by Alxander Manda

CARACAS, Oct. 8 (Xinhua) -- Although Venezuelan incumbent President Hugo Chavez won another victory on Sunday, policy challenges remain for him who has been in office since February 1999.

His victory triggered a massive celebration in the capital by Chavez supporters, with fireworks lighting up the night sky after a preliminary result was announced by the National Electoral Council (CNE) at 10:00 p.m. local time (2300 GMT).

It gives Chavez another six years to push forward his policies focusing on the nation's poor, which he describes as a "Bolivarian Revolution" or "21st century socialism."

With 90 percent of the vote counted, the CNE reported that Chavez had won around 54.8 percent of the vote. Henrique Capriles, the only candidate considered capable of offering a serious challenge, won around 44 percent, and conceded defeat shortly after the partial result was announced.

Enrique Alvarez, a financial analyst at IDEAglobal in New York, told Xinhua that Chavez's reelection represents an element of stability for the nation, but some Chavez's economic policies, including fixing its currency, risk creating serious problems.

"Having two exchange rates has a long history of creating a perverse incentive for corruption in Latin America," said Alvarez. "The attraction of buying the currency at the official rate and selling into the higher parallel rate is an enormous arbitrage opportunity."

Supporters of Capriles, who drew 6 million votes, published the opposition's economic plans to the electorate the day before the election, containing measures to gradually ease Venezuela's currency control so that it can move closely to rates in the informal market.

The mismatch between the two rates is unpopular in Venezuela and might have given Capriles a last minute boost among the nation's middle-class.

"Everyone is affected by this, as most goods are imported at the floating rate due to a lack of dollar supplies at the official rate," a Venezuelan businessman told Xinhua, adding that "something has gotten worse under Chavez's rule."

Chavez supports the argument that a strong interest rate helps contain inflation and that his wider policies, including massive homebuilding, literacy and public health programs, help those who suffer most from financial problems.

"Chavez remains popular with many Venezuelans because he has transparently transferred income from oil exports to the lower class," Eric Farnsworth, an analyst from U.S.-based Americas Center, told Xinhua. However, he argued that social spending is harming government finances.

In a statement published after the election, financial rating agency Fitch warned that if current policies remain in place, inflation could continue to stand at the current 22 percent and the government's budget deficit may rise beyond current forecasts of 6.9 percent.

Chavez has used state-run oil company Petroleos de Venezuela (PdVSA) to bankroll programs for the poor and also supplies cheap oil to energy poor nations in the Caribbean, allowing them to pay in kind and with cheap credits.

It is clear, however, that Chavez has changed Venezuela's politics profoundly. Capriles, a candidate from a rich Venezuelan family, sought to win power by promising a government modeling Brazil's Luiz Inacio Lula da Silva, a former union leader whose presidency was characterized by a mix of social programs and business-friendly development plans.

Among the development plans is a vast pre-salt oil field in the deep waters off Brazil's Atlantic Coast. To fund the activity, state-oil company Petrobras went public on the New York Stock Exchange.

By contrast, PdVSA is completely state-run. Prior to Chavez, Venezuela has basically sought to follow the lead of its neighbor Colombia, the U.S.' closest ally in Latin America.

The election race, which has given Chavez the strongest challenge since coming to power, may have also triggered changes in Chavez. Notable in his victory speech were references to seeking unity with the opposition, describing all Venezuelans as "brothers in Simon Bolivar's fatherland."

Bolivar, after whom Chavez named his Bolivarian Revolution policy, is a Caracas-born 19th century general who led much of South America to independence from Spain and is a personal hero to Chavez. Enditem