Chavez Foes Test Strength in Regional Vote as Succession Looms

Venezuelans head to the polls in regional elections this weekend that will gauge the opposition’s chances of gaining power as President Hugo Chavez’s frail health increases the likelihood of a new national vote early next year.

Voters on Dec. 16 will choose governors in 23 states in South America’s largest oil producer, two months after Chavez was re-elected for a third six-year term over Miranda state Governor Henrique Capriles Radonski.

Before flying last week to Cuba to undergo a fourth cancer- related surgery, Chavez urged Venezuelans to elect his Vice President, Nicolas Maduro, in the event he steps down and forces new elections. While polls show the opposition struggling to hold onto the eight states it currently controls, a victory for Capriles in Miranda state is crucial for maintaining opposition unity behind a single leader capable of defeating Chavez’s chosen successor.

“If Capriles doesn’t win by a convincing margin in Miranda he’s going to be in trouble against Chavismo in coming presidential elections,” said Boris Segura, a Latin America analyst at Nomura Securities International in New York. “These elections have taken an added importance because of the news about Chavez’s health and the possibility that he may not be in the political sphere going forward.”

Surgery Complications

Chavez suffered complications due to bleeding during surgery Dec. 11 and his recovery won’t be immediate, Maduro said yesterday. 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.

To neutralize the opposition after their best showing in an election since Chavez took power in 1999, former Vice President Elias Jaua was tapped to run against the 40-year-old Capriles in Miranda.

Polls taken before Chavez announced his return to Cuba for more surgery showed an uncertain outcome. A survey taken Nov. 21-26 by Caracas-based polling company IVAD predicted a landslide win for Capriles, while another taken this month by Hinterlaces favored Jaua by 49 percent to 44 percent.

Venezuela’s opposition alliance will probably nominate Capriles as its presidential candidate should elections be called soon, provided he wins re-election as governor, Ultimas Noticias reported yesterday, citing opposition officials. If Capriles loses, the opposition would consider a different candidate, according to the Caracas-based newspaper.

Capriles’s Agenda

Capriles won 44 percent of the Oct. 7 national vote, versus 55 percent for Chavez, after visiting more than 250 towns across the country and promising to maintain some of the president’s popular socials programs while gradually dismantling economic policies such as currency and price controls.

Were Capriles, who returned to the governors office after the failed presidential bid, to lose his re-election effort or prevail by a slim margin, “a potentially divisive struggle for the nomination in the opposition camp” would likely open up, Bank of America Corp. said in a report yesterday.

The opposition needs to at least hold on to strongholds in Miranda, Zulia and Tachira to ensure they can remain competitive in forthcoming presidential elections, said David Smilde, a sociologist the University of Georgia who wrote a book about Chavez’s rule.

Government candidates will look to use their leader’s health to motivate voters.

Voter Participation

“There’s a lot of people who only vote when Chavez is candidate who might vote now,” Smilde said in a phone interview from Caracas. “The higher the participation, the more favorable it is for the government.”

Venezuelan dollar debt has gained the second most in emerging markets this month after Argentine bonds and the second best this year, trailing only the Ivory Coast, 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. Yields on Venezuela’s benchmark bonds due 2027 have plunged 4.42 percentage points this year to 9.07 percent.

Capriles, whose family founded the local unit of Nabisco Inc. and owns the country’s biggest movie theater chain, has expressed doubts about whether Chavez’s movement would be competitive without its charismatic leader.

“The big question is whether there is Chavismo without Chavez,” he said in an interview on Union Radio Dec. 11. “I don’t think there is. It’s like a sandwich without the filling.”

Whether that opinion is true will become clearer as results come in during Sunday’s vote, said Smilde.

“These elections are a bellwether referendum on Chavez’s legacy,” Smilde said. “They’re going to be a good indicator of how much support for Chavez could transfer to a candidate such as Maduro in the event of new presidential elections.”

To contact the reporter on this story: 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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