Chavez's decree move enrages Venezuela opposition

Venezuela's President Hugo Chavez watches through the door of a helicopter during a visit to the flooded areas on the south side of Maracaibo's lake in Maracaibo December 8, 2010.

CARACAS (Reuters) - Venezuela's parliament gave preliminary approval on Tuesday for President Hugo Chavez to rule South America's top oil producer by decree for a year, prompting opposition accusations that the socialist leader is behaving like a dictator.

Chavez has ruled by decree three times before during his 11 years in power, and says he needs to again to deal with a national emergency caused by floods that have killed about 40 people and left almost 140,000 homeless.

Venezuela's National Assembly supported the controversial proposal with a first vote on Tuesday. A second and final vote on the "Enabling Law" was expected by Thursday. Once passed, it would allow Chavez to issue decrees across a wide range of areas including housing, land, finances and security.

Private banks and property owners are bracing themselves for another wave of nationalizations by Chavez, who has taken Venezuela down a steadily more radical route in an effort to entrench "21st century socialism."

"He is winning time with the tragedy to put limits on the new National Assembly," opposition politician Pastora Medina told Reuters. "He is consolidating himself as a dictator."

A freshly united opposition coalition won about half the popular vote at a parliamentary election in September to take 40 percent of seats in a new Assembly that will convene on January 5, when they had hoped to put a check on Chavez's power.

"It is a brutal attack, without anesthetics, against democratic life," said Teodoro Petkoff, editor of leading opposition newspaper Tal Cual. His paper denounced the decree move, along with a package of laws being rushed through, as a "totalitarian ambush ... a Christmas ambush" for Venezuelans.

Seeking to outflank his rivals -- and with an eye on the next presidential vote in 2012 -- Chavez asked the outgoing parliament, which is dominated by members of his ruling Socialist Party, to grant him fast-track decree powers for 12 months.

Wall Street took the development in its stride.

"This news is not completely surprising and the market is reflecting that," said Bret Rosen at Standard Chartered. He said the balance-of-power implications were more worrisome than the anticipated fast-track fiscal measures.

Venezuela's benchmark global 9.25 percent 2027 paper, one of the world's most-traded emerging market bonds, rose 0.562 points to bid 74.500.

SALES TAX HIKE

Chavez's latest move raises concern about whether he would accept defeat if the 2012 election does not go his way. Polls show his traditionally high ratings have slipped, with the nation split down the middle in September elections.

Outside parliament, several dozen opposition demonstrators protested against the measure, while supporters of the president rode past on motorbikes shouting "Long live Chavez!"

The president has said one of his first moves will be to hike Venezuela's sales tax to raise funds for reconstruction.

In the past he has used decree powers to pass about 100 laws, including measures to nationalize part of the oil sector and increase the number of Supreme Court judges.

Chavez is legally entitled to ask parliament for the fast-track powers, but opponents say his real motive is to marginalize their gains in the parliamentary elections and stop them trying to block his agenda after they take their seats.

Chavez mocked his foes as "crazy" and "in need of Valium" for suggesting he was trampling on the country's constitution.

"All the decree laws will benefit the nation," Chavez, who casts himself as a savior of the poor, said during a walkabout among flood victims with Ecuador's President Rafael Correa.

Chavez, who has inherited Fidel Castro's mantle as Latin America's leading U.S. critic, still has a strong power base in city slums and impoverished rural areas.

Although his foes' view him as an autocrat ushering in Cuban-style communism, supporters say he is redressing years of imbalance and has encouraged democracy by giving power and funds to grass-roots groups that decide on some public works.

Chavez made his move for decree powers right before the Christmas holidays, when Venezuelans disappear en masse to the beach, making it hard for the opposition to mobilize protests.

But Diego Moya-Ocampos, an analyst at IHS Global Insight, said a major political showdown was brewing. "This will no doubt generate an institutional crisis," he said.

(Additional reporting by Hugh Bronstein in Quito, and Deisy Buitrago, Diego Ore, Patricia Rondon and Marianna Parraga in Caracas; Editing by Daniel Wallis and Christopher Wilson)