CARACAS President Hugo Chavez's severely weakened health as a result of an 18-month battle with cancer has raised the possibility of a new presidential election in Venezuela just months after the former soldier was re-elected to a third term.
Chavez has made no public comments since traveling to Cuba three weeks ago for his fourth cancer operation since his diagnosis in June 2011.
Government officials have given only scant details about his condition since the December 11 operation, offering only terse televised statements and vows that Chavez will soon return to the South American OPEC nation.
Before leaving, Chavez urged supporters to back Vice President Nicolas Maduro if the surgery left him unable to continue in office.
Venezuelans were surprised that he offered no celebratory statements to state television after his allies swept 20 of 23 state governorships in mid-December.
The government has also not shown any video footage of Chavez's recovery, as it did after previous operations. That has been taken as a bad sign for the famously garrulous leader.
Allies who for weeks insisted Chavez would be back in Venezuela to be sworn in on January 10 - the date mandated by the constitution - are now suggesting that that date could be stretched to accommodate his health.
If Chavez were unable to make the swearing-in date, it would not significantly alter the political landscape as he has already been elected for the next term. But the prospect has added to concerns that he may not be fit enough to run the country.
If Chavez died or resigned due to ill health, election authorities would have to call a new vote within 30 days.
Polls in the past have shown opposition leader Henrique Capriles, who lost to Chavez in October, beating Chavez aides including Maduro. But if Chavez were to die, Maduro would likely build his campaign on the president's legacy and tap into the mourning of his supporters. That would pose a considerably greater challenge for Capriles than past polls have suggested.
The government appears intent on delaying the swearing-in in the hope that Chavez's health will improve. A delay would also give Maduro more time to establish himself as the Socialist Party's new standard-bearer.
Maduro and National Assembly President Diosdado Cabello, widely believed to be rivals despite both being Chavez allies, have made a public display of unity in an effort to ward off rumors of division within the party's ranks.
However, a major downturn in Chavez's health could weaken the unity the president has maintained during his 14 years in power.
What to watch:
- Details on Chavez's health and any sign he may step down.
- Signs of Socialist Party in-fighting.
ECONOMY AND DEBT
Economists say Venezuela desperately needs a currency devaluation to bring its fiscal house back in order after blowout campaign spending last year that helped Chavez get re-elected. However, economic policy decisions now appear to be stalled because of Chavez's health.
A devaluation would provide more bolivars for each dollar from oil exports and help close a yawning fiscal deficit, but this would come at the cost of higher inflation, which is already a top complaint of voters.
Devaluation would also reduce the need for the sort of borrowing seen in 2011, when Venezuela and state oil company PDVSA issued a combined $17.5 billion in global bonds.
Issuance dropped sharply in 2012 as Venezuela boosted sales of local-market bonds and doubled a financing arrangement with China that allows it to borrow up to $8 billion at a time, repaid in oil shipments.
A shortage of dollars has pushed up the black market rate of the bolivar, which has been subject to currency controls for nearly a decade. The rate is now nearly four times the official rate of 4.3 per dollar.
There has been speculation that during his new term Chavez may extend state takeovers to largely untouched areas, including private health clinics, pharmaceutical companies and banks.
His government is also expected to extend a rigid system of price controls, currently in effect for a limited number of goods, across a wider range of products. That may aggravate product shortages and boost tensions with businesses already weighed down by crippling currency controls.
What to watch:
- Possible devaluation and economic slowdown.
- Bond issues or new financing deals with China.
OIL AND INFRASTRUCTURE
Crude oil sales remain the financial pillar of Chavez's self-styled socialist revolution.
PDVSA is one of the world's biggest energy companies, but its production and exports have stagnated over the years, despite government promises and ambitious targets for increases.
The company is required to hand over so much revenue to the state that it has neglected investment in older oil fields. PDVSA has also been criticized by union officials for poor maintenance and unsafe conditions at many of its facilities.
In August, an explosion killed more than 40 people at its biggest refinery, Amuay, in one of the deadliest accidents for the global oil industry in the last 15 years.
It was the latest in a string of outages and accidents across PDVSA's refinery network. A wave of nationalizations of service companies in 2009 has also hit production, with PDVSA struggling to take on wells and drilling services previously covered by private companies.
In addition, PDVSA was not paid directly for almost half the crude it pumped last year due to preferential deals with foreign allies, putting more pressure on its finances.
Chavez wants to increase production to more than 4 million barrels per day by 2014, from about 3 million bpd now, by developing the Orinoco extra heavy crude belt.
Some executives involved in the Orinoco joint-venture projects remain concerned, however, that uncertainties about infrastructure shortages and delays in payments by PDVSA could delay the pending developments.
What to watch:
- More deals to exploit the Orinoco.
- Outages at PDVSA's refineries and heavy-oil upgraders.
Venezuela faces more than 20 arbitration cases before the World Bank's International Center for Settlement of Investment Disputes, or ICSID. The largest claims, the result of expropriations by Chavez, extend to several billion dollars.
Rulings could force Venezuela to pay out large sums at a time when its cash flow is tied up by social spending.
Venezuela left ICSID in July, which prevents new cases from being filed, but does not affect pending claims.
Bond prices could drop on a negative ruling if traders and investors believe it will limit Venezuela's ability to service debt. Existing cases include claims by Exxon Mobil and ConocoPhillips for billions of dollars in compensation for assets nationalized in 2007.
Analysts say 140 other member nations would see judgments as enforceable, meaning companies could obtain court orders to seize Venezuelan assets, such as foreign refineries.
What to watch:
- Developments in cases before the World Bank tribunal.
- Statements from Venezuela on how it will handle old suits. (Editing by Kieran Murray and David Brunnstrom)