Bloomberg News

Venezuelan Opposition Loses to Chavez Allies in Elections

December 17, 2012

Venezuela’s opposition lost ground in regional elections while retaining its de facto leader as the country braces for another national vote should President Hugo Chavez lose his battle with cancer.

Opposition candidates lost the governorship in five of eight states they held before yesterday’s vote, the national electoral council reported. Chavez allies took 20 of 23 states nationwide, building on the 58-year-old president’s re-election win in October. Opposition governor and former presidential candidate Henrique Capriles Radonski said that his re-election in Miranda state was an isolated win for his supporters.

“I’m happy for the people of Miranda, Lara and Amazonas,” Capriles said last night, referring to the three states the opposition held on to. “But I can’t feel happy for Venezuela.”

With Chavez recovering from cancer surgery in Havana, his fourth since June 2011, a victory for Capriles was crucial for maintaining opposition unity behind a single leader. The broader victory for Chavez’s allies is a sign the opposition may struggle to beat the president’s successor if a vote is held in the next few months, said Bret Rosen, a Latin America analyst at Standard Chartered Bank in New York.

“Today’s elections went very much in favor of Chavismo,” the political movement led by Chavez, Rosen said in an e-mailed report yesterday.

Vote Count

Chavez’s socialist party, known as PSUV, obtained 4.8 million votes in yesterday’s election compared to 3.8 million for opposition candidates, according to preliminary data released by the National Electoral Council. In presidential elections on Oct. 7, Chavez won with 8.2 million votes against Capriles’s 6.7 million.

The government’s benchmark 2027 dollar bond fell 1.55 cents to 99.46 cents on the dollar as of 10:25 a.m. today in New York, according to data compiled by Bloomberg. The bond’s yield rose 19 basis points, or 0.19 percentage point, to 9.32 percent, the biggest daily increase since Oct. 9, the first day of trading after the Oct. 7 elections.

“The market assumption was that if Capriles won it will be good for the bonds,” Victor Sierra, managing partner and head of sales and trading for emerging market fixed income at Torino Capital LLC in New York, said today in an e-mailed response to questions. “Now dealers are changing their game saying that the strong victory for Chavismo is a sign that they will continue to be in power.”

Dollar Debt

Venezuelan dollar debt has returned 48.1 percent this year, trailing only Ivory Coast in emerging markets, as investors bet that Chavez will step down, paving the way for a transition of power, according to JPMorgan Chase & Co.’s EMBI Global index. The average yield on Venezuelan dollar debt has plunged 4.63 percentage points this year to 9.27 percent.

Chavez, who suffered bleeding during a Dec. 11 operation in Havana, Cuba, has since improved and began communicating with family and government officials three days ago, Technology Minister Jorge Arreaza, who is also the president’s son-in-law, said in a phone interview broadcast on state television yesterday.

Vice President Nicolas Maduro, speaking from the National Pantheon at an event commemorating 19th century South American liberator Simon Bolivar’s death today, said he hasn’t spoken directly with Chavez about the election results.

“We deeply respect the course of his treatment and we’re going to try to make contact in the afternoon,” Maduro said today in comments broadcast on state television.

With elections over, “political and media attention is now back on Havana and Chavez’s post-surgery progress,” Diego Moya- Ocampos, a Venezuelan political analyst at IHS Global Insight in London, said in an e-mailed report today. “His supporters will be expecting him to be in Venezuela on January 10, fit for the inauguration of his 2013-19 constitutional term. Otherwise, a transition could well start formally, paving the way for a fresh presidential election.”

New Elections

Under Venezuela’s constitution, elections must be held within 30 days if Chavez steps down in the first four years of his new term, which is set to begin on Jan. 10.

On Dec. 10, before returning to Cuba for surgery, Chavez urged Venezuelans to elect Maduro should the president be unable to take office or fulfill his term.

“The people have given a present of love to comandante Hugo Chavez,” Maduro said in a phone interview broadcast on state television yesterday.

Capriles, who lost the presidential election to Chavez in October by more than 10 percentage points, won 52 percent of the vote in Miranda state against 48 percent for former Vice President Elias Jaua. Voter turnout was 54 percent after reaching 80 percent in October’s presidential elections.

Capriles Consolidated

“This consolidates Capriles as maybe the one person that can really confront Chavismo,” David Smilde, a sociologist at the University of Georgia who wrote a book about Chavez’s rule, said in phone interview from Caracas. “In the coming months, it looks like Maduro or whoever is the candidate would win an election, though that won’t necessarily be the case in six months time.”

Opposition rivals to Capriles found themselves voted out of office. Pablo Perez, who came second to Capriles in a February primary, lost his re-election bid for governor of Zulia, the country’s most populous state. The opposition also lost strongholds in Tachira, Carabobo and Nueva Esparta.

The government would need to hold elections as soon as possible to capitalize on its momentum, said Smilde. Difficult economic decisions, including a need to devalue the bolivar, could quickly erode gains, he said.

Bank of America Corp. forecasts that Venezuela’s economy will contract 3.6 percent next year as a result of the expected devaluation. Venezuela needs to close a fiscal deficit that widened to an estimated 8.8 percent of gross domestic product as a result of a pre-election spending boom by Chavez. Devaluation would help narrow the deficit because the government would earn more in local currency from oil sales abroad.

“Every week that goes by, there will be less advantage for Chavismo,” Smilde said.

To contact the reporters on this story: Charlie Devereux in Caracas at cdevereux3@bloomberg.net; Corina Pons in Caracas at crpons@bloomberg.net

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


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