Why Chávez Will Win

Francisco Rodríguez, demonstrating what store shelves will not look like in the run-up to next year's election.

So, writing in a Bank of America Merrill Lynch newsletter, Francisco Rodríguez is straightforward about it:

All opinion surveys show Chávez’s popularity increasing over the past few months. Although some analysts attribute this to a sympathy effect, our reading is that this is a consequence of the economic recovery, and in our view is likely to strengthen more over the coming year with the fiscal expansion. As a result, we believe a Chávez victory in 2012 as the most likely scenario.

With the government sitting on $31.9 billion in cash nobody can audit, it’s hard to disagree.

It’s easy to forget that while pundits and bloggers will spend hours upon hours dissecting the minutiae of candidates positioning and self-presentation, economists and political scientists long ago figured out that structural factors that have little to do with the day-to-day horse race have a far stronger impact on election results.

Especially in poor countries, short-term economic trends usually dominate election results. In particular, consumption trends have a hugely outsized impact on the incumbent’s reelection chances.

This is not lost on chavismo. Which is why Giordani has gone to extreme lengths to squirrel money away into a fund where it can all be set loose on the streets in the four months leading up to October’s election, even if that meant having to borrow billions on the side at 14%+ interest to cover the government’s immediate funding needs.

Is this irresponsible to the point of criminality? Yup!

Is it likely to work? You betcha!

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  1. Our hope is that Chavistas are such bad managers that even with a boatload of money, they will not be able to transfer it to el pueblo mesmo. Hopefully they will be too concentrated stealing as much as possible, or more to the point, all of it. Its hard to look farther than their pockets.

    • Claro but I think what he means is that if Cilia Flores steals Bs.12 million and uses them to buy herself a big house, that’s Bs.12 million that ends up going into the construction industry. And the guys who build the house have to spend some of it on food (which stimulates the agriculture sector) and part on buses (which stimulates the transport sector) the farmers and bus drivers in turn also spend them on stuff they need. So you get a multiplier effect.

      Of course, to the extent that Chavistas are squirrelling away much of what they steal abroad, that multiplier will be lower. But when you’re talking about spending $30+ billion – with b-de-donkey – even if only a relatively small portion of that makes it out into the real economy, it can still mean a big consumption boom.

      Moreover – and this is something that guy Tom O’Donnel from the Global Barrel blog stressed – you gotta remember that Chevron, Repsol, Sinopet, Rosneft and ENI are probably going to start physical work on the big Faja Projects next year. That will also mean an influx of tens of billions of dollars hitting the economy in the months leading up to the election. And those dollars have the same kind of multiplier effect as Cilia’s…so…

      • Here’s another supposition to the mix: The local construction industry will not be impacted if Cilia Flores steals that Bs. 12 million to build a house in Miami.

        As for the influx of tens of billions of dollars hitting the economy in the months leaing up to the elections, based on Chevron, Repsol, Sinopet, Rosneft and ENI…probably going to start physical work on the big Faja Projects next year., the normal timeline of petro-engineering projects, is, I suspect, longer than the usual 18-months accorded to say, a tourism development project. So without knowing the contractual terms between the Venezuelan government and these foreign companies, I would hesitate before thinking that there was to be a cash influx, from these endeavours, between now and the elections.

      • I guess that to get rid of Chavez and to change for the better, the majority of Venezuelans will have to open their eyes and vote with their brains, but I am probably expecting too much…

    • I don’t see it as a flaw. This is an opinion based on what current polls say and a projection for next year given the probable economical scenario. FR talks about the most likely scenario. Instead of adopting a defensive attitude and denying that Chavez could win the election while dreaming that the primaries will change the whole situation, MUD must focus on how to counteract the undeniable popularity of Chavez. We all shake our heads in disbelief when we read these reports, but we better swallow it and move on.

  2. No question that they will throw the money kitchen sink next year, but would that be enough?

    Debt and inflation are getting higher, the blackouts are still around and the crime wave continues to rise. No wonder thet want to shut down Globo before next year.

    A year in politics is still a lifetime. I believe now that Chavez will still win the election but let’s wait and see. In venezuela, anything is possible.

    • I was talking with my only chavista friend back at home. He does not mind the black outs, he is happy they are scheduled now (see, how they are treating us well), and when they said that they had overcome the electrical crisis, well, that was not a lie, only a mistake. Un error lo comete cualquiera.


      • It reminds me of that old joke about a painting of Adam / Eve: Son chavistas! No tienen ropa, no tienen techo, solo una manzana para comer y juran que estan en el paraiso!

        Happy that blackouts are scheduled? It’s impressive how ideology trumps expectations of actually being competent. Your friend misses the point: There shouldn’t be blackouts AT ALL!

  3. Another post I’m working on concerns the second link in the post – http://www.bloomberg.com/news/2011-10-20/giordani-says-fonden-received-81-1-billion-since-creation.html – which is another part of the drip-drip-drip revelations on Fonden.

    Honestly, I can’t really make sense of it: in its December 31st 2010 balance sheet (here: http://www.fonden.gob.ve/imagen/descargas/bg_final_al_31dic2010_.jpg) Fonden says it has Bs.8.9 billion on hand. (US$2 billion at the official rate). But in his declaration to the A.N. Giordani implies they’ve assigned-to-projects-but-not-yet-spent US$31 billion!

    So those $31 billion don’t show up in Fonden’s balance sheets…where are they!? In project-specific bank accounts not technically controlled by Fonden!?

    It’s just more administrative chaos. No two statements chavismo makes about Fonden ever seem to gel with one another. It’s maddening that these criminals are likely to win…again.

    • This is just another lie on top of all the rest of the lies for the VTV audience.

      There is no way to prove if the money is there or not so just lie.
      It’s on top of all the other lies that flow out:
      We have built x houses which is 70% of the total for this year.
      Project x will be ready by the end of 2012.
      Chavez – I’m totally cured. What a miracle!
      LL is corrupt.
      The electrical system is perfect – all the cuts are sabotage.
      The electrical problem is due to severe drought.
      Etc., etc., etc.

      Why anyone would believe these numbers is beyond me.
      If they had that kind of money all sueldos would be up to date, all the expropriations would be paid & the pensioners would be given 5 months of bonus.

      Pura paja.

      • Another lie to the list: There’s no insecurity and if there is, it’s all the fault of opposition governors. DIBISE works, the courts are working properly and the jails are just fine.

    • No two statements chavismo makes about Fonden ever seem to gel with one another.

      Not a bad strategy at all. Bowler hat, good suit, annoy the auditors, then once every election go Minister of Silly Spending.

  4. Harold Wilson admitted in days of yore that, “A week is a long time in politics…” so a year is an eternity, speaking of which, the eternity factor hasn’t been ruled out — or properly factored in — as yet. Well financed smoke and mirrors are powerful tools if deftly applied but there has to be something for them to be applied to so, whilst Mr. Rodriguez’s analysis — “our reading…” — may also well be off the mark, the inexorable advance of Time & Tide that wait for No Election remains predominant; as the Brasileras have it, anything can happen “en estos caminos de Díos”.

  5. The spending binge just right before the elections is only one of the reasons why the opposition will always be the underdog when it comes to election against the all powerful and controlling government.It will be ‘cuesta arriba’ and only some unexpected event might create an opening for the opposition, and let’s not forget the governments trump card of stealing the elections at the last moment.

    Chavez is never going to give up power just because of votes.The moment of truth will come when those votes have to be defended.

  6. Few things called my attention, but I don’t know if they are relevant:
    1-His connection with Meryll Lynch. Who trusts in those guys after this?


    2- “Especially in poor countries, short-term economic trends usually dominate election results”. I don’t think that Venezuela is a poor country, is a bad managed country filled with corruption, but not poor.

    3- Is this guy an ex-chavista? He was “the head of the Office of Economic and Financial Advisory of the National Assembly (Spanish: Oficina de Asesoría Económica y Financiera de Asamblea Nacional) from 2000 to 2004 during the presidency of Hugo Chávez.” (source: wikipedia).

    In any case, why worry about what a Venezuelan PhD in Economics from Harvard that knows the government from inside has to say…? Right..?


  7. …sigh sigh and more sighs like carolina :'( what has me even more descorazonada than PhD f-rod’s take is the centro gumilla’s survey. everyone agrees everything is totally F* up but… there’s always tomorrow, in two years we’ll all be fine, and we live for the weekend “parrillita con la cerveza”. with that mind set, it won’t even be necessary for giordani to throw “the whole kitchen $ink” onto the streets, there will be lots left over so cilia can squirrel away much more $$$$ and buy 3 more PHs than those she already owns, and cover these too in travertine marble- including the ceiling.O.o (why oh why do chavistas in general like marble so much, is totally beyond me)

  8. Don’t you all worry. We will have our caribean spring, when everyone is feed up and finally gets out to the streets to take down the regime…. (in 2025 or so….!)

    Just hang on.

    Beautiful editorials last night on Canadian TV about Lybia. It took the Western powers 40 yrs. to get feed up with El Quadaffi’s antics and start bombing the shit out of lybia. Without outside firepower, none of the incumbents in the middle-east/arab spring countries has been toppled down to date (With the exception of the first one Tunisia)

  9. So, what are you saying Quico? That’s it? We’re doomed to re-electing Mr. Chavez?

    How much of what Mr. Rodriguez wrote is hedging of bets and how much of it is truly earth-shakingly accurate?

    I get that you, and probably others, think that this guy knows what he’s talking about, but then too his intended audience are investors, so we must take what he says with a grain of salt.
    I hope he’s wrong and crashes and burns on this one.

  10. I think that the problem lies in the nature of that segment of the population to which the chavista message is geared: the 60% poorest portion of the population, and then some. Chavez has already succeeded in turning them into parasites. Thus, why would these people delay gratification if they will be promised more low-cost or even free goodies? The answer is that, of course, they will not, so they will vote for Chavez to ensure that those goodies continue to trickle down, while the top dogs become even richer. Those are the dynamics of a petrostate: an endless positive feedback loop in which the leader takes it to himself to “distribute” the wealth however he sees it fit, so that he guarantees for himself and his thugs the “loyalty” of the people. This can only end with an abrupt decline in oil prices (unlikely in the short term) or the implosion of the economy (also, unlikely in the short term). Therefore, the conditions for his re-election are served, and what the opposition can do may not matter much. We are talking about Venezuelans, not British to whom a Sir Winston Churchill could say: “sweat, tears, and blood.” This is not derogatory; I truly wished it were different, because these people have really become the instrument of their own destruction. This, of course, is not new. It has been repeated throughout recorded history endless times. Such societies simply disappear. So much for the end of history …

    I have always thought that the tragedy of Latin America lies in the fact that only about a 20% of its population would fit very well in the model of civilized society that is prevalent in Western Civilization. But, unfortunately, that 20% is always dragged down by the rest who don’t really care about becoming prosperous societies. Even if they are uneducated, it is simply a matter of common sense, sadly, a mostly absent attribute in that 80%. That is why in countries like Colombia and Peru there will always be the threat to return to past idiotic ways if something goes wrong with their current efforts, Chile being, perhaps, the exception.

    No doubt Chavez has been planning what to do for his re-election for years. His government may be a model of inefficacy and improvisation, but that is to be expected because this guy is not interested in the least in governing, just maintaining power. He said it himself, long ago: that politics prevail over the economy. Yes, to him, power is always an end unto itself. In that regard, we can expect him and his minions to be very efficient, and all the government apparatus will be devoted to make sure he is re-elected. We ask where will the money come from? Why are we still asking that? What about the almost $30 billion absent from the Fonden account that we were discussing about not long ago. Or, what about the fact that the national government budget is calculated at a price for a barrel of oil that is about half of what it is being sold. Don’t doubt even for a nanosecond that they already have the funds necessary to crush the opposition in the coming elections by buying the “people.” I cannot claim to know what will happen come October 2012, but there are very few reasons to be optimistic.

    • So, Venezuelans after all are in for a world of pain.

      Reelect Chavez because we are ignorant, greedy and short-sighted.

      Then get hit by a recession and a fall in price of crude oil somewhere in the late 2010s.

      Get hit, or rather get blasted, irradiated and blighted. With Chavez or a successor (Chavez having passed away), and a poorer, more ignorant nation, every turn worse than the preceding one. 1983, 1989, 2000, 2008, 2017?

      Then we will learn all about the inevitable end of petrostatism, the hardest way.

  11. This is where the cancer becomes important — how sick he is, and how sick people perceive him to be.

    Because no matter what the economy’s doing, most Venezuelans aren’t in favor of Chavismo without Chavez.

    After years of berating and firing ministers on television, he’s made sure of that himself.

    • Exactly. It’s pretty bold to make a prediction right now when the guy might not even be around in a year. I’m taking this one with a tanker full of salt.

      Oh, and “We’re doomed”? My ass. I’m changing that.

  12. I am surprised people still don’t realize how popular and charismatic Chavez is. Despite 13 years in power, he still has more than 50% approval with soaring crime, shortages, no new housing and all of the promises. This has not changed, Datanalisis has been fairly good on polls, it is bad near an election when they get wishy washy, but their latest said 57% approval with 40% vote intention. In the absence of a clear alternative, he is in the lead until proven otherwise.

    Here is the link to the Merril Lynch report:


    • Thanks for the link, MO.
      Don’t you think that the polling may change once the oppo primaries are done? (Assuming all other major conditions remain the same)

      How much of the 57% is because the opposition candidate is TBD?

      • Yes, that is a very important factor, the oppo has a bunch of candidates. I also think that whether he recovers or not, his ability to campaign intensely is diminished and that would work in favor of the opposition candidate who has to be smart and work extremely hard, it is doable, but not a piece of cake like many people think. (I think he is very sick, but that is a different discussion)

    • A decisive factor for Chavez’s constant popularity is the fact that he is always on the public light 24/7. Why? Two words: Comunicational hegemony. That massive media conglomerate that he has established for years has paid off. Jürgen Habermas, a german philosopher, has talked about the “Public sphere” and I quote: “a discursive space in which individuals and groups congregate to discuss matters of mutual interest and, where possible, to reach a common judgment.”

      Now, Chavez has hijacked the venezuelan public sphere through the use and abuse of state media and the “cadenas”. In short, the discussion about issues like crime, unemployment, economy, etc. has been replaced by a prolonged reality show starring and directed by Hugo Chavez himself. The opposition can’t engage or even critical elements inside Chavismo can’t surge, because it all has come down to one issue: Hugo Chavez himself.

      At the same time, he can create the illusion of ruling via TV or twitter, but not actually
      governing. In the end, he’s not really interested in solve problems but showing that he doing something about it. More like a game show host than president. Combine that with the free spending of money, the ineptitude of the opposition and his own undeniable charisma and you have his always high popularity numbers.

    • Question, what surveys do you think he is referring to when they write:

      “Opinion surveys have also started to look at the possibility of elections without Chávez, which have become more than a mere theoretical possibility. The datashow that there are several potential “chavista” candidates with approval ratingsthat are higher than those of the key opposition presidential contenders. So evenif Chávez is unable to run, we think there is a high likelihood that achavista candidate will have a strong lead.”

      What candidates are those? Does anyone know?

  13. Quico: “that ends up going into the construction industry. And the guys who build the house have to spend some of it on food (which stimulates the agriculture sector) and part on buses (which stimulates the transport sector) the farmers and bus drivers in turn also spend them on stuff they need. So you get a multiplier effect.”

    Why is it so easy for people to understand trickle down, which is very exclusive and inefficient, yet they have a hard time understanding trickle up, with is very inclusive and efficient?

    The counter to chavez’s 31billions is UCT. Let’s get 200k signatures to force a referendum within 30 days to force UCT, taking that dough out of their hands! Let’s trump anything chavez can offer with UCT. That way, even if he wins, his oil hands would be tied.

  14. Quico, that photo of pussycat Fco Rodríguez of Wesleyan University just doesn’t gel with the Merrill Lynch report that you broach. In fact, if you ever visited or worked in a brokerage, especially one in a metropolis with a significant stock exchange, you’d know that the profile of sharks, excuse me, employees, is far, far removed from the “day at the beach” image portrayed by FR from Wesleyan. Nada que ver. Pero naaada.

  15. Aquí sí está más “peleao que rodilla e’cochino” Francisco Rodríguez (no creo que sea el académico): “So even if Chávez is unable to run, we think there is a high likelihood that a
    chavista candidate will have a strong lead”. La ausencia de Chávez en las elecciones cambia el escenario de forma radical. Ni Maduro, menos Jaua, tampoco Adán Chávez, tienen oportunidad de ganarle a un candidato de la unidad.

    • como estaba diciendo anteriormente, Merrill Lynch quiere promover la venta de “papel” venezolano. por eso, hay que tener muucho juicio con los reportes producidos por los corredores de bolsa, algunos más inescrupulosos que otros. ’nuff said.

      • Long day-catching up- looks like a salesman talking for ML-
        I don’t expect flowers to bloom everywhere in Venezuelan economy
        next year-money coming to Venezuela-why?Look at the court cases
        from companies who got ripped off..Sure, Chavez government has
        been lobbying for investments-from US companies- but -most are
        not taking the bait. Or, maybe I am wrong…
        Anyway- peace in Libya, and increased oil production from Libya and
        Iraq for example- price of oil may actually go down in 2012, also.
        Even Chavez will try to “run away from himself” in 2012-and “sell himself”
        as a “new Chavez” – I think he may even try begging – and promising
        anything -just to get reelected….

      • He must have gone to shark summer school, then. Welcome to Wall Street, profe :-). Let’s see how much paper ML can sell to fill the Vz government’s social programs campaign coffers.

  16. Chavez will claim that he has bargained with the Spirits and has a second chance.
    (Since the Spirits are on his side- how can “el pueblo” NOT give Chavez a second chance.)
    Once, again Chavez will set up a test for himself- that he must do some difficult task-and he will remain the center of attention..This is old stuff- primitive magic…

  17. Instead of hoping for Chavez to lose or sabotage his own re-election, can the opposition do something to outshine him?

    Example: let’s say there was a volunteer movement to build houses for people displaced by floods. For example, a volunteer army of employees of Empresa Polar building homes under the “Unity” banner. Something that’s more than words that speaks louder than campaign slogans. Things that express optimism and galvanize a different vision for the future?

    There are lots of things that can be done to change the game.

    Just a thought. Please, don’t jump on me too hard!

  18. I don’t know, but I find two important flaws in this report.
    1. FR says that Chavez popularity has been increasing in previous months, which is not true. It increased only last month. Intention of vote for Chavez even decreased (by only 1 or 2 percent) in the last Datanalisis poll of last week. So I wouldn’t say there is a trend.
    2. It is not true that a probable substitute of Chavez currently leads opposition candidates. Last polls show that several opposition candidates are ahead of Chavistas probables. Even if the difference is closer than I expected. I agree it is too soon to say something on that, but I don’t know, I would say this report is chavista sided.


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