Chavez Loses Biggest States on Defections by Venezuela’s Poor

By Matthew Walter and Daniel Cancel

Nov. 24 (Bloomberg) -- Venezuelan President Hugo Chavez suffered his second electoral setback in two years as the urban poor defected from his socialist party to help elect opposition candidates in Caracas and the three biggest states.

Chavez’s Venezuelan United Socialist Party, or PSUV, lost races for governor in five states yesterday, according to the National Elections Board, and in the country’s two biggest cities. The president, whose candidates captured 21 of 23 states in 2004, won in 17 states.

“In the short term it’s a draw but in the long term it’s a win for the opposition,” said Shannon O’Neil, a Douglas Dillon fellow at the Council on Foreign Relations in New York. “They did incredibly well given the adverse conditions, and it means they’ll be governing almost half of the population.”

The opposition, which has been largely powerless since Chavez’s party nearly swept the last round of regional elections and won almost every seat in congress in 2005, gained platforms in the country’s political and economic centers it can use to try to slow his drive to centralize control.

While Chavez remains personally popular among poor voters, mostly in rural areas, some are starting to question his socialist political agenda as inflation accelerates, crime spirals out of control and oil prices sink.

Changing Rules

Last year, the country narrowly rejected his proposal to eliminate presidential term limits in a national referendum on constitutional amendments. Yesterday’s losses may limit Chavez’s chance to make a second run at changing rules that will end his presidency in 2013, said O’Neil.

Turnout among the country’s 16.9 million registered voters was 65.5 percent yesterday as candidates vied for 603 posts, including 22 of the country’s 23 state governors and 326 mayors.

Opposition candidates beat Chavez’s party in the oil- producing state of Zulia, the country’s most populous state, as well as the industrialized Carabobo state and Miranda, Nueva Esparta and Tachira states, according to the National Elections Board.

In city races, the opposition won in Maracaibo, the second- biggest city, and in Sucre, a municipality in greater Caracas that includes one of the biggest slums in Latin America. The PSUV’s loss in Sucre suggests Chavez’s core supporters are beginning to sour on his policies.

Chavez Test

Chavez had called yesterday’s elections a test of support for his presidency, and campaigned almost daily over the past month for his party’s candidates to head off a loss like the national referendum last December, his first electoral defeat since taking office in 1999.

Chavez said that his party’s victories in a majority of states show he is still supported by most of Venezuela’s 28 million people. Most of the states that supported his candidates are rural and sparsely populated. Of the 17 states he won, 13 have a population of less than 1 million.

“I recognize the adversary’s triumph,” he said in comments broadcast by state television. “Of course we would have liked to win every governorship, but this was a great victory.”

The opposition gains set the stage for increased conflict with the president. In his speech early this morning, Chavez said he wouldn’t yield to the opposition.

‘Path Toward Socialism’

“We’ve won 17 governorships. We won governorships with margins of up to 60 points,” he said. “What they are telling me is that we should stay on the same path toward socialism.”

During the election campaign this year, Chavez threatened to suspend funding for development projects where opposition candidates win, and to throw candidate Manuel Rosales, who was elected mayor of Maracaibo, in jail on charges of corruption.

“The worst scenario is something like Bolivia, where Chavez simply decides to mistreat the political leadership that gets elected from the opposition and increase the level of confrontation,” said Javier Corrales, associate professor of political science at Amherst College. “He has threatened to use not just economic strangulation but also carry out military plans against these leaderships.”

Chavez regularly accuses opposition parties of trying to overthrow him, and he survived a brief coup in 2002 and a national strike that ended in 2003.

Crime Control

Caracas mayor-elect, Antonio Ledezma said he’ll make crime control a priority in the city, where the homicide rate jumped to 130 per 100,000 people last year, a 47 percent increase from 2005, according to data compiled by the Central University of Venezuela’s Center for Peace.

Henrique Capriles Radonski, the opposition governor-elect in Miranda state, said he’s willing to work with Chavez

“The government should know that we didn’t come to argue, but to work,” he said.

Chavez may respond to the losses by invoking powers he decreed for himself earlier this year that allow him to carve existing jurisdictions into federally controlled territories, making existing governors powerless figure heads.

“The reality is that the government has already managed to weaken substantially local offices by approving controversial bills that concentrate power at the executive government level,” Goldman Sachs Group Inc. economist Alberto Ramos wrote today in a note to investors.

To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net; Daniel Cancel in Caracas at dcancel@bloomberg.net.