Chavez Wins Venezuela Term Limit Vote, Opens Campaign for 2012

By Matthew Walter and Daniel Cancel

Feb. 16 (Bloomberg) -- Venezuelan President Hugo Chavez scored a victory in his drive to stay in power as voters scrapped constitutional term limits that would have forced him from office in 2013.

The amendment carried with 54.4 percent of the vote to 45.6 percent, according to preliminary results, said Tibisay Lucena, president of the National Electoral Council, in comments carried on state television. The referendum marked the second time in 14 months that Chavez sought to remove the constitutional bar that kept him from seeking unlimited re-election.

“I’ve received an injection of patriotic fire,” Chavez, 54, said last night in a victory speech from a balcony at the Miraflores presidential palace, as thousands of supporters waved flags and cheered below. “I’ll dedicate myself for life to the service of the Venezuelan people.”

Chavez now has a chance to extend his drive to turn the oil- exporting country into a socialist state, which he says will take until 2019. Without a constitutional check on his power, the former army lieutenant colonel may stay in office indefinitely, opposition leader Leopoldo Lopez said.

Chavez already controls Venezuela’s energy wealth through the state oil company, and holds sway over congress and the courts through supporters and appointees, Lopez said.

Fireworks

The president, who celebrated 10 years in office on Feb. 2, announced he’ll be a candidate in 2012 as fireworks were launched across Caracas. Chavez has spent billions of dollars in oil revenue to offer free health care, subsidized groceries and reading programs for the poor.

“He’s clearly going to be very emboldened,” said Michael Shifter, vice president of the Washington-based Inter-American Dialogue. “He’s going to move ahead in radical fashion with his revolution.”

Voters narrowly rejected a bid to remove presidential term limits in 2007, his first electoral defeat since winning the presidency in 1998.

Chavez regained some of the support he lost in 2007, when the country suffered widespread food shortages. More than 6 million votes were cast in favor of the amendment yesterday, 1.6 million more than in the last referendum. Still, that’s short of the 7.3 million votes Chavez won in the 2006 presidential elections.

The opposition garnered 5 million votes yesterday, an increase of about 535,000 over 2007.

‘Passed the Barrier’

“We’ve passed the barrier of 5 million,” opposition leader Omar Barboza said last night, in comments broadcast by Globovision. “We’ll continue with our proposal of a different country. Sooner or later we’ll triumph.”

Chavez, known for his confrontational style, adopted a conciliatory tone toward the opposition in a press conference yesterday, and on the day before the vote offered to meet with U.S. President Barack Obama anytime. He regularly accused President George W. Bush of aiding Venezuela’s opposition, and last year expelled the U.S. ambassador in Caracas.

Chavez rushed to hold the referendum ahead of a looming economic recession. He proposed the vote the day after regional elections in November when the opposition won the three biggest states and Caracas, and instructed the National Assembly to act quickly.

Venezuela, the fourth-largest supplier of crude oil to the U.S., depends on oil for 93 percent of export revenue and half the government’s budget. Crude prices have plunged 74 percent since touching a record in July.

Recession, Inflation

Caracas-based Banco Mercantil said in a Feb. 3 report that oil income will fall 66 percent this year, and Morgan Stanley forecasts an economic contraction of 1 percent, even as inflation accelerates. Consumer prices rose 30.7 percent in January from a year ago, the fastest rate in Latin America.

The prospect of re-election may push Chavez to “needed but unpopular” measures to deal with the economy now, Goldman Sachs Group Inc. economist Alberto Ramos wrote in a note to investors yesterday, citing devaluation of the currency, which is pegged to the U.S. dollar, and slower government spending as possibilities.

There are already signs the government is low on cash. Chavez ordered the central bank to transfer $12 billion of reserves into a development fund last month. Finance Minister Ali Rodriguez said yesterday the government may back out of a planned takeover of Banco de Venezuela, the local unit of Spain’s Banco Santander SA.

Unpaid Bills

Service providers to Petroleos de Venezuela SA, the state oil company, have complained of unpaid bills and begun to take drilling rigs out of service.

Still, Chavez may view the victory as a renewed mandate to crack down on the private sector, Ramos said.

After his 2006 re-election, he took advantage of a five-year run-up in oil prices to fund nationalizations. He took over the biggest telecommunications and electricity companies, a steel mill and the cement industry. He also forced foreign oil companies Royal Dutch Shell Plc, Chevron Corp. and Repsol YPF into joint ventures as minority partners.

The collapse of oil prices makes hard choices ahead more likely, said Carlos Luna, a professor of international relations at the Universidad Central de Venezuela.

“He’s going to have a clock running against him,” Luna said. “People are expecting big things from him at the exact moment that the economic crisis is knocking at the door.”

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