YAGUARON, Paraguay—A feisty populist former priest could win next April’s Paraguayan elections and become Hugo Chavez’s new ally in this country bordering Brazil, Argentina and Bolivia. The rise of Fernando Lugo, who was active in liberation theology movement within the Catholic Church, illustrates the inadequacies of Latin America’s democratic systems, which periodically give rise to left-wing movements fueled by social resentment.

I came to Yaguaron, a sleepy town to the south of Asuncion that seems frozen in the 18th century, to shoot a documentary on authoritarianism in Latin America. My focus has been on Jose Gaspar Rodriguez de Francia, a fascinating man who ruled Paraguay with an iron fist in the first half of the 19th century and is partly responsible for this country’s despotic tradition. I was surprised to find people, from peasants to schoolteachers, who still express admiration for a leader who built his regime on the notion that Paraguay should be cut off from the rest of the world and ordered all Paraguayans to touch their hat brims when they met him.

A modern-day version of Dr. Francia might be in the offering. A coalition known as the Concertacion Nacional thinks that Lugo could be the answer to the corrupt politics of the Colorado Party, which has ruled this country for more than six decades. In response to a system that has pushed many people to make a living through smuggling, including drugs, Lugo’s supporters propose a combination of socialist and nationalist policies under their firebrand leader who, like his Venezuelan mentor, Chavez, promises “social justice.” Paraguay’s tragedy is that their diagnosis is right—and their remedy a recipe for disaster.

Yes, the nation has suffocated under the Colorado Party of which Alfredo Stroessner, the dictator who held power for 35 years until 1989, was the central character. And, yes, the democratic system that has followed Stroessner has done little to make itself legitimate in the eyes of ordinary Paraguayans. Apart from the traditional soybean, cotton and meat exports, few legal economic opportunities have opened up under a coterie of politicians, soldiers and established business interests who decide everything.

Few things can be more telling with regard to the farce that is Paraguayan politics than the fact that the current president, Nicanor Duarte, is willing to talk to Lino Oviedo, a general who served a jail sentence for attempting a military coup, to persuade him to step into the presidential fray in order to stop Lugo.

This is precisely the kind of environment in which Latin American populism thrives. Paraguayans see Lugo as something of the redeemer, a spiritual figure capable of towering above the discredited institutions to set things right. His supporters fail to see that populist policies—based on concentrating power in the president’s hands, placing companies under government control, weakening commercial ties with the outside world—are responsible for their condition in the first place. For instance, many Paraguayans blame the free-trade policies of the South American common market for their poverty when, in fact, that regional arrangement is a monument to bureaucratic obstacles limiting the free flow of people, goods and services. (I can attest to that after traveling between Argentina, Uruguay and Paraguay with a multinational TV crew.)

Roberto, a grower of the herb yerba mate who lives near Yaguaron, tells me that Paraguayans “need another Stroessner to stop Lugo.” He is one of those who fall into the trap of thinking that the alternative to left-wing populism is right-wing authoritarianism. “He did some nasty things to some people,” Roberto acknowledges of the late dictator, “but there was order in the country.”

Stroessner did some nasty things all right, as a quick visit to “La Tecnica”—now a museum but once a prison on Asuncion’s Chile Street where his henchmen tortured Martin Almada, a nonviolent left-wing activist, in the 1970s—shows in gruesome detail. But no, Roberto, there was no real order in Paraguay. The best proof is that two decades after the general was expelled from power, the nation is debating whether to bring in a military thug or opt for a populist former priest, two extremes that guarantee that this landlocked country will not be stable for quite some time.