Chavez solidified his support by tapping the world's biggest oil reserves to subsidize food, provide low-cost housing and expand health care in poor neighborhoods. Questions about the state of his health following three cancer surgeries mean attention will now shift to who would succeed Chavez if his health fails, said former Brazilian Foreign Minister Luiz Felipe Lampreia.
"The succession race will begin almost immediately," said Lampreia, who oversaw ties with Venezuela when Chavez took office in 1999. "It could create a problem of instability in the government because it's not clear who his preferred successor is."
Respect the Results
Capriles vowed to accept the electoral council's decision in a statement to reporters today before voting ended.
While Diosdado Cabello, the president of the national assembly, and Foreign Affairs Minister Nicolas Maduro are potential replacements, Chavez has dismissed the need for a succession plan since he claims to be free of cancer.
"Undoubtedly, chavismo without Chavez is in trouble and the question of his successor would challenge his party in ways it hasn't before," said Miguel Tinker Salas, a professor of Latin American history at Pomona College in Claremont, California, who wrote a book about Venezuela.
Investors seized on Chavez's health scare and Capriles' strong campaign this year, boosting the price of bonds issued by South America's largest oil producer. Venezuela's bonds returned 30 percent this year through September, more than any country except Ivory Coast, according to JPMorgan Chase & Co.'s EMBI Global index.
Venezuela's dollar bonds yield 11.05 percent on average, down 3.06 percentage points this year while still the highest among major emerging-market countries tracked by JPMorgan's EMBIG index.
Under Chavez, poverty fell to 31.6 percent at the end of 2011 from about 50 percent when he first took office. Extreme poverty declined to 8.5 percent from about 20 percent over the same period. Venezuela has the lowest level of inequality in Latin America and the Caribbean, according to the United Nations.
A pre-election spending boom of 30 percent fueled economic growth of 5.4 percent in the second quarter and speculation that the government will devalue the bolivar. While inflation slowed for nine straight months to 18.1 percent in August, it's still the highest annual rate of 102 economies tracked by Bloomberg after Belarus, Iran and Argentina, where economists say prices are rising at more than double the government's estimate of 10 percent.
"He's inevitably going to have to devalue and it's going to be immediately," said Kathryn Rooney Vera, an emerging- markets analyst at Bulltick Capital Markets in Miami. "He has to do it even just for government financing reasons."
Rooney Vera forecast the bolivar will tumble from a fixed rate of 4.3 bolivars per dollar to at least 7 per dollar.
The government will weaken the official rate 31 percent to 6.2 per dollar in the first quarter of 2013, generating more revenue in local currency from each dollar of oil exports, according to the median estimate of 14 analysts surveyed by Bloomberg in July.
The 40-year-old Capriles had sought to draw a contrast with his rival in an energetic campaign that included stops in almost 300 communities. By unifying a fragile alliance, Capriles may have sealed his role as the leader of the opposition going forward, said Javier Corrales, an associate professor at Amherst College in Massachusetts who wrote a book about Chavez's government.
"Capriles is starting his career still," Corrales said in a phone interview. "There are going to be elections in December and April so he has some opportunities to continue to play a role."
As pre-election polls showed the race tightening, Chavez apologized for his government's shortcomings, vowing to eliminate poverty and be a "more efficient" leader.
"I'm committed to being a better president starting on Oct. 8," he told supporters at an Oct. 2 rally in Lara state. "Although I've committed mistakes, I've never failed you."
Fireworks erupted across Caracas after the results were announced. Chavez supporters had been partying in the streets ahead of the announcement.
"Chavez is an icon," said Lampreia. "As long as he's alive, most people will vote for him."
Editors: Bill Faries, Philip Sanders
To contact the reporters on this story: Jose Orozco in Caracas at jorozco8bloomberg.net; Charlie Devereux in Caracas at cdevereux3bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19bloomberg.net