April 16, 2013

Economics & Finance

Perception of weak mandate adds to pressure on economy

President-elect Nicolas Maduro faces a difficult economic panorama of rising inflation and slowing growth, further complicated by his slim election victory that is being challenged by the opposition. A perception that Maduro has a weak mandate could prompt challenges from within the disparate ruling coalition that formed around Chavez, just as overstretched state finances force him to slow the very oil-funded largesse he staked his reputation on maintaining.

But with the opposition questioning his legitimacy, Maduro may have little room for pragmatic measures such as unwinding the Byzantine system of price and currency controls that have created economic distortions. His narrow win may also dampen speculation that he is seeking a market-friendly replacement for Finance Minister Jorge Giordani, who led the Chavez-era expansion of state control. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-economy-idUSBRE93E16D20130415)

Venezuelan bonds slump upon post-election outlook

Venezuelan bonds plummeted Monday and debt insurance costs jumped following the tight victory of ruling party presidential candidate Nicolás Maduro in the election held on Sunday. The election results have been rejected by opposition leader Henrique Capriles. The country's dollar bond due 2027 fell 1.6 points whereas as the 2022 bond slipped 1.2 points, according to information compiled by Reuters. Venezuela's credit defaults swaps climbed 32 base points to 731 bps, according to data provider Market. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-bonds-slump-upon-venezuelas-post-election-outlook; Bloomberg, http://www.bloomberg.com/news/2013-04-15/venezuela-bonds-drop-after-maduro-elected-president-by-one-point.html)

Commodities

Oil minister: Government plans recovery in oil revenues

Rafael Ramírez, Oil and Mining Minister and president of state-run PDVSA, says Venezuela has been able to recover some U$D 427 billion in oil revenues thanks to government plans. "One of Chávez's most significant legacies is our oil policy. In a country like Venezuela, having gained back control of the oil industry, which used to be in the hands of transnational companies, has been essential to allocate resources for the development of our people," Ramírez remarked. (El Universal, 04-15-2013; http://www.eluniversal.com/economia/130415/venezuelan-oil-minister-government-plans-recovery-in-oil-revenues)

PDVSA to keep funding socialist programs under Maduro

Nicolas Maduro's apparent win in Venezuela's presidential election means state oil company PDVSA will continue funding the government's socialist policies while increasingly relying on deals with China and Russia. That put Venezuela's crude reserves; the world’s biggest, at the service of Chavez's power base among the poor majority. Maduro, who narrowly won the presidential election on Sunday with 50.7% of votes, now takes office on a pledge to push forward his late boss's plan. Maduro can be expected to increase oil sales to political allies, especially China, at the expense of the United States, the traditional top buyer of Venezuelan crude, while taking on more debt from those partners. Chavez turned PDVSA into the financial motor of his self-styled revolution, funding everything from sports and cultural events to free health clinics and home-building programs. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/venezuela-election-oil-idUSL2N0CO1RZ20130415)

Politics

Protests erupt in Venezuela as opposition disputes Nicolás Maduro's victory

Security forces quelled protests as Nicolás Maduro -the handpicked heir of Hugo Chávez- was proclaimed president after a wafer-thin and fiercely disputed vote. El Universal newspaper reported protests in six cities. In Caracas, troops dispersed a crowd of thousands. Twelve student protestors were reportedly injured in Barquisimeto a city in the middle of the country. Images spread by Twitter showed apparently injured protestors being carried away. The scale of the unrest is, as yet, hard to verify. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

An election that reeks of fraud

Fraud is a strong word but, yes, it's the clearest conclusion from Venezuela's election Sunday to pick a successor to the late socialist dictator Hugo Chavez. Chavez's hand-picked successor "won" Venezuela's election Sunday, with what Chavez's anything-but impartial CNE electoral body declaring he'd gotten 50.6% of the vote, while his challenger, Miranda state governor Henrique Capriles Radonski garnered 49.07% — a gap of just 235,000 votes. That's suspicious right there, given the structural advantages and Chavez "sympathy votes" Maduro had yet couldn't turn into a victory. Polls — every one of them — showed that Capriles had crossed over to a tie or lead in the last week of the campaign, while the size of his spirited million-strong rallies — the largest since 2002 — told the same story. Capriles says he had enough evidence amid a stream of down-ballot irregularities — from motorcycle goons intimidating voters to ballot boxes strewn across the Barinas state — to believe he had won. Maduro's angry victory speech threatening voters was an odd thing, given his razor-thin margin of victory and presumed need to unify the country to govern. Obviously, he was trying to hold together his base, which in fact is crumbling as his Chavista political rivals now call for "self criticism." What's more he wasn't able to buy votes this time. Banker Russ Dallen of BBO Financial Services in Caracas points out that amid the shambles of Venezuela's public finances, Maduro didn't even have cash to dole out goodies to buy votes. (Investor's Business Daily, 04-15-2013; http://news.investors.com/ibd-editorials/041513-651977-maduro-victory-in-venezuela-stinks-of-fraud.htm#ixzz2QddWYeO5)

Tight win for Chavez's heir spells uncertainty for Venezuela

Late socialist leader Hugo Chavez's chosen successor Nicolas Maduro won Venezuela's presidential election by a whisker but now faces opposition protests plus a host of economic and political challenges in the OPEC nation. The 50-year-old former bus driver, whom Chavez named as his preferred heir before dying from cancer, edged out opposition challenger Henrique Capriles with 50.7 percent of the votes in Sunday's election, according to election board returns. Capriles took 49.1 percent, just 235,000 fewer ballots. Capriles, whose strong showing confounded most forecasts, refused to recognize the result and said his team had a list of more than 3,000 irregularities ranging from gunshots to the illegal reopening of polling centers. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-idUSBRE93C0B120130415; http://www.reuters.com/article/2013/04/15/venezuela-election-idUSL2N0D107420130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130414/maduro-is-the-new-venezuelan-president-with-5066-of-votes; Bloomberg, http://www.bloomberg.com/news/2013-04-15/chavez-heir-maduro-wins-venezuela-presidency-to-continue-legacy.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=746418&CategoryId=10717; The New York Times, http://www.nytimes.com/2013/04/15/world/americas/venezuelans-vote-for-successor-to-chavez.html?_r=0; The Washington Post, http://www.washingtonpost.com/world/hugo-chavez-heir-nicolas-maduro-leads-in-polls-ahead-of-vote/2013/04/14/334cd2ba-a54b-11e2-9e1c-bb0fb0c2edd9_story.html)

Capriles rejects results until all votes are counted

"I do not make deals with lies and corruption. My pact is with God and with Venezuelans," said opposition United Democratic Conference presidential candidate Henrique Capriles referring to his conversation with President Nicolás Maduro, after the National Electoral Council (CNE) announced results of Sundays presidential election.

"I just heard a speech about an alleged pact. I do not make deals with illegitimacy, with those I deem illegitimate. We recorded 3,200 irregularities (in April 14 vote)," he said. Capriles added that he would not recognize the outcome of the election and asked the electoral power "to open all the ballot boxes and count every vote." (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/capriles-rejects-results-as-long-as-all-votes-are-not-counted; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=747285&CategoryId=10718; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-opposition-candidate-says-he-wont-accept-election-result-without-recount/2013/04/15/968fbaa8-a588-11e2-9e1c-bb0fb0c2edd9_story.html)

Vicente Díaz calls for audit of 100% of balloting stations

National Electoral Council director Vicente Díaz on Sunday asked for citizen-initiated audits in order to recount 100% of the paper ballots cast in April 14 presidential vote, given the narrow vote where Nicolás Maduro won by a slim margin of some 200,000 ballots. "Since this result is so tight, I would like an audit to be conducted by the CNE. Given the close electoral result and the fact that we live in a polarized country, I would like to request that 100% of the ballot boxes are audited," said Díaz. (El Universal, 04-14-2013; http://www.eluniversal.com/nacional-y-politica/130414/vicente-diaz-calls-for-audit-of-100-of-balloting-stations)

Maduro joins call for recount, backs away the next day

Maduro initially stated that he was willing to accept a recount. On Monday, however, the council - which is skewed towards the ruling camp - said the result was irreversible and proclaimed Maduro acting president later the same day. An inauguration is set for 19 April. With no sign of a recount taking place, the decision has sparked outrage among opposition supporters. Claiming 3,000 election irregularities, Capriles said he would consider the government illegitimate without a recount and called on his supporters to show their unhappiness with "cacerolazo"- a popular form of protest where people bang on pots and pans. "If both parties said that they agreed to count all votes, why the rush? What are they hiding?", Capriles said. Ruling camp officials say the allegations of electoral impropriety are part of a US-sponsored plot to destabilize the country and undermine the legitimacy of its elected leader. (The Guardian, 04-16-2013; http://www.guardian.co.uk/world/2013/apr/16/protests-venezuela-capriles-nicolas-maduro)

Maduro’s pyrrhic victory, Capriles tells Maduro: "You're the one who was defeated today".

Elections don’t come much closer. After counting more than 99% of the votes Venezuela’s election authority announced late on Sunday night that the government’s presidential candidate, Nicolás Maduro, had beaten his rival, Henrique Capriles of the Democratic Unity coalition, by just 1.59%. Of almost 14.8m votes cast, fewer than 235,000 separated the two candidates. Capriles and his campaign team have announced their refusal to accept the electronic vote-tally unless the electoral authority agrees to open all the ballot boxes and count the paper ballots. Their position is supported by the only opposition-leaning member of the electoral authority’s five-person board, Vicente Díaz. According to Capriles, the opposition logged more than 3,200 irregularities—enough, he said, to render Maduro’s victory margin moot. In a tough speech, he told Maduro: “You’re the one who was defeated today—you and what you represent.” Indeed, even for those who accept the official result, the government candidate’s victory looked remarkably like a defeat. Maduro’s narrow victory, which many even on his own side will see as a defeat, makes that task all the more difficult. With the election out of the way the chavista movement may once again live up to its reputation as a “nest of scorpions”, as it was once described by a former deputy-chairman of the party. National Assembly President Diosdado Cabello, who many consider Maduro's main rival within their movement, tweeted: "The results oblige us to make a profound self-criticism." (The Economist, 04-15-2013; http://www.economist.com/blogs/americasview/2013/04/venezuela%E2%80%99s-presidential-election; Fox News, 04-15-2013; http://www.foxnews.com/world/2013/04/15/choice-for-venezuelans-hugo-chavez-heir-or-fresh-start-with-emboldened/#ixzz2QYLBJH3M)

OAS supports a full recount of votes in Venezuela

OAS Secretary General, José Miguel Insulza, on Monday endorsed the idea of ​​a full recount of the votes after the controversy over the election results in Venezuela made ​​this Sunday, in which the ruling was the winner Nicolas Maduro. More in Spanish: (CNN, 04-15-2013; http://cnnespanol.cnn.com/2013/04/15/la-oea-apoya-un-recuento-completo-de-los-votos-en-venezuela/?iref=allsearch)

Spain suggests "dialogue", a shouting Maduro threatens Spain for "interfering"

Spain's Foreign Minister José Manuel García-Margallo recommended "dialogue" in view of a "very strong polarization" here. He said the outcome "attests to a very strong polarization in the country, something that calls for agreement and honest dialogue to face upcoming challenges in a stage that will necessarily be different from the previous one." Maduro shouted during his acceptance speech that Spain must disown such "intervention" or face reprisals on all fronts. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/spain-suggests-candor-in-light-of-very-strong-polarization-in-venezuel)

“He could regret his victory”

Today, The Washington Post discusses in its editorial that acting President Nicolás Maduro could regret his victory if he won next Sunday’s presidential election as he will have to deal with Chávez’ legacy: “out-of-control inflation, serious shortages of goods and electric power outages and one of the highest crimes rates globally.” The truth is that will be the scenario to be faced by any of the two candidates that wins on Sunday. (Veneconomy, 04-15-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34350&idc=1)

Putin congratulates vote winner in oil ally Venezuela

Russian President Vladimir Putin congratulated Nicolas Maduro on winning Venezuela's presidential election, saying he expected good relations to continue with a country where Moscow has significant oil investments. Ties between Moscow and Caracas flourished under Hugo Chavez.  Russian officials were hoping for continuity to protect their energy and arms deals there. (Reuters, 04-15-2013; http://www.reuters.com/article/2013/04/15/us-venezuela-election-russia-idUSBRE93E0C920130415; El Universal, http://www.eluniversal.com/nacional-y-politica/130415/governments-close-to-chavez-jump-up-to-congratulate-maduro)

Cristina Kirchner applauds Maduro's victory in Venezuela

Argentine President Cristina Kirchner rushed to congratulate Nicolás Maduro for his tight victory: "My congratulations go to its new President, Nicolás Maduro. In memory and gratitude for ever to friend and comrade Hugo Chávez," Kirchner twitted, AFP cited. (El Universal, 04-15-2013; http://www.eluniversal.com/nacional-y-politica/130415/cristina-kirchner-applauds-maduros-victory-in-venezuela)

Cuba avoids oil cutoff for now as Chavez ally narrowly wins Venezuela presidential election

Cubans were relieved Monday by the announcement that the late leader Hugo Chavez’s hand-picked successor had been elected Venezuela’s new president, apparently allowing their country to dodge a threatened cutoff of billions of dollars in subsidized oil. Cuban President Raul Castro sent a congratulatory message to Nicolas Maduro, who is seen as an ideological ally who will want to continue the countries’ special relationship as he serves out the remainder of Chavez’s six-year term. (The Washington Post, 04-15-2013; http://www.washingtonpost.com/world/the_americas/cuba-avoids-oil-cutoff-for-now-as-chavez-ally-narrowly-wins-venezuela-presidential-election/2013/04/15/f70bfe98-a5e5-11e2-9e1c-bb0fb0c2edd9_story.html)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.