Political change sweeps into Venezuela

OREANDA-NEWS. December 09, 2015. Venezuela's Democratic Union coalition, fresh off an overwhelming victory in 6 December legislative elections, is preparing to advance ground-breaking legal and political reforms viewed as critical to resuscitating the oil-based economy.

The broad-based coalition, known as the MUD, decimated the long-ruling PSUV party's 17-year legislative majority, capturing 110 seats in the 167-member national assembly. The PSUV retained just 55 seats, the government-controlled electoral authority CNE announced last night, over 24 hours after voting stations closed.

The winners of two remaining seats in the legislature have not been called yet officially. But the MUD's nearly 66pc majority in the new national assembly that takes office on 5 January 2016 for a five-year term ensures the opposition the absolute majority needed to challenge the radical socialist government of president Nicolas Maduro.

Maduro, the handpicked successor of imposing late president Hugo Chavez, conceded defeat on 6 December, following weeks of vitriol hinting of a popular uprising backed by the military in the event of an opposition victory.

The MUD?s list of priority legislation includes a blanket amnesty for political prisoners such as former Chacao mayor Leopoldo Lopez.

Former central bank chief economist Jose Guerra, who won a seat in the new assembly, tells Argus that legislation will be advanced to compel the bank, state-owned oil company PdV and the national statistics institute to immediately release macroeconomic, oil and electricity data that the government has blocked from publication since 2010.

Forcing PdV to open its books for an independent audit could shed light for the first time on long-opaque production data and sensitive energy deals with China and Russia, including over \\$50bn in oil-backed loans granted since 2007 mainly by China Development Bank. Foreign oil companies such as US Chevron and Spain?s Repsol that have established upstream projects in Venezuela could see contract scrutiny.

PdV's preferential oil supply deals with Cuba and nearby PetroCaribe states, such as Nicaragua and Jamaica, will also be reviewed to determine if oil exports to these countries should be suspended in early 2016, Guerra added.

Other economic initiatives on the new assembly's agenda include unifying the currency exchange rate, lifting capital and price controls, rewriting the central government's 2015 budget, and raising heavily subsidized local gasoline, diesel, gas and power prices to reduce subsidy-related costs in excess of \\$25bn, according to energy ministry estimates.

The new legislative majority also plans to overhaul the supreme court, the judiciary and electoral authority, all of which are currently controlled by PSUV loyalists, democratic unity officials tell Argus.

The coalition's two-thirds legislative majority gives it the power to override any attempts by Maduro to veto or bypass legislation.

"If the supreme court or attorney general try to block legal reforms, the assembly will replace the chief justices and chief prosecutor with officials willing to comply with the laws and constitution of Venezuela," a MUD spokesperson told Argus this morning.

The PSUV leadership, which has remained largely silent in the immediate aftermath of its electoral defeat, has not disclosed how it plans to exercise its new minority status in the legislature.

Democratic coalition leaders are hopeful that the PSUV faction in the legislature will cooperate to enact legal reforms aimed at stabilizing the economy and deflating partisan political tensions. The Venezuelan economy is forecast to plunge by 9pc in 2015, with inflation north of 200pc and widespread shortages of basic goods.

The sinking oil price is the MUD?s primary challenge as it comes under pressure to immediately act to replenish food and medicine, a role that is still in the hands of the executive branch. PdV's current export price averaged \\$34.05/bl in the week ending 4 December, compared with a full-year 2014 average of \\$88.42/bl. Every \\$1/bl decline reduces PdV's annualized export revenue by \\$700mn, the energy ministry says.

Leaders of the new legislative majority are also upbeat about their prospects for enacting meaningful reforms after defense minister Vladimir Padrino Lopez warned publicly late on 6 December that the armed forces would not permit any political factions to ignore the majority will of Venezuelan voters.

Padrino?s nationally televised warning that the armed forces would uphold the constitution quashed efforts by some PSUV hardliners to disavow the electoral results, senior military sources tell Argus.