In the September 26 legislative elections in Venezuela, President Hugo Chávez's ruling party lost its two-thirds majority in the National Assembly, retaining only a simple majority. The results indicate a shifting political landscape, with the opposition rejoining the democratic process after years of boycotts and sabotage. While many Venezuelans expressed dissatisfaction with Chávez's governance, especially regarding security and economic issues, the opposition faces challenges in unifying and presenting a compelling alternative vision for the future.

1. Q
In Venezuela's legislative elec-
tions Sept. 26, the ruling party of
President Hugo Chávez lost the
two-thirds majority in the
National Assembly that is needed to
secure approval for controversial meas-
ures unopposed. The PSUV did retain a
simple majority in the Assembly, however.
To what extent do the election results sug-
gest a new political environment has
taken shape in Venezuela? What will the
opposition do with its newfound gains?
How will Chávez react? What do the leg-
islative election results mean for Chávez's
plans for re-election in 2012?
A
Bernardo Álvarez, Venezuela's
ambassador to the United States:
"More than suggesting a new
political environment, the results
of the Sept. 26 elections highlight the con-
solidation of Venezuela's participatory
democracy and the transparency and relia-
bility of our modern electoral system, one
that has handled 15 elections since 1998. It
is important to point out three key points.
First, President Chávez's party, PSUV, has
become one of Venezuela's strongest polit-
ical forces, despite being very young. The
number of seats the PSUV won—98, or 60
percent of the assembly—is more than any
other single party, and more than even his
former party, MVR, won in the 2000 elec-
tions. Second, the opposition has finally
rejoined the democratic game. After years
in which it endorsed a coup and sabotage
of the oil industry, not to mention a boy-
cott of the 2005 legislative elections, the
opposition seems to have understood that
it can best play a role within Venezuela's
democratic, constitutional and fully legiti-
mate system of government. Finally,
despite the fact that the different parties in
the opposition coalition managed to win
65 seats, a study from the Venezuelan think
tank Centro Gumilla (financed by the
Open Society Institute) found that 60 per-
cent of Venezuelans conceive of their
democracy in social terms and strongly
value citizen participation in the process.
Inside This Issue
BOARD OF ADVISORS
Copyright © 2010, Inter-American Dialogue Page 1 of 3
www.thedialogue.org Monday, October 4, 2010
FFEEAATTUURREEDD QQ&&AA:: Did Venezuela's Elections
Change the Political Environment? .....................1
Rousseff, Serra Headed to Second
Round in Brazil's Elections...................................2
Correa Backs Off Threat to Abolish
Congress, Visits Wounded Military.....................2
Peru's Villaran Leading Lourdes
Flores in Lima Mayoral Race................................2
Nextel, Televisa Win License
for Mexico 3G Phone Network ............................2
Bunge's Buenos Aires Offices Raided
in Tax Dispute With Government.........................2
FEATURED Q&A
Did Venezuela's Elections Change the Political Environment?
Continued on page 3
A stronger-than-expected showing for
Green Party candidate Marina Silva in
Brazil's national elections Sunday has
pushed the presidential race to a second
round. Dilma Rousseff will face José
Serra on Oct. 31. See story on page 2.
Photo: Minhamarina.org.br
Strong Silva Support Helps Push
Brazil Race to Second Round
Diego Arria
Director,
Columbus Group
Genaro Arriagada
Board Member, Banco
del Estado de Chile
Joyce Chang
Global Head of
Emerging Markets
Research, JPMorgan
Chase & Co.
W. Bowman Cutter
Former Partner,
E.M. Warburg
Pincus
Alejandro Delgado
Senior Economist for
Latin America, Africa,
the Middle East
& Asia Pacific,
General Motors
Dirk Donath
Managing Director,
Eton Park Capital
Management
Jane Eddy
Managing Director,
Corporate & Govt.
Ratings Group,
Standard & Poor's
Marlene Fernández
Corporate Vice
President for
Government Relations,
Arcos Dorados
Jason Hafemeister
Vice President,
Allen F. Johnson &
Associates
Peter Hakim
President Emeritus,
Inter-American
Dialogue
Donna Hrinak
Vice President,
Global Public Policy &
Gov't Affairs, PepsiCo
Jon Huenemann
Vice President,
U.S. & Int'l Affairs,
Philip Morris
International
James R. Jones
Co-chair,
Manatt Jones
Global Strategies LLC
John Maisto
Director,
U.S. Education Finance
Group
Nicolás Mariscal
Chairman,
Grupo Marhnos
Thomas F.
McLarty III
President,
McLarty Associates
Carlos Paz-Soldan
Partner,
DTB Associates, LLP
Beatrice Rangel
Director,
AMLA Consulting LLC
José Antonio Ríos
Chief Executive Officer,
Vadium Technology Inc.
Andrés Rozental
President,
Rozental & Asociados
and Senior Fellow,
Brookings Institution
Everett Santos
President,
DALEC LLC
Shelly Shetty
Senior Director, Latin
American Sovereign
Ratings, Fitch Inc.

2. Political News
Rousseff, Serra Headed to Second
Round in Brazil's Elections
Front-running Workers Party candidate
Dilma Rousseff did not win enough votes
in Sunday's national election to take the
nation's presidency in the first round of
polling, local daily O Estado de São Paulo
reported. A run-off election is scheduled
for Oct. 31. With more than 90 percent of
votes counted, Rousseff, the hand-picked
successor to popular current president
Luiz Inácio Lula da Silva, held a com-
manding lead with 46 percent of the vote,
while opposition candidate and former
São Paulo governor José Serra captured
33 percent of the vote. Green Party candi-
date Marina Silva had 20 percent, a high-
er number than some polls predicted.
Rousseff had been polling in the weeks
ahead of the election with more than the
50 percent of the vote that would have
been required to avoid the runoff, but
Silva's strong showing cost Rousseff some
support, along with recent allegations of a
kickback scheme involving a former top
aide to Rousseff. Three of Brazil's largest
states went to Serra's party, the PSDB, in
governor races Sunday. In São Paulo,
Geraldo Alckmin narrowly won an out-
right victory with just over 50 percent of
the votes, beating Aloizio Mercadante of
the PT, who had 35 percent. In Minas
Gerais, the PSDB's Antonio Anastasia will
remain in office after gaining 63 percent
of the vote. In all, 27 state governors, all
513 members of the Chamber of
Deputies, two-thirds of the Senate and all
1,059 members of the state assemblies
were elected Sunday.
Correa Backs Off Threat to Abolish
Congress,Visits Wounded Troops
Ecuadorean President Rafael Correa this
weekend backed away from threats to dis-
solve Congress and rule by decree follow-
ing national police strikes last week that
led to a state of emergency and allegations
that Correa was kidnapped, according to
the Financial Times. On Saturday, the
presidential Web site showed photos of
Correa at a military hospital visiting
wounded soldiers that were loyal to his
administration in Thursday's street vio-
lence. Eight people were confirmed killed
in the strikes and looting that stemmed
from police who were protesting cuts to
wages and benefits, and several hundred
have been reported injured. Police chief
Freddy Martínez resigned on Friday
morning following the day's chaos. Three
police colonels were arrested and released
over the weekend, pending an investiga-
tion into charges stemming from the
rebellion. Correa maintains that the inci-
dent was a coup attempt by the opposi-
tion and sections of the military and
police, although senior officials with
those entities insist that it was lower ranks
of police forces that prompted the strike
action. Some analysts suggest Correa may
have problems, beyond his adversaries, to
contend with among his own allies. "He
could use this to solidify and mobilize his
base,” Michael Shifter, president of the
Inter-American Dialogue told the
Financial Times. "But it strikes me that
this has revealed serious divisions within
his own party. I'm not sure that he's going
to be able to generate the kind of support
and backing that will enable him to con-
tinue governing without real problems."
Economic News
Anti-Counterfeit Stings Yield
600 Arrests, $50 Million in Goods
A transnational operation coordinated by
Interpol and the World Customs
Organization targeting organized crimi-
nal counterfeiting networks across 13
countries in South America has resulted
in more than 600 arrests and the seizure
of fake goods worth $50 million, Interpol
said in a press release Friday. Carried out
under the umbrella of Operation Jupiter,
goods recovered by police and customs
officers across the region included fake
satellite receivers, car parts, soft drinks
and designer sneakers. Since the launch of
the operation in March, more than 300
raids and checks were conducted across
Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, French Guyana,
Panama, Paraguay, Peru, Suriname,
Uruguay and Venezuela.
Page 2 of 3
NEWS BRIEFS
Copyright © 2010, Inter-American Dialogue
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Nextel, Televisa Win License
for Mexico 3G Phone Network
Mexican regulators on Friday grant-
ed a highly contested license for
U.S.-based mobile phone company
NII Holdings, which operates the
Nextel brand in Latin America, and
broadcaster Televisa to team up to
deploy a wireless phone network in
the country, Reuters reported. The
two companies won rights for the
spectrum with a $14 million bid in
July, but rival companies, such as
struggling third-ranked carrier
Grupo Iusacell, challenged the
license, suggesting that Nextel paid
too little for the spectrum and was
the only bidder.
Bunge's Buenos Aires Offices
Raided in Tax Dispute With Gov't
The Buenos Aires offices of U.S.-
based food and agriculture con-
glomerate Bunge were raided Friday
by Argentine tax authorities, Reuters
reported. Tax officials said last
month that four of the country's
biggest cereal and grain exporters
had underpaid taxes, citing Bunge
for evading $298 million in taxes.
Bunge says it is cooperating with
authorities in the case.
Peru's Villarán Leading Lourdes
Flores in Lima Mayoral Race
The center-left candidate in Lima's
mayoral race, Susana Villarán, is
leading conservative Lourdes Flores
with 39 percent of the vote in
Sunday's regional elections, state
news agency Andina reported late
Sunday night. A former presidential
candidate, Flores had 37 percent the
vote with about 12 percent of the
ballots counted. Elsewhere in the
nation, the APRA party of President
Alan García was forecast to win at
most one governorship of the 25 up
for grabs, Reuters reported today,
citing an Ipsos Apoyo poll.

3. Page 3 of 3Copyright © 2010, Inter-American Dialogue
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Hence, the opposition coalition should
not make a mistake in reading the sup-
port they won for this election (around
47 percent of the popular vote, and not 52
percent of the vote as they have said),
since President Chávez's vision for the
country and his efforts to prioritize eco-
nomic, social and cultural rights res-
onates with many Venezuelans. As for
2012, President Chávez has always done
extremely well in presidential elections,
and we expect that he will again in 2012."
A
Leopoldo López, national coor-
dinator of Voluntad Popular and
former mayor of Chacao: "A
solid majority of Venezuelans
voted for alternative candidates and
against the policies and candidates of the
ruling party, in an election with a very
high turnout. Considering all of the
advantages that PSUV carried—from
control of the media, to use of public
funds, to the fear that votes against the
ruling regime will be recorded and pun-
ished—this result carries great signifi-
cance. The clear conclusion is that
Venezuelans are hungry for new ideas
and a better future, and that should give
courage to new leaders who are willing to
put forth an alternative vision. So what
happens next? In the short term, signifi-
cant obstacles will remain. The fact that
the PSUV still controls 60 percent of the
seats despite only winning 48 percent of
the vote exposes the mockery that has
been made of democracy in Venezuela.
President Chávez has vowed to press for-
ward with his program of authoritarian
control—and we should fully expect him
to try to minimize the result and margin-
alize the people's vote. The important
variable is the opposition, and whether
we are willing and able to seize the oppor-
tunity before us. Can we show the people
a vision for the future that is different
from the past? Can we unite behind new
leaders who can connect with
Venezuelans of all walks of life? And will
international institutions such as the OAS
fulfill their mandate to enforce agree-
ments on democracy and human rights?
If these three questions can be answered
affirmatively, then future prospects for
democracy in Venezuela will be strong."
A
Michael Shifter, president of
the Inter-American Dialogue:
"The election results left little
doubt that there is enormous
and widespread dissatisfaction with
Chávez and his government's policies. He
is vulnerable in the 2012 presidential
elections. Despite his emotional bond
with many Venezuelans, and the extent of
his institutional control and manipula-
tions, the deterioration in the country's
security and economic situation has just
been too great, and it has hit Chávez's
main constituency—the very poor—the
hardest. In the end, governance is crucial,
and even though Chávez may still be
Venezuela's most popular politician, his
governance has been dismal by every
measure. Now the focus will shift to the
Venezuelan opposition, which has long
been fractured and occasionally foolish
and inept. They have a real opportunity
to challenge Chávez but face two critical
tasks. The first is to come up with an
appealing leader who can effectively com-
municate a vision for a post-Chávez
Venezuela that includes Chávez support-
ers. The second is to develop serious pol-
icy ideas to address a range of problems,
particularly mounting crime and eco-
nomic distress. Venezuelans are well
aware of Chávez's deficiencies, whatever
his intentions might be. It is doubtful that
Chávez will now become more pragmatic
and moderate and seek to reach accom-
modation with parts of the opposition.
That would be out of character. He could
resort to other tricks and tactics that he
has used in the past, but they are not as
likely to work this time around. The
mood of the country has shifted, and a
growing share of the Venezuelan popula-
tion seems tired of confrontation and
polarization."
The Advisor welcomes responses to this
Q&A. Readers can write editor Gene
Kuleta at gkuleta@thedialogue.org with
comments.
Featured Q&A
Continued from page 1
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