By Daniel Cancel and Matthew Walter

Feb. 15 (Bloomberg) -- Venezuelans go to the polls today to vote on whether to scrap term limits and give President Hugo Chavez a chance to extend his decade-long rule indefinitely.

Chavez, who lost a referendum on the same question 14 months ago, says he needs more time in office to fully transform Venezuela into a socialist state. Today’s vote takes place as a looming recession and a stronger opposition threaten his plans.

“It’s life or death for Chavez,” said Patrick Esteruelas, Latin American risk analyst with the Eurasia Group in New York. “He can’t afford to lose legitimacy and political strength at a time when his government will have to face some very hard economic policy choices.”

Chavez, a 54-year-old former paratrooper, used billions of dollars in oil revenue over the past decade to fund food and health care programs, and reshaped Venezuelan politics with his confrontational style. With oil prices depressed, he’s counting on his populist charisma and loyal following to get out the vote.

Polls opened this morning under partly cloudy skies in Caracas, where voters stood in lines that stretched as long as two blocks in downtown. All voting centers nationwide are open and operating normally, Sandra Oblitas, a director at the National Electoral Council, said this morning in comments broadcast by state television.

“This is a celebration of democracy,” Finance Minister Ali Rodriguez said today after casting his ballot.

Vote Results

Voting centers will close at 5:30 p.m. New York time. The elections regulator said it expects to begin publishing results within the next three hours.

Voters narrowly rejected Chavez’s bid to eliminate presidential term limits as part of a broader constitutional overhaul in 2007, and last year his socialist party was beaten in elections in three of the country’s biggest states and Caracas. Those losses were the opposition’s first significant gains since Chavez took the presidency in 1998.

Under the constitution, Chavez would have to step down in 2013.

Venezuela, the fourth largest supplier of crude oil to the U.S., depends on oil for 93 percent of export revenue and half the government’s budget. Prices for crude have plunged 74 percent since touching a record in July, and Caracas-based Banco Mercantil said in a Feb. 3 report that income from oil will fall 66 percent this year.

Leading indicators show the economy has already slowed. Retail sales declined for the sixth consecutive month in October, the last period reported by the central bank. Car sales plummeted 43 percent in January from the same month in 2008.

Fiscal Gap

Goldman Sachs Group, Inc. and Barclays Capital Inc. say a devaluation of the country’s currency and higher taxes may be needed to close the fiscal gap this year. Those adjustments are likely to be unpopular in a year when, in addition to slower growth, annual inflation remains the highest among 78 economies tracked by Bloomberg.

The price on the government’s benchmark bonds due in 2027 dropped to 51.50 cents on the dollar from 93 cents on Sept. 1 before the global credit crisis deepened, according to JPMorgan. The yield rose to 18.62 percent from 10.08 percent.

“Whether he wins or loses, the economy is on a path of underperformance,” said Alberto Ramos, senior Latin America economist at Goldman Sachs in New York. “They’ll try to get out of the crisis by spending, which will aggravate other imbalances.”

A third electoral setback in as many years would signal waning approval for Chavez, who has called each of the campaigns a referendum on himself. Fissures in his ruling coalition might surface as allies jockey for position to succeed him, said Christopher Sabatini, policy director at the Council of the Americas in New York.

“This is his best window of opportunity to gain re- election,” he said.

More Changes

Chavez may view the amendment’s success as a renewed mandate to accelerate his march toward socialism, said Javier Corrales, an associate professor at Amherst College in Massachusetts.

After his 2006 re-election, Chavez took advantage of a five- year run-up in oil prices to carry out nationalizations. He took over the biggest telecommunications and electricity companies, a steel mill, the cement industry and a commercial bank. He also forced foreign oil companies Royal Dutch Shell Plc, Chevron Corp. and Repsol YPF into joint ventures as minority partners.

“I’d expect him to become more radical and arbitrary in his management of the economy,” Corrales said in a phone interview.

Chavez held a lead in opinion polls at about their margin of error in recent weeks. He lost the 2007 referendum by 2 percentage points as a result of abstentions amid shortages of basic foods including milk and sugar.

Chavez resorted to well-worn polarizing tactics early in the campaign, telling voters an opposition victory would bring “war to the streets” and end his programs for the poor.

“When Chavez tells them that it’s either me or violent chaos and an institutional vacuum, there’s more incentive to vote for him,” Esteruelas said.

Should Chavez lose, he’s already said there are other ways to amend the constitution before the next election in 2012. He said Feb. 2 that he could call a constituent assembly, or propose the same amendment again in another referendum.

“This is an issue of absolute anxiety for him,” said Alberto Barrera, co-author of “Hugo Chavez: The Definitive Biography of Venezuela’s Controversial President.” “For him the history of Venezuela and Hugo Chavez are the same thing.”

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Matthew Walter in Caracas at mwalter4@bloomberg.net.