Maduro battles lawmakers, default risk resurfaces

OREANDA-NEWS. January 15, 2016. President Nicolas Maduro scored a political victory today in an ongoing constitutional clash with Venezuela's opposition-controlled legislature, but more battles lie ahead as the oil-based economy shrivels.

Three deputies from the opposition democratic union (MUD) coalition that the supreme court's electoral chamber has blocked from assuming their legislative posts agreed to stand down temporarily until voting fraud allegations are resolved. The government-controlled electoral authority (CNE) has not commented on the dispute since declaring the results of the 6 December election won by the opposition.

The trio?s departure reduces the coalition's majority in the 167-member national assembly from 112 deputies or 67pc of the legislature to 109 deputies or 65.2pc, just shy of the two-thirds absolute majority needed to implement sweeping legislative changes.

National assembly president Henry Ramos Allup said the "temporary departure" of the three indigenous deputies from Amazonas state would have no impact on the legislature's ability to advance its agenda. He asserts that the absolute majority remains intact based on a reduced overall tally of 164 deputies.

A presidential palace official tells Argus that the assembly's "intelligent decision to accept the rulings of a supreme court that they initially dismissed as politically biased against the opposition establishes an important legal precedent in terms of the court's constitutional and institutional legitimacy."

Maduro will deliver a constitutionally mandated annual report on the state of the republic to the assembly on 15 January, since the first battle between the government and legislature has been settled in the government's favor, the palace official said.

During his upcoming address, Maduro will also present the government's proposed emergency measures to "win the economic war against Venezuela," the official added.

Maduro's recent appointment of a market-hostile academic to the newly created post of productive economic development vice president suggests that the government's proposals will embrace more price controls, tougher capital restrictions and higher taxes. It is not clear if the measures will require the assembly?s approval.

The government is under pressure to act as the risk of a default on sovereign debt, or state-owned oil company PdV?s obligations, resurfaces in response to the tumbling oil price. The next big payment, amounting to around \\$2bn, comes due mainly from PdV next month. Venezuela's total foreign debt reported by the government is over \\$112bn.

PdV's average export price dropped below \\$24/bl yesterday for the first time in over 12 years, the energy ministry said.

Preliminary 2015 estimates disclosed by central bank economists indicate that Venezuela's economy contracted by up to 10pc in 2015 and inflation spiked to 270pc.