Monday, July 24, 2006

Presidents Castro & Chavez Dominate Mercosur Summit

Castro visits Che Guevara home

Sunday Jul 23 10:48 AEST

Cuban President Fidel Castro has taken his Venezuelan protege on a pilgrimage on Saturday to the childhood home of his one-time revolutionary comrade, communist icon Ernesto "Che" Guevara.

Residents of the small Argentine city packed the sidewalks, cheering as Castro and Venezuelan President Hugo Chavez made their way through a middle-class neighbourhood to the house, which is now a museum dedicated to "el Che."

Guevara, whose bearded image has become an international symbol of rebellion, helped Castro lead the Cuban revolution in 1959. Eight years later, he was captured by the CIA and executed in Bolivia, where at age 39 he was fighting to spread socialist revolution.

Inside the house, a guide showed Castro some of Che's belongings and old photographs.

Castro steals show as Mercosur celebrates new member

By Benedict Mander in Córdoba, Argentina
Published: July 24 2006 03:00

Late in the night on Friday, Fidel Castro wound up a typical rambling three-hour speech at an "anti-imperialist" rally in the central Argentine city of Córdoba, delivered with such gusto that his health seemed far from failing.

Having dropped the suit and tie sported at the Mercosur presidential summit earlier in the day in favour of his customary olive-green fatigues, the Cuban leader's anti-US rhetoric was rivalled - if not in length - by a fiery warm-up address from his admirer, Hugo Chávez of Venezuela.

The outspoken duo stole the show at the meeting, which celebrated the addition of Venezuela to the trade bloc. Its original mem­bers are Argentina, Brazil, Paraguay and Uruguay.

Mr Castro's guest appearance, following a trade deal signed between Cuba and Mercosur, commanded generous media attention after being confirmed only at the eleventh hour.

"Sometimes I have to misinform even my own friends. Not even I knew I was going to come," he joked.

But the implications of Mr Chávez's status as the new arrival at Mercosur, which has prompted the group's formal support for Venezuela's bid for a seat on the United Nations Security Council in 2007-2008, have also generated speculation on the direction the enlarged bloc will take.

Some commentators fear that Mr Chávez might hijack the group as it becomes less a trade organisation and more a political alliance, another forum for his tirades against the US.

In a light-hearted aside to President Néstor Kirchner of Argentina during the meeting, President Luiz Inácio Lula da Silva of Brazil promised to ensure that Mr Chávez would "behave himself".
But he preferred to emphasise, as strengthening Latin American integration became the recurrent theme of the meeting, his wish for a "Merco-­America" that would one day stretch from Mexico and Cuba to Patagonia.

Indeed, both Argentina and Brazil formally encouraged Bolivia to become the sixth full member of the group, while Mexico's foreign minister, Ernesto Derbez, said he hoped Mexico would become an associate member of the group - along with Bolivia, Chile, Colombia, Ecuador and Peru - before Vicente Fox's presidency comes to an end in December.

Mercosur's leaders resolved to support other projects enhancing unity, including the "great gas pipeline of the south", which will run from Venezuela through Brazil to Argentina, Bolivia, Paraguay and Uruguay. They also backed the creation of a Mercosur development bank to finance infrastructure projects, and the founding of a parliament, which Mr da Silva said could happen by the end of the year.

Nevertheless, tensions inevitably simmered, in particular discontent among Mercosur's smaller members, Uruguay and Paraguay, who complain of poor access to Brazilian and Argentine markets. Although the group resolved to tackle those issues, Uruguay's finance minister, Danilo Astori, formally asked for permission to be able to make bilateral trade agreements independently of Mercosur.

President Nicanor Duarte Frutos of Paraguay complained of the "expropriation" of shared resources, interpreted as referring to the significant debt that Paraguay owes to both Brazil and Argentina for the massive hydroelectric projects it shares with both countries and for which he is seeking relief.

Kirchner’s visit to Paraguay last week saw a decision delayed over whether to pardon $5bn (€4bn, £2.7bn) of debt.

The Financial Times Limited 2006

Bush told to plan for Chávez oil shock

By Andy Webb-Vidal in Caracas
Published: July 23 2006 22:27

Richard Lugar, chairman of the US Senate foreign relations committee, has urged the Bush administration to adopt specific “contingency plans” for a potential disruption to oil supplies from Venezuela.

In a letter sent to Condoleezza Rice, secretary of state, last Friday, a copy of which has been obtained by the Financial Times, Mr Lugar warned the US that it needed to “abandon” reliance on a “passive approach” to energy diplomacy.

Mr Lugar’s warning follows the release last month of an investigation by the Government Accountability Office (GAO) that the US was ill-prepared for an oil embargo by Venezuela, the world’s fifth largest ex­porter. President Hugo Chávez, whose government has been emboldened by a torrent of oil revenues, has several times warned that he would “cut off” oil supplies to the US if Washington persisted in allegedly plotting his overthrow.

“Venezuela’s leverage over global oil prices and its direct supply lines and refining capacity in the US give Venezuela undue ability to impact US security and our economy,” Mr Lugar wrote in his letter to Ms Rice.

The GAO study, commissioned by Mr Lugar, a Republican, estimated that a Venezuelan oil boycott would raise oil prices by $11 (€9, £6) per barrel over a six-month period and reduce US economic output by $23bn.

Bernardo Alvarez, Venezuela’s ambassador to the US, dismissed as “absurd” the GAO study’s premise that Mr Chávez would purposefully shut off oil supplies, citing the economic impact it would have on his own country.

Venezuela ships two-thirds of its oil to the US, or about 1.5m b/d and oil accounts for about 80 per cent of export revenue and half of fiscal revenue.

Mr Lugar, while acknowledging that an embargo seemed unlikely, said that it would be “negligent” of the US to rely on “ad hoc” responses, such as use of the Strategic Petroleum Reserve.

“However unrealistic Venezuelan President Hugo Chávez’s repeated threats to disrupt oil supply may be, we have a responsibility to plan appropriate contingencies that protect the American people,” he wrote.

Mr Lugar added that there was a “real risk” that Venezuela could “act in concert” with other countries to disrupt oil supplies. Mr Chávez is due to visit several countries in Asia over the next two weeks, including Iran.

Myles Frechette, a former US ambassador and now a consultant on Latin American affairs, said: “Lugar believes that when an opportunity presents itself, Chávez will try to break his oil links with the US.”

Venezuelan oil exports to the US fell six per cent in the first four months of 2006 to 178m barrels, compared with the same period last year. One of Mr Chávez’s policy goals is to reduce dependence on the US as its main market and send more oil to China.

The Financial Times Limited 2006

Venezuela deal in US stirs Cfius interest

By Stephanie Kirchgaessner in New York
Published: July 23 2006 21:45 | Last updated: July 23 2006 21:45

The takeover last year of a California-based voting machine company by a group with ties to Venezuela has caught the attention of the Treasury-chaired com­mittee that investigates deals on national security grounds.

The revelation that the committee on foreign investment, or Cfius, has shown interest in the deal – and could initiate a retroactive review – underscores how dramatically the vetting process for foreign takeovers has changed following the furore earlier this year over the approval by the Bush administration of the sale of five US port terminals to a Dubai-controlled company.

The Treasury Department said it had made contact with Smartmatic, a private Delaware-incorporated subsidiary of a Dutch company that is controlled by Antonio Mugica, a Venezuelan citizen, but declined to comment on whether Cfius was reviewing the deal.

In the years before the Dubai controversy put Cfius at the centre of a political storm, the panel, comprising 12 government agencies, generally reviewed transactions involving sensitive defence technology. But the uproar over the approval of the Dubai deal, which ultimately scuppered it, has prompted the administration to take a tougher approach, in part because it is fighting off attempts in Congress to give lawmakers more oversight of Cfius.

The Treasury said it had taken steps to get Congress more involved, including notifying congressional committees once investigations of deals are closed, giving the director of national intelligence a greater role, and by giving only “Senate-confirmed officials” the ability to sign off on Cfius cases.

“There have been a number of changes in Cfius. It is a much more difficult regulatory environment than it was six months ago,” says David Marchick, an attorney with Covington Burling who handles Cfius cases.

Todd Malan, who heads the Organisation for International Investment, which represents US subsidiaries of foreign companies, said of the Smartmatic takeover of Sequoia, the California-based company, that he could not recall another instance when Cfius had contacted a company after a transaction was complete but that it was sign of a more flexible approach to defining “national security”.

“To me, all this adds up to the fact that elected policy- makers should have confidence that things are happening outside the legislative context,” Mr Malan said.

The Treasury declined to say what spurred its interest in the Smartmatic deal but it was the subject of a letter to John Snow, then Treasury secretary, last May from New York congresswoman Carolyn Maloney, who has backed a House proposal to tweak the Cfius process.

Smartmatic said there was “absolutely no ownership” by the Venezuelan government and that the deal had no “military, defence or nat­­ional security applications”.

Financial Times Limited 2006

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