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Evo's Challenge in Bolivia | The Nation

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Evo's Challenge in Bolivia

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Years of Washington Consensus-style economic policies, first adopted in the mid-1980s under the label "shock therapy" and expanded in the mid-1990s when the country privatized its oil, gas, electric and other major industries, have done little to help Bolivia's people, more than 65 percent of whom are still stuck below the poverty line. In fact, despite the country's being the testing ground for much of this policy over the past twenty years, the average Bolivian is now poorer than his grandparents were fifty years ago. The privatization schemes, rather than bringing prosperity as promised, have left Bolivia the most impoverished nation in South America. They've also provoked a wave of anger against international financial institutions and the United States, a sentiment that was on display all over Bolivia in this presidential election.

Research support was provided by the Investigative Fund of The Nation Institute.

About the Author

Daphne Eviatar
Daphne Eviatar, a Brooklyn-based lawyer and journalist, is a senior reporter for The American Lawyer.

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The US government, for its part, has expressed deep fears about a Morales presidency, claiming that he is a protégé of Hugo Chávez and Fidel Castro--as revolutionary, and as unpredictable. But in many ways it's the United States that has put Morales in the position he's in today. In Bolivia the United States is not only a symbol of foreign capital but of the bitter "war on drugs," which strong-armed Bolivia into accepting a US-financed coca eradication campaign that even the World Bank has admitted bears some responsibility for Bolivia's current poverty. Like everything else in Bolivia, the coca leaf is a symbol: of a locally grown crop, of sacred rituals, of a way of life that allowed Bolivia's peasants, by chewing on the bitter leaves that give energy and stave off hunger, to endure the harsh conditions in the silver and tin mines where they worked as slaves to the Spanish for some 300 years and where many still labor under perilous conditions today. As indigenous culture increasingly becomes a point of pride rather than a mark of shame in Bolivia and across South America, the symbolism of the coca leaf has gained even more importance--and the US war against it has stoked Morales's popularity.

But the most potent symbol in this election for most Bolivians was natural gas, an ever more coveted resource as the international price of oil skyrockets. And the foreign oil companies that extract it--the transnacionales, as they call them here, almost spitting the word--represent to many just the latest form of foreign exploitation of Bolivia and its people. Thus every candidate in this election had to promise to "nationalize" the natural gas industry--a word that suggests expropriation of private company property and sets off alarm bells with foreign investors, but which actually means a range of different things in this ideologically charged political culture.

For the right-wing candidate Jorge Quiroga, it meant respecting existing oil and gas contracts but "nationalizing the benefits"--in other words, spending more to pacify the population. But for Morales it has meant forcing a conversion of existing gas contracts into ones in which the state gets 50 percent of the profits and retains control over how, to whom and at what price Bolivian gas is sold. Although that's not what's usually meant by expropriation, his plan still has foreign energy companies panicking. That's because under their current contracts and the 1996 hydrocarbons law that privatized the industry, private companies have had virtually complete control over the production, sale and pricing of oil and gas, and have paid only 18 percent royalties and no taxes--a deal that even government and industry insiders who helped write the law and negotiate the contracts now privately admit is a bad deal for Bolivia.

Still, when the last government, under Carlos Mesa, tried to change the law to increase government revenues, almost every major oil company--including Spain's Repsol, the French company Total, British Gas, ExxonMobil and Oklahoma-based Vintage Petroleum--threatened to bring a claim against Bolivia in international arbitration. Although so far they've agreed to hold off to see what the new government does, if Morales nationalizes the industry, under the terms of the bilateral investment treaties between Bolivia and the companies' home countries, those companies could sue--in private, closed-door arbitration, without the safeguards normally provided by publicly appointed judges in an international court--not only for the approximately $3.5 billion private companies have already invested in the natural gas industry here but also for the loss of expected profits, which could total tens of billions of dollars. For a country like Bolivia, whose annual revenues are only a little more than $2 billion, that's no small threat. "These processes could bring about requirements of indemnity against the Bolivian state that it cannot pay," says Carlos Romero, executive director of Centro de Estudios Jurídicos e Investigación Social (CEJIS), a prominent human rights organization based in Santa Cruz. It's for that reason--and a host of other ways the United States, the World Bank, the IMF and the Inter-American Development Bank can threaten to tighten the noose around Bolivia's highly indebted neck--that an Evo Morales presidency may well remain largely a symbolic victory.

Nor can Morales do much to address the plight of coca farmers. Although he has said he'll campaign to decriminalize the coca leaf on an international level, he knows that's a long shot--and that he can do little to change the system at home. Indeed, he admitted as much in a recent interview. Seated at his campaign headquarters before a plate overflowing with coca leaves, he told me that "zero coca means zero cocaleros." His affable manner had turned grave. Evo does not disguise his disdain for the old US-imposed policy of "zero coca." But that policy, as he well knows, was already abandoned last year under Carlos Mesa's government, with eventual US acquiescence. Since 2004, farmers in certain regions have been permitted to grow small amounts of coca for local traditional use.

Most cocaleros don't consider that nearly enough to earn a living, but Morales knows that to completely decriminalize the coca leaf domestically--something he has never said he will do--would be a dramatic rejection of US policy that would likely lead not only to a loss of US aid but would require the United States, under US law, to vote against any Bolivian application for loans or grants from the World Bank, IMF or Inter-American Development Bank, all critical to Bolivia's ability to finance its debt and fuel its economy. (Even more than the money itself, the credibility these institutions offer the country in the international financial markets is immeasurable.) In effect, any attempt by the new president to do exactly what Bolivians just elected him to do would marshal the forces of the international financial community against the government and doom the country's already precarious financial stability.

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