Venezuelans vote as Chavez likely to retain parliament

CARACAS (Reuters) - Venezuelans voted in a parliamentary election on Sunday and President Hugo Chavez was expected to keep control of the National Assembly in a poll testing his support ahead of a presidential ballot in 2012.

Opposition parties in South America's biggest oil producer are guaranteed to make big gains, however, after boycotting the last legislative election five years ago.

The focus is on whether the opposition can take more than a third of the 165 seats up for grabs, which would mean the socialist leader would need support from his foes for major changes to laws or to make appointments to key institutions.

Chavez, who was first elected president in 1998, is not on the ballot but his larger-than-life personality has dominated the campaigns -- and exposed sharp political differences in a country with vast oil and mineral wealth and a huge gap between rich and poor.

The former paratrooper delivered a torrent of Twitter messages through the night before polls opened at 6 a.m. (12 p.m. BST), exhorting supporters to get out and cast their ballots.

"Everyone up and on the offensive! We will demonstrate again that the revolution is here to stay! Nobody Left Without Voting!" he said from his personal account, @chavezcandanga.

Chavez is hailed by supporters as a champion of Venezuela's many poor, but denounced by critics as a boorish dictator. His popularity is in the 40 percent to 50 percent range -- well below his highs of previous years but probably enough to ensure his ruling Socialist Party retains a majority.

"The opposition are very confident this time but they do not understand how the people feel," said Carlos Cristiani, 44, wearing a Chavez T-shirt and selling newspapers in Sebucan, one of the most affluent neighbourhoods of the capital Caracas.

"Chavez has problems, that's clear, but nobody wants these other (opposition) people. They will be very disappointed."

In addition to the 56-year-old president's polarizing personality, the peaceful campaign has focussed on Venezuela's shocking crime statistics and its economic woes. Sky-high inflation has worsened a second year of recession.

In a televised broadcast from the Miraflores presidential palace, Chavez spoke out against opposition leaders: "They will never enter here again, the immoral ones, the mobsters, the stateless ones, the traitors. I am going to say this until the last day of my life."

SOCIALISTS SEEN AS FAVORITES

According to polls, the Socialists are a couple of percentage points ahead of a newly united opposition umbrella group, Democratic Unity. Combined with changes to voting rules and the electoral map that favour the government, analysts say that means Chavez's party enters the vote as favourite.

Opponents, however, say there is a wave of disenchantment with the president that will prove the polls wrong.

"We need to get rid of this crazy guy right now," said housewife Valeria Mendes, 37, walking with pro-opposition friends on the Avila mountain that towers above Caracas. "We've put up with him for too long. He's ruining our country."

The armed forces said they had temporarily closed the border with Colombia until 8 p.m. on Sunday (2 a.m. on Monday) "to avoid any problems that could hinder the electoral process."

Tensions had spiked between the Andean neighbours in early August after U.S. ally Colombia accused Chavez of tolerating leftist guerrillas on his territory. Chavez briefly cut diplomatic ties in protest, but relations have since improved.

Investors will be paying close attention to the vote, particularly because debt issued by the government and state oil company PDVSA offers very high yields for those willing to bear what some consider a significant chance of default.

Venezuela's yield spread over U.S. Treasuries remains the widest among nations listed on JP Morgan's Emerging Markets Bond Index Plus (EMBI+).

Its benchmark dollar-denominated 2027 global bond rose 6.73 percent to 70.56 on Friday from 66.13 two weeks ago, thanks, analysts say, to the non-violent run-up to the vote and increased investor appetite for risk.

Some market players will be hoping for opposition gains because they are wary of the nationalizations by Chavez that have put a wide swath of the economy under state control, including multibillion-dollar oil projects run by U.S. majors.

"As far as the bond market is concerned, as long as Chavez doesn't have the two-thirds majority, that will hopefully slow down some of his more radical actions and the Assembly will be able to put a brake on them at least," Russ Dallen, head trader at BBO Financial Services in Caracas, told Reuters.

In a nation of party-lovers who have made Venezuela one of the world's highest consumers of whisky per capita, alcohol sales have been banned throughout the election period.

(Additional reporting by Andrew Cawthorne and Frank Jack Daniel; editing by Mohammad Zargham)