Chavez says GDP slump heralds death of capitalism

* OPEC member’s economy shrank by 5.8 pct in Q1

* Chavez says rivals are partying at “capitalism’s wake”

CARACAS, May 26 (Reuters) - Venezuelan President Hugo Chavez said on Wednesday that a recession in his Latin American country marked the death of capitalism and had nothing to do with his government’s socialist revolution.

The OPEC member’s economy is bucking the global recovery trend, with the central bank posting a 5.8 percent contraction for the first quarter of 2010 on Tuesday. [ID:nN25157365]

The increasingly grim macroeconomic environment -- which economists call “stagflation” because the slump has not cooled runaway inflation -- is now a major challenge for Chavez with a legislative election looming in September.

“GDP shrank in the first quarter and the bourgeoisie are having a party,” Chavez said, referring to political opponents who blame his policies for the recession.

“They don’t realise that the party they are attending is the wake of capitalism ... because the economy that is shrinking is the capitalist economy,” he said in a televised speech.

The poor fiscal performance in the first three months, compared with the same period of 2009, had been widely forecast by analysts who expect Venezuela to be the only country in the region to record negative growth this year.

The central bank attributed the contraction mainly to restricted access to foreign currency for imports, lower domestic demand and power rationing -- despite the recovery of crude prices benefiting the region’s biggest oil exporter.

“We are going to bury Venezuelan capitalism,” Chavez said, adding that his administration would “take from the bourgeoisie control of the money which belongs to all Venezuelans.”

After 11 years in power, he blames the economic woes on a global crisis in capitalism and the impact of a traditional elite who he says are determined to drive him from office.

Critics, however, say his socialist economic policies -- including widespread nationalizations, currency controls and pressure on the private sector -- are ruining what should be one of the continent’s richest nations, given its oil wealth. (Writing by Daniel Wallis; editing by Carol Bishopric)