Bolivia

Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
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Full Report: Bolivia

Overview

1910-1920: Bolivia begins the decade in political stability and prosperity under a liberal president. The rise of tin production, presided over by a few Bolivian tin magnates, causes social tensions as mining laborers live in precarious conditions. When World War I leads to a decline in mineral exports, support for a new Republican Party increases. A bloodless coup in 1920 puts Republicans in power.

1921-1930: The Republicans split into factions, some Socialist- and Marxist-influenced. Tin prices decline, slowing economic growth. Bolivia relies heavily on foreign loans, despite nationalist opposition to favorable terms for lenders. Labor and Indian uprisings are suppressed. A military junta overthrows President Siles Reyes, then allows elections that give reformist Daniel Salamanca the presidency.

1931-1935: President Salamanca fails to suppress social unrest or solve the economic problems the Depression engenders. In 1932 he leads Bolivia into a three-year war with Paraguay in a border dispute over the Chaco area and its oil fields. An armistice grants Paraguay most of Chaco and Bolivia some oil fields. Loss of life and territory discredit the traditional ruling class and prompt a military coup.

1936-1939: Coup leader Colonel David Toro attempts a program of "military socialism," but he is overthrown by a coup led by the more radical Colonel Busch. A new constitution favors government intervention in social and economic affairs. Busch alienates the conservatives and finds little popular or military support, and he commits suicide. Elections replace him with General Enrique Peñaranda.

1940-1943: Peñaranda's support comes primarily from the traditional Liberal and Republican parties, but new socialist and leftist groups gain control of Congress. The main opposition comes from the Nationalist Revolutionary Movement (MNR), with support from intellectuals and workers. With the help of reformist military officers, the MNR overthrows Peñaranda and replaces him with Major Villaroel.

1944-1946: Villaroel resumes the reformist policies of Toro and Busch, but fails to gain the support of the miners and peasants who make up the majority of the labor force. Increasing political terrorism and rivalry between the MNR and the military further undermine his regime. In 1946 students, teachers, and workers seize arms, capture and kill Villaroel, and take over the presidential palace.

1947-1952: Social unrest and economic decline intensify under three successive Conservative governments. The tin industry stagnates, the inflation rate rises, and food imports increase. The MNR, the dominant opposition group, sides with workers and native-population Indians. After several failed attempts, in 1952 the MNR succeeds in overthrowing the government. Víctor Paz Estenssoro is made president.

1953-1955: The Bolivian National Revolution begins. President Paz Estenssoro establishes universal suffrage. The government reduces the armed forces' size and budget. The three major tin companies are nationalized, to be run by the Mining Corporation of Bolivia (Comibol). Strongly influenced by peasants, the government enacts sweeping agrarian reform. Miners organize the Bolivian Labor Federation (COB).

1956-1960: Representing the MNR's right wing, new president Hernán Siles Zuazo continues the revolution. He turns toward the stagnant economy and, under advice from the IMF, freezes wages and implements a stabilization plan. Weakening relations between the MNR and the COB are further damaged when Siles Zuazo rebuilds the armed forces to quell unrest. A group from the MNR forms the Authentic MNR (MNRA).

1961-1964: The revolution loses momentum. Paz Estenssoro returns as president, but conflicts within the MNR and corruption grow. Paz Estenssoro loses the support of the left when he restructures the tin industry, ends workers' control over Comibol, and reduces salaries. Vice President General René Barrientos receives military assistance in occupying the presidential palace and assumes the title of president.

1965-1969: Despite promises to the contrary, Barrientos continues his predecessor's policies. The economy improves, aided by rising tin prices. Barrientos encourages private and foreign investment. His attempts to control labor anger miners. Che Guevara's radical guerilla movement is set back when troops kill him in 1967. Barrientos dies in a helicopter crash, and General Ovando takes power in a coup.

1970-1971: In the spirit of "revolutionary nationalism," Ovando nationalizes the U.S.-owned Gulf Oil Company, but workers don't want to cooperate with a military government. The military itself is polarized, and reformists now support a more radical general who overthrows Ovando. Lacking authority, strategy, and political experience, he is quickly ousted in a military coup led by Colonel Hugo Banzer.

1972-1978: Growing exports and foreign borrowing fuel strong economic growth until 1976, when oil production declines and cotton prices fall. The governing alliance disintegrates. Banzer announces the formation of a "new Bolivia" under increasingly repressive military rule, especially brutal to the left. Elections in 1978 are annulled due to fraud, and Banzer's candidate carries out a coup.

1979-1981: A series of military governments rules briefly, each overthrown by the next. Political parties are fragmented, the armed forces divided, and austerity measures provoke social unrest. Arrests, torture, and disappearances destroy the opposition. The government takes part in cocaine trafficking. Under growing pressure, the military allows the 1980 Congress to choose Siles Zuazo as president again.

1982-1984: The political arena is characterized by infighting and corruption. The international recession and domestic fiscal mismanagement put the Bolivian economy in a state of crisis. The government prints money, fueling inflation. Per capita income falls below 1965 levels, with more than half the labor force employed in the informal sector. Paz Estenssoro is elected president again.

1985-1988: Shifting his focus away from the center left that elected him, Paz Estenssoro institutes a drastic New Economic Policy that liberalizes trade, deregulates the financial sector, privatizes some state enterprises, and implements tax-reform law. These "shock therapy" measures succeed in reducing record inflation and bringing about slow but steady economic growth. Success comes at a high social cost.

1989-1993: Jaime Paz Zamora, Paz Estenssoro's nephew, is elected president. He continues his uncle's neoliberal reforms, maintaining slow economic growth. Cocaine trafficking contributes illegally to the economy. Social tensions explode in a series of forcefully suppressed strikes for higher wages and against privatization. Sánchez de Lozada, architect of the shock therapy program, is elected president.

1994-1997: Sánchez de Lozada enacts political decentralization, granting municipalities more control over revenues. Heeding international concern for the environment, the government implements a coca-eradication program. Capitalization of several state enterprises brings economic growth in capital-intensive sectors. Banzer returns as president after more civil disturbances, promising greater social equity.

1998-1999: The Brazilian and Asian financial crises bring Bolivia's slow economic growth nearly to a halt. Income per capita falls further as unemployment rises. Bolivia participates in a World Bank/International Monetary Fund debt reduction initiative for heavily indebted countries.

2000-2003: Economic stagnation takes hold in the wake of the Asian crisis and amid global slowdown. Frustration grows at the apparent failure of market reforms to relieve poverty. The government deploys soldiers to stop protests. Indian and coca growers' movements gain popularity. An ailing Banzer resigns; his vice president takes over. Former president Gonzalo Sánchez de Lozada returns to the office in 2002.

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Political

1982-1985: Siles Zuazo fails to gain support from any faction. The economic crisis worsens. Conflict with Congress, labor, and the private sector puts the government on the verge of collapse. The opposition forces Siles Zuazo to give up power through an election. General Banzer wins by a slim margin. In Congress, the MNR forms a coalition that elects Paz Estenssoro, the runner-up, for a fourth time.

1986-1988: Paz Estenssoro shifts away from the center left. He signs a Pact for Democracy under which Banzer and his Nationalist Democratic Action (ADN) party agree to support the drastic New Economic Policy (NPE), a new tax law, and repression of labor. In exchange, the ADN receives control of some municipal governments. This Pact holds up through 1988, when the two parties disagree on electoral law.

1989: Political parties scramble to find new allies. The election results in a three-way tie between the MNR, the ADN, and the Movement of the Revolutionary Left (MIR). The ADN and MIR form a Patriotic Accord coalition. Congress elects Jaime Paz Zamora from MIR as president and a vice president from the ADN. The ADN also gains control of the principal policymaking bureaucracies.

1990-1993: Paz Zamora governs as a center-left moderate. He faces growing national security, social, and economic threats from cocaine trafficking and addiction, which he attempts to control. The 1993 elections are peaceful and relatively open. The MNR defeats the ADN/MIR coalition. Gonzalo Sánchez de Lozada, former planning minister and architect of 1985's shock therapy reform, assumes the presidency.

1994-1997: Sánchez de Lozada alienates traditional MNR factions when he attempts to reduce party patronage and focuses on administrative decentralization. The Law of Popular Participation transfers control over 70 percent of government funds to local municipalities. Banzer returns with a campaign that stigmatizes the government for increasing the gap between rich and poor. He wins the 1997 election.

1998-2000: Banzer claims to strive for stability in the financial system and reform in the social and political arenas, but social unrest and violent uprisings in 2000 disrupt his plans. He imposes a state of siege to control the unrest and removes ministers who criticize his handling of the crisis.

2001-2003: Illness forces Banzer to resign; Vice President Jorge Quiroga replaces him. Political conflicts deepen, and antigovernment feeling spreads. A radical leader of the Indian communities, Felipe Quispe, leads a popular protest movement. In 2002, coca grower Evo Morales places second in the presidential election, forcing a runoff with the eventual winner, former president Gonzalo Sánchez de Lozada.

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Economic

1982-1984: International recession and domestic fiscal mismanagement create a crisis. External financing from private sources ends as foreign banks reassess Bolivia's ability to service its debt. Total output declines by 4 percent per year. Siles Zuazo's government tries unsuccessfully to negotiate a series of politically controversial and tentative stabilization programs with the IMF.

1985-1986: The illegal coca and cocaine industry props up the economy with U.S. dollars. Paz Estenssoro introduces his dramatic New Economic Policy (NPE), a "shock therapy" program designed by Sánchez de Lozada and Jeffrey Sachs. The NPE liberalizes import policies, restructures the public sector, deregulates the economy, privatizes state enterprises, freezes public wages, and eliminates subsidies.

1987-1989: The NPE results in a dramatic drop in inflation, slow but steady economic growth, and increased private (domestic) investment. A strong underground economy based on contraband, coca production, and the informal sector still employs an estimated one-third of the workforce and is thought to total more than official international trade. Foreign investment is almost nonexistent.

1990-1993: Paz Zamora continues his uncle's neoliberal reforms, and the economy grows, albeit slowly. He promotes the NPE and works to develop agriculture and small and medium-sized industries. Investment in the private sector and mining increases. The cocaine trade, however, continues to be a major contributor to the economy.

1994-1997: Through an aggressive "capitalization" program, investors acquire 50 percent ownership and management control of the state oil company, the telecommunications system, and electric utilities, with the other 50 percent going to national pension funds. Private investment in the hydrocarbon and mining sectors surges. Economic growth in capital-intensive sectors emphasizes regional disparities.

1998-2003: Already slow annual economic growth of 2.5 percent is further affected by tight government budget policies and the fallout from the Brazilian and Asian financial crises. Income per capita falls, and unemployment rises. In 2002 incoming president Sanchez de Losada promises public works investments. His plan to increase income taxes for emergency revenue fails amid violent protests.

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Social

1982-1984: Rapid urbanization establishes poverty belts in urban areas. Droughts and floods combine with the deteriorating economy to cause severe food shortages. In 1984 Bolivia is the poorest nation in South America, with per capita incomes below 1965 levels. The informal sector is estimated to employ roughly 60 percent of the country's labor force.

1985-1988: The New Economic Policy (NPE) imposes spending controls on the public sector, freezing wages and eliminating social programs. Thousands of workers lose their jobs at restructured state-owned enterprises. By 1987 unemployment exceeds 20 percent. In response, the government creates the Emergency Social Fund to develop public works projects and create temporary jobs. Social unrest is pervasive.

1989-1993: In 1989 a nationwide teachers' strike for higher wages extends to include other union members. Paz Zamora's government responds by imposing a state of siege and arresting more than 850 union members. With 37 percent of the population in extreme poverty, national strikes for higher wages and against privatization continue, in vain, through the early '90s.

1994-1996: Popular participation and decentralization give municipal governments greater authority to provide basic services and recognize community and neighborhood organizations. Investment in social areas and participation in education grow. High income inequality, fiscal restraints, and privatization, however, spark another wave of civil disturbances which are violently suppressed.

1997-1999: Bolivia defines social programs to be funded through a debt-reduction initiative for indebted poor countries. Banzer initiates health reform and a rural literacy campaign, but many local governments lack the means to implement programs. A program to buoy pension funds with the proceeds from the capitalization of five public enterprises is undermined by poor dividends and widespread fraud.

2000-2003: Various social uprisings merge as farmers, civil servants, and the poor protest privatization, low wages, lack of public investment, and the coca eradication program. The Banzer government imposes a state of siege and deploys 20,000 soldiers. When Jorge Quiroga and, in 2002, Gonzalo Sánchez de Lozada take over, they find a population increasingly frustrated with poverty and impatient with reforms.

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Environmental

1982-1987: Mining regions suffer from soil erosion and water pollution. The slash-and-burn tactics of coca growers destroy tropical forest resources, while cocaine production processes dump sulfuric acid, lime, and kerosene into the ground and bodies of water. Financially strapped, the government depends on a small number of non-governmental organizations for environmental conservation efforts.

1988-1991: The government passes a controversial law on the control and eradication of coca plantations, allowing a limited quantity of legal coca. It also creates the National Secretariat for the Environment, responsible for environmental planning and policymaking, and the National Fund for the Environment. The Fund is to coordinate with the Ministry of Planning to implement an Environmental Action Plan.

1992: The government adopts a comprehensive environmental law requiring projects to undertake an environmental impact statement. The law establishes an Environmental Audit program and regulations for water use. Bolivia works with international organizations to bring regulations in line with the standards of industrialized countries while seeking to attract investment in mining and other sectors.

1993-1996: As economic growth slowly resumes, the government creates the Ministry of Sustainable Development and the Environment. The Ministry develops a General Plan for economic and social development, but lacks the means of execution at the national and district levels. The coca-eradication program reduces the amount of land used for coca cultivation.

1997-2003: Local and international environmentalist groups oppose a Bolivia-Brazil pipeline that runs through the Chiquitano forest and the Patanal wetlands, two sensitive eco-regions. A petroleum pipeline break and the ensuing oil gush help further their cause, but the pipeline project continues. Bolivia considers ecotourism as a means of boosting the economy while preserving the environment.

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Rule of Law

1982-1985: Bolivia is relatively free of the terrorism, insurgency, and criminal violence that afflict other Andean nations, although corruption and favoritism in the political arena are rampant. The public sector encompasses some 500 agencies, providing opportunities for graft. Tax evasion is widespread. In an attempt to keep the national currency at market rates, the government legalizes the black market.

1986-1989: The cocaine industry increases corruption at all levels of public institutions. The cocaine business also fuels a new kind of crime among coca-paste addicts. Increasingly militant and powerful unions of coca growers hamper Bolivia's attempts, with U.S. support, to implement a program of cocaine interdiction and coca eradication. Cocaine-related acts of terrorism increase.

1990-1993: President Paz Zamora orders an attack on terrorists and breaks up a number of drug-trafficking networks, but he allows lenient sentences to the biggest narcotics kingpins. Paz Zamora is later suspected of having ties to some accused traffickers, as are the head of the anti-narcotics police and the interior minister. Mass arrests follow social protests and demonstrations.

1994-1997: Demonstrations become more frequent as various segments of society protest privatization, low wages, and poor living conditions. Three weeks of civil disturbances in 1995 prompt the government to arrest more than 300 labor leaders and suspend constitutional rights so it can hold people without trial.

1998-2003: President Banzer makes the elimination of illicit coca growing a central goal of his government and succeeds in reducing production and trafficking. Widespread poverty and increased migration to cities, however, contribute to a rapid increase in crime. Protests in 2000 leaves five dead and many wounded after 13 days of government-imposed siege.

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Trade Policy

1982-1984: Bolivia relies primarily on exports of tin and other minerals, as well as illegal contraband and cocaine trafficking. The domestic market is protected, with customs tariffs ranging from zero to 180 percent and volume and value quotas in place for many goods.

1985-1986: Trade policy shifts toward making the external sector more market-oriented and diversifying the export base. The government liberalizes import policies by introducing a uniform tariff of 20 percent. All export taxes are abolished. Constant devaluations through a floating exchange rate help lower prices of exports. The government establishes an export-promotion institute.

1987-1989: The export sector struggles in the face of depressed commodity prices. Exports of natural gas increase while those of tin decrease. Under the economic Reactivation Decree, the government fosters export activity by introducing tax rebates for exporters. A large portion of exports (those of cocaine and illegal smuggling) are not reported. The tariff for capital goods imports falls to 10 percent.

1990-1995: Trade is integrated into neighboring economies. Trade between Chile and Bolivia increases. The Peruvian Congress agrees to give Bolivia a free-trade zone in a Southern port. But Bolivia suffers from its dependence on Argentine payments, most of which are in arrears, for natural gas exports. A law grants rebates of all domestic taxes paid on the production of items later exported.

1996-2001: The government strives to make Bolivia the regional hub for exporting hydrocarbons. A pipeline to Brazil expands the export market for natural gas. Bolivia participates in several regional preferential-trade agreements. In 1997 Bolivia implements an association agreement with the Southern Cone Common Market (Mercosur). The United States remains Bolivia's largest trading partner.

2002-2003: The substantial elimination of the illicit coca trade removes an illegal but valuable source of foreign revenue; Bolivia complains that its legal exports are hindered by the failure of its trading partners to adopt free-trade reforms that match its own, as well as by the flow of contraband across its borders. The government pushes for fast trade integration in the Andean region and Southern Cone.

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Money

1982-1984: As external financing dwindles, the government prints more money, fueling inflation. The value of the peso plummets. Siles Zuazo outlaws dollar deposits and loans, used by 90 percent of the economy, to restore faith in the national currency. Massive capital flight ensues. Several attempts at stabilization fail due to political opposition. Bolivia reaches a state of financial crisis.

1985: Prices soar. Inflation tops 24,000 percent. Illegal cocaine dollars flood the economy. Many financial institutions are insolvent. In response, the government deregulates the financial sector, legalizes deposits in U.S. dollars, frees interest rates, and stresses tax reform. The decision to float the peso against the dollar causes massive devaluation. Inflation drops below 20 percent.

1986: The Central Bank establishes a flexible exchange rate through mini-devaluations. An auction mechanism, the Bolsín, determines the daily value of the peso on the basis of supply and demand. A tax reform measure lowers the country's highest tax bracket and institutes a general value-added tax. This reform and an aggressive tax-collection policy help reduce public sector deficit.

1987-1989: By 1988 the currency, now called the boliviano, is relatively stable. The official and black market rates differ by one percentage point. The government succeeds in reducing its massive debt through international financial schemes, including debt purchase agreements and debt-for-equity swaps. The budget deficit falls from 36 percent of the GDP to 4 percent. Inflation hovers around 6 percent.

1990-1996: The government launches a program to strengthen investments and financial institutions. Congress approves a law establishing many guarantees to promote private investment. A new banking law replaces an older decree in establishing clear rules for commercial banks and authorizing them to maintain foreign currency accounts. The government helps recapitalize and restructure several major banks.

1997-2003: Bolivia owes more than $3 billion to foreign creditors, which is mitigated by $854 million in debt relief. Flaws in the pension fund system force the government to borrow at a high interest rate to cover $50 million in pension payments in 1997 alone. Inflation tops 7 percent in 1998 as a result of a world economic slowdown, falls to 4 percent, and rises again in 2000 following social conflict.

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Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
Graphs: Growth | Income | Inflation | Unemployment | Well-being | Trade Volume | Trade (CAB) | Spending

Related: Video | LinksView all categories for years from to | See Full Report | Print