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Chavez faces stiff election challenge in Venezuela

This year will see what is expected to be the most hotly contested election in Venezuela since Hugo Chavez won the presidency in 1999

He will be facing off against 39-year-old Henrique Capriles Radonski, a centrist governor of Miranda state. Chavez is tipped to win the October election, as he remains popular among the country’s poor and will be able to mobilise state-run television, which dominates Venezuela’s airwaves, against Capriles.

However, Chavez’s health has become a major issue in the campaign after he was forced to return to Cuba in February to have a malignant tumour removed from his pelvis. The surgery is expected to be followed by another round of radiation treatment that will almost certainly slow down the energetic Chavez just as the election season goes into full swing. Venezuelan’s will have to consider whether or not he will be able to carry out another six-year term.

Recent opinion polls have shown Chavez holding a commanding lead over Capriles. A poll taken in March by Hinterlaces indicated that Chavez would win the election by a 52% to 34% margin. Another poll by Consultores 30.11 projected a similar result, with Chavez garnering 57.4% support compared to Capriles’ 26.6%. Polling, however, has a spotty record in Venezuela, and with the election season shaping up to be highly volatile, the outcome remains highly uncertain.

If Chavez were to return to health and go on to win the election, the oil and gas industry will most likely see more of the same for years to come. Capriles, though, is an unknown for the industry. Investors have been encouraged by his rhetoric on the campaign trail. He has sharply criticised Chavez’s nationalisations, saying that he would review them “one by one”. He has also pointed to Brazil as an attractive economic model for Venezuela and Petrobras as a model for PdV.

That could eventually lead to a part-privatisation of PdV in the mode that has been so successful for state-run companies in the region such as Petrobras and Colombia’s Ecopetrol. Such a move would impose a certain level of market discipline on PdV and encourage improved transparency at the company. Capriles would also likely improve fiscal terms in the country as he has vowed to do more to attract foreign investment, though he has not laid out specific measures he might put in place.

The oil industry and PdV have been so thoroughly remade in the image of Chavez that Capriles, or anyone one else for that matter, would face a daunting task pushing through transformative reforms. PdV, for instance, had most of its top personnel expelled from the company in the wake of the 2002 strikes. Most of the heavy oil experts that were with the company at that time are more likely now to be found working in Alberta Canada’s oil-sands patch than oilfields in the Orinoco Belt. Moreover, in many cases, those positions were filled on the basis of political allegiance rather than technical skill, which has created a talent gap and made PdV a highly politicised state-run company. Turning PdV and the industry around, then, is going to require a deft political touch, a willingness to work with the industry and years of persistence.

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