“Change has started in Venezuela,” Jesus says.
We’re of course referring to Jesus “Chuo” Torrealba, the opposition leader in Venezuela where mid-term elections held on Sunday showed citizens are fed up with Nicolas Maduro’s socialist paradise.
In what amounted to the worst defeat in history for Hugo Chavez’s leftist movement, the opposition won at least 99 of 167 seats that were up for grabs in the National Assembly. With 99% of the vote counted and 22 seats still contested, the United Socialist Party had won 46 seats. "As important as the number of seats won, is the number of votes," Barclays adds. "For comparison, based on projected voter turnout, the opposition looks to have received more than 8.0mn votes in this election, exceeding what Maduro received when he was elected in 2013 (7.58mn). "
As WSJ notes, “the margin of victory was bigger than expected, and a landmark victory for the country’s frustrated opposition, which hasn’t won a legislative or presidential vote since the late populist Hugo Chávez won the presidency in 1998 and launched his self-styled Bolivarian Revolution.”
“I feel as if we won the World Cup while playing with our two legs tied. This has been the most abusive campaign ever, but the important thing is that we were able to use democracy to beat a system that is deeply undemocratic,” opposition deputy Julio Borges said. Here’s WSJ summarizing [7] what’s at stake:
A majority will allow the opposition to free political prisoners like Leopoldo Lopez, a former mayor well known outside Venezuela, enact basic laws, and approve the budget and government debt. Three-fifths of congress—101 or more deputies—would permit the passage of powerful laws that could lead to a host of deep overhauls. The opposition could also remove the vice president or ministers. Two-thirds of the assembly would give them the power to restructure a judiciary that human-rights groups say is stacked with government supporters.
"This is not the first time that the opposition has a majority in the legislative assembly," Barclays reminds us. "It also had a majority at the beginning of the chavista era when Chavez was first elected in 1998-2000 [but] at the time the opposition also only had a simple majority, versus the qualified majority (or even super) that it may have achieved this time." The implication: "...this will be the first time that the opposition can impose real checks and balances on a chavista government."
But if you thought Mauricio Macri has a tough road ahead in Argentina [8] (where the newly-elected President who just threw out the Peronists will need to fix a veritable FX crisis post-haste), it’s nothing compared to the disaster facing Venezuelan officials. “The current government is doing more or less everything wrong at the moment in terms of maintaining a viable economy,” Paul McNamara, a money manager at GAM UK Ltd. in London told Bloomberg [9].
Yes, “everything wrong.” Here’s what “everything wrong” looks like:
And here's a map that puts things in context vis-a-vis LatAm as a whole (via Goldman):
As WSJ puts it, "though rich in oil, Venezuela is ravaged by inflation above 200%, rampant food shortages, a local currency that has shed 81% of its value in 2015, as well as low oil prices that have left the government broke and unable to import basics like medicine and car parts." Right. And let's not forget that Caracas has recently resorted [12] to selling its gold and tapping its IMF holdings in a desperate attempt to service its debt.
“In any other country, people can save. Here, no one in my generation can save anything, and much less have hopes of owning a car or a house," one hotel worker told WSJ.
For his part, Maduro called the vote a "wake up call."
“We have come with our honor to recognize these adverse results, to accept them and tell Venezuela that the constitution and democracy have triumphed,” he declared. “We accept the results just as they have been announced by the electoral body.”
Well that's nice of him, and we suppose he fully understands that this was essentially a referendum on his mismanagement of the economy and according to at least one observer, this may be Maduro's "come to Jesus" moment (no pun on the opposition leader's name intended): “One good thing about this election is that Chavismo will have to face reality,” Michael Penfold, a professor of public policy at Venezuela’s IESA business school told WSJ. “Oil has been the drug that has kept the party going. But now it’s over. They have to take decisions that they have put off.” Here's Maduro's speech, which he delivered wearing a Sopranos-style red track suit:
Obviously, we're a long way away from any kind of meaningful change in Venezuela, so no one should get too excited here. Indeed, even if this ushers in a new era for Venezuelan politics, persistently low crude prices will conspire to keep the economy hamstrung for the foreseeable future. Here's Barclays on why you should curb your enthusiasm, so to speak:
Even if the election has shown that inaction can have a political cost, we think that, challenged by a reinvigorated opposition, the Maduro administration will not be able to coordinate the necessary economic reforms. This would require moving away from the rhetoric of ‘economic war’, and to admitting that things are not being done well and need to be fixed. However, after the results were announced, President Maduro appeared reluctant to step back, and continued to blame the ‘economic war’ for the country’s situation and government’s election defeat. Even if the government does now move to introduce reforms that could bring improvements, we think it faces a credibility problem that will limit its ability to succeed. The government has spent the past two years talking about reforms but not making any, while distortions in the economy have widened. For reference, the spread between the official and non-official exchange rate moved from around 200% to more than 14,000% during this period. The country’s economic crisis has become systemic and requires comprehensive rather than partial solutions. Therefore, a change in leadership seems to be a precondition for implementing a successful structural reform process. In the absence of significant reforms, the economic situation is likely to keep deteriorating.
Yes, it sure is, but then again, there's always drug smuggling [13].
We'll close with a quote from (who else?) Maduro: "We have lost a battle today, but the struggle to build a new society is just beginning."



