Venezuela: Opposition defeat or electoral fraud? – Deutsche Bank

In view of analysts at Deutsche Bank, it is still too early to ascertain the political and market consequences of the Venezuela’s regional elections with preliminary results (with 96% of votes tallied) beating expectations on both sides.

Key Quotes

“The ruling coalition (PSUV) obtained 54% of the national vote and 17 of the 23 governorships in dispute, 7 more than president Nicolas Maduro forecasted last week. The opposition alliance (MUD) increased its states under control to 5 from 3 in the 2012 election, however it fell short of the 13 – 18 governorship victories predicted by most local pollsters. The MUD did not recognized the results, alleging procedural irregularities, including misleading errors in the opposition candidates appearing in the ballots, as well as last minute changes and communication problems in voting centers.”

“MUD leaders refrained from denouncing systematic fraud before its electoral witnesses finish a full audit of voting certificates. The hypothesis of an electoral defeat cannot be discarded until the audits are completed. A strong incumbent advantage, fragmented leadership and a disenfranchised base of supporters after the heavily repressed demonstrations of April/July could have hurt the electoral chances of the opposition, as was the case during the primaries on September 10th. Base on the preliminary results, the MUD could only get 45% of the national vote, although turnout increased to 61% on Sunday, higher than the historical average of 54%.”

“The market reaction to the election has been negative so far. Prices for Venezuela/ PDVSA bonds in the short-end of the USD curve dropped between $1 and $2.5 on Monday. However, it is difficult to disassociate this correction from the fact that the two issuers now accumulate $322 million in interest payment delays and the 30-day grace period in the first of these four coupons will expire on November 12th. We have long argued that a proven fraudulent election could pull the trigger on trade restrictions from the US and persuade regional blocks (Europe and Latin America) to suspend ongoing mediation efforts and enforce similar sanctions at the multilateral level. Both the National Electoral Council (CNE) and the MUD will announced the results of their respective audits this week.”