Venezuela: The Next Steps In The Political Transition

The inauguration of Venezuelan President Hugo Chávez’s fourth term is officially scheduled for Thursday, January 10. However, he is highly unlikely to be sworn in, as he is still in Cuba following respiratory complications after a fourth cancer-related surgery. The Venezuelan National Assembly has authorised the inauguration to be postponed to a later date, sparking a heated debate over the constitutionality of such action, and increasing political tensions. Indeed, the opposition claims that fresh elections should be held within 30 days if Chávez’s inauguration does not take place on January 10. Below are some key takeaways from a related article we have just published on Business Monitor Online:

Although Venezuela’s political trajectory will remain highly uncertain, we believe that the ruling PSUV party will take steps to extend Chávez’s presidency for as long as possible, in order to maintain political stability and dominance over the country’s institutions. That said, we do not rule out a deeper political crisis, with the potential for military intervention, as political and social tensions are set to heighten in the near term.

Currently, the opposition’s chances of winning a snap presidential election are low, following their waning support after a disappointing performance during the December 16, 2012 regional elections.

The best bet for the PSUV to avoid a major political and social crisis at this point is to unite behind Chávez, which is what we believe will transpire as long as the president is alive, even if he steps down from office. Indeed, the PSUV will seek to maintain the strong popular support Chávez has built throughout his 14 years in power, in order to diminish social tensions.

Also, the PSUV will use Chávez’s legacy to avoid intra-party fragmentation, in order to entirely shut out the opposition in prospective elections in the near future.

Nonetheless, once Chávez dies, political tensions will intensify, and we do not rule out a major political crisis. Although Chávez has named Vice-President Nicolas Maduro as his chosen successor, Maduro could still meet resistance from the PSUV.

Without Chávez’s influence, the political vacuum could lead to a destabilising power struggle within the party, with the potential for intervention by the military faction, headed by Diosdado Cabello (President of the National Assembly).

In addition, the Bolivarian militia, which is estimated to have at least 20,000 members who are ideologically loyal to Chávez’s ‘socialist revolution’, could also step in if it determines that the government is deviating from ‘Chavismo’.

Furthermore, opposition supporters would also play a role through mass mobilisation, implying that civil-military conflict cannot be ruled out.

Although financial market optimism has prevailed, signaling that investors interpret any move towards a Venezuela without President Chávez as a positive event, we believe that a meaningful shift away from the current policy mix would only be brought about after a painful and destabilising process, which we believe could take years to unfold. As such, once investors realise the high levels of political risk, we believe they will reassess their relative optimism.