Now that President Hugo Chavez has been handed broad constitutional powers, he faces the colossal task of remedying this country's deep economic and social problems, an undertaking that Chavez acknowledges will be "a tough road."
In a national referendum on Wednesday, 72 percent of voters approved a sweeping new constitution for Venezuela that gives the state a bigger role in the economy, makes the judicial system more democratic and consolidates power in the executive branch.
The charter also guarantees social security coverage for all of Venezuela's 23 million people, regardless of whether they can afford to pay into the system. Economists say this provision is not viable given the state of the economy, stuck in its worst recession on record. Experts estimate that the plan will raise the number of pensioners from 600,000 to 1.9 million, and increase government spending by at least $3.6 billion a year.
The adoption of a new constitution has been a linchpin of Chavez's "peaceful revolution." He was elected a year ago on a pledge to rebuild this poor, but oil-rich nation after four decades of corruption and mismanagement by its traditional political parties.
But exactly how Chavez, a 45-year-old former army lieutenant colonel who led a failed coup seven years ago, will be able to use this new constitutional framework to devise concrete and effective policy remains unclear.
Chavez has already moved to clean up Venezuela's judiciary by firing and suspending about 300 judges and court workers. More dismissals are expected, but filling the vacant posts as quickly as possible with qualified professionals is considered crucial to reforming the system.
The largest wild card remains the economy. Despite a rise in global oil prices, the Venezuelan economy is expected to contract by about 7 percent this year, partly reflecting a lack of investor confidence that experts say has reduced private investment here to a 30-year low. Capital flight has also accelerated under Chavez; economists estimate that about $3.6 billion has left the country since he was elected. Some fear Chavez is moving Venezuela toward a dictatorship.
Nearly 600,000 jobs have been lost this year, pushing the official unemployment rate to 15 percent and forcing increasing numbers of Venezuelans to seek jobs in the underground economy, which now employs about half of the nation's work force. Overall, four out of five people live in poverty.
Although Chavez's popularity is high, surveys by the Caracas consulting and polling firm Alfredo Keller & Associates show his approval ratings slipping from 85 percent in March to 71 percent last week. Nonetheless, said the firm's president, Alfredo Keller, "Chavez has time on his side because people have bought the idea from him that they have been patient for 40 years and can be patient for a few more years while he tries to erase the social and economic contradictions in the country."
One of the most contentious of the constitutional articles extends presidential terms to six years from five and allows presidents to run for consecutive terms--a change that could allow Chavez to remain in office for a total of 13 years. The constitution calls for new elections, which are scheduled for early next year, for president, a new unicameral National Assembly and state and local governments.
Chavez remains popular among those who believe he is working to dismantle an entrenched political system that provided few benefits to the majority of Venezuelans while catering to the interests of the rich.
"Chavez has remained strong because he delivered on his promises to obliterate the old political establishment. But now he has to come through on the economic side," said Ricardo Penfold, chief economist at Santander Investment in Caracas.
Penfold added, "To get the economy on a sustainable growth track is an enormous challenge. In the short term, he could turn it around by increasing government expenditures as a result of higher oil prices, but that would jeopardize the long-term picture."
Economists say that for Venezuela, the largest exporter of oil to the United States, the rise in petroleum prices to about $23 a barrel from $7 last February has prevented a bad situation from getting worse. Venezuela's economy is expected to grow by about 3.5 percent next year with the help of increased oil revenues.
Even so, businessmen contend that the new constitution gives the state too much of a role in the economy and has added to the sense of uncertainty and skittishness among potential investors. For instance, the constitution enshrines continued state ownership of the oil industry and reduces the autonomy of the central bank in setting monetary policy. It also contains a number of clauses calling for legislation that would unravel hard-won 1997 labor reform by reinstating the retroactivity of severance payments according to a worker's last wage.