MercoPress. South Atlantic News Agency

Breaking News.

Headlines:
Chile's economy vulnerable; Volkswagen workers reject redundancies; Argentine oil reserves falling.

Chile's economy vulnerable

It's almost impossible for the Chilean economy to expand 4% in 2003 because of the slowing down of the world economy, since 60% of the country's GDP depends on foreign trade. Chilean Finance Minister Nicolás Eyzaguirre said this week in Santiago that although the government had targeted growth rate between 3 and 4%, and even when it still has to make official a lower forecast, "expansion will be closer to the lower estimate". "We're not invulnerable to what happens to the world economy, and we therefore should not be surprised with a more modest than expected expansion result", said Mr. Eyzaguirre. After growing at an annual average rate of 7% during most of the nineties the Chilean economy slowed down following the impact of the 97/98 Asian crisis and has since remained at relative low gear. In 2002 the economy expanded 2,1% mainly because of the sluggishness of the US economy, the country's main trade partner. However the Chilean economy has been the most stable of Mercosur and last week marked a new record in "country risk". "It's excellent news, the lowest ever for Chile, just 116 points. But we must keep persevering", said President Ricardo Lagos. "Having a lower country risk means we have access to loans with lower interest rates, we can improve investment chances, and more investment means more jobs, more activity", stressed Mr. Lagos who nevertheless cautioned that "we live in a very competitive world, and must not let ourselves become complacent". A 116 points means Chile can borrow at 1,16% above the going US bond rate.

Volkswagen workers reject redundancies.

Brazilian Volkswagen work force decided this Tuesday in an assembly to reject any transfers or redundancies as anticipated by the German automobile manufacturer that wants to eliminate 3,933 jobs, 16% of the workforce. "We the workers have decided that under no circumstances will we accept a breach of the stability agreement with Volkswagen that expires in 2006, and therefore we will not accept any transfers and much less redundancies", remarked Jose Lopez Feijo president of the metal workers union of Sao Paulo. "If Volkswagen breaks the agreement, we will begin conflict strife". The decision was taken in a public meeting with the participation of 12,500 members of the VW 24,800 strong workforce and held in the company's main plant in Sao Bernardo do Campo. "Unfortunately we don't have jobs for the 24,800 workforce, today or in the coming years", said the Brazil Volkswagen president, Mr. Paul Fleming. "Any drop in sales is uses by manufacturers as an excuse to fire workers. We're not going to accept redundancies and we consider the announcement blackmail" indicated Fernando Lopes from the Brazilian Metal workers Confederation. Volkswagen's announcement occurs when the Brazilian government is preparing a plan to stimulate industry following an 8,2% drop in car sales in the first six months of 2003. The Brazilian automobile industry comes from a negative 2002 when overall production dropped 2% (1,7 million units) with domestic sales falling 7,1% (1,6 million cars) and a 3,2% reduction in export revenue that reached almost 4 billion US dollars. High interest rates in Brazil are blamed for the domestic demand contraction. VW has promised that all redundant workers will be recycled either in other companies belonging to the group or in new jobs

Argentine oil reserves falling

Argentina's oil reserves have dropped 3% and natural gas 10% according to Argentine industry experts who urgently demanded incentives for long term investments in risk exploration. Other demands include the gradual elimination of the 20% surtax on crude exports and a redrafting of the natural gas price at the well. However the Argentine government has repeatedly refused to raise frozen public utility rates arguing the country is in "a social and economic emergency". A review of natural gas prices would have a direct impact in electricity rates, transport and overall industry costs. But the Argentine oil industry insists in warning the risks involved and negative effects for reserves and the absence of new investments in the area. "We need more wells; we have 91% of high risk areas unexplored", indicated former Energy Secretary Daneil Montamat who added that "risk exploration needs clear long term signals and certain incentives, could be similar to those currently in the mining industry (30 years of fiscal stability)". Argentina has 16 years natural gas reserve which has now fallen to 14, 15 years, and "proven reserves have to be de categorized if prices are not profitable" explained Mr. Montamat. A cubic meter of natural gas for home consumption in metropolitan areas in Argentina is currently equivalent to 0,25 US cents. When the Argentine peso was pegged to the US dollar, a million BTU would cost a dollar and twenty cents and following the devaluation in December 2001 it dropped to 0,40 US cents. "A reasonable price for a million BTU, and attractive for long term investors, would be in the range of 70 to 80 US cents", explained Mr. Montamat.