Turnabout in Bolivia as Economy Rises From Instability

William Neuman

LA PAZ, Bolivia — Argentina’s currency has plunged, setting off global worries about developing economies. Brazil is struggling to shake concerns over years of sluggish growth. Venezuela, which sits atop the world’s largest oil reserves, has one of the world’s highest inflation rates. Farther afield, countries like Turkey and South Africa have watched their currencies suffer as investors search for safer returns elsewhere.
And then there is Bolivia.

Tucked away in the shadow of its more populous and more prosperous neighbors, tiny, impoverished Bolivia, once a perennial economic basket case, has suddenly become a different kind of exception — this time in a good way.

Its economy grew an estimated 6.5 percent last year, among the strongest rates in the region. Inflation has been kept in check. The budget is balanced, and once-crippling government debt has been slashed. And the country has a rainy-day fund of foreign reserves so large — for the size of its economy — that it could be the envy of nearly every other country in the world.

“Bolivia has been in a way an outlier,” said Ana Corbacho, the International Monetary Fund’s chief of mission here, adding that falling commodity prices and other factors have downgraded economic expectations throughout the region. “The general trend is we have been revising down our growth forecast, except for Bolivia we have been revising upward.”

Bolivia has taken an unlikely path to becoming the darling of international financial institutions like the monetary fund, not least because the high praise today is coming from some of the same institutions that the country’s socialist president, Evo Morales, loves to berate.

Mr. Morales often speaks harshly of capitalism and some of its most ardent defenders, like big corporations, the United States, the monetary fund and the World Bank. He nationalized the oil and gas sector after taking office in 2006, and he has expropriated more than 20 private companies in a variety of industries.
Yet while Mr. Morales calls himself a revolutionary, others have begun using a very different word to describe him: “prudent.”

Both the monetary fund and the World Bank, in recent reports, praised what they called Mr. Morales’s “prudent” macroeconomic policies. Fitch Ratings, a major credit rating agency, cited his “prudent fiscal management.”

While Mr. Morales remains firmly in Latin America’s leftist camp, on many economic matters he fits within a broader trend away from ideological rigidity in the region.

In Peru, President Ollanta Humala went from ardent leftist to centrist. In Colombia, President Juan Manuel Santos, a former defense minister, now plays the role of peacemaker, negotiating with the country’s largest guerrilla group. In El Salvador, presidential candidates from left and right moved toward the center to woo voters. In Uruguay, President José Mujica, a leftist and a former Marxist guerrilla, has carried out business-friendly economic policies.

“There’s definitely an underappreciated element of pragmatism” in the region, said Maxwell A. Cameron, a professor of political science at the University of British Columbia.

Not long ago, Bolivia was a focal point of political and economic instability, and while it remains South America’s poorest country, much has changed.

Economic growth last year was the strongest in at least three decades, according to the monetary fund, and it continued a string of several years of healthy growth. The portion of the population living in extreme poverty fell to 24 percent in 2011, down from 38 percent in 2005, the year before Mr. Morales took office.

Though there is still much misery, the economic transformation is widely visible, in thriving urban markets or in the new tractors tilling land where farm animals pulled plows not long ago. In El Alto, a working-class city perched above the capital, the newly wealthy flaunt their success in the form of brightly colored mansions. Another recent addition: the proliferation of bakeries selling elaborate cakes, a sign that even those of more modest means have extra cash to spend.

One of the most surprising developments is the way that Bolivia has amassed foreign currency, salting away a rainy-day fund of about $14 billion, equal to more than half of its gross domestic product, or 17 months of imports, that can help it get through economic hard times.

According to the monetary fund, Bolivia has the highest ratio in the world of international reserves to the size of its economy, having recently surpassed China in that regard.

“We are showing the entire world that you can have socialist policies with macroeconomic equilibrium,” said Economy and Finance Minister Luis Arce. “Everything we are going to do is directed at benefiting the poor. But you have to do it applying economic science.”

The country is doing well thanks to relatively high prices for natural gas — its most important export — during Mr. Morales’s presidency. That enabled Mr. Morales to order in November that all government and many private sector workers get double the customary year-end bonus of a full month’s salary.

It was a populist move that critics linked to the coming election season — Mr. Morales will run for a new term in October. But it is consistent with a broader effort to redistribute wealth and direct some of the country’s natural gas income directly into people’s pockets.

“I wouldn’t necessarily say these are mainstream economic policies,” Ms. Corbacho said. “What we have assessed as very positive are the outcomes they have achieved when it comes to growth, social indicators” and other criteria.

Bolivia’s turnaround is noteworthy because for many years the country was a proving ground for the kind of orthodox, free market policies long promoted by the monetary fund and other international institutions. Grappling with a host of economic problems, including hyperinflation that reached 24,000 percent in 1985, the government cut spending, eliminated fuel subsidies, partially privatized government-owned companies and fired many workers.

Critics say that while those policies tamed inflation, they also did long-term damage, exacerbating the unequal distribution of wealth, pushing newly out-of-work miners and farmers into coca farming that increased cocaine production, and ultimately contributing to the social unrest that helped usher in Mr. Morales as president.

“The Morales administration has basically cast off the recommendations of the I.M.F. and other huge international lending organizations, and for the first time, during his tenure, you see those macroeconomic indicators improve significantly, which finally gains the approval of organizations like the I.M.F.,” said Kathryn Ledebur, director of the Andean Information Network, a research group based in Bolivia.

Mr. Morales has benefited by being president during a time of high commodity prices, which have driven economic growth here and in many countries throughout the region. In a highly contentious move, he nationalized the energy sector by taking a greater stake in the companies that extract the nation’s gas and demanding a bigger share of the revenues. That has greatly increased government income, giving him the money to pay for social programs like cash payments to young mothers, improved pensions and infrastructure projects.

But while the nationalization rattled foreign investors, Mr. Morales now gets generally good marks for the way he has handled the windfall.

“You could mismanage this opportunity, and the reality is they have not,” said Faris Hadad-Zervos, the resident representative of the World Bank in La Paz, who cited the large foreign reserves stock and substantial increases in government spending on infrastructure.

Not that there are no areas of concern. Both the monetary fund and the World Bank say much more should be done to encourage private investment. Bolivia has less than half the rate of private investment of most other countries in South America.

There are also worries about what will happen if natural gas prices fall significantly, and whether Bolivia is simply in the midst of the typical boom-and-bust cycle that often bedevils poor countries.

Bolivia’s gas exports go entirely to Brazil and Argentina on long-term contracts, meaning that sustained economic problems in those countries could eventually spell problems for Bolivia. But a greater concern is over a low level of investment in gas exploration, which could endanger Bolivia’s ability to maintain production levels in the future.

“This is not sustainable in the long term,” said Jose L. Valera, a lawyer based in Houston who has represented energy companies doing business in Bolivia. “The model is not designed to generate substantial profits for an oil industry that is going to then be incentivized to reinvest in Bolivia.”

Bolivia’s relations with the monetary fund and the World Bank, both based in Washington, are a sharp contrast to those of some of its leftist allies. Venezuela, Ecuador and Argentina refuse to take part in annual economic reviews by the monetary fund.

Mr. Morales’s public statements have also often been highly critical. He once said the World Bank tried to blackmail him into changing his economic policies. And in a speech in December 2012, he called for the dismantling of “the international financial system and its satellites, the I.M.F. and the World Bank.”

But his attitude toward the bank seemed to have changed in July at an event to announce a World Bank project to support quinoa farmers.

“The World Bank does not blackmail, or impose conditions, not anymore,” Mr. Morales said, according to a publication on the bank’s website. To celebrate, he played a friendly soccer game with the bank’s president, Jim Yong Kim.

Monica Machicao contributed reporting.

U.S. halts economic aid to Bolivia citing expulsion of USAID

The United States has halted all economic aid to Bolivia, because that country expelled representatives of the USAID last May, the Bolivian press reported.

USAID stands for U.S. Agency for International Development.

In 2006, when President Evo Morales took office, that aid amounted to about $40 million a year for programs of health care, environmental protection and economic development. That amount has since declined.

“Our economic support has always been delivered through the USAID, and, at the request of the Bolivian government, that agency no longer functions here, so economic support is no longer an issue between the two countries,” said Larry Memmott, U.S. chargé d’affaires in La Paz, interviewed by the radio station Fides on Thursday (Jan. 30).

Bolivia expelled the USAID on Sept. 30, 2013, almost five months after Morales accused that agency of having funded nongovernment organizations (NGOs) and opposition groups. The USAID established its presence in Bolivia in 1964.

President Evo Morales on Friday said that Bolivia “does not need charity” and pointed out that the U.S. had vowed to contribute to Bolivia’s fight against drug trafficking, according to the Bolivian press.

“If we talk about the struggle against drug trafficking, because of international agreements, [the U.S.] has the obligation, within its shared responsibility to contribute to the struggle against drug trafficking. That’s not aid,” he said.

In any case, Morales said, 80 percent of the United States’ money returned to the U.S. in the form of Bolivian contracts for business enterprises and consulting services, “so what aid are we talking about?”

“If we review the data, the latest data, I believe it comes to 20 or 25 [million dollars], practically nothing,” he said at a press conference in the presidential palace.

Presidential chief of staff Juan Ramón Quintana told the press that USAID contributions amount at present to $23 million.

“We do not need charity. We’ll study this thoroughly and, who knows, maybe Bolivia can cooperate with the American people,” President Morales said, without explaining what he meant by cooperation with Americans.

“Let them condition [their aid], let them blackmail us,” he added, heatedly. “To me, there’s never been any aid.”

The announcement was made in La Paz by a chargé d’affaires because the United States does not have an ambassador in Bolivia. In September 2008, Morales ordered the expulsion of Ambassador Philip Goldberg, accusing him of conspiring with an opposition group in Santa Cruz Province.

The U.S. State Department denied the accusation but retaliated by expelling the Bolivian ambassador, Gustavo Guzmán. Two months later, Morales ousted the functionaries of the U.S. Drug Enforcement Administration.

Bolivia’s top representative in Washington today is Gen. Freddy Bersatti, identified by the Bolivian government as “chief of mission.”

The suspension of economic aid represents another crack in U.S.-Bolivia relations, which have not been improved by Morales’ rapprochement to left-leaning nations like Cuba, Venezuela and Ecuador.

Morales this week attended the summit in Havana of CELAC, the Community of Latin American and Caribbean States, a regional association that does not include the U.S. or Canada.

Republished from Progreso Weekly

Bolivia’s Indigenous Future: A Balance of Preservation, Protection and Connection

Evo Morales’s very name seems to suggest his destiny of leading Bolivia in a valiant attempt at ‘moral evolution’ with all other Nation States in tow. Tasked with the difficult role of representing his Indigenous roots at the national and international levels of government and policy, Morales continues to make great strides that by all appearances bridge the dichotomy of tradition and modernity. Recent evolutions in Bolivian national policy regarding the protection and preservation of indigenous cultures continue to gain legal traction. Simultaneously, more Bolivians than ever before are poised to claim their rightful place in the interconnected web that is the information age.

Indigenous Peoples in Bolivia recently performed rituals to ‘Pachamama’, or ‘Mother Earth’ to bless the launch of Bolivia’s first telecommunications satellite. The satellite has been officially named, ‘Tupac Katar’, after the revered Amyara indigenous hero who led a resistance to Spanish colonization in the 18th century. The new satellite has been lauded with the potential to drastically reduce the cost of television and satellite services to rural communities, according to the Associated Press.

Bolivia’s indigenous communities have claimed another victory of late. A new law is being implemented, designed to instill harsh penalties on any entity found to be endangering the livelihood and preservation of Bolivia's numerous Indigenous Peoples. Recent coverage on Infosurhoy.com provides a rundown of the new legal development, outlining four categories of offenses that will elicit harsh penalties on guilty parties.

The first category of offense cited is: ‘cultural genocide’, which carries a punishment of 15-20 years in prison for those found to be in violation. Such designated crimes would include actions deemed to exhibit a plausible threat to the continued existence of any Indigenous Peoples in Bolivia.

The second category in the new legal framework is ‘cultural disruption’, which is defined as any activity found to negatively alter indigenous livelihood--a crime that's punishable by anywhere between 6-10 years in prison.

The third category, ‘financing of cultural disruption’, with a nod to Bolivia’s overall movement towards resisting destructive forms of imperialism, can carry an even harsher penalty of 8-12 years.

The final category, ‘environmental damage’ can also carry an 8-12 year sentence, perhaps highlighting another recent evolution in national jurisprudence that gave distinctive rights to Pachamama herself.

The new legal move towards preserving indigenous culture will also give birth to a new government agency known as DISEPIO. Translated to English as "The General Directorate of Indigenous Nations and Peoples at Risk of Extinction, in Voluntary Isolation or Without Contact", DISEPIO, according to Deputy Minister for Native Indigenous Justice, Isabel Ortega, will be in charge of developing specific plans and programs that protect Indigenous Peoples under the new regulations.

In a recent interview, Guarayo indigenous leader, Bienvenido Zacu, lamented on the challenges ahead in bridging the gap between establishing such regulations and assuring their broad and continued implementation:

"In order to protect the indigenous peoples of Bolivia, we need more than just regulations. We need to raise the level of awareness and we particularly need to provide ongoing health care, instead of responding to emergencies, such as the threat of extinction."

Zacu went on to suggest that broad public awareness campaigns might also play a role in these focused efforts at preventing cultural extinction. “We’re about to become extinct. We can’t stand back and let this happen. We need to get back in touch with our roots,” he commented.

According to the most recent Bolivian census, between 15 and 36 indigenous populations are hovering on the edge of cultural extinction. This new law will seek to preserve these important lines of heritage while the new technology services will aim to supplement the overall standard of living in rural areas. The Machineri Peoples, with a count of just 38 men, women and children, is the most vulnerable of all. Others, such as the Guarasugwe and the Tapieté remain intact, though with populations that are dipping below 100. The relatively large Amyara and Quechua Peoples are stable and strong, each having populations well over a million according to the same census count. It is thought that all of the headcounts may prove to be much higher once more advanced methods of obtaining and reporting familial heritage become available.

Bolvia’s forward strides in indigenous rights at home will most likely continue to pave the way internationally as a model for, and harbinger of, a more evolved standard of indigenous jurisprudence around the world. Landmark paradigm shifts, such as Bolivia’s official declaration of ‘plurinationalism’ in 2009, continue to reinforce Bolivia’s status as a global leader in the movement to recognize indigenous sovereignty as protected by international law. In return, increased international awareness may be expanded and reflected back to Bolivia’s Indigenous Peoples from the international stage, as more and more Bolivians gain access to information technology and thus claim their rightful power to represent themselves directly to the global community.

Republished from Intercontinental Cry