Chavez' Big Test

On Sunday, it's election day in Venezuela. All indications are that President Hugo Chavez and the political party that he founded, the United Socialist Party or PSUV (Partido Socialista Unido de Venezuela), might lose key strength around the country. Chavez himself is not on the ballot.

While Hugo Chavez, himself, has regained popularity from a low 48 percent to the current 58 percent, things aren't very pretty in Venezuela and that could result in many PSUV losses in this Sunday's election. First, the nation's capital, Caracas, is the most crime-ridden city in the world as measured by the United Nations. Trash litters many of that city's streets. Food shortages, especially f0r staples like bread, milk and eggs, are constant and widespread throughout the country. Unemployment is still high and inflation is out of control and, as we all know, Venezuela's only real export, oil, has tumbled in price by 65 percent.

Oil, especially, has hurt the Chavez government. He had used it as his "socialist" goodwill tool. He either gave it away or sold it below market prices to show what a good friend Venezuela was. When oil prices were high against his low cost of extracting it, it was an easy thing for him to do. Now, with oil prices in collapse, his commitments are draining the Federal coffers. Further, when oil was high, Hugo went shopping. Like a kid in a candy shop, he bought tanks, planes, and guns from Russia and even more weaponry from other countries like Korea and China. That wasn't very long ago. Now, deliveries on his shopping sprees will be coming due soon and the money for his weapons fling will also be due. All those previous profits from oil will be going out the door and nothing will be replacing it since prices have fallen so dramatically.

Economically, Venezuela is a one-trick pony. Their entire strength is built on oil. Domestically, you can buy gasoline for 15 cents a gallon because the price is artificially controlled. My guess is that won't last long and the Chavez government will have to raise prices to stop the bleeding. That will just add more fuel to Chavez's out-of-control inflation.

Sunday's elections might be the beginning of the end of socialism in South America and, if the world does go into recession, it will be his form of government that will probably get hurt the worst. Friendly, socialists like Bolivia (who has no oil) won't be far behind. It will all depend on how many political seats Chavez and the PSUV loses on Sunday. Any significant number of losses could signal his end. On the other hand, if he maintains or increases his strength, that could easily signal an end to Venezuela's fragile democracy.

One last comment. Chavez might not go down without swinging. He may try to use the military to gain control of any lost areas of the country. However, the military has, in the past, been split in it's support of Chavez. In fact, parts of the military were instrumental in toppling Chavez during a very short-lived coup in 2002. Whether or not there are more or fewer Chavez loyalists in the military, today, remains to be seen. But, for Chavez and, for that matter, any other socialist dictator, the military option is always on the table. Whether Chavez wins or loses, this should be an interesting election and one that sets the tone for all of South America from this point forward. Just mark my words.