March 23, 2009
By James M. Roberts and Gonzalo Schwarz
The new Bolivian constitution-written by President Evo Morales
and approved by voters in late January-is an assault upon the
universal ideals of individual and economic freedom. Fortunately,
Morales was forced to scale back the most radical land-grabbing
elements of the constitution after the first draft was met with
massive protests. Nevertheless, as the Daily Telegraph of
London noted, the new constitution marks another step in Morales's
campaign to "enhance his own powers and turn the country into a
An analysis of some of the most radical provisions in the new
100-page constitution concerning the economic structure and
organization of the economy provides a good indication of where
Bolivia is heading under Morales's leadership.
A Threat to Private Property
The new constitution (Article 308) purports to respect "private
initiative and the freedom to operate a firm." However, Articles
312 and 56 seem to contradict this notion, with the former warning
that "the private accumulation of economic power" will not be
permitted to "endanger the economic sovereignty of the State" and
the latter asserting that "the right to own private property either
individually or collectively [must] fulfill a social function" and
"not harm the collective interest."
These conflicting articles raise a number of questions:
Morales and his fellow socialists apparently do not realize that
the firms' growth can be choked off if taxes are too high. At a
certain point, these overtaxed firms will die. And with them will
die good jobs and a part of Bolivia's economic vitality. What
incentives are left for entrepreneurs to open a business when they
might be prosecuted under the constitution if they end up being
"too successful" or accumulating "too much" economic power?
That the drafters of the new constitution did not take into
consideration the possibility that the government can destroy
private companies indicates either their paucity of understanding
of how a market economy functions or their devotion to Marxist
beliefs and desire to kill the private market entirely. The new
constitution's provisions for exceptions to the "social function"
rule when failing industries (presumable state-owned) are allowed
to subsist with the help of government subsidies or protectionist
measures is another sign of the statist orientation of the new
The constitution also contains too much authority and discretion
for courts to interpret its provisions with regard to the
fundamental principles of property rights. Given the ability of the
Morales government to pressure judges or otherwise sway judicial
opinion and rulings from the bench, it appears that defenders of
private property and genuine rule of law will not fare well under
the new national charter.
Re-Nationalization of State-Owned
Article 316 of the new constitution addresses the government's
responsibilities toward the economy, the most relevant of which is
to "determine the state monopoly of the productive and commercial
activities that are considered non-rescindable in case of public
necessity." This provision is another threat to
property rights, since the new constitution, for all of its
verbiage, fails to establish a clear boundary to judge what
constitutes a public necessity. The very ambiguity of this term
might permit the government to define "public necessity" in
whatever way it desires so that it can appropriate a specific
firm's means of production, whether it is privately owned or
In recent years, the "public necessity" argument has been used
by the Morales government to justify the re-nationalization of
several private or semi-privately owned firms, including landline
telecommunications carrier Entel and Bolivia's oil and natural
gas sector. Article 316 raises the possibility that any
remaining private economic activity can fall under the scope of
This expansion of government control over the private sector is
aggravated by Article 339, which gives the President the authority
to declare an emergency and spend government funds that have not
been appropriated by the legislature in the budget. With this
additional "power of the purse," Morales can create additional
public monopolies with very deep pockets, a situation ripe for
financial mismanagement and corruption.
Hostility to Foreign Direct Private
Article 320 raises the possibility of blocking private foreign
investors, since "Bolivian investment will be prioritized over
foreign investment." Bolivia is a country rich in natural gas
reserves, minerals such as lithium (needed for hybrid vehicle
batteries), and other natural resources. It has and would continue
to benefit from diverse sources of private financing for new
projects in these areas, either domestic or foreign, but such
investment will be stymied by Article 320.
Central Bank Loses Autonomy
Aping his Venezuelan mentor, would-be President for life Hugo
Chavez, Morales also used the new constitution to gain control over
his nation's central bank through Articles 326 ("The State, through
its executive branch, will determine the monetary and exchange rate
policy objectives in the country, in coordination with the Central
Bank of Bolivia") and 329 ("The president of the Central Bank of
Bolivia is required to submit reports and balances [to] ... the
Plurinational Legislative Assembly ... and is under a system of
fiscal and governmental control by the State").
These two articles do not allow for the independence of the
central bank from the executive branch. This lack of autonomy could
allow Morales to pursue the dangerous practice of financing public
debt by monetizing it through the central bank, which can have
serious inflationary consequences.
Many in Morales's political base of support are indigenous
Bolivians from the western highlands who have been mired in poverty
for generations. Improving these indigenous people's living
conditions is certainly a laudable goal, but Morales's methodology
for realizing such improvement-attempting to control all Bolivian
mineral and gas exports and using legal subterfuge to grab farm
land from the relatively wealthier eastern lowlands and give it to
his followers-will end in disaster for all Bolivians. The poor will
be poorer, and those whose lands they occupy will be newly
impoverished and vengeful. When Robert Mugabe tried a similar
scheme in Zimbabwe, it resulted in horrific internecine violence
and the worst hyper-inflation in world history. Bolivians can do
better than following Mugabe's blueprint of economic and social
The Obama Administration Must Act
Given the likelihood that Morales will use the new constitution
to drive Bolivia's economy into ruin, the possibility of future
political violence cannot be ruled out. The Obama Administration
must take steps quickly to work with other Latin American countries
to contain the damage from Morales's reckless and thoughtless
actions. If not stopped, the upheaval in Bolivia could threaten the
stability of the rest of the continent.
James M. Roberts is
Research Fellow for Economic Freedom and Growth in the Center for
International Trade and Economics at The Heritage Foundation.
Gonzalo Schwarz is a graduate student in economics at George Mason
University. Originally from Uruguay, Mr. Schwarz did his
undergraduate studies and began his professional working career in
Show references in this report
Gareth Rubin, "Bolivia Faces Crisis as Evo
Morales Wins Referendum," The Telegraph, January 27, 2009,
les-wins-referendum.html (March 4, 2009).
Political Constitution of the State, National Congress,
Constitutional Assembly of Bolivia, October 2008, at http://www.samuel.bo/wp-
(March 4, 2009).
International Telecommunication Union,
"Government to Nationalise Entel Bolivia," June 20, 2006, at http://www.itu.int/ituweblogs/treg/Government+T
o+Nationalise+Entel+Bolivia+.aspx (March 20, 2009).
Carin Zissis, "Bolivia's Nationalization of Oil
and Gas," Council on Foreign Relations, May 12, 2006, at http://www.cfr.org/publication/10682/
(March 20, 2009).
Political Constitution of the State, National Congress,
Constitutional Assembly of Bolivia.
Department of State, "Background Notes: Zimbabwe," January 2009, at
(March 23, 2009).
The new Bolivian constitution-written by President Evo Morales andapproved by voters in late January-is an assault upon the universalideals of individual and economic freedom.
James M. Roberts
Research Fellow For Economic Freedom and Growth
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