On Sunday, November 23, voters swarmed to the polling stations in Venezuela to cast their ballots in the mayoral elections. Even though president Hugo Chávez wasn’t on the ballot sheet, the results say a lot about the president and his future. The success of his candidates reflects not only his popularity but also considerations of the continuation of his high-spending, socialist political agenda.
Ever since last December, when the president’s referendum that would have allowed for continuous re-election was defeated, Chávez has wanted to prove that his people still support him. His supporters now say the election satisfies this wish. Chávez’s ruling party, the United Socialist Party (PSUV), claimed 17 out of 23 states. But this isn’t the whole story. The states that Chávez’s party lost convey an interesting story and explain why investors reacted positively to the election results.
The opposition took six states – Zulia, Carabobo, Nueva Esparta, Tachira, Miranda and Capital district –the most populous and economically important in the country. Strategically placed Zulia is at the heart of Venezuela’s oil industry.
Out of the five districts in Caracas, the capital of Venezuela, the opposition took four – even after Chávez disqualified the most popular opposition candidate, Leopoldo Lopez, on murky corruption charges. These seats also reflect Chávez’s failures. The president has poured billions of petrodollars into social projects for the city’s poor. But today corruption and violent crime still top most global statistics with, on average, 40 murders a weekend. Clearly his spending focus has failed.
If all votes are amalgamated, Chávez’s party won a total of 51.5% of the electoral votes, against the opposition’s 48.5% – hardly the sweeping victory that the president wanted to prove that his country still supported him.
What does this mean? Most important, Chávez will not propose, for a second time, the constitutional amendment that would allow him to stand for election for a third term in 2012. If he did, it would fail again.
Until six months ago, Chávez was reported to have up to 70% popularity. Very high government spending, the result of high oil prices, supported this position. But now oil sells for $40 a barrel, not $140 a barrel. Oil revenues accounted for 90% of Venezuela’s export earnings in 2007, more than 50% of the government’s budget revenues and about 30% of GDP, according to Oxford Analytica. Inflation is above 40%, food prices are rising and food shortages are growing. The IMF predicts that Venezuela’s GDP will grow only 2% in 2009, in contrast to the 10.7% average between 2004 and 2008.
Before the election, the opposition states constituted 14% of the voters. The swing to 48.5% clearly shows that Chávez’s people no longer trust him the way they used to – they want change.
Chávez has two options. The first is to refuse to recognize the election results. But, as this is his second setback at the polls in less than a year, this route holds little credence. Initial reactions show that the president has gracefully accepted the results.
The second option is for him to change his policies.
With Barack Obama set to take the helm in the US, Chávez no longer has a scapegoat in Bush. The drop in the oil price means that allies in the region such as Nicaragua, Ecuador and Bolivia that he has bought with subsidized oil are no longer as dependent on Venezuela as they have been. The shift in oil power also means that Chávez’s frivolous spending, which could have been sustained with oil above $85 a barrel, is no longer feasible.
Manuel Rosales, a member of the opposition who took the mayoral post for Maracaibo, Venezuela’s second-biggest city, said after the election: “The map of Venezuela has started to change.”
In the light of this success, the opposition are now focusing on the 2010 National Assembly elections. If Chávez is to have any hope of retaining a majority in these, strict selective spending measures will need to be implemented to curtail the $3 billion fiscal shortage that is expected next year. Although there are enough reserves to pay for this shortfall at this stage, inflation, which is affecting Chávez’s core potential support among voters, must be controlled. The official exchange rate is 2.15 to the dollar, but the black market rate is more than 5. A revaluation of the bolivar will have adverse impacts on Chávez’s electoral agenda but if oil prices continue to drop he will no longer have any choice.
