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.
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.
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.
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.
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.
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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