CARACAS, Thursday April 11, 2013 | Update

Maduro wins and then the trouble starts

Election is easy compared to reforming demands for subsidies and rents

Thursday April 11, 2013  07:55 AM
New York City.- Four political and financial analysts in a New York conference figured Nicolas Maduro would win election to president next Sunday -but then the economy will crater, threatening the stability of his government.

Francisco Rodriguez of Bank America Merrill Lynch and other three analysts predicted a Maduro win. Harvard's Kennedy School visiting professor Francisco Monaldi wondered how the opposition could win against the myth of Chavez, whose favorable job rating of 75% is higher in death than at any time he lived. 

But then the bottom falls out. In 2012, Chavez created a 15% imbalance in GDP by lavish spending to get re-elected, which Venezuelans will pay for mightily in the coming months and years. Rodriguez expects 41% devaluation of the bolivar, a big spike in inflation, shortages of food, medicine, jobs, dollars and electricity -and no help from a boost in oil production or price.

"Chavismo has been massively weakened," Kathryn Rooney Vera of Bulltick Capital Management said, just returning from a trip to Caracas. "In three years there will be space for the opposition to win, but not now. The immediate crisis is so bad, you don't want to win."

"A loan in Venezuela costs twice what it costs in Nigeria," Monaldi noted. The economic crisis could push Maduro's favorable rating down to 30% later in 2013 -a level where former presidents Chavez was in 2002, Caldera was in 1996 and Carlos Andres Perez was in 1989.

"He can survive but it's not going to be easy," Monaldi said. In the wings are Capriles Radonski, who is young and strong, but there are also internal threats: Diosdado Cabello and the military, Rafael Ramirez and his oil dollars, and a possibly devastating upheaval in the streets, which all add to the uncertainty.

Moderator Chris Sabatini of the Americas Society, which hosted the meeting at its elegant Park Avenue and 68th Street address in Manhattan, posed whether a Maduro government would amend leftist views to attract foreign investment especially in oil.

Everyone thought so. "Even Raul Castro is working for market incentives," Monaldi said. "The Venezuelan military is very pragmatic."

When Maduro picks his government team, it will be clearer if oil and investment is opened up while government subsidies are gradually lessened including those to Cuba and for domestic fuels. "To import oil at $110 a barrel and sell it for close to zero is not sustainable," Monaldi said.

Minister Giordani is on his way out, the conferees believed.

Brazil's Petrobras and America's Chevron appeared to be well positioned with Maduro's government, while China wants results for its loans.

Maduro's challenge is incentivizing production of goods and services and discouraging black market transactions in currencies, which is now the only economic game in town.

Election is easy compared to reforming demands for subsidies and rents.

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