Endgame for Evo?

LA PAZ – The populist government of Bolivian President Evo Morales seems to be heading for political failure. Faced with 11% annual price growth and mounting complaints from the country’s worst-affected sectors, Morales promises change, but delays decisions, leaving in place the policies that are stoking the problem.

Of course, economic common sense sometimes prevails, but it is usually short-lived. At the end of 2010, for example, the Morales government decided to eliminate fuel subsidies in order to reduce the fiscal drain of importing market-rate energy and selling it at prices that have not changed in ten years. But the decision was reversed within a week, because the groups that brought Morales to power took to the streets in protest. Morales then promised to “govern by obeying.”

Opinion polls have registered a sharp fall in Morales’s popularity, with social protest of the type he once engineered now raised against him. A long strike by public transport workers was followed by another, just as long, staged by the Central Obrera (Bolivia’s trade union federation) and state employees.

The transport workers wanted a pay increase, following a multi-year wage freeze, while other workers want higher salaries to compensate for inflation, which is higher in Bolivia than the Latin American average, while economic growth is lower. Morales has yielded to the protests by making concessions and short-term promises, which will only fuel further inflation.

Moreover, the lack of effective results from the state’s administration of companies is endangering the popular backing of the nationalizations that brought Morales to power. For example, Morales tried to appease the Central Obrera unions by offering to nationalize three important mines. But the workers, having seen what Morales-style management is like, refused, preferring to remain in the private sector.

The government, however, seems unwilling to recognize public dissatisfaction with its ideologically driven policies or the failure of forced industrialization. None of the new state-owned factories (paper, cardboard, milk, urea, cement, textiles, and citric products) created in recent years is fully up and running, and nationalized companies (particularly the country’s oil refineries) have experienced declines in output and efficiency.

Convinced that he can increase production and employment, Morales has forced the central bank to give credit on favorable terms to state-owned companies. In other words, his government remains determined to increase the state’s hold over the economy.

Meanwhile, drug trafficking grows and diversifies, despite more police. Efforts to eradicate coca plantations have achieved the bare minimum, and increasingly frequent seizures of cocaine and coca paste originating in Peru indicate that trafficking activities are relocating to Bolivia, thus bringing more illicit money and more organized – and violent – criminal groups.

Bolivia’s neighbors, Brazil and Chile in particular, have expressed growing concern about this trend. While they have gained new verbal commitments from Morales to contain the narcotics trade, the government’s ineffectiveness was evident when a Bolivian police general was arrested in Chile while transporting a huge shipment of cocaine to the United States. The official, convicted in the US for drug trafficking, was the head of the intelligence agency on whose efficiency the fight against drug trafficking depends.

In the face of his growing problems, Morales has resorted to two tactics that successfully diverted public opinion in the past: conflict with Chile over landlocked Bolivia’s claims to Chilean territory that would give it an outlet to the sea, and a new electoral campaign, this time for judges.

But the claim against Chile does not seem to have the same attraction that it had in the past, and the election of judges to the Supreme Court and the Constitutional Tribunal backfired. Indeed, Morales endured a resounding defeat, with 60% of voters rejecting the government’s initiative with ballots that were either nullified or blank.

A movement of indigenous people from Bolivia’s lowlands played a crucial role, staging a march on La Paz to demand respect for the Indigenous Territory and National Park “Isiboro-Sécure” (TIPNIS). After 65 day s of overcoming police repression and blockades thrown up by groups allied with Morales, the marchers entered La Paz as heroes. Their efforts forced Evo to ban road construction through the park, part of a project financed by Brazil and backed by that country’s former president, Luiz Ignácio Lula da Silva.

Evo’s political prospects look grim. Government spending is using up a large share of the country’s export revenues. A fiscal deficit has returned. Inflation – mainly from higher food prices – is generating discontent, and legal insecurity is discouraging the investment that could increase supply. Organized groups (unions, neighborhoods, and communities) are increasingly impatient, and management of state institutions is becoming increasingly incompetent.

Changing direction and adjusting policies to the people’s demands should be easy in a regime that concentrates power in the president. A caudillo can make key decisions alone, because popular support is personalized: only he is indispensable. But Morales is persisting in his policies, despite the absence of positive results. As this inclination continues to alienate his electoral base, the formulas that brought him to power may ultimately lead to his downfall.

Roberto Laserna, an economist, is a researcher at CERES, a private research center in Cochabamba, Bolivia, and President of Fundacion Milenio, a think tank in La Paz.

Copyright: Project Syndicate, 2011.
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