Chavez Signals Mixed for Assets: Analysts

Admission that Venezuelan President Hugo Chavez’s heath has worsened and that he will undergo another surgery represents a marked change in the government’s communication strategy ahead of this year’s elections, though it is unclear how this will affect the results. While analysts say there are signs a regime change scenario may accelerate, whether it is orderly one is unclear. “While we expect Venezuelan bonds to be well supported in the short term due to these new conditions, we fear about a disorderly transition in the country in case of President Chavez’s absence from office,” Nomura says in a report. There is no clear Chavista replacement candidate, and it is not clear how the military might react if the opposition were to gain power, the bank says. Barclays sees Nicholas Maduro as a replacement if Chavez can’t campaign, but notes he trails opposition candidate Henrique Capriles in the polls. “The increased possibility of a democratic transition should be supportive for Venezuelan assets and, even if uncertainty could create some volatility, we would expect the transition effect to prevail,” Barclays says, adding that its base case scenario remains a peaceful and orderly transition. The shop recommends increasing duration in Venezuela credits, noting it prefers PDVSA 2022 bonds.