[Cincinatus' Wife]

Chavez opponents rip up tax forms [Full Text] CARACAS, Venezuela -- Tens of thousands of Venezuelans marched on the federal tax agency Tuesday and many ripped up their tax forms, vowing to further deprive President Hugo Chavez of revenue as part of their strike that has already dried up oil income. In a speech he ordered broadcast on all radio and TV stations, Chavez warned that tax evasion carries up to seven years in prison.

Protesters cheered and blew whistles as they tore up blank tax forms at the doors of the tax agency. They called for individuals and businesses to stop paying income and value-added taxes. The march was the first opposition protest in the capital since clashes between Chavez foes and followers and security forces left two people dead and 78 injured last week.

Venezuela's largest labor confederation, the biggest business chamber and opposition political parties began the strike Dec. 2 to pressure Chavez into resigning or accepting an early vote on his rule. The president has refused to do either. The strike has crippled Venezuela's oil industry, which provides half of government income and 80 percent of export revenue. [End]

[Cincinatus' Wife]

Venezuela's Economy: From Bad to Worse ***Analysis - Despite record-high global oil prices throughout the year, the Venezuelan economy contracted about 10 percent in 2002. The blame lies with the country's persistent political turmoil, including a military rebellion in April and a national strike in December that shut down operations of state-run Petroleos de Venezuela (PDVSA). However, the economic crisis likely will grow even worse in the first quarter of 2003, as the government runs out of cash to pay its employees, creditors and debts, according to senior government officials, opposition leaders and private economists in Caracas.

Planning Minister Felipe Perez acknowledged Jan. 2 that the government's $24 billion budget for 2003 would have to be "revised" during January to reflect the fiscal losses accruing from PDVSA's work stoppage. The government will have to slash its $24 billion budget by at least 20 percent to avoid financial insolvency, according to Central University economics professor Francisco Vivancos. However, with new polls showing that President Hugo Chavez is losing substantial support among poor Venezuelans, who represent the base of his political support, the government likely will try to keep budget cuts to a minimum. At the same time, it probably will resort to devaluing the currency, issuing Venezuelan debt paper, deferring payments of external and internal debts and possibly seeking financial assistance from the International Monetary Fund and other multilateral entities.

Still it is unlikely that the IMF will aid Venezuela's government without substantial economic reforms, which Chavez would be unwilling to make. Venezuelan banks -- already holding $12 billion of domestic government debt -- in turn will be unwilling to absorb more government debt, even at exorbitantly high interest rates, while the combined work stoppages in the private sector and PDVSA last. This will leave the Chavez government with three main options for dealing with its fiscal deficit: cutbacks, currency devaluation and deferment of debt payments. However, these options will make a bad economic situation much worse and further cut into Chavez's popularity among the poor. ***