Political uncertainty increasing economic woes in Venezuela

CARACAS, Venezuela - Economists say the political uncertainty surrounding President Hugo Chavez's ''social revolution'' is hurting rich and poor alike, and could be prolonged by the suspension of last weekend's elections.

''The problem is the government isn't dealing with the economic issues because of politics,'' said Juan Calvo, president of Conindustria, Venezuela's largest private business organization. ''Independently of whether we have elections right now, the government must deal with the economy.''

While Chavez is expected to outline a series of measures aimed at jump-starting the economy, business leaders remain cautious. They say the president's repeated verbal attacks on the private sector and the electoral crisis are having a negative effect.

Investors are hesitant and need to see a strong government plan, said Ricardo Penfold, economist with Santander Investment.

Rising oil prices have helped Venezuela, the world's third biggest petroleum exporter. The extra oil income has been offset by $3.5 billion leaving the country in the first quarter of this year, private economists said. However, Central Bank director Armando Leon told The Associated Press on Thursday the figure was closer to $1 billion.

Last year's capital flight was $5 billion.

Calvo said the economic woes could be prolonged by the uncertainty caused by the postponement of the May 28 vote - Venezuela's sixth national election in a year and a half.

A week ago, the country's highest court suspended the balloting, citing a lack of ''credibility and transparency'' caused by technical difficulties. The temporary legislature must now set a new election date.

The court ruling and the resignation of the country's five-member National Election Council have sparked protests and raised political tensions in this South American nation of 23 million people.

Protesters gathered Thursday outside the capitol building in downtown Caracas chanting, ''Venezuelans want elections!''

Politically, Venezuela has been in limbo since Chavez pushed through a new constitution last year that dissolved the Congress and called for new elections to ''re-legitimize'' more than 6,200 public offices as part of a ''social revolution'' through radical reform.

Economically, like much of Latin America, Venezuela is battling to regain its footing after months of recession. But as countries like Mexico and Brazil are rebounding, Venezuela's financial picture remains unfavorable despite the largest oil reserves outside the Middle East.

Venezuela's growth stood at 0.3 percent for the first three months of 2000, much better than a 7 percent decline last year but slower than economists had hoped. Meanwhile, the unemployment rate hit 15.3 percent. Calvo said 44,000 jobs, especially in construction in services, were lost - on top of an estimated 600,000 last year.

Chavez received some good news Thursday, when the Central Bank said the inflation rate was 1 percent in May compared to 1.5 percent in April.

Critics, however, say Chavez's apparent success in controlling inflation is due to little demand and a slowdown in economic activity.

Even the normally stable petroleum industry has suffered despite high oil prices, largely because of the government's decision to reduce output as part of its strategy to raise prices.

Last year, about 600 medium and small petroleum-related businesses shut down, said Hugo Hernandez, vice president of the Venezuelan Petroleum Chamber.