Chavez Cancer Hints at Turnaround in Venezuela - U.S. Relations

By Tom Ramstack

Caracas, Venezuela

Venezuelan President Hugo Chavez's announcement that he will undergo more cancer surgery is raising the possibility for a turnaround in relations with the United States.

Chavez is a harsh critic of the United States who has tried to rally Latin American countries against their northern neighbor.

Now, the recurrence of his cancer is creating speculation about whether he will be able to continue running for a third term as Venezuela's president.

"The probability that President Chavez could not be a candidate has increased after this announcement," financial analysts Alejandro Arreaza and Alejandro Grisanti from Barclays Capital wrote in a note to clients this week.

Chavez has been Venezuela's socialist president for the past 13 years. The next election is scheduled for Oct. 7.

He plans to return to Cuba this weekend for more surgery on what appears to be a malignant tumor in his pelvis.

"I promise I will fight without respite for my life," the 57-year-old Chavez wrote in a Twitter post on Wednesday.

He underwent surgery last year and emerged to declare himself cancer-free.

The fact the cancer returned in the same area of his body indicates the cancer is chronic and might have spread to other parts of his body, meaning it could be a terminal condition, according to some doctors.

"If it turns out to be malignant, there will surely need to be another phase of radiation therapy, and this would slow me down, of course," Chavez told the Venezuelan media.

The most likely person to replace him is the opposition leader, Henrique Capriles Radonski, the 39-year-old governor of Miranda state. He is known for his moderate policies and the strong support he wins in popular opinion polls.

He won the primary election for the Justice First party with 64.2 percent of the vote.

He has accused Chavez of using the judicial system to bring criminal charges against his opponents.

Other indications of a victory by Capriles were created by the fact Chavez has failed to groom a successor within his ruling Socialist Party of Venezuela, meaning an internal power struggle is nearly unavoidable when the current president leaves office.

The first hopes that Venezuela soon will depart from its protectionist and nationalistic policies were reflected in its bond markets this week.

The country's bond market rose as investors anticipate Venezuela will become a better credit market.

The bond rally is lowering borrowing costs for South American oil production.

The oil industry is particularly important for Venezuela and its customers. At 296 billion barrels, Venezuela holds the world's largest reserves of crude oil, according to OPEC figures.

Although it is thicker and harder to refine than Middle Eastern oil, it still surpasses the volume of Saudi Arabia, which is second in oil reserve volume at 264 billion barrels.

Under the Chavez administration, Venezuela has not achieved the full economic benefit of its oil.

Oil production had dropped to 3 million barrels a day, or 16 percent less than the 3.5 million barrels a day Venezuela produced in the 1990s.

The lower production resulted from Chavez's concerns about foreign influence, particularly from American companies.

He forced out key members of the oil industry's skilled workforce and management that he associated with companies like Chevron and Shell. He replaced them with members of the state-run oil company, called PDVSA.

However, Capriles has said that if he is elected president he would boost oil production and invite foreign expertise to help Venezuela's industry.