George W. Bush and Venezuela's Hugo Chávez crisscrossed Latin America on parallel tours recently, pushing opposing agendas. While Bush touted free trade, cooperative ventures and US aid programs, Chávez touched down in Bolivia, where his socialist ally, President Evo Morales, is dancing precariously with a divided population.

"We want to keep the fighting in the assembly and out of the streets," Willy Padilla told us in September 2006 in Sucre, Bolivia's constitutional capital. The assembly to rewrite the Constitution had been mired in infighting, and Padilla, a politically middle-of-the-road assemblyman, was worried. "If the assembly doesn't do its job, this is a possibility."

Protest movements paved the way to the December 2005 election of Morales as Bolivia's first indigenous president, but the transition from the streets to the presidential palace has been far from smooth. Padilla's fears were realized in January, when youth groups sponsored by "civic committees" and armed with lead pipes, barbed wire and hockey sticks confronted coca-farmer unions in a bloody street battle in Cochabamba. These civic groups are part of a regional right-wing movement against the changes Morales is pushing. The coca unions demanded the resignation of conservative governor Manfred Reyes Villa, while Reyes and his right-wing allies called for regional autonomy from the central government.

The conflict in the streets, like the conflict in the assembly, was born out of diametrically opposed views on how best to run the country and its natural resources. On the one side is the socialist vision of Morales; on the other that of the business elites, landowners and right-wing politicians struggling to keep their power. More than a year after Morales's landslide electoral victory, his administration has given the state more control over natural gas and mines, convoked an assembly to rewrite the Constitution, redistributed land and defended coca growers' rights. At the same time, regional and class divisions have exploded on many levels.

The constitutional assembly is the formal version of the fight over the nation's political and economic direction. Approximately 60 percent of the country's population is indigenous, and the same percentage lives below the poverty line. Many of these disenfranchised citizens see the assembly and their new president as an opportunity to create a country that will include them in its idea of progress.

Elections were set for the new assembly before Morales took office, but conservative sectors demanded that they include a referendum on autonomy for Bolivia's nine states, or departments. Autonomy in this scenario means greater local control over natural resources, lower taxes to the central government and more political power on a local level. In effect, this is a gambit by entrenched elites to retain their power, or at the very least for economically rich eastern lowland departments like Santa Cruz to distance themselves from the socialist movements of the western highlands.

When the assembly election results came in last July 2, new conflicts arose. The representatives of Morales's Movement Toward Socialism Party, or MAS, did not win the two-thirds of the seats they needed to control the assembly. While original legislation stipulated that the new Constitution would be approved by a two-thirds majority of the assembly, the MAS proposed that a simple majority be used in the assembly, to be followed by a two-thirds majority in a national referendum. This national referendum will approve or reject the entire Constitution, including articles on autonomy. Conservative sectors--mostly the loud, right-wing Social Democratic Power (PODEMOS) party--were outraged by the proposal, as their 33 percent minority is enough to block the MAS.

After a nearly six-month standoff over voting regulations, assembly members reached a multiparty agreement on February 14. As a result, the twenty-one thematic commissions can now begin to negotiate the content of the new constitution. The decision-making regulations require each constitutional article to be approved in the entire body of the assembly by a two-thirds majority.

The MAS administration has had to meet challenges on all fronts. The goals that seemed simple when chanted through a loudspeaker in street marches appear more complicated when negotiated from the government palace. MAS politicians seeking to reverse 500 years of oppression and racism have tripped over their desire for revenge, and administrators with the best intentions to redistribute wealth and resources have stumbled over their own inexperience. As MAS assemblyman Raul Prada admitted, "The opposition has grown, not so much for what they have done, but as a result of our mistakes."

However, recent polls show that Morales's popularity is even higher than at the time of his election. While constitutional assembly members remain unable to resolve key issues, including nationalization of gas and mining sectors, coca production and agrarian reform, the traditional legislative bodies have made drastic changes.

Wealth Underground

In 2003 and 2005 popular revolts demanding gas nationalization ousted presidents and reversed corporate policies. Morales came into office on the wave of these protests, pledging to formalize victories gained in the streets. In May 2006, he donned a helmet from the state gas company and announced the nationalization of Bolivia's gas. The decree bumped up Bolivia's share of profits from two major gas fields, from roughly 50 percent to 82 percent. Under the new decree, the government is able to renegotiate contracts and set the base prices of gas as high as the market will allow, thus increasing the taxes and royalties the state receives.

Before the change, approximately 18 percent of Bolivian energy project revenues went to the state and 82 percent were kept by foreign companies. The new plan reverses these percentages, and Morales has said that in four years the renegotiated contracts will generate $4 billion in yearly government revenue. Increased revenue from the gas industry has already aided new government programs initiated by Morales in healthcare for women, seniors, youth and rural communities. Tractors have been distributed to rural areas, and funding has been made available for financial aid to young school children.

In reality, Morales's "nationalization" is more like a renegotiation, and not all social sectors have been happy with state management of the industry so far. In early February protesters in the town of Camiri shut down a gas pumping plant, demanding that it be nationalized beyond Morales's decree. After eight days of clashes between protesters and security forces, Morales promised to fulfill their demands.

Talk of nationalization in the gas sector can't help but have repercussions in Bolivia's historically troubled mining industry. Zinc, silver, gold and tin are Bolivia's largest exports after natural gas. International metal prices doubled last year, raising the value of Bolivia's mineral exports from $547 million in 2005 to $1.1 billion in 2006, only 1.5 percent of which went to the state. Past privatization of the industry led to social conflicts between miners employed by the state mining company and "cooperatives," actually private enterprises formed by unemployed miners that have grown increasingly powerful over the past twenty years. Seventeen people were killed last October in the town of Huanuni when miners from both sectors clashed over access to ore deposits. They threw dynamite at each other and rolled tires full of explosives down the Posokoni mine and into the town, leveling neighborhoods.

Morales has since courted both mining groups with few results. Efforts to reincorporate cooperative miners into the state company in an attempt to end the divide have met with very limited success. A proposal in February to tax private mining brought dynamite-tossing cooperative miners marching into the legislative and administrative capital of La Paz. Morales canceled the taxes but made headlines two days later when he sent 200 soldiers to occupy the privatized Vinto mineral processing plant, Bolivia's only smelting complex. The administration says it will not compensate the former owner, the Swiss Glencore company, accusing the company of failing to invest in infrastructure promised as part of the purchase contract. Glencore has said it will take legal action for compensation.

The Coca Question

Another contentious Bolivian issue that brought Morales into the presidential palace is coca production. The small, eye-shaped leaf has been at the center of Andean religion, medicine and culture for millennia. Chewed or brewed as tea, the leaf is nutritious, energizing and a hunger suppressant. It also is the source of the alkaloids used to make cocaine. Though the cocaine-making process is long and complicated, the United Nations has declared that the coca leaf itself is a dangerous and addictive drug. The futile US "war on drugs" has tried to end production by militarizing the region, forcefully eradicating coca crops and terrorizing coca farmers.

As a former and current president of the largest coca-growers union, Morales has retained the support of his base by ending forced eradication of coca crops in the Chapare region. Instead, he has expanded a program of voluntary eradication that limits coca production per family to one cato (about one-third of a football field). The collaborative eradication efforts in the Chapare are based on the Morales administration's own ties with this region and the coca union's pre-established infrastructure. This has meant standing up to US militarization and lobbying for "revalorization" of the coca leaf. Venezuelan President Chávez has pledged his help in this project by supporting factories to make coca products like tea, shampoo, salve and candies for export.

While peace has returned to the Chapare, Morales has continued forced eradication of coca in the Yungas region and elsewhere. The government's coca policy went awry last September when two coca growers were killed near the Chapare during clashes with police and military. The use of military forces and the administration's subsequent claims that farmers were linked to narco-traffickers was a contradictory move coming from a government led by a former coca grower.

Creating social justice in Bolivia has always been linked to land reform, promised but never completed by the Revolution of 1952. Last November, various landless-farmer, campesino and worker organizations allied with the MAS arrived in La Paz after marching from around the country to demand improvements to the existing agrarian reform law. In response, that same day, the Senate--minus boycotting opposition party members--passed the reforms. According to the law, land not serving an ecological, social or economic function should be given to campesino and indigenous groups. Recent reforms aim to redistribute 77,000 square miles of state and private land, around the same size as Nebraska. So far, the Morales administration has handed out about 8,500 square miles of state land.

In addition to political impasses and historic inequality, the Morales administration has been hit by natural disasters. After recent floods in eastern lowland departments killed thirty-five people and affected 350,000, people in the Beni department were frustrated by the government's delay in declaring a national emergency. Indeed, some worried that the existing east-west political divide might influence the government's response. And some analysts speculated that the administration's hesitation stemmed from the agrarian reform law, which states that lands affected by national emergency are no longer eligible for reversion.

It remains to be seen if Morales can take advantage of the disaster as, in his words, "an opportunity to convoke the unity of the country." Bolivians were ready to do so, and as the typically exploitative Bolivian press filled TV screens with sobbing families, many joined the internal "Solidarity Bolivia" campaign, which raised nearly $375,000 for victims. Another warning sign for President Bush as he toured Latin America was the shadow of empire that Morales saw in those floods, which were officially attributed to the ocean-current phenomenon known as El Niño. Morales suggested that global warming caused by pollution in Western countries might be responsible for extreme and deadly weather suffered in the Third World.

More than a year into Morales's first term, Bolivia remains in its labyrinth, somewhere between reform, revolution and national crisis. The Administration's continuing challenge, as assemblyman Willy Padilla said, will be to prove that conflicts can be better resolved at the negotiating table than in bloody confrontations in the streets.

• Get The Nation at home (and online!) for 75 cents a week!
• If you like this article, consider making a donation to The Nation.