We wrote last week about the odds of an electoral upset in Venezuela this autumn and the bull market in Venezuelan government bonds that would result if that starts to look realistic. As of the last couple of days, that’s starting to look a bit more likely. As BBC (and everyone else) is reporting:
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Venezuelan President Hugo Chavez has said that he will have to have further surgery after doctors found a lesion during medical tests in Cuba.
The 57-year-old had two operations in Havana last year to remove a cancerous tumour from his pelvis, and had said he was completely recovered.
He said the lesion was in the same area and was probably malignant. |
Obviously, any analysis of how serious Chavez’s health problems are is speculation – and there is plenty of that in Caracas right now – but while the president went on to downplay the risk, the way this affair has played out so far suggests they may be getting worse.
While it seems highly unlikely that he would withdraw from the race unless completely unable to carry on, there may be a greater chance that his usual energetic campaigning style will be restricted. That may benefit the opposition’s chances, although conversely Chavez could benefit from a sympathy vote.
The bond market appears to be tracking towards the first view. The benchmark 9.25% government bond due 2027 has tightened a little further since we last wrote and now yields 11.49%
Of course, while the markets would almost certainly welcome Chavez’s defeat in the short-term, it’s worth remembering that the outlook for a post-Chavez Venezuela may present plenty of difficulties and risks when it comes to making the transition and clearing up the country's many problems.