Aug. 7 (Bloomberg) -- Venezuelan President Hugo Chavez's opponents met with a regional trade bloc's human rights panel, seeking leverage on the government to reverse a ban on some of their candidates from running for office.

Adriana Pena, a Uruguayan parliamentary representative and president of the human rights commission of Mercosur, visiting on a non-official trip, said the opposition has a need to be heard and that she hopes to meet with government officials to hear their side of the story.

``We don't want to leave having listened to only one side,'' Pena said in comments broadcast by Globovision. ``It would be very healthy and democratic to be able to converse with the comptroller.''

The opposition, reeling from the release of 26 decrees on the legal system, the economy and the military, is also rallying against a ban on 272 people from seeking public office, including at least five opposition members who planned to run in November. The decrees bolster Chavez's power by ending lawmakers' oversight of government borrowing, allowing him to appoint regional officials and opening much of the economy to government intervention.

The Mercosur parliament will discuss the issue during its next meeting in Montevideo starting August 17. Venezuela is seeking to join the group, which requires members to conform to its charter's clauses on democracy.

Elections

The opposition, which includes student and business groups, conservative free-marketers, and leftists disenchanted with the growth of centralized control, had several meetings with Pena today and called for a march in support of the excluded candidates on Aug. 9. The court decision set back opponents' hopes of unseating some pro-Chavez governors and mayors in the coming elections.

``This is a measure that restricts political competitiveness and will have an effect when countries analyze Venezuela's entry into the trade bloc,'' said Ricardo Sucre, a political analyst in Caracas.

While political parties focus on the November races, analysts picking through the 342 pages of legal changes said the statues could lead to increased debt and inflation.

Food Inflation

An attempt to slow food inflation, which reached 50 percent in July on an annual basis, by imposing criminal penalties for violating price controls could backfire, said Carlos Machado Allison, a professor at the Institute of Advanced Business Studies in Caracas.

A third of the text of the new agricultural law ``is dedicated to sanctions, fines, and how to use the full force of the law against merchants, farmers, and food distributors,'' he said. ``This will cause more inflation, the cost of doing business will increase significantly, there will be more fear of investing in the medium and long term.''

Government debt, meanwhile, is likely to boom as at least 300 agencies gain the ability to issue bonds with only the president's approval, bypassing legislative hearings, said Gustavo Linares Benzo, an administrative law professor at the Central University of Venezuela in Caracas.

``In the 1980s, debt wasn't controlled by the state, it was in the hands of these agencies,'' he said in a phone interview. Falling oil prices led to a debt crisis that required the restructuring of $20 billion with the International Monetary Fund, at which time the legislature was given oversight, he said. ``This was the seed of the impoverishing debt crises of the '80s and '90s.''

Bonds

The yield gap on Venezuelan bonds over Treasuries today widened 12 basis points to 6.59 percentage points, according to JPMorgan Chase & Co.'s EMBI Plus index.

Benzo also said a new law changing the name of the military to the Bolivarian National Armed Forces and adding the citizens' militia as a fourth branch was unconstitutional, because the constitution defines the military's name and structure.

Luis Tascon, a socialist lawmaker who left Chavez's coalition last year, disagreed.

``The militia becomes a legal defense mechanism,'' Tascon said in a phone interview. ``It's the people, armed, like in Israel or Switzerland, where the people take part in the defense of the nation alongside the armed forces.''

Caracas Mayor

Leopoldo Lopez, favored in some polls to win the Caracas mayor's race, was among the potential candidates sidelined by the court's decision. Others were opposition candidates for mayor of the Baruta and Sucre boroughs of the capital and governorships of the states of Tachira, Apure, Miranda and Anzoategui.

``The president is who really made the decision,'' Lopez, 37, said at the rally by hundreds of backers yesterday

The court, dominated by Chavez appointees, ruled that the comptroller general has the constitutional power to bar candidates on a finding of public corruption without any review by a judge. The court, in a statement posted on its Web site, said being banned from seeking office is an ``administrative sanction'' not a political, legal or civil one.

A poll by Caracas-based Datanalisis in April found that 52 percent of adults oppose the comptroller's election ban, and 18.8 percent support it. Of 1,500 people surveyed in greater Caracas, 50.8 percent viewed the measure as politically motivated, while 19.7 percent said it was fair. The survey has a margin of error of 2.53 percentage points.

`Political Motive'

``The ineligibilities have no political motive,'' said Alberto Muller Rojas, vice-president of Chavez's United Socialist Party of Venezuela. ``There are as many ineligibles on one side as the other.''

The National Assembly began hearings into Lopez's alleged corruption yesterday, according to a statement on its Web site. The case involves a 1998 donation to a charity he was involved with. The comptroller also ruled he used funds for other than designated purposes in the municipal budget of Chacao, where he's the mayor.

Changing the candidate list may tilt the election in Chavez's favor, said Jose Vicente Leon, director of the polling at Datanalisis.

``This changes the possibility of the opposition winning key states and puts a dent in the electoral process,'' he said.

To contact the reporter on this story: Steven Bodzin in Caracas at sbodzin@bloomberg.net or Daniel Cancel in Caracas at dcancel@bloomberg.net.

Last Updated: August 7, 2008 19:14 EDT