Chavez May Strengthen Grip on Venezuela Economy as Foes Gain Ground
Chavez Foes Seek Congressional Gains
Eitan Abramovich/AFP/Getty Images
A Venezuelan national guard soldier casts her vote at a polling station in Caracas.
A Venezuelan national guard soldier casts her vote at a polling station in Caracas. Photographer: Eitan Abramovich/AFP/Getty Images
Venezuelan President Hugo Chavez suffered his worst setback at the ballot box since taking office in 1999, losing his two-thirds majority in congress as support for his rule wanes before 2012 presidential election.
Opposition candidates, who boycotted the 2005 congressional race, secured 52 percent of the popular vote in yesterday’s legislative election, giving them enough seats to force Chavez to negotiate on key decisions, said Ramon Guillermo Aveledo, head of the Democratic Unity Table alliance.
Chavez said his party won 98 of 165 seats, giving his allies an “ample majority,” in comments sent via the Twitter social networking site. The National Electoral Council said Chavez’s United Socialist Party of Venezuela, or PSUV, won at least 90 seats at 2 a.m. today. Election officials didn’t provide a tally of the overall vote or the final seat count.
Chavez’s party, while securing a majority in the National Assembly after redrawing electoral districts, fell short of the 110-seat threshold needed to be given decree powers, approve the national budget and pass new laws single-handedly. Opposition candidates won 61 seats and non-aligned indigenous candidates won 3 seats, according to the council.
“This is a tremendous defeat of the Bolivarian project,” said Friedrich Welsch, a political analyst at the Simon Bolivar University in Caracas. “Chavez built his campaign on a vote of confidence in his socialist project and the majority of the people gave their votes to forces opposed to it.”
Biggest Bond Gain
Venezuela’s bonds posted the biggest gain in emerging markets today. The extra yield investors demand to own Venezuelan bonds instead of U.S. Treasuries fell 32 basis points, or 0.32 percentage point, to 11.44 percent at 1:12 p.m. New York time, according to JPMorgan Chase & Co.’s EMBI+ index. The broader EMBI+ index rose 2 basis points to 2.84 percent.
The yield on the nation’s benchmark 9.25 percent dollar bond due 2027 fell 60 basis points to 13.34 percent, according to JPMorgan. That’s its biggest decline since June 10. The bond’s price jumped 3 cents on the dollar to 72.75 cents.
The results are “positive” and “potentially limit Chavez’s ability to push through unfriendly market policies,” Eduardo Suarez, an emerging-markets strategist at RBC Capital Markets in Toronto, wrote in a report today.
Electoral Goals
Opposition candidates, whose boycott in 2005 on concerns of possible fraud handed Chavez near-absolute control of the congress, took advantage of voter discontent with rising crime and 30 percent inflation to make gains. Venezuelans are increasingly dissatisfied with the government’s management of the economy, now in its second year of recession, analysts said.
Chavez may seek to undermine the new assembly before it takes office in January, Bank of America Corp. said in a report today.
“Looking toward the 2012 presidential election, the opposition has a greater argument that Chavez is out of touch with the country and Chavez will need to focus on gaining broader support,” the report said.
Aristobulo Isturiz, the campaign manager for Chavez’s United Socialist Party of Venezuela, said the government party didn’t reach its electoral goals.
“We were aiming for 110 deputies, which was not reached by any political party,” Isturiz told supporters waving red flags outside the presidential palace.
Chavez on Twitter
Chavez called yesterday’s results a victory for his Bolivarian socialist revolution.
“We’ve obtained a solid victory, sufficient to continue deepening Bolivarian and democratic socialism,” he said in a message on his Twitter account. “We must continue strengthening the revolution. Another victory for the people.”
In 2007, Chavez suffered his only electoral defeat since taking office when voters rejected by 50.7 percent to 49.3 percent a referendum to change 69 articles of the constitution.
“The popular victory is likely to reenergize the ranks of the opposition and perhaps consolidate the unity we have seen in this election,” Alberto Ramos, an economist at Goldman Sachs Group Inc. in New York, wrote in a report today. He said Chavez might boost spending and take steps to undermine key opposition figures to win a third six-year term in 2012.
Gerrymandering
Chavez retained control of the National Assembly after redrawing electoral districts last year to favor rural areas where he’s more popular, analysts said.
The changes mean that 20,000 people in pro-Chavez Amazonas state elected a single lawmaker, giving them the same representation as 350,000 people in the opposition-controlled capital of Caracas.
More than 66 percent of Venezuela’s 17 million registered voters cast ballots. That compares with 61 percent in 2007 and 70 percent in another referendum to lift presidential term limits in 2009.
Venezuela’s flailing economy, the fastest inflation rate among 78 economies tracked by Bloomberg and sporadic blackouts from underinvestment in the nation’s power grid have caused Chavez’s approval ratings to fall below 50 percent this year.
A drop in foreign investment due to nationalizations and reduced government income from lower oil prices caused the economy to shrink 3.5 percent in the first half of 2010 while the rest of South America rebounded from the global financial crisis.
‘Face of Fascism’
In a reflection of the country’s polarized political climate, opposition supporters heckled Finance Minister Jorge Giordani as he cast his vote in the capital. Oil Minister Rafael Ramirez was met by protesters banging pots and pans.
“Take your economic policies to Cuba!” a group of 15 Chavez opponents shouted to Giordani as he left the voting center in Santa Monica, a middle-class neighborhood in Caracas. Giordani called his opponents “the face of fascism.”
Also hurting the government’s approval rating are homicides that have more than tripled since Chavez came to power to a record 16,047 last year from 4,550 in 1998, according to the Venezuelan Observatory of Violence, a Caracas-based research group.
Still, the 56-year-old former paratrooper remains revered among many poor Venezuelans who benefit from free health clinics and subsidized food markets. As oil rose to about $76 a barrel Sept. 24 from about $12 when Chavez took power in 1999, poverty has fallen by half to 24 percent in 2009, government data show.
“If we don’t continue, the opposition will take everything away,” said Carmen Carmona, a 48-year-old social worker, outside a polling station in the Caracas slum of Petare with a group of red-shirted female supporters of Chavez.
Cheap Loans
The president traveled across the country during the election campaign promising cheap loans for household appliances and blaming the opposition for alleged sabotage that has led to the blackouts and deteriorating public services.
The current congress has until Jan. 5 to pass measures benefitting the government. Among the legislation it may consider is a constitutional change giving greater power to community councils beholden to Chavez, said Luis Vicente Leon, director of the Datanalisis polling firm.
“We’re heading to a situation of further radicalization,” Leon said in an interview before yesterday’s vote. “Chavez has several elements at his disposal to ride out any result.”
To contact the reporters on this story: Charlie Devereux in Caracas at cdevereux3@bloomberg.net; Corina Rodriguez-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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