Capriles vs Chavez: What's at Stake in Venezuela's Presidential Election

Oct. 2, 2012— -- Venezuela is holding presidential elections on Sunday, October 7. Latin American leaders, oil investors and international news junkies might find themselves glued to computer screens and TV sets, rooting for President Hugo Chávez or perhaps hoping that he fails to hold on to another six-year term.

There is much at stake in these elections. Venezuelans will pick between two candidates who have radically different views on basic concepts like democracy and freedom of speech. As in every Venezuelan presidential election, the winner also gets to manage one of the world's largest oil reserves. The outcome of these elections will also have a direct impact on countries that are large recipients of Venezuelan aid, such as Cuba and Nicaragua. Countries that have tried to cooperate with Venezuela in security matters, such as Colombia, and the United States, will also closely monitor developments in the tropical country. Here's our guide to the Venezuelan elections:

The CandidatesHugo Chávez, the charismatic President, has been in office since 1999, and is now running for an unprecedented third term in office.

As President of Venezuela, Chávez controls the world's largest oil reserves, he spends generously on social programs that are important to poor Venezuelans, and has said that he wants to turn Venezuela into a socialist state, where communes and state-owned enterprises play an ever-larger role.

But Chávez, who has crushed his opponents in the past two presidential contests -- winning by 15 to 20 points -- faces his toughest opposition thus far.

It comes in the form of a 40-year-old state governor who claims that he represents neither the left nor the right, and compares himself to David, the biblical character, fighting against Goliath, i.e. Chávez.

Henrique Capriles envisions Venezuela as a market economy with strong social programs, modeled after Brazil. He points out that under the watch of Hugo Chávez, productivity has stalled in the country, which relies heavily on food imports. Crime has also skyrocketed in Venezuela, where the homicide rate of 49 murders per 100,000 residents, is two and a half time higher than the murder rate in Mexico.

Capriles trailed Chávez by just two points in a survey published on September 25th by the Varianzas polling agency. A poll by Consultores 21, published on that same week, put Capriles ahead of Chávez by 3 percentage points, while other polls put him 10 to 15 points behind the socialist leader.

It's hard to know which polling firm to trust, but from what you can observe in the streets of Caracas, this race seems to be much closer than any presidential contest held in Venezuela in the past 15 years, with both candidates drawing massive crowds as they tour the country in the final days of their campaign.

A Socialist Democracy?

Opponents of Chávez say the Venezuelan president is autocratic, with some even calling him a dictator.

They point out that Chávez had the country's constitution changed so that he can be re-elected an unlimited number of times. The president has also expanded the number of judges on the Supreme Court and packed it with his supporters, while promoting laws that give him greater control over the state-owned oil company PDVSA.

One major concern for Venezuela's opposition as of late has been the decision by the Venezuelan congress to divert resources from state governments -- which are sometimes controlled by politicians opposed to Chávez — towards socialist communes, that are officially independent, but rely on the government for funds and for their legal status. A law passed in 2010, says these communes will have courts with jurisdiction over local residents, and that their objective will be to "regulate social and community life [and] guarantee public order, social harmony and the primacy of collective over individual interests."

Chávez supporters argue that the communes are merely an effort to expand democracy, and get people directly involved in government. The president's supporters also note that the indefinite re-election law was voted on through a national referendum, and that other changes in Venezuelan democracy have been approved legitimately, by that country's congress.

The government plans to register 3,000 communes around the country if Chávez is elected for another term, while the Capriles campaign says that it would stop this scheme and instead focus on generating family owned small and medium enterprises.

Freedom of Speech

During Chávez's most recent term in office, 34 radio stations had to go off the air, as well as a major TV channel that was critical of the Chávez administration. A media law amended in 2010 gives the government greater regulatory power over media and sanctions journalists who transmit messages that "foment anxiety in the public."

Opposition groups say the government is on a quest to silence critical voices such as RCTV, the TV channel that was denied a new broadcasting license in 2007 and pushed off cable TV in 2010 for not complying with laws that obliged the channel to broadcast government events.

The government argues that RCTV and other media outlets were not shut down because of their politics, but because they broke tax laws, communications laws, or acquired their broadcasting licenses through illegal means. It claims that its media laws protect children, and claims that it has democratized media ownership in that country by backing new community run media outlets.

Henrique Capriles recently said in a Facebook forum, that he would allow RCTV back on the air if he wins the election, claiming that power should be used "to open opportunities," and not to "shut down doors."

Chávez's government proposal for the years 2013 to 2019, says that media outlets should be strengthened, so that they can serve as an educational instrument, that will facilitate the transition to socialism.

Economic Liberty

Chávez came to power in 1998, promising to help Venezuela's poor to get their fair share of the country's vast oil wealth. He has fulfilled this promise by cranking up government investment in medical programs and pensions for senior citizens. He has raised salaries by decree, set up literacy programs and public housing schemes.

But Venezuela has some serious economic issues. Its large influx of oil dollars means that the country is naturally prone to high inflation rates. Big government spending programs have made inflation worse according to local analysts, even though the government has managed to slightly curb the country's inflation rate, -- a whopping 27 percent in 2011 -- by importing food and selling it for cheap prices at government run stores.

Chávez has also attempted to curb inflation by imposing price controls on a large number of items, such as milk, eggs and even toilet paper. But while such polices help to control prices for certain goods, they have also led to shortages, and they discourage investment from foreign and local companies.

The Venezuelan president has even nationalized large companies in order to improve local supply of certain items. In 2008, for example, several major cement companies were taken over by the government, partly because they were shipping their goods abroad for better prices. But again, moves like this one discourage investment, and they put government finances under constraint.

Federico Barriga, an analyst for The Economist Intelligence Unit, says that under Chávez the Venezuelan economy has been characterized by tight exchange rates that prevent people and companies from taking their money out of the country, high government spending and very low private investment in sectors other than oil.

"What keeps the economy going is that [the government] still produces 3 million barrels of oil per day. They're losing all the private production capacity of the country," Barriga said.

Barriga recognizes that social indicators have improved under Chávez, but says that government programs would be in severe trouble if the price of oil fell, because much of the government's budget comes from oil sales. According to the State Department, oil finances 40 percent of the Venezuelan government's budget revenues, and it accounts for 95 percent of the country's export earnings.

Capriles has promised to facilitate private investment in Venezuela and make it into a country that makes a living by exporting goods other than oil. It is not clear how quickly he would be able to dismantle price controls, as this would be politically unpopular, or to what extent he will be able to cut back on excessive government expenditures.

One thing that his campaign has been adamant about is cutting costly foreign aid projects in countries like Nicaragua and Cuba. This brings us to our next topic.

International Impact

Venezuela only has 28 million people and 19 million voters. But thanks to its oil wealth, and its strategic location the country punches above its weight in the international arena.

Cuba currently gets 100,000 barrels of oil per day from Venezuela at highly subsidized rates, in a deal that is crucial for the island's economy. Leaders of the communist island will closely monitor elections in Venezuela. Venezuela also provides aid to left-wing governments in Bolivia and Nicaragua. In Nicaragua, for example, the Venezuelan government spent $1.6 billion from 2007 to 2010, an investigation by the Christian Science Monitor reports.

Capriles has said he will cut these projects, and instead spend the money on fixing domestic problems, like electricity shortages in Venezuela. Chávez, who once also subsidized heating for impoverished New Yorkers, has expressed no intent to cut back on foreign aid.

"In Chávez's ideology, countries don't exist, what is important, for him is the [political] cause," international analyst Olaguer Chacón told ABC/Univision.

Chacón is a professor at Caracas' Andres Bello University. He reckons that if Capriles where to win the election, Venezuela would be more focused in defending commercial interests abroad through trade deals and in convincing other countries to back its territorial claims in the Caribbean sea.

"There wouldn't be confrontation with countries that are currently allied with Venezuela," Olaguer said, "but the objectives of those relationships would change."

Chacón added that if Capriles won the election, he would likely revise Venezuela's relations with Iran and Russia as well, but may also keep economic ties with those countries if they are mutually beneficial.

In the security realm, neighboring Colombia and the United States have tried to work with Venezuela to capture drug traffickers and confront Colombian rebels, who have allegedly found sanctuary in Venezuela.

The U.S. has had a tough time securing Venezuelan cooperation in this field, due to ideological differences with President Chávez, Colombian President Juan Manuel Santos on the other hand, has painstakingly improved the relationship with Chávez and his government, which recently captured a top Colombian drug trafficker on Venezuelan soil.

Santos has said he is neutral in the Venezuelan election. A wise move to make, considering President Chávez's strong stance against foreign intervention in Venezuela's affairs.

But recently Santos held a 15 minute meeting with Capriles in Bogota, which was widely reported on in local media outlets. "Why would he risk the relationship with Chávez, for such a brief meeting," Chacón wondered out loud during our recent conversation. Santos is known for being a clever politician and knowing how to pick his friends. Perhaps he senses that change is coming to Venezuela.