Hugo Chávez in combat mode

President Hugo Chávez faces rising discontent in the wake of the devaluation of January 8th and an ongoing electricity crisis. Even so, he has persisted on a radical policy course, nationalising more companies and shutting down a television station critical of his government, while promising more socialist-oriented measures ahead. Student protests have ensued, and more violence may be on the way. Opposition parties, however, remain poorly positioned to take advantage of the turmoil in September mid-term elections.

The devaluation and the introduction of a two-tiered official exchange rate in early January were designed to address a deteriorating fiscal situation and to boost the government’s spending power ahead of the legislative election, when the governing party’s near-complete dominance of congress will be challenged. But the negative repercussions, such as rising prices and erosion in real incomes, combined with a persistent recession and the problem of electricity shortages and rationing, are heightening public frustrations with the Chávez administration.

Playing to his base

To fend off discontent, the government has already announced a two-step rise in the minimum wage (10% now and a further 15% just before the election) and creation of a “bicentennial fund” to boost credit growth. It hopes that this will lift its approval ratings among its core supporters (the poor have been particularly badly hit by rising inflation and the contraction in purchasing power) and lift its chances of retaining control of the unicameral National Assembly.

Furthermore, the government on January 17th took over a supermarket chain, Éxito (owned by Colombia’s Éxito and France’s Casino Guichard Perrachon), owing to alleged improper price hikes. It has warned other retailers of possible interventions. And it is looking to incorporate businesses into a state-controlled “Corporation of Socialist Markets”, announced in December 2009, which is intended to provide a plethora of goods and services at heavily subsidised prices.

Botched rationing plan

Despite such efforts to appeal to its base, the government’s troubles are mounting. Less than a week after the devaluation announcement, Mr Chávez announced the immediate introduction of rolling, four-hour power-cuts for the whole country, scheduled to last at least four months. The alternative, according to the minister of electricity, Ángel Rodríguez, was a collapse of the national power grid as early as the end of February.

However, the measure provoked an immediate backlash in Caracas, prompting Mr Chávez to dismiss Mr Rodríguez and suspend rationing in the capital. The rolling blackouts are still being implemented throughout the rest of the country, however, forcing many businesses to shut their doors for three mornings or afternoons each week. Mr Rodríguez has been replaced by one of the most prominent cabinet members, Ali Rodríguez, formally minister of finance

Lashing out

As is his norm, Mr Chávez has responded to the growing discontent by deflecting blame for policy mistakes and lashing out at his opponents, domestic and foreign. Recent government pressure led cable-TV companies to drop Radio Caracas Television International (RCTV), a station that has long been critical of Mr Chávez’s policies. (The government in 2007 cancelled RCTV’s license for regular over-the-air broadcast TV). Officials say RCTV was removed because it refused to carry mandatory government programming, as is required by a new law.

The RCTV closure, along with government intentions to revive the power rationing scheme for Caracas, has sparked new street protests. Since January 24th university students have been marching daily, resulting in clashes with the police (and the deaths of two in the city of Mérida). Mr Chávez has also made additional changes to his cabinet, designating a vice-president with radical views and signalling that he intends to go into combat mode, rather than back down.

Given recent events, Mr Chávez’s standing in opinion polls is suffering. According to Luis Vicente León of a local polling company, Datanálisis, his popularity has dipped well below 50%; other pollsters, such as Oscar Schemel of Hinterlaces, hint at an even greater fall, although no figures have yet been published. Former director of the Consejo Nacional Electoral (CNE, the electoral commission)—and former chavista—Eduardo Semtei has predicted that support for the president could fall as low as 30-35%.

Uncertain electoral outcome

At this early stage it is difficult to predict with certainty the likely political impact of these developments. It is far from clear that the government will suffer the consequences of its failings in the forthcoming election. The opposition has been completely unable to capitalise on rising public discontent. Barely responding to the devaluation and power rationing, it remains embroiled in complex internal discussions to select candidates for the September parliamentary vote.

By mid-January not a single “consensus” candidate had been chosen, and there were threats by Henry Ramos of Acción Democrática (AD) to go public with the names of those opposition leaders who—in his view—have been sabotaging the negotiations. The likelihood is that he was referring to Leopoldo López of Voluntad Popular. Mr Ramos is seeking to select candidates in most areas on the basis of negotiations, whereas Mr López has been calling for primary elections.

Unless the opposition manages to unite and connect with disenchanted chavistas, the share of the electorate failing to identify with either the government or the opposition is likely to rise, resulting in a sharp increase in levels of abstention. This can only benefit the governing Partido Socialista Unido de Venezuela (PSUV) and, of course, Mr Chávez. At present, it appears more likely than not that he will maintain control of the legislature and the political scene.

The Economist Intelligence Unit