AP) Security at exchange The New York Stock Exchange has proposed taking fingerprints of its employees and those who regularly do business with the exchange so they can be submitted to the Federal Bureau of Investigation. In a filing with the Securities and Exchange Commission, the exchange said tighter monitoring was needed because of heightened security concerns. The proposal, which seeks "accelerated" approval by May 30, would cover employees, service providers, contractors and even journalists. (AP) Atari Inc.,the video game-maker that is majority owned by Infogrames Entertainment SA, said its "Enter The Matrix" game sold more than 1 million units in its first week. (Bloomberg) Internet salesrose as a proportion of U.S. retail sales in the first quarter compared with the period a year earlier. Online sales were $11.9 billion, or 1.5 percent of all sales.(Bloomberg) Carlo Tassara SpA, a steel company controlled by investor Romain Zaleski, increased its stake in Edison SpA to 15.3 percent from 7.1 percent. (Bloomberg) Lagardere SCA said it had fired the chairman of Hachette Livre, Jean-Louis Lisimachio, over a "strategic disagreement" regarding a possible bid for Vivendi Universal Publishing. (AFX) Steve Ballmer,the chief executive of Microsoft Corp., is selling an undisclosed number of shares for the first time in 12 years. He owned almost 471 million shares as of September. (Bloomberg) Edison Schools Inc.,the largest for-profit manager of public schools in the United States, has defaulted on $59.5 million in loans, according to a regulatory filing. (AP) Gap Inc.earned $202.5 million in its first quarter, more than five times its net income of $36.7 million in the period a year earlier. First-quarter sales were up 16 percent to $3.35 billion. (AP) European Commission antitrust regulators have restarted an inquiry into General Electric Co.'s E2 billion purchase ($2.3 billion) of Instrumentarium Oyj. (Bloomberg)

Reuters, 05.23.03, 4:35 PM ET By Pascal Fletcher

CARACAS, Venezuela, May 23 (Reuters) - Venezuela's economy plummeted a record 29 percent in the first quarter of 2003, squeezed by a anti-government strike and tight official currency controls, the Central Bank said on Friday. Analysts said it was the worst economic collapse ever recorded by Venezuela, the world's No. 5 oil exporter, and probably also the steepest quarterly contraction ever seen in Latin America. "It's unprecedented and reflects a destroyed economy," independent economist Alexander Guerrero told Reuters. The Central Bank said Venezuela's strategic oil sector, which accounts for half of government revenues, shrank by 46.7 percent in the first quarter while the non-oil sector contracted 20.9 percent. In December and January, left-wing Venezuelan President Hugo Chavez toughed out a general strike aimed at forcing him from office. Crippling work stoppages temporarily slashed oil output and exports by state oil firm, PDVSA, choking off government revenues and triggering heavy capital flight. This forced the government to introduce foreign exchange controls that reduced imports and exports. "Firstly, it was the effect of the PDVSA strike and secondly the impact of the exchange controls," said Jose Cerritelli, an economist with Bear Stearns in New York. He noted, however, that the government had managed to restore strategic oil production in the wake of the strike. IDEAGlobal's Benito Berber said the unrelenting political conflict between populist Chavez and his political opponents had also contributed to the economic collapse. "There is no purely economic factor that can explain this kind of fall, only a political one," he said. DOWN, DOWN The 29 percent gross domestic product (GDP) shrinkage in the first quarter followed an earlier record decline of 16.7 percent in the last quarter of 2002. In the whole of last year, when Venezuela was rocked by months of political turmoil culminating in a short-lived failed coup against Chavez, GDP fell nearly 9 percent. In its first-quarter 2003 report, the Central Bank said the capital portion of the balance of payments registered a deficit of $1.5 billion against a $2.4 billion deficit a year ago. The first quarter current account surplus stood at $1.9 billion compared with a surplus of $209 million a year earlier. Although expected, the GDP collapse was a blow for Chavez, who since his election in late 1998 has struggled to implement his self-styled "revolution", an anti-poverty program based on government spending and a bigger state role in the economy. His foes, who include business leaders and dissident military officers, accuse him of squandering the nation's oil riches and trying to implant Cuba-style communism. Analysts said the crucial oil production recovery could slow the economic nosedive over the rest of the year. The International Monetary Fund has predicted Venezuela's economy will shrink 17 percent in 2003. Finance Minister Tobias Nobrega sees a decline similar to last year, around 9 percent. "Unfortunately, the currency controls continue to be asphyxiating," Bear Stearns' Cerritelli said. Private importers and exporters say the painfully slow allocation of dollars by the state currency board Cadivi is strangling business activity, disrupting manufacturing and creating shortages. Finance Minister Nobrega said on Thursday the government would correct faults in the currency regime. The Central Bank said the public sector contracted by 34.8 percent in the first quarter of 2003, while the private sector shrank 25.6 percent. The worst hit sector was construction, which fell 64 percent, followed by manufacturing, which shrank 35.1 percent and trade that declined 33.5 percent. (Additional reporting by Tomas Sarmiento)

Caracas, May 23 (<a href=quote.bloomberg.com>Bloomberg) -- Venezuela's economy plunged 29 percent in the first quarter for its biggest contraction ever, as an unsuccessful strike to oust President Hugo Chavez crippled oil production and consumer spending.

The drop in the gross domestic product from the same period a year ago was the same as the forecast by seven economists in a Bloomberg survey. The oil industry, which usually makes up about 30 percent of the economy, fell 47 percent while the non-oil economy contracted 21 percent.

``I don't know about the War of Independence, but this is the largest collapse since at least the 1950's,'' said Irene Costa, an analyst with Banco Mercantil in Caracas. The central bank started publishing annual GDP results in the 1950s and quarterly results in 1994.

The shrinking economy may undermine the popularity of Chavez, who may face a binding referendum on his mandate later this year, which if he loses would lead to new elections. The strike, which cost the economy $7.4 billion, helped drive unemployment to 21 percent, and polls show about 60 percent of Venezuelans want Chavez to leave.

The previous worst contraction was 17 percent in the fourth quarter of last year. The economy has lost ground for five consecutive quarters and for two of the four years that the former army lieutenant colonel has been in office.

Oil production, which fell to 150,000 barrels a day in the first week of January, rose to 3 million barrels a day by the end of March, back to pre-strike levels, according to the government. Oil output averaged 1.8 million barrels a day during the first three months of the year, down about 35 percent from the year before, the government said.

Oil Surge

The strike and concern that a war in Iraq would cut production from that country boosted crude oil prices to $34.67 a barrel on March 12 from $23.63 on Nov. 13. Prices fell to $28.85 today.

As a result of the strike, Chavez restricted foreign currency trading in January to bolster international reserves depleted by falling confidence in the bolivar.

Since then the government has sold $12 million, compared with daily sales of about $50 million before the restrictions. The lack of dollars has stifled production in a country that imports 60 percent of consumer goods and where many companies rely on foreign parts and raw material to operate. Last Updated: May 23, 2003 13:36 EDT

<a href=www.business-standard.com>business-standard.com Our Regional Bureau in Mumbai Published : May 23, 2003

Several Latin American countries evinced keen interest in sourcing ayurvedic products and bulk drugs from India, at the second Indo-Latin American pharma meet organised by the Confederation of Indian Industry (CII) here.

Rumed Pharmaceuticals (Paraguay) director Rene Zotti said his company also focused on natural remedies and herbal products and was looking for outsourcing Indian products.

Zotti said his company was also keen on sourcing bulk drugs such as antibiotics, anti-inflammatory, cardiac and oncological drugs and vaccines as the disease pattern in India and the northern region of Latin America were quite similar.

Alfredo Cifuentes Schulz, international trade head of the US $60-million Laboratorios Maver Ltda of Chile, said his company was also looking for herbal products.

CII Latin American Committee chairman Madhur Bajaj said “Trade between Latin America and India has crossed US $2.5 billion in 2001-02.

A series of policies aimed at boosting Indian exports to the region and the growth of the pharmaceutical market in the top seven Latin American countries by almost 50 per cent from US $20 billion in 2000-01 to US $29 billion in 2001-02, provide a good opportunity to the Indian pharmaceutical industry.”

CII project consultant Varunesh Tuli said in 2002, Latin America’s pharmaceutical market was worth US $16 billion, nearly 4.5 per cent of the global pharma market.

Mexico, with a US $6 billion market, topped the list, recording a nine per cent growth, he said.

“Even per capita consumption figures are high Argentina leads the list with US $115 (pre-devaluation of its currency) followed by Chile at US $53. India’s per capita consumption stands at just US $3. Cardio vascular drugs will constitute the bulk of the demand as there is a three-fold increase in death caused by cardio vascular diseases,” he said.

Tuli said there were no entry barriers in Argentina and Brazil. He stressed the need for entering into referential Trade Agreements, especially with the Mercosur belt comprising Brazil, Argentina, Uruguay and Paraguay.

Ivax Corporation (Mexico) business development director Pedro Morfin called for better relations between governments of India and Latin American countries for free trade agreements in the pharma sector.

Maria Isabel Puerta Correa, purchase chief of Laboritorios Ecar (Columbia), said he was looking for antibiotics, oral medication, injectibles and ophthalmic solutions.

The meet was attended by pharma majors from Chile, Columbia, Mexico, Paraguay, Uruguay and Venezuela. Representatives of companies such as Zentex (Chile) and Ivax Corporation (Mexico) were here to explore opportunities of forging alliances with Indian companies.

More than 70 companies including Nicholas Piramal, Cadila and RPG Lifesciences represented India.