Hugo Chávez is in a free-fall, and the uncertain transition that will follow him bodes ill for the stability of the country with the Western Hemisphere’s largest oil reserves. The signs that started appearing last year, when he lost the referendum that would have prolonged his power, have become quite pronounced, and were evident in my recent cursory visit to the country.

Chávez’s ascent was not surprising. After years of failed and corrupt governments dominated by the Venezuelan elite, he came to power because of the populism that is still attractive in South America, where Che Guevara is a cult hero and Fidel Castro remains an admired leader. Nor was it unique. Others such as Vladimir Putin in Russia and Mahmoud Ahmadinejad in Iran ride sentiments loaded with empty nationalism and class warfare. Anti-Americanism is essential to rally the people, tapping on their thinly disguised jealousy and frustration at their failure to absorb modernity and development. Dissatisfaction with the Anglo-Saxon dominance of international business and pop culture sometimes takes whimsical turns. Support for the regime becomes the face of inferiority complexes, with a vengeance.

Chávez would be a comical figure were it not for $100-plus oil prices, which have papered over his shortcomings and prolong the eventual day of reckoning.

The trouble with ideology and fanaticism is that they are not particularly suited for running countries. Venezuela has perhaps the unhealthiest economy in South America. All productive sectors have been thwarted. Nationalization has been used to strip companies of any profitability. After national oil company PDVSA was usurped (the only enterprise that could afford it, though barely) telecommunications and utilities were next. But Chávez didn’t stop there, continuing on to the cement and steel industries.

Lands have been confiscated and artificial price and wage controls are imposed on everything. Food shortages are epidemic and, not surprisingly, people are hoarding. There is virtually no investment in infrastructure and deterioration is evident everywhere. What is not obvious to many Venezuelans is that current government actions will take decades to remedy, even if Chávez were to leave tomorrow.

To bolster the regime, services are given away, and at a time of sky-high oil prices, gasoline sells for $0.02 to $0.05 per liter (less than $0.20 per gallon).

The national currency, the Bolivar, just shed three zeros to become the Bolivar “fuerte.” The official exchange rate is 2.15 Bolivars to the dollar, but nobody in the country seems to buy that. All over the Caracas airport, people accost passengers, offering 4 to the dollar. The Bolivar dropped to as low as 6.5 and then climbed a bit after a massive infusion of dollars by the Venezuelan Central Bank. The actual rate is probably 7 Bolivars (or more) to the dollar.

The country’s economic predicament may not be the worst part. Even more palpable is the social animosity. Chávez has directed such a venomous attack on the middle class that it has led to a counter-reaction. The polarization between Democrats and Republicans in the U.S. pales compared to that between Chavistas and their opponents. Few leaders are as reviled by their citizens as is Chávez in Venezuela. But what is far more worrisome is the hatred now nurtured by the none-too-political middle class towards Chávez and the Chavistas.

Anticipation of the regime’s unavoidable unraveling is countered by uncertainty over the alternative. Some of the more thoughtful anti-Chavistas reluctantly admit that it may be better to wait until the presumed end of the nightmare, four years from now. Any crisis (such as a small drop in oil prices due to a U.S. or global recession, or food riots) could lead to the frightening possibility of a decimated and unprepared opposition filling the vacuum.

Chavismo is such an anachronistic version of socialism that, after the monumental collapse of social engineering (in the U.S.S.R.) and the end of the Cold War more than two decades ago, one would have thought it could not resurface. By equating government support with patriotism, Chávez has practically eliminated the possibility for any smooth transition. That’s why one anti-Chavista hoping for a smooth exit asked pessimistically, “Can you imagine Chávez voluntarily passing the presidential sash to anybody else?” .