Venezuela's future after Chavez death
Today's announcement did not come as a surprise: Chavez had appointed vice president Nicolas Maduro as his succesor two months earlier. This was the first signal that he would not be able to stay in office for much time, considering that he was very fond of power, we knew he had to be forced by the circumnstances of his health in order to give the power to Maduro. The second important signal came when Chavez was flown from Cuba to Venezuela last month: Chavez wanted to die in Venezuela. The third signal came hours before the death announcement. Nicolas Maduro gave a speech in the morning, lambasting the enemies of Venezuela, who "poisoned" the president to death, in an attempt to prepare the population for the death announcement.
When trying to take a guess on Venezuela's future path, we ought to remember something: Chavez was president for 14 years. 14 years of Chavismo has slowly changed Venezuela's institutions and peoples in ways that they might not even be conscious of. We can be sure with today's announcement of Chavez' death that it is the beginning of a new political transition in Venezuela, with Chavism still occupying enormous importance in the people's hearts, minds and institutions.
Short term effects
1) No fights inside the Chavism: It seems that Chavez took care of his party well in advance. Maduro was in public rivalry with Diosdado Cabello, the president of the National Assembly, who had the legitimate right to be the interim presidency -as the Venezuelan constitution states. But Chavez was clear about it. The preferred was Maduro and not Cabello, and the armed forces are supporting this decision, as far as we are concerned.
2) Peso to continue devaluing: Clearly, the uncertainty created by Chavez' death will not help the peso to revert its devaluing trend. Remmember than on early February, Venezuela just undertook a massive currency devaluation, re-pegging the bolivar to a value of 6.3 per U.S. dollar from its previous official exchange rate of 4.3 bolivars per dollar.
3) Not a strong catalyst in the oil price: The news is not a market mover because we were all anticipating and expecting this. Oil production will continue at current levels in the short run, therefore it will not become a catalyst in the oil market.
More information on this point at: http://www.cnbc.com/id/100524977
UPDATE (@7:07 PM JAPAN time): Downside in .
4) Chavismo will remain in power (60%): May we be not too optimistic about it. Chavez death will convert him automatically in a hero. Chavismo has a huge political advantage and will most likely remain in power. According to the Venezuelan laws, elections are to be called within 30 days after the president's death. Most likely, we will see Nicolas Maduro (the chosen political successor of Chavez, 60% likely that he will be the next president) against opposition leader Henrique Capriles (who lost last year by 10 points margin against Chavez and who will lose again). The government seems to have prepared well the population for today's announcement: people are getting the idea of Chavismo without Chavez. Examples of this are: the victory in the December gubernatorial elections (by a huge margin), the favorable judicial decision by the Supreme Court, the support of the Army, etc.
5) Elections will be sooner than expected: To take advantage of the strong effect that Chavez death has left in the population. Chavez is death. A new hero is born for Chavismo. Chavismo will use the image of Chavez as a hero, sitted next to Simon Bolivar in the history books of Venezuela, to unify all the factions inside the party and lead them towards a huge victory in the coming elections. For Chavismo, the faster the better.
Long term effects
6) Oil price: Certainly, Chavez death cannot become a market mover in the short run, but whatever is decided in the polls will have a medium run effect on oil price. To begin with, a shift in regime (unlikely) could change the political structure of oil giant PDVSA: it could renegotiate oil production for good or better, loan payments in oil (e.g. Venezuela has been repaying China’s $36 billion in loans with oil, not cash) or stop sending highly subsidized oil to Cuba. However, as we stated in the first part of the article, a shift in regime is unlikely.
7) Maduro will have trouble holding the Chavismo together: Political incumbents will certainly be on their way. As long as the image of Chavez death and Chavez as a hero, he could keep control of the situation. The main issue, though, is to keep the social projects active: the socialist machine in charge of giving cash to the massses (cash obtained by PDVSA).
|Chavismo will remain in power. Elections will be called within a month. Nicolas maduro versus Henrique Capriles. Nicolas Maduro wins by a far margin (60 for Maduro, 30 for Capriles, 10 N/A). Chavez figure is used to consolidate Chavismo. Oil production remains at current levels.||60%|
|Chavismo will remain in power. Elections will be called within a month. Nicolas maduro versus Henrique Capriles. Nicolas Maduro wins by thin margin. As months go by, fractures inside Chavismo start to show. Maduro finds difficult to remain in power. Social discontent produces uncertainty and economic growth for 2013 shifts from an estimated 2.0% to 1.0% or less||20%|
|havismo will remain in power. Elections will be called within a month. Nicolas maduro versus Henrique Capriles. Capriles or an incumbent oppositor win the elections. Shift in regime. Transition to a market economy will produce social fractures in the middle run. Oil contract re negotiations produce a short run negative effect on the market. In the long run, Venezuela goes back to steady economic growth. The economic model in the country is altered.||15%|
|N/A (coup, new incumbent, etc.)||5%|
Photo by Platon Antoniou |© Pleasurephoto
Interesting Links (collection taken from www.qz.com)
Here is a selection of in-depth articles on Chávez’s life and legacy.
Death comes for El Comandante. Time, March 2013. Tim Padgett surveys’s the president’s life.
Hugo Chavez, RIP: He Empowered the Poor and Gutted Venezuela. BusinessWeek, March 2013. Moisés Naím looks back at the good and the (mostly) bad of the president’s legacy.
Don’t cry for me, Venezuela. The New York Review of Books, Oct. 2005. Alma Guillermoprieto on four books peeling apart Chávez’s personality and myth.
Fidel’s Heir. The New Yorker, June 2008. Jon Lee Anderson sums up the Venezuelan leader’s relationship with his Cuban mentor.
A strongman’s last stand. The Guardian, Oct. 2012. Rory Carroll depicts Venezuela on the eve of Chávez’s last presidential victory.
Slumlord. The New Yorker, Jan. 2013. Anderson again, looking at the country he leaves behind..
Chavismo After Chávez (registration required). Foreign Affairs, Jan. 2013. Javier Corrales on “the race to claim the mantle of Venezuela’s revolution” after Chávez is gone.
Memorable quotes from Times analyst Tim Padgett
"Still, whatever Chávez’s legacy is, Washington and the rest of the world need to remember the unmistakable reasons for Chávez’s rise to power—chief among them a failure to build the kind of democratic institutions in Latin America that can close the region’s unconscionable wealth gap. That flaw still lingers, which is why the memory of Chávez should too."