CARACAS, Venezuela (Reuters) --Venezuelan President Hugo Chavez, facing a
crisis of confidence at home amid U.S. criticism of his leftist government, has said
he believes in democracy, is not a communist, and does not back terrorism.

In an uncharacteristically conciliatory speech late on Wednesday, the former
paratrooper even extended an olive branch to his domestic opponents, asking them
to help him "sheathe his sword" and end confrontation over contested economic
reforms.

"I am not a communist. ... I am very clear about which direction my country is
going," the 47-year-old president, who is known for his abrasive, outspoken
leadership style, said in the city of Maracay after swearing in a new trade minister.

In an indirect response to critical comments made on Tuesday by U.S. Secretary of
State Colin Powell, Chavez firmly defended his government's right to follow the
policies it chose "because this is a sovereign and independent nation."

Chavez, a firebrand populist who won a 1998 election six years after attempting a
coup, spoke a day after Powell criticized his ideas on democracy, his fraternizing
with U.S. enemies and his questioning of the war on terrorism.

Powell's remarks dealt a further blow to already-falling investor confidence in
Venezuela, the world's No. 4 oil exporter and a leading supplier of crude to the
United States.

The Venezuelan economy, the fourth-largest in Latin America, is coming under
pressure from sliding oil prices and fears about increasing political confrontation
between Chavez and opponents over his self-proclaimed leftist "revolution."

In his speech, Chavez did not directly mention Powell's criticism but left no doubt
that he was responding to it.

"I believe, as president of Venezuela, that the government in Washington must know
very well that what is currently underway in Venezuela is not a terrorist plan," he
said.

LIES AND CONFUSION

Suggesting U.S. officials might be suffering "confusion," Chavez dismissed as "lies,
lies" accusations by opponents that he supported Marxist rebels in neighboring
Colombia. The United States considers the Colombian guerrillas to be terrorists.

The president also defended his three-year-old rule in Venezuela as "a democratic
plan that defends and respects human rights and seeks a much better life for our
people."

Chavez's opponents, who in recent months have staged widely supported street
protests against him, have accused him of trying to impose a Cuban-style leftist,
authoritarian regime.

But Chavez said he supported a "mixed" economy, combining the state with "a
dynamic and enterprising private sector."

Powell had repeated U.S. criticism of the Venezuelan leader's foreign policy,
referring to his visits to Iraq and Cuba and his public questioning last year of
President George W. Bush's war on terrorism in Afghanistan.

Chavez said his government's policies "are the business of no one else in the world
except Venezuelans."

Noting that his visit to Iraqi President Saddam Hussein in Baghdad in 2000 had
"irritated some people in the world," Chavez said: "What do we care? Let them get
irritated. ... We are defending the sacred interests of the Venezuelan people."

Four Venezuelan journalists last week presented a video showing Venezuelan military
officers meeting Colombian FARC guerrillas in July 2000. They said this showed
that the Chavez administration was collaborating with the Colombian rebels.

Chavez said he personally called Colombian President Andres Pastrana to explain that
the operation was a humanitarian mission to rescue a Venezuelan national held by the
rebels.

He added, however, that the Venezuelan officers had "made a mistake" by not
informing higher authorities about the mission, which took place without the assent
of Colombia's government.

In an apparent peace gesture to business opponents, Chavez described Venezuela's
1999 Constitution as "imperfect" and said disputed reforms passed under it were
open for modification.

He previously had rejected all opposition calls to revoke the reforms, which include
laws redistributing rural estates to the poor and tightening state control over the oil
industry. Critics say these laws will destroy jobs and investment.

    Copyright 2002 Reuters.