Oct. 9 (Bloomberg) -- Venezuela’s opposition has just two months to regroup for its next electoral battle after losing its best chance in 14 years to convince voters they can do more to cut poverty and fight crime than President Hugo Chavez.
Chavez, recovering from three cancer-related surgeries and struggling to control the world’s fourth-fastest inflation rate, won 55 percent of the vote in the Oct. 7 election versus 44 percent for former Governor Henrique Capriles Radonski. Capriles, 40, won only two of the country’s 24 states after vowing to fight corruption and boost economic growth.
The historically fractured opposition, which slowed Chavez’s efforts to change the constitution in 2007, may struggle to stay united ahead of a Dec. 16 vote to pick state governors and regional legislators, said David Smilde, a sociologist at the University of Georgia who wrote a book about Chavez’s rule. Municipal elections follow in April.
“They’re still kind of reeling from their electoral loss, so the next couple of days are going to be pretty crucial to see if they fall into internal bickering or come up with a unified front,” said Smilde, who lived in Venezuela for 10 years and spoke by phone from Caracas yesterday.
This week’s defeat is particularly bitter for the opposition because it had high expectations coming into the vote after some opinion polls showed a tight race, said Carlos Romero, a political analyst at the Central University of Venezuela.
A Sept. 27 to Oct. 2 survey of 1,546 people by Caracas-based Consultores 21 gave Capriles a lead of 51.8 percent to 47.2 percent. The poll had a margin of error of 2.5 percentage points. Other surveys showed Chavez, 58, with an advantage of about ten percentage points.
Capriles said today that he hasn’t made a decision whether to run for governor of Miranda again and said that regardless he will continue to lead the opposition in its attempts at expanding the number of governors in the South American country.
“Am I disappointed? Of course I am, I truly believed we had a good chance of winning,” Capriles said at a press conference in Caracas. “This united front that got the most votes in recent years will stay together and the road we blazed will bear its fruits.”
Capriles said that he has retaken his duties as Miranda state after stepping down to run for president. Capriles said that while there wasn’t fraud in the election he competed against the state’s financing and media campaigns of “lies and insults.”
Investors increased demand for Venezuelan debt earlier this year as Chavez struggled with his cancer treatment, said Alfredo Viegas, managing director for emerging markets at Knight Capital in Greenwich, Connecticut. The country’s dollar bonds, which had returned 30 percent this year through September, fell today on the first day of fixed-income trading in the U.S. following a holiday.
Yet the 11 percentage point victory by Chavez marked progress for the opposition, which for the first time rallied around a single candidate after holding primaries in February. In 2006, Chavez beat his nearest competitor by 26 percentage points, or more than 3 million votes. Capriles lost by about 1.6 million votes.
“If you draw one conclusion from this presidential election, it’s that the opposition has been seeing sustained growth,” Romero said. “The opposition now thinks Chavez must recognize that half the country isn’t with him anymore.”
The self-declared socialist this year toned down the triumphalism of his past campaigns as Capriles attracted tens of thousands of followers to his rallies, going so far in an Oct. 4 speech to apologize for his mistakes and vow to become a better president.
Capriles, who spoke by phone with Chavez after conceding defeat in what the president called on his Twitter account a “friendly” conversation, will remain in politics and will fight for issues raised in his campaign like inflation and crime, his campaign manager Armando Briquet told reporters yesterday.
At 18 percent, Venezuela has the world’s highest inflation rate of any country tracked by Bloomberg after Belarus, Iran and Argentina, where economists say prices are rising at more than double the government’s estimate of 10 percent. Venezuela also has the highest murder rate in South America, according to the United Nations.
‘Bet on Unity’
“We are going to continue with our fight, which keeps us united,” Briquet said in images transmitted live on television channel Globovision. “We always bet on our unity and remaining together to seek solutions for all Venezuelans. We’re on our way to the next election on Dec. 16.”
Chavez told reporters in Caracas today that Vice President Elias Jaua will run for governor of Miranda state in December, beating out Capriles. Chavez’s former rival hasn’t yet said if he will run for governor of the state after stepping down from that role earlier this year for his presidential campaign.
Running for governor would make it difficult for Capriles to become the nationwide leader of the opposition, limiting his chances if Chavez leaves office before his term ends, Boris Segura, a strategist at Nomura Securities International Inc., wrote in a report e-mailed to investors today.
While Chavez’s victory gives him another six years in office, he may have to step down and allow for elections to take place if he becomes too ill to serve during the first four years of his new term, according to Venezuelan law.
Considering that Chavez’s cancer returned after initial rounds of treatment, the risk of another re-occurrence is “much higher” than before, Michael Pishvaian, an oncologist at the Lombardi Comprehensive Cancer Center at Georgetown University in Washington, said by phone. Pishvaian hasn’t treated Chavez.
Still, it’s unclear whether the opposition will rally around Capriles in another election after some think he lost a rare chance to defeat an incumbent politically damaged by a crime wave and physically weakened by cancer, Smilde said.
The “old guard” of the opposition probably will criticize Capriles for taking what they see as a conciliatory approach toward Chavez, Smilde said, while others may even doubt whether the president can be defeated democratically, Romero said.
“It’s natural that, when expectations aren’t met, you have internal tensions,” Margarita Lopez-Maya, a researcher at Central University in Caracas, said by phone. “Capriles has shown he’s a leader who can generate a lot of enthusiasm, and his challenge is to sustain that leadership and maintain unity.”
Investors will be watching to see whether the opposition splinters and gives Chavez free reign to carry out his so-called 21st century Bolivarian revolution, said Kathryn Rooney Vera, a macroeconomic strategist at Bulltick Capital Markets.
Venezuela’s benchmark 2027 bonds lost 4.61 cents on the U.S. dollar, the most in four years, to 86.63 cents at 4:10 p.m. New York time, according to prices compiled by Bloomberg. The yield on the securities rose 69 basis points, or 0.69 percentage point, to 11.10 percent.
“You’ve got to have a strong opposition to be able to have some type of push-back,” Rooney Vera said by phone from Miami today. “The real concern is a de-facto, one-party system in Venezuela that makes the rules and changes the rules. And the market looks upon that very unfavorably.”
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