Chavez welcomes international mediation, but reminds he leads legitimate government

<br>CARACAS, Venezuela (AP) _ President Hugo Chavez on Friday welcomed a new international effort to end a seven-week strike against him, but said the world ``must recognize that there is a legitimate

Friday, January 17th 2003, 12:00 am

By: News On 6

CARACAS, Venezuela (AP) _ President Hugo Chavez on Friday welcomed a new international effort to end a seven-week strike against him, but said the world ``must recognize that there is a legitimate government here in Venezuela.''

Representatives from the United States, Mexico, Brazil, Chile, Spain and Portugal agreed to create the new ``Group of Friends of Venezuela'' this week to seek solutions to the stoppage against Chavez.

``Each country must make a great effort to understand what is happening in Venezuela,'' Chavez said in his annual state of the nation address to Congress. ``This is a democratic government, a democratic republic, confronting fascists, confronting terrorists, confronting coup-plotters.''

Strike leaders want Chavez to agree to a plebiscite in February on his presidency. Although the vote would be nonbinding, strike leaders believe Chavez would be pressured by the outcome he would step down.

Venezuela's opposition believes Chavez has ruined the country's economy and tried to gather too much power in his own hands. They staged another march Friday.

Chavez said if a majority of Venezuelans, following the law, voted to shorten his presidential term, he would respect the outcome.

He condemned what he called a bid by Venezuela's rich and its news media to topple him. He said they tried, and failed, to do the same during an April coup when he was ousted for two days.

``We didn't create or look for this confrontation,'' Chavez said. He called the strike affecting Venezuela's crucial oil industry ``a monstrosity.''

In New York on Thursday, Chavez said any plebiscite held before August would be unconstitutional. Venezuela's constitution allows for a binding recall referendum halfway through the presidential term, which would be August.

Chavez said the new initiative should be expanded to include Russia, France, Algeria, and China _ nations he considers allies.

``We think it is still an embryo and that it should be broadened,'' he said.

A key opposition negotiator, Timoteo Zambrano, told Union Radio Friday that ``we have to wait (to see) what the plan of action this group is going to put together.''

The initiative ``is promising, but what's lacking is a game plan,'' said Steve Johnson, a Latin American specialist at the Washington-based Heritage Foundation.

The leader of the Organization of American states, Cesar Gaviria, who has been trying to negotiate a solution to the standoff, also said the group could help.

The strike ground on Thursday, with the Central Bank suspending its daily dollar auctions to stop a run on the currency.

The move came before the local bolivar currency closed at 1,715 to the dollar on Thursday, slightly up from its all-time low of 1,716 on Wednesday.

One trader, speaking on condition of anonymity, said Thursday that the Central Bank was only providing dollars to banks and others with legitimate needs, such as merchants who have to pay for imported goods.

The strike has crippled Venezuela's oil exports, which provide half of government income. The stoppage has cost the country $4 billion, the government has said.

Despite government assurances that it did not plan to devalue the bolivar, citizens lined up at exchange houses this week, pushing demand for dollars to about $114 million a day, Planning Minister Felipe Perez said.

In a report this week, the Santander Central Hispano investment bank warned that Venezuela's economy could contract as much as 40 percent in the first quarter of 2003 if the crisis isn't resolved soon.

Venezuela's economy contracted by an estimated 8 percent in 2002. Unemployment is 17 percent and inflation is 30 percent.