beyondbrics

So Hugo Chávez’s challenger in October’s presidential elections has finally been decided, with Henrique Capriles Radonski (pictured) convincingly seeing off his opponents in primary elections on Sunday.

That may not have come as much of a surprise – even if markets reacted positively to the higher-than-expected turnout – but does Capriles have any chance against the formidable Chávez himself?

The consensus view from a slew of bank analyst notes published following the result is that it’s still going to be tricky.

“Winning the election would still be difficult as President Chávez remains the favourite,” says Felipe Hernandez at RBS, who thinks the president will take full advantage of his control over public sector institutions and expansionary fiscal and monetary policy.

“Notwithstanding, the opposition seems to have a chance,” he adds.

At Capital Economics, David Rees thinks things are “too close to call at this stage”.

“This is the best shot that the opposition has ever had to unseat President Chávez during his 13-year tenure,” says Boris Segura at Nomura, admitting that different polls still show Chávez ahead, but by a small margin.

Over at Eurasia Group, Daniel Kerner argues that the primary result “gives little indication of voter preferences in the presidential elections. The outcome of the presidential election will be determined by independent voters, and the primary results give little indication of where these voters’ preferences are.” Nevertheless, Kerner still thinks that although the election will be “tight”, resilient popular support and higher economic growth will give Chávez the edge.

The understandable fence-sitting by most analysts suggests that a lot depends on what happens over the coming months.

So even if, as Segura points out, Venezuelan asset prices are likely to remain “well-supported” over the next few weeks thanks to the positive news of the higher-than-expected turnout, the uncertain outcome on October 7 means that over the coming months there will be plenty more volatility for Venezuelan securities.

Related reading:
Poll boosts hope of Chávez challenge, FT
Think before betting against Chávez, beyondbrics
Venezuelan politics sparks big bond jump, FT
Venezuela election: the race is on, beyondbrics