Venezuela: A ray of light

Walter T. Molano, GUEST COLUMNIST

There is an old joke in Caracas: "How do you emigrate from Venezuela and return with a million dollars? You first leave with two million."

The interesting thing is that there is a trickle of Venezuelans who are starting to return.

After weathering the tropical heat of Panama and the mediocrity of Miami, some people are opting for home. It's not that they ran out of money, it's just a good time to head back.

Elections are less than eight months away, and there is hope that the country could experience a change in leadership. The three dozen political parties that comprise the opposition are coalescing under the banner of United Venezuela. The leading opposition candidate is Capriles Radonski, the former mayor of Baruta.

A lawyer by training, Radonski is the scion of a prominent commercial family. His political campaign hinges on two major points. The first is his age. Just under 40 years old, Radonski is calling for a generational change. This is an important point for a country such as Venezuela, where the median age is only 25 years old.

This is in contrast to the median age in the United States, which is 36; Germany, 43; and Chile, 31. It is also a way to surreptitiously undermine President Hugo Chávez's physical condition.

Although he claims to be cured of cancer, there have been several stories that time is running out. The second major point is Radonski's admiration for former President Lula of Brazil. Instead of advocating a shift to the right, Radonski wants to pursue the socialist policies that were so successful in Brazil.

This is particularly appealing to the working poor.

Further integration with Brazil would also bode well for Venezuela, which shares a long contiguous border with the Amazonian giant. Of course, Radonski's privileged background makes an easy target.

Nevertheless, Venezuelans are not giving up hope. In less than a week, the country heads to the primaries to select the final candidates who will run against Chávez. A resounding vote for Radonski would create a strong political opponent.

Chances are that Chávez will still win the presidential elections in October, but Venezuela's succession plan requires an interim president to call elections if less than half the term was served.

Strongest candidate

Such a scenario would leave Radonski as the strongest candidate in the field. Of course, he would face a strong opposition in the legislature, but it would set the stage for an orderly transition of power.

This political calculus is the reason why many Venezuelans are shifting their views. For the first time, in more than a decade, there is a true prospect for change. In addition to returning home, many people are snapping up assets —including properties and bonds.

The spreads on Venezuelan and PDVSA instruments are narrowing, and the rally could continue for some time.

Despite all of the destruction of wealth that was orchestrated by Chávez and his merry band of Bolivarians, Venezuela is still an impressive country. Its infrastructure gives some of its noteworthy neighbours a run for their money.

Colombia's and Brazil's highway system, if it can be called that, pale in comparison. Several Venezuelan cities, such as Caracas, Maracaibo and Valencia, have well-developed subway systems. Meanwhile, the capitals of Colombia and Peru can only dream of having such forms of mass transportation.

Venezuela boasts a slew of modern airports. It has one of the fastest Internet networks in the continent. Likewise, Venezuela is one of the largest oil producers in the world, exporting more than two million barrels of oil per day. This is a small percentage of its full potential, given that PDVSA was maimed early in Chávez's tenure.

Oil reserves

PDVSA has the highest level of proven oil reserves in the western hemisphere, with more than 77.5 billion barrels. Its mineral deposits include a treasure chest of gold, iron ore and bauxite.

The country's macroeconomic indicators are just as impressive. Venezuela's debt-to-GDP ratio is 23 per cent and it has a current account surplus of more than US$25 billion, while most of its highly rated peers sport sizeable deficits.

Venezuela's only drawback is its political leadership, but now change may be on the horizon. This is why some Venezuelans are coming home.

Our biggest fear was always Venezuela's succession. Chávez did a very good of dismantling the country's political and economic institutions in order to centralise all power within his command. Therefore, a change in leadership had the potential to be a messy affair. Moreover, the opposition was badly fragmented.

This meant that in a country with such an abundance of guns, oil and money any transition would be a tricky proposition.

Mother Nature and good sense opened a path that could lead to an orderly changing of the guard. Therefore, it's time to take a fresh look at Venezuela.

Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC. Email wmolano@bcpsecurities.com.