Same reason anyone has odds with anyone else really: Difference in life values. The Romulans can be a democracy that respects its' people without having the exact same values as the Feds, perhaps they see it as okay to go around settling on worlds with native populations and interfering with their development as long as they get a new world. Maybe they just feel they have a manifest destiny (which is pretty much canon...) and the Feds are an obstacle.
Well, I can get on board with that. Like Praetor, I've always seen some quasi-democratic aspect to the Romulan Empire. Given the Senate, it appears to be an oligarchical or aristocratic form of government--so not free or particularly accountable, but also not centralized in a single person the way a dictatorship needs to be. Communist China (again as Prae said
) is a good analogue. So is, more obviously, Rome before Sulla. I wonder if there are any such things as tribunes in the Romulan Empire? (On a less serious note, why is the leader of the Senate called a praetor, anyway? The Roman praetors, while technically senators, were just a judge or junior army commander... is there a Romulan consul? Censor? Clearly, there is no imperator... if the praetor is a dictator he should just be called the Roman word for dictator... in the original Latin, dictator
For what it's worth, I think there was a period where they could have gone the way you suggest with the Ferengi, turning them into a rather fearsome (and topical) ideological enemy. We all know that didn't work out for a variety of reasons, and what we've learned of their government since has not helped anyone who'd like to see them as anything but a rather one-note, if entertaining, caricature.