Venezuela's currency plunges; banks announce strike against Chavez

Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said the planned PDVSA shake-up "could become a problem rather than create more efficiency." "This is certainly not a move seen in a democracy. It looks like something done under a controlling state," he added.

CARACAS, Venezuela - Venezuela's currency reached a record low against the dollar Wednesday, and banks said they will close for two days to support a 38-day-old strike seeking President Hugo Chavez's ouster.

Demand for dollars soared on speculation that Chavez's government, facing a fiscal crisis because of dwindling oil and tax revenues, would devalue the bolivar to balance its budget. Nervous depositors wanted dollars before the banks closed, not knowing what the bolivar would be worth when banks reopen next week.

Jose Torres, president of Fetrabanca, the umbrella group for bank workers' unions, said banks will shut down Thursday and Friday, adding weight to a strike that has dried up oil income in the world's fifth largest oil exporter.

The bank strike underscored the intransigence of both sides in Venezuela's crisis, despite international pleas to help Organization of American States Secretary General Cesar Gaviria find a solution.

The bolivar plunged by as much as 13 percent before its official close at 1,510 bolivars per dollar, down 6 percent, said the Central Bank, which uses an average of all the day's trading prices.

Earlier Wednesday, the government had tried to raise money by offering 40.5 billion bolivars (US$29 million) in government bonds. There were no takers.

Street violence returned Wednesday when National Guardsmen fired tear gas to disperse pro-Chavez protesters throwing objects at the National Elections Council building, where opposition leaders were holding a news conference.

Opposition leaders want Chavez to call elections in 30 days if he loses a Feb. 2 nonbinding vote on whether he should remain president.

Chavez insists the constitution only requires him to respect a possible recall referendum next August, the midpoint of his six-year term.

Colombian President Alvaro Uribe urged Venezuelans to avoid the violence that has plagued Colombia for 38 years. "You should listen to us Colombians, because here we have suffered so much," Uribe said.

Local banks joining the protest include subsidiaries of Spain's Banco Santander Central Hispano, Banco Bilbao Vizcaya Argentaria S.A. and Citi Group Inc.'s Citibank.

Chavez has gone so far as to threaten nationalizing striking banks, which have opened just three hours a day since Dec. 9.

Thousands line up each morning outside Caracas banks that are splattered with graffiti reading "I want my money!" and "Banker Thieves!"

Before Wednesday, the bolivar's value had fallen by more than 45 percent since Chavez abandoned exchange controls last year to curb capital flight. Venezuela spent US$6 billion in 2001 to support the bolivar.

Activity at the state-owned oil monopoly Petroleos de Venezuela S.A., or PDVSA, is seen as gradually picking up but is still well below normal. Crude output is estimated at around 400,000 barrels per day, compared to the pre-strike level of 3 million barrels a day. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Chavez has managed to somewhat stabilize domestic gasoline supplies through imports. Caracas streets were busy with traffic Wednesday, and many small businesses were open. But international franchises, large malls and multinationals - a bedrock of the economy - were closed. Public schools opened for the new year Monday; some private schools have delayed classes.

Three Venezuelan navy ships were collecting Colombian rice, beans and other staples to alleviate strike shortages in Venezuela.

Late Tuesday, Energy Minister Rafael Ramirez vowed to crush the strike by decentralizing the oil monopoly, where 30,000 workers are on strike.

Chavez's government will cut jobs at the Caracas headquarters of the company, a hotbed of dissent where 7,000 are employed, Ramirez said. His government is systematically firing strikers at the giant company.

Venezuela's oil industry contributes half of government income. Other revenue is down because thousands of businesses closed, affecting tax collections. The government is cutting its US$25 billion 2003 budget by 10 percent.

Paul MacAvoy, an economics professor at Yale University who has followed the industry for 30 years, said he's never seen a restructuring plan like the one proposed by Chavez.

Since production, refining and distribution operations are scattered, a single operational headquarters - rather than two separate ones, as proposed by Chavez - is the industry norm, he said.

"This looks like a political ploy to show (Chavez) supporters the company is being dismantled for their benefit," MacAvoy said.

Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said the planned PDVSA shake-up "could become a problem rather than create more efficiency."

"This is certainly not a move seen in a democracy. It looks like something done under a controlling state," he added.

Smoke billows behind an oil refinery in El Palito, appoximately 150 miles West of Caracas, January 7, 2003. Workers trying to restart Venezuela's 130,000 barrel per day El Palito refinery, shut by a 37-day strike by foes of Venezuelan President Hugo Chavez, have damaged a seal in one of the vacum units. 'The products have to be drained from the vacum unit of the plant and they have to be burned', Pedro Jimenez, the plant's logistics manager said. REUTERS/Str

National Guardsmen hide behind a wall after firing tear gas to disperse supporters of Venezuelan President Hugo Chavez throwing objects at the National Elections Council building, where opposition leaders were holding a news conference, in Caracas, Venezuela, Wednesday, Jan. 8, 2003. Opposition leaders want Chavez to call elections in 30 days if he loses a Feb. 2 nonbinding vote on whether he should remain president. (AP Photo/Fernando Llano)

Hugo Chavez - Venezuela

Chavez Bombshell? A defector's testimony links the Venezuelan strongman to international terror.*** In January 5, Venezuelan President Hugo Chavez's former personal pilot dropped a bombshell that has been ignored by just about every major U.S. news organization: The Venezuelan president, according to the pilot, gave al Qaeda a substantial sum of money following the September 11, 2001 terrorist attacks. Venezuelan Air Force Major Juan Diaz Castillo, who is now seeking political asylum in the United States and says his "life and liberty are in danger in Venezuela," says Chavez chose him to conduct the transfer because he trusted him as a close personal assistant. But Díaz, disgusted with Chavez's regime, resigned his post on October 25 - and fled following a December 16 attempt on his life.

At a Miami press conference this past Sunday, Diaz said that shortly following the September 11 terrorist attacks, Chavez commissioned him "to organize, coordinate, and execute a covert operation consisting of delivering financial resources, specifically $1 million, to [Afghanistan's] Taliban government, in order for them to assist the al-Qaeda terrorist organization," while, "making it appear as if humanitarian aid were being extended to the Afghan people." ***

The first attempt to transfer the money fell through, but in late September 2001 Venezuelan Vice President Diosdado Cabello decided to funnel the money through Venezuela's ambassador in India, one Walter Marquez. The Taliban received the money and publicly acknowledged receipt of $100,000 in "humanitarian aid." "The rest went straight to al Qaeda," claims Díaz Castillo. "That is, $900,000."

There is more. Diaz Castillo said that while in the Venezuelan air force, he saw Chavez's government send pro-Chavez armed groups - named "Bolivarian Circles," after South American independence hero Simón Bolívar - to Cuba for military training and ideological indoctrination, in order "to carry out acts of violence through them" against opponents. Diaz also says that Chavez has supplied money and arms to the Marxist guerrillas in neighboring Colombia that have plunged that country into chaos.

Diaz Castillo's testimony alone should not be taken at face value - but his statements are consistent with other defectors' testimony and Chavez's public behavior.

General Marcos Ferreira, who resigned as director of Venezuela's border-control service, recently told Insight magazine that Cuba's General Intelligence Directorate (Spanish initials: DGI) has practically taken over Venezuela's ominously named Directorate for Intelligence, Security, and Prevention (DISIP), and that Interior Minister Ramon Rodriguez Chacin pressured him to cover up the identities of terrorists - many from the Middle East - passing through Venezuela and to deceive U.S. terrorism investigators. "I quit my job when I got tired of doing dirty work for Chavez with the Cubans looking over my shoulder," he said.

General Nestor Gonzalez Gonzalez, another military dissident, says Chavez has routed weapons and supplies from Cuba through Venezuela to Marxist guerrillas in Colombia. Gonzalez was with Diaz Castillo on December 16 during the failed attempt on Diaz's life. Militares Democraticos, a military dissident coalition, claims that Gonzalez was also targeted and that Chavez's DISIP was behind the attempt.

In 2001, Chavez paid state visits to - and signed "cooperation agreements" with - Libya, Iraq, and Iran.

Chavez's hatred of the United States and our allies is well known, as is his propensity for violence. On September 12, 2001, Chavez supporters burned an American flag in Caracas's Plaza Bolivar to celebrate the previous day's terrorist attacks. Chavez tried to seize power by force in 1992; and recently his thugs have ransacked television stations and fired on opposition demonstrators. It is not a stretch to believe he would ally himself with anyone trying to do us harm.

The Bush administration must leave no stone unturned in investigating the allegations of Major Juan Diaz Castillo and of other Venezuelans who have fled and will flee Chavez's rule. If the allegations prove true, then the Chavez regime's current course poses a threat to the region's stability. How deeply is Chavez involved with international terror? We and our hemispheric neighbors need to know.

- Ivan Osorio is editorial director at the Competitive Enterprise Institute. The views expressed here are his own.

Chávez must yield to election calls*** After being the fastest-growing economy on record between 1920 and 1980, Venezuela experienced an extraordinary reversal of fortune in the following two decades, with income per capita falling by half. Disappointed with their lot, Venezuelans voted for a candidate who blamed corruption and privilege - not lack of growth - for their miseries and who offered a political agenda centred on constitutional reform. Since Mr Chávez took power four years ago, income per capita has fallen by another 20 per cent, in spite of high oil prices. The constitutional reform approved in 1999 did away with a 40-year-old constitution that had generated enough political stability to ensure the transfer of power to nine elected presidents, seven of them running from the opposition. Enough checks and balances were put into the system and sufficient institutional space was created for political parties so that all constituencies found it in their interest to play by the rules and to search for consensus.

The new constitution, through design and circumstance, ended up concentrating power in the presidency and eliminating most checks and balances. It was drafted by a constituent assembly elected through a rule that gave Mr Chávez 92 per cent of the seats with just over 50 per cent of the vote, essentially disenfranchising the opposition. This winner-take-all assembly dissolved the elected Congress and appointed loyal supporters to the Supreme Court, the attorney-general and the comptroller-general without following constitutional procedures. In addition, the new constitution extended the presidential period, allowed for a one-time re-election and substituted a two-chamber congress with a one-chamber national assembly, in order to lessen the burden of consensus-building. This concentration of power has allowed the government to get away with murder, misuse public funds, arm violent gangs and disarm opposition local police.***

01-08-03 - OPEC Calls Emergency Meeting to Rein In Oil Prices*** Expectations for more OPEC oil already have knocked prices from their end-December peak of $33.65 a barrel for U.S. crude, when it was first revealed the cartel was discussing a substantial output increase. "They're trying to prevent panic on the oil markets. Most in OPEC are resigned to a war in the Gulf," said Varzi. In Wednesday trade, U.S. crude eased another 73 cents to $30.35 a barrel and London Brent blend lost $1.13 to $28.20 a barrel.

The cartel's most influential producer Saudi Arabia is pushing for a big increase while most other countries, including Kuwait, Algeria and Libya, prefer an addition of one million barrels daily. The group, which pumps about 60 percent of world oil exports, wants to plug a 2.7 million bpd supply gap from Venezuela, where a strike against President Hugo Chavez is in its sixth week.

Loss of Iraqi supplies in the event of a U.S. military attack to oust President Saddam Hussein would remove another two million bpd from the 77-million-bpd world market. "It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," said OPEC Secretary-General Alvaro Silva. Many in OPEC already are pumping at, or close, to capacity. Only Saudi, the United Arab Emirates, Iran and Nigeria can add volumes among the 11 member group, Varzi said. Shippers and oil company sources said Riyadh already has lined up more crude sales to the United States, Venezuela's largest customer.***

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OPEC Secretary-General Alvaro Silva is Venezuelan. He replaced Rafael Ramirez when Chavez called Ramirez home to become his Energy Minister.

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09-18-02 - Oil and Gas International - OPEC scorecard: who's for what at Osaka*** Taking them at their word in public pronouncements, those who are plucking for higher production are Saudi Arabia's Ali al-Naimi, the United Arab Emirates' Obaid bin Saif Al-Nasseri, Algeria's Dr Chakib Khelil, and Iran's Bijan Namdar Zangeneh.

Those who are opposed to increasing the total production are OPEC President and Nigeria's Rilwanu Lukman, Qatar's Abdullah al-Attiyah, Venezuela's Rafael Ramirez, Libya's Abdulhafidh Zlitni, Kuwait's Sheikh Ahmad al-Fahd al-Sabah, and Indonesia's Purnomo Yusgiantoro. Iraq's Dr. Amer Mohammed Rasheed will not be taking part in the meeting.

OPEC Secretary-General Alvaro Silva said today, on the eve of the meeting, that the ministers are still nowhere near reaching a common position. "We are looking for a consensus," he said, "but so far there is none, there are still several different positions." OPEC's official production level is 21.7 million b/d, but members have been cheating to the tune of more than 2 million b/d, making their self-imposed limitation on production moot. According to al-Naimi, this is precisely the reason the organization's output should be officially increased, to accommodate this excessive overproduction. However, several members say if the official limit is raised, cheating will simply exceed that level as well, thus oppose a new, higher ceiling. Some of the pressure to boost production was relieved by Iraq's agreement yesterday to allow UN weapons inspectors to return, thereby reducing the war premium added to oil prices, but Washington's negative response still leaves the possibility of war and keeps prices up.***

Probably because by August he will have once again changed the rules. He has already altered their constitution to favor his own consolidation of power into the presidency. He can change the rules again, if he is allowed the time.

That he is the type has already been amply demonstrated both by his previous coup attempt and by his fiddling with the constitution. When he couldn't get what he wanted through a swift coup, he changed tactics to use freedom against those who want to remain free, and used the free election system to get into power. From there he pursues an "incremental coup," where he slowly eliminates his adversaries, replacing them with his own trusted people, as he slowly alters the rules to favor himself. In his case he is already going down the road oft traveled and is inviting Cuban personnel into the country to act as his right arm, so there is no time to waste with this guy. If Venezuelans wait too long he will have fully neutered his opposition inside the government and will have a fully operational, and probably largely Cuban-supplied secret police force to ensure the loyalty of Venezuelans who may be having second thoughts and who will be rendered "loyal" through fear, if need be. And if history is any guide, there will be even once-loyal Chavez-supporting Venezuelans who will become repulsed with Chavez's reliance on Cubans. As they leave or say the wrong things and get purged, Chavez will replace them; but since he has a shrinking pool of candidates, he will end up taking even more Cuban, or other foreign or criminal assistants, after which things escalate until he is violently overthrown or until his cadre of hardline supporters, backstabbers, street-thugs and narks are so numerous that his opposition freezes in fear and is rendered moot.

It is highly doubtful he will simply step down or permit his authority to be reigned in or to come to an end. He's not the type... look at his friends- Moammar Quadafy, who has been in power for decades; Saddam Hussein, who just had a fraudulent election; and Fidel Castro, who has been in power his entire worthless life. We have seen what Mugabe has done and is doing in Zimbabwe, and he is of the same ilk. Does anyone seriously think Chavez is going to be any different? It may be young, but if it screeches like a dictator, looks like a dictator, and walks like a dictator, it's going to be a dictator.

And if history is any guide, there will be even once-loyal Chavez-supporting Venezuelans who will become repulsed with Chavez's reliance on Cubans. As they leave or say the wrong things and get purged, Chavez will replace them; but since he has a shrinking pool of candidates, he will end up taking even more Cuban, or other foreign or criminal assistants, after which things escalate until he is violently overthrown or until his cadre of hardline supporters, backstabbers, street-thugs and narks are so numerous that his opposition freezes in fear and is rendered moot.

Chavez Bombshell? - A defector's testimony links the Venezuelan strongman to international terror***- General Marcos Ferreira, who resigned as director of Venezuela's border-control service, recently told Insight magazine that Cuba's General Intelligence Directorate (Spanish initials: DGI) has practically taken over Venezuela's ominously named Directorate for Intelligence, Security, and Prevention (DISIP), and that Interior Minister Ramon Rodriguez Chacin pressured him to cover up the identities of terrorists - many from the Middle East - passing through Venezuela and to deceive U.S. terrorism investigators. "I quit my job when I got tired of doing dirty work for Chavez with the Cubans looking over my shoulder," he said.***

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