Venezuela is often referred to as the capital of South America, and in some respects, its easy to see why. In terms of notable leaders on the continent, one doesn’t immediately think of Luiz Inacio Lula da Silva, President of a Brazil that comprises nearly half of the land mass, but indeed, of Venezuelan President Hugo Chavez.

Save for perhaps the tyrannical Robert Mugabe, there is no larger-than-life geo-political persona than that of Chavez, a man who wears his foreign policy on his sleeve. Although his kind words with Barack Obama indeed painted a picture of an Americas on the mend, inside the nation, the dictator’s latest actions have bode poorly for investment intrigue and open political scientists’ eyes  to a nation on the brink of economic and social revolution.

In the past few months, Chavez has used an imagined and somewhat nostalgic threat of overthrow and sedition to justify wide seizures of power. Some feel his vociferous statements, ideology behind the Sucre and recent world tour are purely to distract from the growing belief that Venezuela is tapped out economically. The IMF predicts that Venezuela’s inflation rate will reach double-digit figures in 2009 (36.4 percent) and 2010 (43.5 percent), versus 30.4 percent in 2008. Indeed, foreign investors fret further nationalization of industry, severely stifling the prospect of healthy competition.

Therefore it comes as quite a coincidence that the February referendum victory did away with presidential term limits, and perhaps with an eye to next year’s legislative elections, Chavez, now more than ever, seems to be looking for excuses to wipe out the opposition — or, possibly, to bait them until the imagined threat becomes an actual threat, giving further justification to his despotism.

In addition to arrest warrants for several top opposition leaders including Manuel Rosales, the jailing of the former general-turned-critic Raúl Baduel, numerous takeovers of food producers, banks, and ports, as well as the creation of an appointed “mayor of mayors” to eliminate powers of locally elected officials, the state also decided to convict an important group of political prisoners.

In early April, choosing a date conveniently close to the anniversary of the 2002 coup, a political court sentenced police commissioners Lázaro Forero, Henry Vivas, Ivan Simonovis, and several others to 30 years in prison on trumped-up charges that they committed crimes against the state  (Chávez himself only served two years in prison for his own coup). In his televised address April 13, Chavez noted it is an act of “subversion” to criticize the sentence given to the police officers, encouraging his supporters to “do what they have to do” to any journalists who question the verdict.

Chavez taunted the opposition, remarking that the revolution was steamrolling the “oligarchs” and “bourgeoisie.” He added that Venezuelans “must stay on the offensive, crushing the counterrevolution; we have no other alternative!” Any possibility of national reconciliation or dialogue was firmly rejected, as he ‘admitted’ that he was the “king of fools” for having believed during the early years of his presidency that it was possible to reach agreements with “the extreme right and the imperial forces.”

You make a big noise on the right to distract from what is occurring on the left. Simple enough strategy, yet when stereotypes of South American dictatorship and autocratic accusation becomes water-cooler factual conversation, investor confidence crashes and economic outlook paints a picture of a bottomless pit with salvation only through economic or perhaps social revolution.