MONTEVIDEO, Uruguay — This small country's only oil refinery is a desultory antique on the outskirts of the capital whose tower casts a perpetual plume of black smoke over the shanties and homes that surround it.
The diesel fuel produced there is of poor quality, yet its gasoline is among the most expensive in the Americas: Filling up a 15-gallon tank here can set you back $50.
And yet, Uruguayans are expected to vote in large numbers today to overturn a law designed to rectify the problem. If polls conducted ahead of the referendum are proved correct, voters here will instead preserve the monopoly of the state oil company, ANCAP, and derail any future attempts to privatize its operations.
"ANCAP is not for sale!" reads one graffito repeated again and again here in the capital and in the Uruguayan countryside. "Uruguay is not for sale! Vote yes on Dec. 7."
The referendum in this country of 3.4 million people squeezed between Argentina and Brazil reflects a trend in those countries and across South America: a growing rejection of neoliberal economics and the leaders who backed the policies for a decade.
Polls show voters favoring a "yes" vote in the move to repeal Law 17,448 -- approved last year by Uruguay's Congress -- by a more than 2-to-1 margin. First proposed by President Jorge Batlle in 2000, the law allows private companies to import fuel into the country, which has no natural oil reserves.
"The law is a blow to our national patrimony," said Reinaldo Gargano, a senator and member of the Socialist Party. "ANCAP is our country's largest state-owned enterprise, and the law would give away half of the fuel market in exchange for practically nothing."
The left-leaning Broad Front-Progressive Encounter coalition and the ANCAP workers union backed the campaign that collected 685,000 signatures in favor of the referendum.
Analysts here say the opposition parties have transformed today's vote into a plebiscite on Batlle's government and its policies of privatization and fiscal conservatism, which many blame for Uruguay's lingering economic malaise.
"The referendum will be in large measure a kind of punishment vote against the government," said Alain Mizrahi, director of Radar, a polling firm.
Uruguay's unemployment rate stands near 20%, inflation is rampant, and the currency, the Uruguayan peso, has lost half of its value relative to the dollar and other currencies since last year. The country's gross domestic product declined by about 10% in 2002.
As in neighboring Argentina, many young people are migrating to Europe and the United States in search of better horizons. "This plebiscite isn't just about the [privatization] law, but rather about all the things that have brought Uruguay to this disaster and that have forced so many to emigrate to find work," said Tabare Vazquez, leader of the Broad Front-Progressive Encounter coalition.
Mizrahi said both parties are treating the election as a warmup for next year's presidential election, which is expected to see Batlle's ruling Colorado Party driven from power.
Supporters of the privatization law argue that the issue has been politicized by the Broad Front-Progressive Encounter coalition. The issues of economic efficiency have been largely obscured in the debate over the law, they say.
"We have the highest gasoline prices [in the region] because we are a market of just 3 million people," said Alejandro Atchugarry, a senator who backs the privatization law. "When we buy crude oil, we don't have any power to negotiate."
When the privatization law was approved, several foreign-owned firms stepped forward with an offer to buy part of ANCAP's operations, including ChevronTexaco and the Brazilian firm Petrobras.
Those plans are now likely to be placed on hold.
Times staff writer Andres D'Alessandro in Buenos Aires contributed to this report.