Chavez's defeat a warning to his Andean allies

By Alonso Soto

QUITO (Reuters) - Venezuelan President Hugo Chavez's stunning defeat in a vote on expanding his powers through constitutional changes may serve as a warning to his Andean allies as they try the same tactic to make leftist reforms.

Chavez suffered his first defeat at the ballot box in Sunday's referendum vote, a clear boost for opponents of the anti-U.S. bloc he leads in the Andean region.

Bolivian President Evo Morales faces opposition groups fiercely resisting his reform plans, and Ecuador's President Rafael Correa is drawing up his own package of proposals.

Although Chavez's proposals were the most far-reaching, all three men want to use constitutional rewrites to gain wider powers and push through changes aimed at giving more state resources and power to the poor.

Chavez has led the charge but many Venezuelans feared he would use the powers to impose a dictatorship. Even his moderate supporters were concerned, and he fell short.

"It shows the other guys that you have to be very careful when pushing controversial, radical reforms because it could backfire," said Alberto Ramos, a senior analyst at Goldman Sachs. "They might assess the situation better, and not rush for radical changes that the population is not ready for."

The Venezuelan reform package included scrapping term limits on Chavez's rule, allowing him control of the central bank's foreign currency reserves and giving him more powers to nationalize large areas of the OPEC economy.

While Chavez remains popular, his proposals united the usually fractured opposition, and a nascent student movement took to the streets in often violent protests.

Morales, a former coca farmer and Bolivia's first indigenous president, also faces the threat of serious unrest.

He wants reforms giving more autonomy to a poor, indigenous majority and a special assembly is debating the constitutional rewrite but he faces tough opposition from conservative foes.

BOLIVIA DIVIDED

They recently shut down six of Bolivia's nine provinces in a general strike and three people were killed in protests that underlined deep divisions between the Andean highlands city of La Paz, a Morales stronghold, and the wealthy lowlands.

Business elites accuse Morales of slavishly backing Chavez after the Venezuelan leader spent some of his country's vast oil revenues to finance social programs in Bolivia.

"The polarization in Bolivia is chronic and will end badly," said Riordan Roett, director of Latin American studies at Johns Hopkins University in Washington. "The Chavez defeat should encourage the Bolivian opposition to keep opposing."

Correa, who also has close ties with Chavez, is proposing similar leftist reforms to Ecuador's constitution, including expropriating nonproductive land and stripping the central bank of its autonomy.