Published by Financial Times

Less than 10 days after Venezuela’s opposition picked their candidate to run against President Hugo Chávez in October’s election, the socialist leader has announced that he will be back in hospital in the “coming days” for another operation, adding to speculation that his health may be the biggest player the future of the country.

Bonds rallied on the news of Chávez’s ill health. The yield on the country’s 9.25 percent bonds due in 2027 fell six basis points to 11.82 percent earlier today, their price rising 0.38 cents to 81.88 cents on the dollar, according to Bloomberg data.

Doctors in Cuba found a small lesion in Chávez’s pelvis, the same site of a cancerous tumor which was removed last year leading the president to declare himself free of cancer.

“Because of the growing rumors, I’m obliged to give this information now,” said Chávez, as he toured a factory in his hometown of Barinas.

“I’m in good physical condition to face this new battle,” he said, adding that no one should be alarmed.

Those politically close to Chávez will be most alarmed, as his campaign for re-election gears up.

Part of this campaign is a planned 46 per cent increase in government spending this year, funded by both the $120 oil barrel and bond sales.

The money will go into social programs intended to help the poor, Chávez’s core support.

Venezuela is expected to sell more bonds in the coming weeks. Indeed, Venezuela last year issued a total $17.5bn worth of bonds, more than the rest of Latin America combined.

However, analysts believe that Chávez’s health may be so severe as to rewrite the electoral calendar.

“The probability that President Chávez could not be a candidate has increased after this announcement,” wrote Alejandro Arreaza and Alejandro Grisanti of Barclays Capital in a note to investors on Tuesday.

“It could also alter the electoral calendar, postponing the presidential election that was set to be held on October 7, particularly considering that it has not been formally called by the National Electoral Council (CNE).”

The pair point out that the election must be held before the end of 2012, according to Venezuela’s constitution.

In vitriolic language even for his standards, the president has personally attacked Henrique Capriles Radonski, the opposition’s newly appointed leader. “Now we have the loser,” Chávez said on Friday.

“We’re going to pulverize you in the October election!”

The president added: “You have a pig’s tail, a pig’s ears; you snort like a pig. You’re a low-life pig.”

This comes on top of attacks on Capriles’ Jewish roots and alleged homosexuality, both made on state media last week.

The harsh rhetoric shows that the government here is worried. Chávez’s health will only make the next eight months more nailbiting as after 13 years in opposition, Capriles and his supporters push for victory.