Bloomberg News

Chavez Speaks in Video With Cuba’s Castro After Surgery

June 29, 2011

(Updates with Brazilian comments on summit in 10th paragraph, credit default swaps in 14th paragraph.)

June 29 (Bloomberg) -- Venezuelan President Hugo Chavez appeared in a video broadcast today on state television alongside Cuba’s Fidel Castro and spoke publicly for the first time since June 12, allaying rumors of his deteriorating health.

Chavez, 56, was shown dressed in a tracksuit with a Venezuelan flag design as he spoke standing with Castro in a garden or park in Havana, and indoors with one of his daughters and Castro. A thinner Chavez was shown looking at a June 28 copy of Cuban newspaper Granma, the same paper that published the last images of the leader June 18.

“These images should bring calm to the Venezuelan people about the president’s health,” Information Minister Andres Izarra said yesterday after still images of the meeting were shown. “Images speak more than 1,000 words.”

Venezuelan state television today broadcast 20 minutes of both video and audio of Chavez meeting Castro yesterday. Chavez spoke animatedly while standing and reading headlines from Cuban newspapers and then sat in a rocking chair indoors chatting with Castro about his military career and former Chilean President Salvador Allende.

“Look at Fidel reading the headlines without glasses, I almost need them, but am doing fine,” Chavez said.

Chavez, who has occupied Venezuelan airwaves during his 12 years in power with speeches that can stretch as long as six hours, hadn’t spoken publicly since calling into the Telesur television network on June 12, two days after being operated on in Cuba to remove a pelvic abscess.

Lack of Information

Since undergoing surgery, the president’s seclusion and lack of information about his health have raised questions about whether he should be running South America’s largest oil producer from Havana. Venezuela’s political opposition, which wants to remove Chavez from power in next year’s elections, has called on Jaua to replace him until he recovers. Jaua has ruled out such a move.

“He’s recovering well and we support his right to take the necessary time to mend,” Jaua said on state television yesterday. “He hasn’t stopped performing his constitutional duties.”

Brazil’s President Dilma Rousseff was told that Chavez will return to Venezuela this weekend, columnist Ancelmo Gois wrote in Rio de Janeiro-based newspaper O Globo. The Venezuelan leader had to take morphine in Ecuador because of pain in his pelvis caused by the abscess, Gois said. Tests in Cuba ruled out cancer. His condition worsened as a result of a respiratory infection aggravated by smoking while in Havana, according to Gois.

Summit, Spending

Chavez will participate in a summit of Latin American and Caribbean heads of state beginning July 5 and coinciding with the 200th anniversary of Venezuela’s independence from Spain, Marco Aurelio Garcia, a foreign policy advisor to the Brazilian president, told reporters today in Asuncion, Paraguay.

Izarra said that Chavez is “active” and has been signing extra spending credits as well as Foreign Ministry statements.

The yield on Venezuela’s benchmark 9.25 percent dollar bonds due in 2027 fell 13 basis points to 13.03 percent at 1:05 p.m. New York time, according to JPMorgan Chase & Co., the lowest since January 18. The price of the bonds erased earlier losses and rose 0.70 cent on the dollar to 74.70 cents.

The yield has declined 72 basis points, or 0.72 percentage point, since Chavez underwent surgery. The yield closed at 14.33 percent on June 16.

Investor View

The cost of protecting Venezuelan debt against non-payment for five years with credit-default swaps fell 24 basis points to 1,018 today, according to data compiled by CMA in London, the lowest since April 13. Venezuela CDSs have plunged 193 basis points since June 20.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

About half the recent rally in Venezuelan bonds is explained by uncertainty about Chavez’s health and the possibility of a change in government, RBS Securities Inc.’s Siobhan Morden wrote in a note to clients today. An opposition win in elections next year would cause Venezuela’s borrowing costs to drop 500 basis points, or 5 percentage points, and converge with Argentina’s, she said.

Fernando Soto Rojas, the leader of the National Assembly, said June 26, “I would be the first to tell the country” if Chavez had cancer. The lawmaker said Chavez should return to Venezuela for the Independence Day celebration.

Chavez’s elder brother, Adan Chavez, who is a former ambassador to Cuba and currently governor of his home state of Barinas, has also said that the president would return to Venezuela by July 4. The July 5 summit of Latin American leaders is scheduled to take place on Margarita Island.

Critical State

A June 25 report by El Nuevo Herald, the Spanish-language sister newspaper of the Miami Herald, cited unidentified U.S. intelligence officials as saying that Chavez was in a critical state of health though faced no immediate threat of dying.

While Izarra said that planned events for the bicentennial will continue, he didn’t specify whether Chavez will be back for the celebration.

“Chavez is good, recovering well,” he said. “We’ve been providing the necessary information regarding his condition even as people say all kinds of things like he’s in a coma or can’t get out of bed.”

--With assistance from Carla Simoes in Asuncion. Editors: Richard Jarvie, Robert Jameson

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net. Charlie Devereux in Caracas at cdevereux3@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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