The Economist Forecast | Venezuela

Dec 8th 2005
From the Economist Intelligence Unit
Source: Country Forecast
Forces aligned with the president, Hugo Chavez, have won all the seats in Venezuela's national assembly, thanks to a boycott by most of the opposition parties. The opposition remains divided and is unlikely to pose a threat to Mr Chavez when he runs for re-election in December 2006.
Fiscal profligacy will keep the public finances in deficit, despite high oil prices. Fiscal oil revenue will decline modestly in 2006, as prices begin to fall, but in light of electoral pressure we do not expect any fiscal retrenchment to take place until at least 2007. Inflows of foreign direct investment (FDI) to exploit Venezuela's abundant energy reserves should be maintained, even in the face of increasingly difficult operating conditions. Most non-oil investment will continue to be put off by the uncertain legal and regulatory regimes and by price and exchange controls, which will be maintained throughout the outlook period. Fiscal spending will help to underpin economic activity, but growth will soften from 2006, as political uncertainty rises and investment falls.

Key changes from last month

Political outlook
As this report went to press, just days before the December 4th legislative election, all of Venezuela's major opposition parties announced their decision not to participate in the polls. This development will set the stage for a more volatile political environment in the run-up to the presidential election in December 2006. However, our basic assumption that the government will face few obstacles in enacting its policy agenda remains unchanged.
Economic policy outlook
The transfer of an initial $6 billion of net international reserves to a government development fund has begun. The methodology for transfers of “excess” reserves to the fund in 2006 has not yet been established, but, in the short term at least, creditworthiness should not be an issue, with reserves levels expected to continue to represent more than 10 months' import cover.
Economic forecast
We have revised our growth forecast for 2006 upwards, to 6.5%, based on growing signs of an extremely large fiscal stimulus in the year.

AmbassadorVisist

.

When are the Primaries ???

Now that the dust has settled a little in Venezuela I would like to make a few comments on where I believe things should go from here.

For better or for worse the opposition withdrew from the elections and the "official" abstention rate was ~75% with 25% of the votes null, although more independent numbers put it closer to 85%. Personally I think this offers a glimmer of hope for the opposition while it also being a defeat for Chavez, however the opposition should not automatically assume they have 75% support, doing so would be unwise and ultimately lead to their defeat.

So where do we go from here? Primaries! Yes, I said it. The opposition has to hold primaries soon, I would say by the end of February, this would allow for the much missing grass roots participation in politics in Venezuela. I would envision the political parties getting together and selecting three or four candidates that have the best probability of defeating Chavez (ie. Borges, Rosales and Petkoff). Once candidates are selected the NGO Sumate should be asked, due to there impartiality and respect among the population, to coordinate the primaries. Prior to the primaries the 3 to 4 candidates should campaign and lay out there vision for the country, a vision of hope, unity, peace, and prosperity (they should avoid confronting Chavez or the government at this point). At this point the message between the the candidates will likely be the same, so in actuality this is more of a popularity contest to see who can move the electorate. The primaries should be held in such a way that everyone in the country can participate and votes should be counted the time tested method of manual vote count of all the ballots.

After the Primaries the *elected candidate should then build his/her campaign and campaign hard! He/she should call for a new CNE and full transparency during the presidential campaign. The most important aspect is to lay out a campaign message of hope and prosperity, so avoiding the same old Chavez is evil campaign would be wise. The people want hope and a plan if you can provide that they will follow. Without a plan or a sense of hope you a doomed, this in my opinion has been one of the mistakes of the opposition.

The candidate should call for everyone to go to election in mass and demand a full manual vote count, by asking the voters to camp out in front of the voting booths to defend their vote. By this time the government should be weakened enough and the population mobilized enough to achieve the manual vote count. If the CNE refuses then the opposition candidate has to call into activation article 350, civil disobedience by peaceful means at first then take more drastic measures (ie. possibly violence as the last resort). Regardless, of what happens the opposition should go out to vote, with the intention of defending their vote. Essentially, I am modeling this after what took place in the Ukraine.

It is my view that this is the best hope for the opposition at this point and is the most democratic and peaceful way. However, I am also very confidant that this scenario will result in violence no matter what. There is no way Chavez will leave peacefully, he has stated this countless times so whoever is the single candidate must be prepared to call into place article 350 and violence, he/she must be cunning, think fast, have charisma, but most importantly he/she has to be able to move the people. If he/she can do this Chavez will likely have meet his ultimate match.

A quick comment about the national assembly (NA) elections, I am not to worried about Chavez getting the whole thing it was already known so it wasn't a big lose. Actually I think the lose of the NA was a bigger win than a lose in part by the hope or what may happen as I described above. It is important to note that if you can get rid of Chavez, Chavismo in the present form can't survive So the presidency is more important at this point than the NA. Moreover, there are ways to deal with the National Assembly once the opposition can take the presidency. More on this later.

*note to reader - imagine if the abstention rate goes down during the primaries (say 50%) or what if one candidate gets more votes than Chavez in 1998 or 2000! I could call this a second electoral coup.

National Assembly elections

A quick post on todays elections for the National Assembly, it is being reported that voter abstention is about 90%!! This is dispite government officials coming on TV stating that those government workers that do not vote should be fired tomorrow morning!! Please see the links to the right that have more information on what is going on.

I hope to post again tonight or tomorrow.

It must be the glasses

What do you think?