Friday, 13 February 2009

No Abstention Allowed: Chavez Tries Second Attempt at Indefinite Re-Election. We Expect a Close Call, More Political Polarisation

Ojo pelao, bebé!

President Hugo Chávez, Venezuela's ruler, is trying to get indefinite re-election approved in his country for the second time in 14 months. The referendum for the abolition of term limits takes place on Sunday, Feb. 15. With the prospects of an economic downturn haunting him, the former lieutenant colonel (let's not forget where he comes from) is rushing to get voters scrap term limits that would otherwise force him to step down at the end of his presidential period (early 2013.)

Most polls show the ballot will be a close call, with the most recent data giving a small edge to the 'Yes´ -- the opposition had a 10-point lead in surveys only a month ago. The results of the two previous elections and an ''intimidation” factor that polls failed to capture in recent elections aren't contained in these results. The 'No´ has, therefore, decent chances of winning this one (again.) We felt no consensus among voters has been built about the need for indefinite re-election. But the government has mobilised its supporters massively and ... yes, it helps their objectives (click here to read a very good story by Bloomberg News bureau chief in Caracas, Matt Walter, in which he depicts the efficient Chavez machinery working. During my time at Bloomie, I also wrote a similar story describing the abuses incurred during campaign time.) Thus, the greater the turnout of Chavista voters, the bigger the probability that the 'Yes´ wins -- Chávez has been hurt in the past two elections by the apathy of his rank-and-file, which the opposition says is tiring of his XXI Century Socialism.

Nevertheless, neither option will win by a large margin. A victory of Chavez should grant him more political leeway to extend political control while enabling him to fight dissent within his coalition. He will gain momentum in his crusade to intimidate foes and hold back business leaders seen as opponents of his regime. The word starts with D and ends with P. The problem will come in the aftermath of the vote, when the former lieutenant colonel (let's not forget where he comes from) has to contend with the impact of plummeting oil revenues, rampant inflation and rising food shortages -- or a recession. Funnily, Barclays Capital expects the economy to contract about 4 percent this year (we mentioned this in a recent post.)

On the other hand, a defeat of the 'Yes´ will raise questions over the path of the Bolivarian Revolution. This may trigger a more authoritarian direction by the lt. colonel, with political and social tensions spiking. We write here in MM about the economic implications of this vote: let's start then ... There's a slight probability the government chooses to do the right thing, regardless of the result, and begins tidying up the house: that domestic fuel subsidies are trimmed, that he overhauls fiscal spending policies and eases exchange rate controls.

His victory will further undermine checks-and-balances in the country, not only at an institutional level but also in the economic environment. First, there is virtually no oversight on about $20 billion in off-budget funds, and the current budget reflects an unrealistic view of the nation's finances. And as Chávez runs short of policy alternatives to deal with high inflation and food shortages (because he left the country more vulnerable to oil,) the problem will be radicalisation of his economic agenda. Nationalisations can occur. Possible sectors: banking and finance, food. Does he have the money to do it? probably he is running out of petrodollars to embark on an ambitious wave of seizures, similar to that of 2007. But, this is the key point, the policy of economic compensation may have to be reworked. Will he pay? depends on PDVSA's cash holdings .. and we have taled extensively about this in this blog ... the company is facing a severe cash crunch.

1 comment:

  1. As much as the Carioca Grouch dislikes the Lt. Colonel and considers him a dangerous, irresponsible fascist (Italian, Brazilian-style) authoritarian, the Grouch is against term limits. Term limits are un democratic. If people want a leader, good or bad, they should be able to elect him or her as many times as they want. Most important, term limits, releive voters of their responsiblity to vote and accept the consequences of their vote. Instead of doing the right thing and throwing the bum out at the ballot box, they stand back and let the constitution do it. I think Venezuelas oppoisiton should be more focused on beating Chavez in a general election rather than wasting their time and energy focusing on technical, legal and constitutional issues. There's nothing that says a country can't kill itself with democracy. The best antidote to stupid voting and stupid leaders is to let people feel the pain of their stupidity. In the end Chavez needs to be beaten at the polls and it will be better to beat him in a one-on-one with a rival. Yes I realize the end of term limits will allow him to consolidate his power, but then again it will also make it clear that he is responsible for all that happens. I would like to see Chavez gone tomorrow, and part of me, despite my dislike of term limits, would not be terribly sad if he lost the referendum, but the real defeat will be when he gets defeated at the polls on his own merits. This is a sideshow. If the Venezuelans want to keep electing this idiot, I hope Brazil, the U.S., Canada, Europe will allow those who can't get ahead under Chavez to move to new countries and leave the populists to their democratic fate. Democracy ain't easy and insulating people from thieir responsiblity only makes the down-side worse. Viva la opposicion! Viva la resistencia a Chavez, Viva democracia! Viva responsiblidade. The Carioca Grouch