Setback for Chavez in Venezuela vote

CARACAS (Reuters) - Venezuela's opposition won a third of the seats in parliament and claimed a majority of the popular vote in elections on Sunday, boosting its hopes of defeating President Hugo Chavez at the next presidential poll in 2012.

Although Chavez's Socialist Party retained a majority in the 165-seat National Assembly, it fell short of its goal of keeping at least the two thirds it needs to pass major laws or make appointments to the Supreme Court and electoral authorities without the support of its political foes.

As results came through early on Monday, the newly-united opposition Democratic Unity umbrella group said it had won 52 percent of the overall vote. If confirmed, that would be a symbolic blow to Chavez in the 12th year of his rule of South America's biggest oil exporter.

"We are the majority!" sang opposition supporters after the tallies were announced overnight.

The polls were watched closely by investors with money in Venezuelan debt, which offers very high yields. Its benchmark 2027 global bond jumped on the news from polling centres.

"This is a huge result for the opposition. They exceeded even their own expectations," David Smilde, a Venezuela expert from the University of Georgia, told Reuters.

Following years of defeats and missteps, and a boycott of the last parliamentary poll five years ago, opposition leaders will now focus on trying to topple the man they call an autocrat at the ballot box in 2012.

With final results still coming in, however, Chavez was close to the three-fifths of seats needed to give him special decree powers that he could use to bypass parliament and drive forward his socialist reforms.

Election authorities said on Monday that his Socialist Party won at least 94 seats in the Assembly and that Democratic Unity took at least 60 seats. Five seats went to other parties and the results from the remaining six were not yet in.

A baseball-mad former tank soldier who rose from a poor rural childhood, Chavez first tried to take power in a 1992 coup and has lost only one election since he won the presidency at the ballot box in 1998.

The 56-year-old has since become one of the world's most recognizable politicians, taking the crown from Cuba's Fidel Castro as the leading critic of Washington in Latin America, and nationalizing the assets of foreign oil companies.

CHAVEZ "IMPOSSIBLE TO PREDICT"

Chavez is widely accused of using bullying tactics against his opponents, although he can argue his democratic credentials are burnished by the opposition gains in Sunday's vote.

He is still the country's most popular politician, but his approval ratings have been hit by a deep recession, a soaring violent crime rate and electricity shortages.

An electoral council source backed the opposition's claim of winning 52 percent of the popular vote, and the outcome was welcomed by investors in Venezuela's popular bonds.

Debt issued by the government and state oil company PDVSA offers particular high yields for those willing to bear what some consider a significant chance of default.

In early trading on Monday, its benchmark 2027 global bond price rose 3.5 percent to bid 73.00.

The election was essentially a referendum on Chavez's rule, and he sought to put a brave face on the results, declaring via Twitter overnight that it was a "new victory for the people."

His ruling party had always been likely to get a higher percentage of seats than votes, due to changes in electoral districts and voting rules that favoured it.

Facing the prospect of negotiating with politicians he views as bourgeois capitalists, Chavez may yet move to curb parliament's influence. He could devolve some powers to community groups that are loyal to him, or pass legislation before the new parliamentarians take office in January.

Analysts are unsure whether he might now radicalize his self-styled "Bolivarian Revolution," named for independence hero Simon Bolivar, or soften policies to appeal to the many who voted against him.

"He has always been impossible to predict," said a senior Western diplomat in Caracas.

The election result signals the unofficial start of the presidential race in which Chavez hopes to extend what will by then be nearly 14 years in power. For the opposition, it gives them their first major presence in the Assembly for years.

"It's going to be a hostile parliament, that's for sure," Guillermo Miguelena, the Caracas secretary-general of the opposition Democratic Action Party, told Reuters.

"Now we need to keep the unity we have achieved."

(Additional reporting by Andrew Cawthorne, Enrique Andres Pretel, Deisy Buitrago, Eyanir Chinea, Marianna Parraga; Editing by Kieran Murray)

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