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Senior military officers have openly joined
the opposition against President Chávez, claiming that constitutional
clauses call for civil and military disobedience. Simultaneously, union
groups and businesses are working on the approval of a non-binding national
referendum to advance elections in order to raise pressure on Chávez to
resign. The persistence of political uncertainty will continue to undermine
a recovery from the deepening recession. |
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Military officers join civilian opposition to Chávez
On 22 October, a group of 14 senior military officers led by General
Enríque Medina Gómez declared themselves in open civil disobedience to
President Chávez, demanding new elections and the president’s resignation.
The military officials made use of a clause in the 1999 constitution that
calls for civil and military disobedience to remove a president if basic
democratic rule is not respected and individual rights are violated
(Article 350). Even though none of the officers now participating was
directly involved in the military coup, some voiced open opposition to the
president following 11 April events that led to the deaths of several
civilian protestors. National unions and business associations have voiced
support for the military officers’ actions and are pushing for an
alternate strategy, which uses the political institutions to pressure for
change. The civilian opposition has gathered more than 2 million
signatures in support of a non-binding national referendum that calls for
early elections. The opposition promises to call for an indefinite,
general strike against the government if the National Electoral Council (CNE,
Consejo Nacional Electoral) does not approve the initiative by 4 December.
Chávez claims that constitutionally a national referendum for early
elections cannot be approved until half way through the current
government’s term, which would be in August 2002. If the current
referendum initiative is approved by the CNE and voters decide by an ample
majority to advance elections, pressure on Chávez would mount. To
implement the popular vote, election officials would require 30 days to
verify the opposition signatures and the referendum could be authorized
within another 60 days or by 2 February 2003). The rejection by the
Supreme Court would ensure that social unrest will continue. The resulting
political uncertainty is certain to further undermine an already dire
economic growth trajectory.
Currency strengthens but continued
political uncertainty may prompt further US$ sales
Similar to its regional peers, Venezuela benefited from the easing
regional contagion emanating from the Brazilian presidential elections. In
addition to sovereign risk spreads – the spread to US Treasuries of the
Venezuelan J.P. Morgan EMBI+ composite bond narrowed by 104 basis points
in October – the currency recovered significantly. The bolivar
appreciated 7.3% in October over the prior month to reach 1,375
bolivares to the US$. However, despite the rebound and repeated
Central Bank intervention in the foreign exchange market, the bolivar
remains one of the worst performing currencies in the world among 59
currencies tracked by Bloomberg, the international news agency. The annual
depreciation in the currency has now reached 44.5%. Encouraged by recent
developments in the currency, the Central Bank has decided to lower its
daily US$ sales, used to stabilize the currency from US$ 51 million to US$
45 million. Central Bank sales and private individuals’ purchases of US$
resulting from political uncertainty have been offset by strong oil
related US$ inflows. The annual average price of the Venezuelan basket of
crude oil reached US$ 22.09 per barrel on 1 November, up from 21.67 at the
end of September. As a result of the favourable oil price development, the
Central Bank interventions have not depleted international reserves. On
the contrary, in October, international reserves rose 4.6%, reaching US$
15.5 billion (including funds of the Investment Fund for Macroeconomic
Stabilization). Panellists expect international reserves to deteriorate by
the end of the year. Increased US$ buying is likely to lead to some
deterioration in the currency, which is anticipated to depreciate 11.2%
from its levels at the end of October by the end of the year. The currency
will stabilize next year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here.
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