Venezuelan President Hugo Chavez is running for reelection at a time of brisk economic growth driven by unprecedented oil revenues. But while many Venezuelans are happily spending money, some economists are warning that a painful day of reckoning lies ahead. VOA's Michael Bowman has details from Caracas.

A man walks by campaign mural for President Hugo Chavez in Maracaibo, in Venezuela's oil-rich Zulia state, 1 Dec 2006

In a country where the poor account for three-fourths of the population, Venezuela has become one of the world's hottest markets for luxury items.

Business is brisk at Caracas' Mercedes-Benz dealership, where Alejandro Velazco is trading in his dilapidated pickup truck.

"My preferred car is the Mercedes 300. A classic car, like the 320 you see over there, that also suits my style," he says.

Velazco, a government-employed attorney and ardent supporter of Hugo Chavez, sees no contradiction between coveting a nice automobile while advocating his president's socialist ideals.

"Our economy is strong. Praise be to God, our country is moving forward," he says. "Economically we have evolved, thanks to President Chavez. He has transformed the nation."

Hugo Chavez speaks during news conference at Miraflores Palace in Caracas, 30 Nov 2006

Mr. Chavez was similarly upbeat at a recent news conference.

"How our country has changed economically! Today we have one of the most flourishing economies on the planet," he said. "Look at the figures: social investment has risen by more than 40 percent in recent years."

Yet even the president has expressed alarm over rampant consumerism in Venezuela, criticizing his country's new-found appetite for imported whiskey.

Noel Alvarez, who heads an association of Venezuelan retailers, Consecomercio, says the problem is not so much that Venezuelans are spending too much, it is that the country is producing little other than oil.

"In Venezuela we have an economic boom driven by demand [for products], not supply," he says. "People are buying goods and services. The banks are lending money. There is a stimulation of consumption. But domestic production capacity has not risen, so there is an imbalance between supply and demand."

Alvarez says government expropriations of privately-held lands and assets, coupled with strong anti-capitalist rhetoric, have discouraged investment to boost the country's production capacity. As a result, Venezuela is importing vast amounts of goods to satisfy consumer demand, causing oil revenue to flow out of the country almost as fast as it comes in.

Alvaro Brito, former head of Venezuela's largest business association, Fedecamaras, says the trend is not sustainable.

"Looking to the future, we will be in trouble unless the price of oil remains eternally high and we increase petroleum production each year," he says. "But the next time there is a global recession, demand for oil will fall - and so will prices. That will be catastrophic for Venezuela, because we are overly dependent on oil revenues."

Some economists have warned that Venezuela's consumer over-indulgence will inevitably be followed by a national economic hangover.

If a painful adjustment lies ahead, Caracas resident Sergio Schile says the Chavez administration's massive social spending will be to blame.

"If you give money away, it will go toward ends that are not productive," he says. "That is what populism is all about, and it does not bring progress."

Another Caracas resident, Chavez supporter Alberto Izaguirre, sees things differently.

"Our main problem has been that, for 40 years, previous governments did not distribute the wealth," he says. "It has always stayed in the hands of the elite. Chavez has broken this cycle, and has given everyone a slice of the oil revenue."

Opposition candidate Manuel Rosales with his security walks through supporters after speaking at campaign rally in Caracas, 25 Nov 2006

Sunday, Venezuelans cast ballots for president. Challenging Mr. Chavez is Zulia State Governor Manuel Rosales. Rosales has criticized the president's economic policies. But he has not refrained from injecting his own populist proposals, including the direct distribution of Venezuela's oil wealth to the people through government-issued debit cards.

"With all our oil wealth, what have the people been given? Bread crumbs and table scraps," he said. "But that is going to change. We will distribute oil revenue to its rightful owners: the Venezuelan people."