Fisher Investments on Global Elections

With Barack Obama and Mitt Romney gearing up for the first US presidential debate on Wednesday, most folks have politics on the brain. But the US election isn’t the only upcoming contest—voters in Venezuela and Georgia hit the polls this week. Elections in far-flung developing countries may not have huge capital markets impacts, but they’re worth watching as barometers of freedom and free markets’ global advance. Today, Fisher Investments reviews the latest political happenings in the developing world.

We start in Venezuela, where dictat—err, three-term incumbent President Hugo Chavez is up for a fourth term Sunday. Under 14 years of chavismo, Venezuela’s gone backward: Socialism has wreaked havoc on the economy and Venezuelans’ quality of life; crime runs rampant in the capital, Caracas; and personal and political freedoms have eroded as Chavez has overseen the constitution’s rewriting, seized control of media and used the military to crack down on political opponents. Chavez himself is battling cancer, and though he claims he’s cured, medical observers believe his health is declining. Meanwhile, for the first time since Chavez took power, the opposition has united around a credible challenger, Henrique Capriles, whose popularity rivals that of early-days Chavez.

Yet, as much as the contest should seem handicapped against Chavez, his ouster seems unlikely. Allegations of vote-rigging are already afoot: Due to the ballot’s confusing design, people who think they’re voting for Capriles may unwittingly vote for Reina Sequera or no one at all. Assuming, that is, Capriles’s supporters show up: Fear of the new electronic voting system may dampen opposition turnout. The system scans every voter’s fingerprints, and many worry it will record every voter’s choice—and worry Chavez will retaliate against those voting against him. Finally, lest we forget, Chavez controls the vote-counters. Thus, while Capriles could yet win, Venezuelans seem more likely to endure the status quo.

Across the world on Monday, Georgians voted in a parliamentary election that may be a turning point for democracy in the Caucasus. President Mikhail Saakashvili’s United National Movement (UNM) is neck and neck with opposition leader Bidzina Ivanishvili’s Georgian Dream coalition—not just for Parliament’s 150 seats, but for a premiership that will gain significant executive power once constitutional reforms take effect next year.

Both sides fear the winner could establish an autocratic regime, conjuring painful images of Georgia’s Soviet past. If UNM wins, some believe Saakashvili could become Prime Minister once his presidential term ends next year, extending and consolidating his eight-year grip on power. If Georgian Dream wins, some fear Ivanishvili will be a puppet leader for Russian President Vladimir Putin. Both men deny these speculations, but voters’ tensions run high nonetheless.

Saakashvili is polarizing. Positively, he favors strong relations with the West over Russia and is seeking NATO and EU membership. He’s also cleaned out much of the corruption that reigned under his predecessor, and he’s restored the rule of law. But allegations of human rights violations surround his 2008 attacks on separatists and Russian peacekeepers in breakaway region South Ossetia. Anti-government protesters were killed in 2011, and a prison abuse scandal rocked the last two weeks of his campaign. During this election, Saakashvili hasn’t exactly played fair—he’s revoked Ivanishvili’s Georgian citizenship and pushed through campaign finance limits, leading to the billionaire challenger’s $45 million in fines for illegal campaign contributions.

Ivanishvili is running on an anti-corruption platform, but he’s equally controversial. He’s Georgia’s richest man, but he made his fortune in Russia—and critics argue his $6.4 billion wouldn’t have survived if he didn’t have strong links to Putin. Putin isn’t shy about his distaste for having a pro-Western democracy in his backyard, and many speculate he’s behind Ivanishvili’s ascension—especially since his campaign has taken aim at Georgia’s political institutions while promising a stronger relationship with Russia. If he wins, some fear Georgia will revert to a Russian satellite, accomplishing what the Russian military couldn’t when it crossed the Georgian border in 2008.

It may seem like Georgian voters faced a double bind on Monday, but what we’re most likely seeing are Georgia’s growing pains. It’s a very young democracy, and this is the first truly contested election. Tense nerves on both sides are understandable. But despite the heightened rhetoric, it’s entirely possible Georgia’s system has enough checks and balances to prevent the victor from becoming a strongman. If international observers verify election was free and fair and the rule of law holds, Georgians might learn first-hand what Western democracies have known for centuries: Polarizing elections and political upheaval needn’t go hand in hand.