Chavez Heir Maduro Wins Venezuela Vote

Nicolas Maduro was elected Venezuela’s president today after pledging to deepen 14 years of the late Hugo Chavez’s socialist revolution that cut poverty by half.

The 50-year-old former bus driver received 50.7 percent of the votes, the national electoral council said after about 99 percent of ballots were counted. Henrique Capriles Radonski, who temporarily stepped down as governor of Miranda state to run for president, had 49.1 percent.
“We had a fair and constitutional victory,” Maduro said after the results were announced. “This is another victory, an homage to our Comandante Hugo Chavez.”

As a candidate, Maduro benefited from a wave of sympathy for Chavez’s March 5 death; as president, he faces accelerating inflation, shortages of consumer goods and slowing growth. Investors will be looking to see if he adopts policies that are more friendly to businesses, after he resorted to anti- capitalist rhetoric during the campaign to galvanize Chavez’s followers, said Alberto Ramos, senior economist at Goldman Sachs & Co in New York.

Venezuelan bonds, last month’s worst-performing Latin American securities, erased losses as polls showed Maduro would win the elections, reducing the likelihood of a power struggle that could hurt investors. The South American country’s dollar bonds have gained 2.1 percent this month, reversing part of March’s 2.7 percent loss, JPMorgan Chase & Co.’s data show.

“We don’t know who the real Maduro is,” Ramos said in a phone interview April 12. “Some in the market were of the view that he’s relatively pragmatic but we’ve seen very little evidence to inform that.”
Oil Reserves

Maduro has vowed to follow the steps of his mentor Chavez, who increased state control over the economy by nationalizing more than 1,000 companies or their assets and introduced currency and price controls. Chavez also tapped the world’s biggest oil reserves to help cut poverty to 21.2 percent of the population in the second half of 2012 from 42.8 percent when he first took power in 1999, according to government data.

“I voted for Maduro because my comandante Chavez ordered it,” said Jose Sanchez, a 57-year-old civil engineer. “Chavez prepared him for six years.”

Maduro called the election a choice between capitalism and socialism. As Chavez languished in a hospital bed in Cuba before his death, Maduro oversaw a devaluation of the bolivar and expelled two U.S. ambassy oficials who where accused of plotting against the government. The U.S. denied the charges.

Maduro faces mounting economic challenges including dollar shortages and falling oil production that could rapidly undermine the former union leader’s support, Kathryn Rooney Vera, a strategist for Bulltick Capital Markets, said in an interview with Bloomberg Television.
Empty Shelves

Inflation accelerated to 23 percent in February, the fastest annual pace in 10 months and the highest official rate in the hemisphere. Rising prices are compounded by shortages of products on supermarket shelves. The central bank’s scarcity index, which measures the amount of goods that are out of stock in the market, rose to a record high of 20.4 percent in January.

Maduro said after casting his vote that his two priorities will be reducing violence and attracting investment to boost the production of food and industrialized goods.

He said Venezuela is ready to re-establish diplomatic relations with the U.S., should the world’s biggest economy respect the sovereignty of the South American nation. The U.S. ambassador was expelled from Caracas in 2008.

Data published by the United Nations shows Venezuela has the highest homicide rate in South America, which deters companies from operating in the country, according to Nicholas Watson, Latin America analysis director at London-based research group Control Risks.
Slowing Growth

“There were many things remaining to be done,” Maduro said before the election results were announced. Chavez “left us many tasks to complete, and a legacy.”

Chavez won his third six-year term last October when he defeated Capriles by 11 percentage points after raising salaries, building thousands of homes for poor families and increasing cheap imports to slow inflation. The spending binge helped the economy grow 5.5 percent in 2012.

Growth will slow this year to 1.9 percent, the slowest in three years, according to a Bloomberg survey. The bolivar devaluation and dollar shortages could push the economy into recession this year, according to HSBC Holdings Plc.

The London-based bank expects Venezuela’s economy to contract 0.6 percent after previously forecasting growth of 0.5 percent, according to a second-quarter note to clients.

A 16.5 percent rise in imports in 2012 led Venezuela to post a current account deficit in the fourth quarter for the first time since 2009.
Devaluation

That forced the government to devalue the bolivar by 32 percent in February as it sought to close a fiscal deficit for the central government and state oil company Petroleos de Venezuela SA of 14.5 percent of gross domestic product in 2012, Bank of America Corp. said in an April 4 note. Even after the devaluation, BofA said it expects a deficit of 9.7 percent this year.

The shortage of greenbacks also prompted Maduro to unveil a dollar auction system in March to rein in an unregulated currency market that trades at almost four times the official rate of 6.3 bolivars per dollar. The government didn’t say for how much it sold dollars in the auction.

“It’s this tangled web of convoluted economic policies that have to be undone,” said Bulltick’s Vera. “Maduro is going to have to be somewhat more pragmatic just to survive.”

Bloomberg