Everyone Listens to the Colonel.


Investors are increasingly worried about the possible victory of former Lt. Col. Chavez in Venezuela's presidential elections.

AS DECEMBER'S ELECTIONS approach and the popularity bubble of former colonel Hugo Chavez has not burst as many of his opponents had hoped. investors in Venezuela are struggling to assess the former military coup leader and his proposals.

"There is no question that investors are petrified of a Chavez victory." says Eduardo Cabrera, manager of Latin American strategy for U.S. investment bank Merrill Lynch. "It's impossible to imagine a positive spin to a Chavez win." "He scares investors [and] is a destabilizing factor," adds a European business leader, who asked not to be named.

The former paratrooper's messages have been mixed. He tells cheering crowds in the streets of Caracas that he would seek a moratorium on foreign debt payments. revise privatization contracts. and cut back petroleum investments. He has espoused the Cuban revolution and pledges to nationalize land, capital and natural resources, maintaining the basic industries in state hands.

At the same time, the 43-year old Chavez says he welcomes foreign investment. would even consider selling part of state oil giant PDVSA's holdings abroad, and would not declare a debt moratorium unilaterally--only after negotiations with creditors.

"He is a chameleon. He says whatever his audience wants to hear," says Tim Duhan, head of the British Chamber of Commerce in Caracas.

Some investors see him as a Venezuelan version of populist military leaders like Juan Peron of Argentina or Juan Velasco of Peru. while others see him as a potential Alberto Fujimori or Carlos Menem--two politicians who ran on semi-leftist platforms, then became free-market converts when in office. 0thers compare him to U.S. politicians. "He's sort of a Ross Perot candidate," says Cabrera.

In order to find out which way he will go, analysts are looking at Chavez's personality and who his supporters are. "His inconsistency makes me skeptical," says Pedro Palma, who heads Heptagon Financial Group, a local investment bank. "Many of his supporters would be hesitant to embrace market-oriented reform."

Indeed, many of his advisors are leftist intellectuals, many linked to the Central University in Caracas. He is backed by the PPT, a left-wing splinter party, and the socialist MAS party. Chavez has also found support from the agricultural sector, which he has pledged to support. The powerful Accion...

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