June 27, 2005

June 27, 2005 | WebMemo on Latin America

Bolivia Needs Consensus and Property Rights, Not Elections

Venezuela's rambunctious president Hugo Chávez blames U.S. President George W. Bush for the stewing conflict in Bolivia. He says the demonstrations that prompted Bolivian president Carlos Mesa to resign on June 6 were a popular repudiation of the democratic and free market policies that Bush advocates. "Mr. Danger, your poisoned medicine has failed," he gleefully charged in a June 12 radio address in Venezuela.

Chávez recommended his own revolution as a better alternative. His is an autocratic welfare state that supposedly funnels profits from government-run monopolies to social programs for the poor. But Chávez's snake oil is the worst poison. Concentrating national treasure in the hands of a few is the classic Latin American recipe for corruption and economic ruin.

What Bolivia needs is a dose of the opposite: compromise and civic education to get competing social groups to work together, laws to get the government out of the energy business, and a new legal framework to protect property rights.

Simmering Divide

Much of the turmoil in Bolivia stems from discord between citizens of European descent and the country's majority (60 percent) indigenous poor. Spanish descendants have typically received land grants and access to political power from crony governments while natives lived apart, mostly uneducated, and were forced to work in silver and tin mines as well as subsistence agriculture.

From independence in 1825 to the 1980s, Bolivia experienced frequent coups and short-lived constitutions. After a revolution in 1952, it nationalized the mineral industry and redistributed farmland to indigenous groups. Within 20 years, the public sector ballooned and Bolivia racked up so much debt that it had to resort to a barter economy.

From 1985 to 2000, civilian elected leaders, a more independent congress, privatizations of state industries such as hydrocarbons, lower taxes, and an opening to trade brought the country stability and 4 percent annual economic growth, on average. Unfortunately, Bolivia's feuding communities squandered the moment to identify common interests and promote broad participation in a free economy.

Gas Pains

In the background, narrowly focused U.S. foreign assistance had helped Bolivia eliminate about 90 percent of its illicit coca crop. But crop substitution programs failed to compensate for the loss of income, causing the economy to contract. At the turn of the century, President Jorge Quiroga hoped exploitation of newly discovered natural gas reserves might reverse the decline, but left the matter to his successor.

Elected in 2002, Gonzalo Sánchez de Lozada tried to boost government revenues by raising taxes, angering voters. He provoked them further by announcing plans to build a pipeline from Bolivia to the Pacific Ocean to export gas to the United States, without explaining how exports could restore the economy and help the poor.

Radical agitators exploited the opportunity. In September 2003, they threatened beatings and vandalism to get residents of El Alto-a shantytown surrounding the highland capital of La Paz-to block main roads in protest of the pipeline. Violence erupted when rioters shot at government troops trying to rescue tourists from rock-throwing mobs. When soldiers fired back, organizers called it a massacre and blamed the government.

On October 17, Sánchez resigned. Later, Bolivia's armed forces commander reported that some 70 rebels from the Revolutionary Armed Forces of Colombia (FARC) had entered the country to participate in the demonstrations. Back home, this Marxist army has waged a 40-year civil war to overthrow Colombia's government.

Sanchez's replacement, Vice President Carlos Mesa, pursued an appeasement agenda to buy time. As a result, the agitators kept the upper hand, forcing the government to accept creeping nationalization of the oil and gas industries, new elections, and a constituent assembly to write a new constitution to specifically benefit their groups.

In March 2005, Mesa offered his resignation to congress, which rejected it. In May, he refused to sign a bill raising energy royalties on foreign companies from 18 to 50 percent, but without his formal veto it passed into law. On June 6, he quit for good. Lawmakers named Supreme Court Chief Justice Eduardo Rodríguez to replace him. Because Rodríguez is outside of the formal line of succession, new elections are mandatory.

Us Against Them

Elections won't keep two intransigent groups from colliding, however. On one side are radical indigenous leaders like Jaime Solares of the Bolivian Workers Union and Abel Mamani, head of a neighborhood association in El Alto. Aligned with them but also competing is congressman Evo Morales, leader of a coca growers union from Cochabamba and head of the Movement Toward Socialism Party. All want oil and gas nationalization and a new constitution to redistribute property, much of it in distant lowlands far from where their constituencies live.

On the other side are businessmen in the lowland Santa Cruz province. Concerned about a repeat of the 1952 revolution and its economic fallout, they seek autonomous government and effective control over their own resources. Most of Bolivia's hydrocarbon deposits are nearby. Because Bolivia's constitution does not protect private property and subsurface resources belong to the state, control of government is crucial to both groups.

Re-Raveling Democracy

After 20 years of stability and economic growth, Bolivia seems to be backsliding toward coup, revenge, and populism. But the antidote to a war between rich and poor is something neither side has attempted: dialogue and consensus over the role of government and private property rights.

Outside of high profile activists like Solares, Mamani, and Morales, many indigenous communities are wary of populist panaceas. Business leaders should reach out to them to create a coalition of shared interests in political access, economic participation, and stronger property rights so that all can own land, take advantage of subsurface resources therein, and keep their wealth. Bolivia's congress should consider repealing draconian energy taxes to restore foreign investment and then make it legally possible for citizens to profit from resources on their property.

U.S. and other foreign governments should encourage this coming together with targeted public diplomacy and civic education programs. Inactive National Endowment for Democracy political party training programs should be revived.

There is little time to lose. Some in South America, like Venezuelan president Hugo Chávez, who would love to see Bolivia become a militant, populist government aligned with his own. Colombia's FARC rebels would like to see a Marxist dictatorship. The surest way to make either happen is to fuel social divisions and place the country's energy resources in the hands of a self-selected few.

Stephen Johnson is Senior Policy Analyst for Latin America in the Douglas and Sarah Allison Center for Foreign Policy of the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.

About the Author

Stephen Johnson Senior Policy Analyst
The Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy

Related Issues: Latin America