Venezuelan President Hugo Chavez, after suffering his worst setback at the ballot box since taking office in 1999, may further radicalize his socialist revolution to strengthen his rule ahead of 2012 presidential election.
Chavez’s United Socialist Party of Venezuela, while securing 98 of 165 seats in the National Assembly after the redrawing of electoral districts, lost the two-thirds majority needed to pass key legislation. The opposition took 65 seats and says it won 52 percent of the popular vote. Authorities haven’t released the overall vote count.
Chavez has experienced defeat just once before in 12 elections and could look to increase state control of the economy, boost spending on social programs and crack down on emerging opponents to regain political momentum, analysts said.
“It’s not in Chavez’s nature to take this threat lying down,” said Ray Walser, a Latin America analyst at the Heritage Foundation in Washington. “He will likely take a retaliatory step.”
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 28 basis points, or 0.28 percentage point, to 11.49 percent at 6:22 p.m. New York time, according to JPMorgan Chase & Co.’s EMBI+ index. The broader EMBI+ index was unchanged.
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 key victory by the opposition could provide a near- term boost to asset prices, but the rally could be short-lived until Chavez acts,” Bank of America Corp. said in a report.
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.
Chavez may seek to undermine the new assembly before it takes office in January, using his control of the lame-duck congress to push through measures that strengthen his rule, said Alejandro Grisanti, an economist at Barclays Plc in New York.
Grisanti said that without a two-thirds majority, Chavez cannot change laws governing the Central Bank like his party did twice in the past year. His majority also falls short of the three-fifths needed to grant Chavez decree powers.
Chavez on Twitter
“The next congress will be full of debates and conflict, but few laws will be passed,” Grisanti said in an interview from New York.
Chavez, in a press conference with foreign correspondents, called yesterday’s results a “triumph” for his Bolivarian revolution, while acknowledging that he fell short of his “maximum goal” of winning a super majority of 110 seats.
He said the opposition distorted the results of the elections to falsely claim victory and that his allies won the popular vote 5.4 million to 5.3 million for the Democratic Unity Table alliance. He said the alliance, which said it won 52 percent of the overall vote, was errantly counting for themselves ballots cast for the Fatherland for Everyone party, which broke with the government this year and won 2 seats in the new congress.
“The squalid ones said they won,” he said in a message on his Twitter account earlier. “Well, let them keep winning like this!”
“Before the elections, Chavez was already threatening to radicalize,” said Colette Capriles, a political analyst at the Simon Bolivar University. “We may see him try to govern as an insurgent government.”
In 2007, Chavez suffered his only electoral defeat when voters narrowly rejected a referendum to change 69 articles of the constitution. He went on to implement many of the measures, including making it easier to expropriate property.
Chavez retained control of the National Assembly after redrawing electoral districts last year to favor rural areas where he’s more popular. 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 lower oil prices caused the economy to shrink 3.5 percent in the first half of 2010.
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, according to the Caracas-based Venezuelan Observatory of Violence.
Still, the 56-year-old former paratrooper remains revered among many poor Venezuelans who benefit from free health clinics and subsidized food markets. Poverty has fallen by half to 24 percent in 2009, government data show.
--With assistance from Andrea Jaramillo and Helen Murphy in Bogota, Jose Orozco and Daniel Cancel in Caracas and Drew Benson in Buenos Aires. Editors: Joshua Goodman Brendan Walsh
To contact the reporters on this story: Charlie Devereux in Caracas at email@example.com; Corina Rodriguez-Pons in Caracas at firstname.lastname@example.org
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