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In Venezuela's elections, will oil wealth trump desire for change?

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Venezuela's opposition presidential candidate Henrique Capriles (left) and President Hugo Chavez attend campaign rallies on Thursday.

Updated:4:10 p.m.ET

CARACAS, Venezuela -- There's a rule that holds true in Venezuela's capital: Five miles equals one hour.

Caracas traffic seems to be in constant gridlock because gasoline, at 24 cents a gallon, is cheap. And one consequence of living in an oil-rich nation is that nearly everyone has a car.

The standstill, however, is also a metaphor for Venezuela's progress and the central theme of this nation's elections.

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On Sunday, Venezuelan President Hugo Chavez, 58, will face the toughest election of his 14-year rule. Chavez and his oil-financed largesse are pitted against fresh-faced challenger Henrique Capriles' promise of jobs, safer streets and an end to cronyism.


 

Chavez staged a remarkable comeback from cancer this year and wants a new six-year term to consolidate his self-styled socialist revolution in the oil-rich nation.

Where's the oil benefit?
The Organization of the Petroleum Exporting Countries estimates Venezuela has the largest oil reserves in the world, but Caracas resident and anti-Chavez political operative David Smolansky says his country has little to show for it.

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"Venezuela has more oil that Dubai, still we have little to show for it. Our infrastructure is falling apart, we have food shortages, and street crime is an epidemic. I have a friend who was shot and killed for his Air Jordan sneakers," said Smolansky, 27. "I believe, and others agree, that the government is complicit in that the corrupt police here ignore crime." 

This weekend Venezuelan President Hugo Chavez will be facing his toughest political challenge since rising to power. If Chavez wins, analysts think Venezuelan bonds will sell off dramatically. CNBC's Michelle Caruso-Cabrera reports.

But others argue Chavez has delivered.

His supporters receive free housing and don't go hungry. They shop at state-run grocery stores where food is available at half price. Poverty in Venezuela has dropped from 50 percent to 32 percent in the last decade.

To Argenis Moreno, a 29-year-old Chavez supporter at a rally on Thursday night, the president represents "the interests of the people." He said he appreciates the improvements Chavez has made to the health and education system.

Asked if he believes life has improved under Chavez, Moreno replied, "Yes, of course it's a better life." And with a fist pump and a "Chavez!" cheer he expressed confidence that Chavez would win re-election.

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The golden goose
Oil production slipped 30 percent in the last decade after the government regained control of the oil industry in 2003. Critics say when ExxonMobile, Chevron, Total and ConocoPhillips were forced out, Chavez began to neglect the proverbial golden goose.

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The only attention "the oil goose" gets comes when the golden eggs are laid, the critics say. Venezuela shares its oil bounty at below-market prices with Iran, Nicaragua, China, and Bolivia, to name but a few. 

Playing the game
Andy Lipow, a Houston-based oil industry analyst, says Venezuela has not properly maintained or invested in its oil industry equipment, which is why oil output continues to fall.

"If President Chavez gets reelected, I expect that we will see lower crude oil sales to the U.S. as Venezuela and the U.S. move further apart, and that's going to cost the consumer more money for their gasoline," Lipow said.

The South American country is the fourth-largest supplier of oil to the United States, but neither Secretary of State Hillary Rodham Clinton nor President Barack Obama has made any statements on the upcoming elections.

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Erick Langer, director of the Latin American Studies Center at Georgetown University, says their silence is strategic.

"By simply ignoring what President Chavez says to the United States, the U.S. wins because the U.S. is not playing Chavez's game," he said.

That game is characterizing the United States as the boogieman. And, as his mentor Fidel Castro in Cuba once did, Chavez rallies the population against the boogieman and, consequentially, unifies their support for the man already in power. 

The opposition
At 40-years old, Capriles is a Chavez counterpoint: young, thin, and -- some say -- sexy.

Catholic Capriles has been especially offended when Chavez supporters call him a Nazi: His maternal grandmother fled Adolf Hitler-occupied Germany.

'Ghetto Chavez' and the battle for Venezuela's youth

The unmarried Capriles does not fit neatly into the Capitalism versus Socialism argument.

He is a well-financed, wealthy politician with left-of-center ideology. He has vowed to shed Chavez's vision of a state-led economy for a balance between social welfare and free enterprise.

Capriles has also been given a good shot at victory by coalescing various opposition groups. Together they agree on one thing: Chavez must go.

Too many Chavez supporters believe the nation's oil is "like a water faucet, that you open it and the dollars just starts coming out," said Jorge Pinon, a research fellow at the University of Texas at Austin.

As long as people have that simplistic understanding, "I believe there is a good likelihood that Chavez will be reelected," he added. 

Mood of the people
There's excitement on both sides, and a 90 percent voter turnout is predicted.

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Venezuela is more than twice the size of California, with a population of close to 29 million. Half of the population is under the age of 26 years old.

After hitting the polls on Sunday, most Venezuelans expect to learn who won by early Monday. Most best-known pollsters put Chavez in the lead. But two have Capriles just ahead, and his numbers have edged up in other surveys.

Once the winner is decided, a new debate will begin: Was every vote counted? Was the system rigged?

Reuters contributed to this report.

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