Venezuela's President Maduro speaks during a news conference at Miraflores Palace in Caracas
© Handout . / Reuters  /  REUTERS
Venezuela's President Nicolas Maduro speaks during a news conference at Miraflores Palace in Caracas, in this handout photo provided by Miraflores Palace July 23, 2014. REUTERS/Miraflores Palace/Handout via Reuters
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updated 7/26/2014 10:02:21 AM ET 2014-07-26T14:02:21

CARACAS (Reuters) - Venezuela's ruling Socialist Party began a six-day congress on Saturday with President Nicolas Maduro seeking to quieten hardliners who believe the state is failing to stem corruption or fix the economy.

It is the party's third congress since formation in 2008, but the first without its charismatic founder, former president Hugo Chavez who died last year of cancer after ruling the South American OPEC nation for 14 years.

"This congress is going to determine the future of the revolution in coming years," Maduro said ahead of the meeting, adding that the party's 7.6 million members had sent some 23,000 proposals to be considered by 537 delegates.

By sheer force of personality, Chavez was able to hold together the ruling party's competing factions, from Marxist ideologues to military officers and pragmatic businessmen.

Maduro, 51, a former bus driver who rose to be Chavez's vice-president, has been unable to replicate his political grip and faces a dilemma in preserving his predecessor's political legacy while rectifying deepening economic problems.

Venezuela has the highest inflation rate in the continent at 62 percent in the 12 months to June.

A Byzantine currency control system, with official rates ranging from 6.3 to 50 bolivars to the dollar and a black market level of 80, is creating price distortions, stimying private business and earning huge sums for those playing the system.

Shortages of basics continue across the nation, while electricity and water cuts are also angering Venezuelans.

"The daily life of working people has become a Calvary," said one disgruntled 'Chavista' group called Socialist Tide, lambasting "scandalous" graft and government policy paralysis in a paper ahead of the congress.

"There is confusion and pessimism over the future of the process and the conquests won," it said. "This situation jeopardizes the political stability of President Nicolas Maduro's government."

POLITICAL "BLOODSHED" AVERTED

The frustrations and fissures in government circles came into the open last month when Maduro pushed out of government Jorge Giordani, a long-time Chavez minister, Marxist academic and architect of Venezuela's economic controls.

The party then suspended a director who backed Giordani's departing criticism of Maduro for failing to stem multi-billion-dollar fraud with the currency controls.

Despite that high-profile affair and the grumbling at grassroots level, Maduro appeared unlikely to face a revolt at the party congress. A low turnout at delegate elections favored cabinet-backed candidates with superior mobilizing capacity.

"There could have been bloodshed but they've been able to domesticate it," said veteran Venezuela analyst David Smilde, of Tulane University. "They are going to sidestep the difficult questions. Then in August they will do what they have to. What they have in mind is slow change, like turning a big ship."

Maduro's vice-president for economy, Rafael Ramirez, has said the three currency control levels will likely be unified.

That would effectively bring a devaluation, create further price pressure, and risk more ire from grassroots party hardliners who do not want to see Chavez's model changed.

Economists see simplifying or even ending currency controls as an inevitable first step toward fixing economic distortions.

Then there is the hugely sensitive move to raise gasoline prices that are currently the cheapest in the world.

Officials have for months been trying to prepare Venezuelans to pay more for fuel, and the government could do with the extra revenues, but they seem to be baulking at passing the measure due to the risk of social unrest.

Venezuela's opposition parties, meanwhile, are licking their wounds after traumatic events earlier this year when hardline leaders spurred three months of street protests and barricades that led to 43 deaths in daily clashes between demonstrators, government supporters and security forces.

The unrest shook but failed to topple the government, and split the opposition coalition between radicals and moderates.

Venezuela's poor failed to join the protests that were largely a student and middle-class affair, and while slum-dwellers are often critical of the Maduro government, they do seem ready to throw their support behind his foes.

"Seventeen months after the departure of our comandante, we can say that the Bolivarian revolution that Chavez founded is still standing, stronger than ever, with a united people," Maduro said this week, urging a day of remembrance for Chavez on Monday, the 60th anniversary of his birth.

(Editing by Lynne O'Donnell)

(c) Copyright Thomson Reuters 2014. Click For Restrictions - http://about.reuters.com/fulllegal.asp

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