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Chavez illness changes the game for Venezuelan election

By Phil Gunson, For CNN
March 1, 2012 -- Updated 0305 GMT (1105 HKT)
Poor health may prevent Venezuelan President Hugo Chavez from being re-elected.
Poor health may prevent Venezuelan President Hugo Chavez from being re-elected.
  • President Hugo Chavez recently has a tumor removed from his abdomen
  • Diagnosis comes when opposing party is in better shape then ever
  • Democratic Unity alliance elected candidate with unexpectedly high turnout
  • Chavez' challenger is younger, has a message of change

Caracas, Venezuela (CNN) -- The possibility that poor health may prevent Venezuelan President Hugo Chavez from being re-elected in October has altered the country's political landscape.

On Monday, Chavez underwent an operation in Cuba to remove a tumor from his abdomen. He also was diagnosed with cancer last June, though the type wasn't revealed.

The detection of the tumor comes at a bad time for the ruling United Socialist Party. With the presidential election campaign scheduled to start soon, the opposition Democratic Unity alliance is in better shape than ever. Just days before the president announced his health issues, the alliance had elected its own presidential candidate in primaries featuring an unexpectedly high turnout of 3 million voters.

The candidate, centrist Henrique Capriles, governor of the important state of Miranda, obtained almost two-thirds of the votes, giving him a solid mandate to face off against Chavez. At 39, Capriles is almost 20 years younger than the president, and his message of change seems to have found a ready audience after 13 years of 'revolution' under the former army officer.

This leaves the chavistas -- as the president's supporters are known -- in a dilemma. With a plentiful flow of cash from the state-run oil industry and control of all the country's levers of power, the popular and charismatic Chavez might normally be expected to win in October. But a weakened Chavez, perhaps unable to campaign, could prove a liability.

New health battle for Hugo Chavez

In the absence of the president -- either through death or incapacitation -- it might be impossible to keep the party's squabbling factions together. Chavez has, apparently quite deliberately, declined to cultivate a viable successor. The very real prospect of defeat has already brought some disagreements into the open. More bad news might lead some to jump ship or seek backroom deals with the opposition.

A defeat for the government in October would bring more than a simple handover of power. Chavez seeks the installation of a "communal" state with a centrally planned economy, and he has been taking steps in this direction since he was last re-elected in 2006. The opposition would gradually restore the political institutions and economic freedom theoretically guaranteed under the 1999 constitution.

The prospect that the president might die or lose power peacefully in this year's elections triggered an optimistic response from the markets. Venezuelan bonds gained a couple of percentage points after Chavez announced his operation, and they continued to rally throughout last week, reflecting the possibility of a more business-friendly regime taking power next January.

Much interest also focuses on the country's role as a major oil exporter. Already heavily dependent on oil revenue, the Venezuelan economy has become even more petroleum-centered since Chavez took power in 1999. Of every $100 in foreign earnings, $95 now come from oil and its derivatives. Yet production has fallen, and much of what the country exports now brings in less revenue, thanks to concessionary deals for friendly countries such as Cuba. These would be cut back under a Democratic Unity alliance government.

Oil exports to the United States, historically Venezuela's most important market, are at their lowest level for more than 20 years. But despite his anti-U.S. rhetoric, Chavez seems unlikely to halt them altogether because of their importance to the government's cash flow.

The likeliest cause of such a disruption is perhaps a U.S. embargo, triggered by Venezuelan support for its ally Iran, especially if a Republican president were to take over in Washington. But by then, the Chavez government might just be history.

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