By Eurasia Group Analyst Patrick Esteruelas

2009 may well prove a tough year for Hugo Chavez -- and for Venezuela. Low oil prices continue to sap the country's economic strength and to compromise the president's ability to maintain the lavish spending that buttresses his government's popularity.

The numbers tell the story. Crude oil accounts for about 95 percent of Venezuela's total export income and more than half of all government revenue. For every $1 fall in the price of oil (West Texas Intermediate or WTI), the country's public sector loses about $400 million in annual revenue. Inflation has now pushed past 30 percent, reaching a 12-year high.

The government has enough cash in reserve to muddle through for the next year or two, even if oil prices remain low. Its external liquid assets total about $60 billion, including international reserves and foreign currency assets. But reserves are falling at a worrying rate, because Venezuela must import virtually everything except crude oil. Compounding the problem, now would be an especially bad time for Chavez to impose austerity measures.

This is a crucial moment for Chavez and Venezuela, because the president is about to put his popularity to a crucial (and very public) test. He has called for a national referendum, likely to be held in February, which will ask Venezuelan voters to endorse reform of the country's constitution. The changes would, among other things, remove presidential term limits. (Under the current constitution, Chavez's presidency will end in 2012.) This latest vote will mark Chavez's second attempt to avoid becoming an early lame duck; he first failed to persuade voters to back constitutional change in December 2007.

Chavez will probably lose again. Most Venezuelans like their president; latest polls have his personal approval rating above 55 percent. But they don't like him enough to give him the chance to become president for life.

Just 37 percent of voters currently favor a lifting of term limits, while 53 percent reject it outright, according to Datanalisis, a Caracas-based pollster.

So why is Chavez doing this now? Because growing criticism of his government's mismanagement of the economy and less and less money available to spend his way out of trouble suggests that his political standing will only deteriorate over time. In other words, this may be Chavez's last, best chance to extend the life of his presidency.

If he loses, he won't recover easily. Rejection will be difficult to shrug off, because he is likely to personalize the campaign for a "yes" vote. A loss would weaken his hold on the chavista movement and his ability to contain criticism from dissidents. It would trim his political coattails and give the country's often-fractious opposition an opportunity to gain new political momentum.

But the larger worry is that a "no" vote, by threatening Chavez, could undermine Venezuela's democracy itself. If he loses, Chavez will likely lose whatever faith he still has in the democratic process, encouraging him to consider pushing the country in a more radical and authoritarian direction. That outcome would generate a level of political turbulence we haven't seen in Venezuela for several years.