Bold Venezuela Call Puts Wall Street Contrarian in Spotlight

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(Bloomberg) -- Francisco Rodriguez relishes playing the role of contrarian pundit in Venezuela. There was the time he boldly, and correctly, predicted Hugo Chavez would comfortably win re-election in 2012, or the time in 2015 he foresaw how the opposition would gain a two-thirds majority in Congress.

But those out-of-consensus calls pale in comparison to the audacity of his current forecast: That President Nicolas Maduro stands a good chance of being defeated in the April 22 election.

True, Rodriguez, who’s the chief economist at a boutique New York firm called Torino Capital, isn’t flat out saying Maduro will lose -- he describes the race as too close to call -- but that he’s even willing to entertain the thought makes him an extreme outlier. Most Venezuela experts call the vote a sham after Maduro systematically turned what had once been Latin America’s most vibrant democracy into an authoritarian regime that controls the local media and jails political enemies. The main opposition parties have become so dispirited that they’re boycotting the election.

Rodriguez is undaunted. He says that, regardless of the obstacles, Venezuelans looking for relief from an unprecedented economic collapse and humanitarian crisis will vote against the president.

“A lot of analysts are afraid to take these views -- if you get it wrong, you’re looked at differently,” Rodriguez said from Caracas, where he was visiting with government officials and taking stock of the mood on the streets. “I look carefully at what people are saying and read my competitors’ research. But in the end, I have to sit down with the data and analysis and come up with a call.”

Some critics say that Rodriguez’s view is distorted by his relationship with Henri Falcon, the most prominent opposition candidate, who has courted support from Wall Street and Washington officials. Those meetings often featured Rodriguez by his side, leading some to suspect he’s jockeying for a future cabinet position.

Rodriguez says that while he thinks Falcon would make a great president, he has no role in the campaign. He says it’s common for analysts to serve as informal advisers to politicians and he’s willing to share his thoughts on the economy with anyone who will listen. The relationship, he says, has no bearing on his analysis of the race.

Of course, Rodriguez’s forecasting history hasn’t been spotless. Like most analysts, he failed to foresee the government’s landslide victory in October’s gubernatorial races. He says that his latest prediction takes into account what he got wrong by adjusting for the accuracy and bias of local polling services.

That adaptability has served him well. In a country where the government has stopped publishing consistent economic information, Rodriguez’s research reports, chock full of hard-to-find data points, are prized by bond investors trying to decipher whether officials will find a way to scrounge together the money to pay them back.

“I have a lot of respect for Francisco,” said Bent Lystbaek, a money manager at Danske Capital, one of the biggest holders of Venezuelan debt, said from Lyngby, Denmark. “He has a lot of good connections there” and “is also a brilliant economist.”

Rodriguez, a 48-year-old Caracas native who holds a doctorate from Harvard University and worked in the congressional budget office during Chavez’s rule, expects widespread discontent toward Maduro to fuel turnout in defiance of the opposition’s calls for a boycott. More than three-quarters of Venezuelans want a new government amid the economic malaise in a country with the world’s largest oil reserves, according to a poll by Caracas-based Venezuelan Institute of Data Analysis.

“There’s one chance every six years to change your government,” Rodriguez said. “Letting that moment go without doing anything is not an idea many people support. A lot of people think this is the moment to go against Maduro.”

One significant caveat to Rodriguez’s position is that he says there’s a good chance the opposition will indeed gather more votes, but Maduro will still be declared the victor because of government fraud.

Maduro has vowed to oversee a fair election, but his officials have already banned two popular opposition figures, activist Leopoldo Lopez and ex-governor Henrique Capriles, from running for president and jailed hundreds of anti-government demonstrators. Ricardo Hausmann, a government minister in the 1990s who now runs the Venezuela Project at Harvard University’s Growth Lab, has said the situation is so dire that foreign military support may be required to force regime change.

Rodriguez, a one-time disciple of Hausmann’s, disagrees on that point. He says the two most likely election results are deeper authoritarianism if Maduro wins or economic revitalization if he’s displaced. Extending Maduro’s mandate could allow him to hang on far longer than any critic would have ever imagined, a la Robert Mugabe in Zimbabwe or the Castro brothers in Cuba. An opposition victory could lead to a free-market overhaul similar to the one orchestrated by Mauricio Macri following his election in Argentina in 2015.

A few weeks ago, Rodriguez had been more confident about an outright opposition victory. But he’s given himself a bit more wiggle room after the opposition announced its boycott and demanded a later election date. Things could still change, with the opposition said to have renewed private talks with the government as Maduro seeks some legitimacy for the vote.

“An opposition win is possible and there’s a reasonably high likelihood,” he said. “And I do think that’s out of consensus.”

On that point, at least, he is definitely right. 

Analysts’ Views on Election

NAME
MOST LIKELY WINNER
MAIN REASON
PROBABILITY OF MADURO WIN
Luis Vicente Leon
Head of Caracas polling firm Datanalisis
MaduroNon-competitive and opposition boycott“This is obviously a non-competitive election.”
Risa Grais-Targow
Eurasia Group director of Latin America
MaduroVoting manipulation“Higher than 60%”
Siobhan Morden
Nomura head of Latin American fixed income strategy
MaduroNot a fair election“High”
Jennifer McCoy
Political scientist at Georgia State University and former director of the Carter Center’s election monitoring group
MaduroDivided opposition“High”
Miguel Tinker Salas
Venezuelan historian at Pomona College in Claremont, California
MaduroDivided opposition“Good chance”
Ricardo Hausmann
Venezuelan economist at Harvard University
MaduroDictatorshipMaduro’s survival will be determined by military support rather than popular support
Raul Gallegos
Author of “Crude Nation: How Oil Riches Ruined Venezuela”
MaduroDictatorship“No question”
Jorge Quiroga
Former Bolivian president 
MaduroDictatorshipVenezuela will be installing its own North Korea in the Caribbean
Benjamin Gedan
Former South America director on National Security Council
MaduroDictatorship“Very high”

©2018 Bloomberg L.P.

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