Chavez Heir Maduro Wins Venezuela Vote as Foe Rejects Count

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Nicolas Maduro, Venezuela's president elect, celebrates following the election results in Caracas on April 14, 2013. Close

Nicolas Maduro, Venezuela's president elect, celebrates following the election results... Read More

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Photographer: Luis Acosta/AFP/Getty Images

Nicolas Maduro, Venezuela's president elect, celebrates following the election results in Caracas on April 14, 2013.

Nicolas Maduro, political heir to the late Hugo Chavez, was declared the winner of Venezuela’s presidential election yesterday in a result that was immediately challenged by the opposition.

The 50-year-old former bus driver received 50.7 percent of the votes, the national electoral council said after about 99 percent of ballots were counted. Henrique Capriles Radonski, who temporarily stepped down as governor of Miranda state to run, had 49.1 percent and vowed to contest the results.

“We had a fair and constitutional victory,” Maduro said after the results were announced. “This is another victory, a homage to our comandante Hugo Chavez.”

The margin of victory was the narrowest since the 1968 presidential election and may lead to political unrest as almost half the country questions the government’s legitimacy, said Russell Dallen, a Miami-based bond trader at Caracas Capital Markets. As a candidate, Maduro benefited from a wave of sympathy for Chavez’s March 5 death; as president, he faces accelerating inflation, shortages of consumer goods and slowing growth.

Capriles said he will demand a recount of the ballots before conceding defeat. The opposition has evidence of irregularities that impacted hundreds of thousands of votes, he told reporters less than an hour after the official result was announced.

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Supporters of Venezuelan President Nicolas Maduro cheer during a rally in Caracas. Close

Supporters of Venezuelan President Nicolas Maduro cheer during a rally in Caracas.

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Photographer: Luis Acosta/AFP via Getty Images

Supporters of Venezuelan President Nicolas Maduro cheer during a rally in Caracas.

Illegitimate

“The people expressed themselves today and that result doesn’t reflect the will of the country,” Capriles said. “Mr. Maduro, if you were illegitimate before, today you’re even more full of illegitimacy.”

Venezuelan bonds, last month’s worst-performing Latin American securities, fell after Maduro’s narrow win. The government’s bonds due in 2027 declined 26 cents to 100.43 dollars at 8:48 a.m. in London, according to data compiled by Bloomberg. Yields rose three basis points, or 0.03 percentage point, to 9.19 percent.

The cost of insuring Venezuela’s debt against default for five years rose 33 basis points to 702 basis points at 7:42 a.m. local time.

“He’ll be a weaker president,” said James Barrineau, director of Latin America at Schroder Investment Management Co., in a phone interview from New York. “The market’s perception was that he would be forced to be more pragmatic on the economy. But it’s impossible to predict how he’s going to govern given how close this election was.”

Narrow Margin

The margin of victory was the narrowest in a Venezuelan general election since Rafael Caldera of the Christian democratic party defeated Accion Democratica’s Gonzalo Barrios by 29.1 percent against 28.2 percent.

Photographer: Juan Barreto/AFP/Getty Images

Supporters of Venezuela's acting president Nicolas Maduro celebrate after knowing the election results in Caracas on April 14, 2013. Close

Supporters of Venezuela's acting president Nicolas Maduro celebrate after knowing the... Read More

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Photographer: Juan Barreto/AFP/Getty Images

Supporters of Venezuela's acting president Nicolas Maduro celebrate after knowing the election results in Caracas on April 14, 2013.

There were no major reports of violence overnight. While supporters celebrated Maduro’s victory by setting off fireworks in Caracas, National Assembly President Diosdado Cabello wrote in his Twitter account the government needs to engage in “profound self-criticism” following such a narrow win.

Capriles’ vote tally leaves him well-placed to dispute for the presidency a third time should Maduro falter, said Jorge Piedrahita, president of New York-based brokerage Torino Capital LLC.

“He is the closest the opposition ever had to re-taking the country,” Piedrahita said in an e-mailed response to questions. “He might be a heartbeat away from the presidency.”

Comandante Chavez

Maduro has vowed to follow the steps of his mentor Chavez, who increased state control over the economy by nationalizing more than 1,000 companies or their assets and introduced currency and price controls. Chavez also tapped the world’s biggest oil reserves to help cut poverty to 21.2 percent of the population in the second half of 2012 from 42.8 percent when he first took power in 1999, according to government data.

“I voted for Maduro because my comandante Chavez ordered it,” said Jose Sanchez, a 57-year-old civil engineer. “Chavez prepared him for six years.”

Maduro called the election a choice between capitalism and socialism. As Chavez languished in a hospital bed in Cuba before his death, Maduro oversaw a devaluation of the bolivar and expelled two U.S. embassy officials who were accused of plotting against the government. The U.S. denied the charges.

Maduro faces mounting economic challenges including dollar shortages and falling oil production that could rapidly undermine the former union leader’s support, Kathryn Rooney Vera, a strategist at Bulltick Capital Markets, said in an interview with Bloomberg Television.

Inflation Rally

Inflation accelerated to 23 percent in February, the fastest annual pace in 10 months and the highest official rate in the hemisphere. Rising prices are compounded by shortages of products on supermarket shelves. The central bank’s scarcity index, which measures the amount of goods that are out of stock in the market, rose to a record high of 20.4 percent in January.

Maduro said after casting his vote that his two priorities will be reducing violence and attracting investment to boost the production of food and industrialized goods.

He said Venezuela is ready to re-establish diplomatic relations with the U.S., should the world’s biggest economy respect the sovereignty of the South American nation. The U.S. ambassador was expelled from Caracas in 2008.

Data published by the United Nations shows Venezuela has the highest homicide rate in South America, which deters companies from operating in the country, according to Nicholas Watson, Latin America analysis director at London-based research group Control Risks.

The Legacy

“There were many things remaining to be done,” Maduro said before the election results were announced. Chavez “left us many tasks to complete, and a legacy.”

Chavez won his third six-year term last October when he defeated Capriles by 11 percentage points after raising salaries, building thousands of homes for poor families and increasing cheap imports to slow inflation. The spending binge helped the economy grow 5.5 percent in 2012.

Growth will slow this year to 1.9 percent, the slowest in three years, according to a Bloomberg survey. The bolivar devaluation and dollar shortages could push the economy into recession this year, according to HSBC Holdings Plc.

The London-based bank expects Venezuela’s economy to contract 0.6 percent after previously forecasting growth of 0.5 percent, according to a second-quarter note to clients.

Bolivar Devaluation

A 16.5 percent rise in imports in 2012 led Venezuela to post a current account deficit in the fourth quarter for the first time since 2009.

That forced the government to devalue the bolivar by 32 percent in February as it sought to close a fiscal deficit for the central government and state oil company Petroleos de Venezuela SA of 14.5 percent of gross domestic product in 2012, Bank of America Corp. said in an April 4 note. Even after the devaluation, BofA said it expects a deficit of 9.7 percent this year.

The shortage of greenbacks also prompted Maduro to unveil a dollar auction system in March to rein in an unregulated currency market that trades at almost four times the official rate of 6.3 bolivars per dollar. The government didn’t say for how much it sold dollars in the auction.

The narrow margin of victory is a “mortal blow to the Chavismo,” Bulltick’s Vera said in a telephone interview. “It will be very difficult for Maduro to be as immune as Chavez was from all the deterioration that the country has seen over the past 14 years.”

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: Andre Soliani at asoliani@bloomberg.net.

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