Bolivia’s Landslide Lays to Rest the Fears of Fraud
Bolivia’s Landslide Lays to Rest the Fears of Fraud

Bolivia’s Rocky Road to Reforms

The first-round victory of Evo Morales in the December 2005 presidential election profoundly altered Bolivia’s politics and the way South America’s poorest nation is seen abroad.

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Executive Summary

The first-round victory of Evo Morales in the December 2005 presidential election profoundly altered Bolivia’s politics and the way South America’s poorest nation is seen abroad. His left-wing Movement Toward Socialism (MAS) party rolled over the traditional parties in a landslide that reflected the expectations and desires of a majority of Bolivians for far-reaching socio-economic change, institutional reform and full inclusion of the mostly rural and indigenous poor. If Morales is to succeed, however – and he must if Bolivia is to avoid serious instability and violence – the international community will need to show understanding and offer support as he grapples with explosive issues of nationalisation, constitutional reform, autonomy, drugs and development policy.

Morales immediately demonstrated he is following a drummer different from that of every Bolivian president of the past 25 years. He appointed representatives of social movements and left-wing intellectuals to key posts, nationalised the hydrocarbon sector on 1 May 2006 and arranged for the election of a constituent assembly and a referendum on regional autonomy on 2 July. In foreign policy, he closed ranks with Presidents Hugo Chávez of Venezuela and Fidel Castro of Cuba and distanced himself somewhat from the U.S. While his assumption of power in January and first months in office have been surprisingly peaceful, there are strong indications the journey to the far-reaching reforms he and his constituents want will be difficult.

The hurdles include deep-seated economic, institutional and social problems; less than full control of the legislature; the opposition of economically and politically powerful groups in Santa Cruz in the east and Tarija in the south; and the hybrid nature of the MAS – both rooted in and constrained by the social movements. The reduction of Bolivia’s grinding poverty and the creation of a more effective, inclusive and just state depend also on the relations the new government is able to build with foreign investors, South American neighbours, the European Union (EU) and the U.S.

In general, the international community reacted positively to Morales’s election, which it correctly saw as the expression of overdue political change, an important step towards at least short-term institutional stability and a chance to make headway against widespread social exclusion and poverty. Not even the thorny issue of legalising the cultivation of coca bushes, an important Morales campaign topic and a preoccupation of Washington, Brussels and other European capitals, seriously dampened the initial honeymoon.

This changed on May Day, when Morales issued a decree that foreign enterprises in the hydrocarbon sector would have to yield “control and direction” of their facilities to the state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB) and sign new contracts stipulating higher returns to YPFB within 180 days or be barred from further operations in the country. This measure, which affected primarily Brazilian and European investments, was followed by announcements that the government would soon implement land reform and nationalise other key sectors of the economy, such as mining. Spanish business circles were most outspoken in their protest, while relations with Brazil and Argentina were strained and the volunteered efforts of Venezuela’s Chávez to mediate only complicated matters.

The referendum on regional autonomy on 2 July 2006 and the election of the constituent assembly that same day are milestones in Bolivia’s political history. If the twin processes are carried out effectively, they might enable the Morales administration’s fairly radical policies to be managed successfully and in the end produce institutional stability and a stronger democracy. But given the divisions within the country of virtually every sort – from ethnic to class to region – they also could prove to be the battlefield on which Bolivia’s stability and even its territorial integrity will be determined.

The international community – not least the EU because of its resources and relatively uncontroversial standing in the country – need to engage the Morales administration about how it can help Bolivia overcome widespread poverty and social exclusion in a reform process that protects everyone’s interest in stability. Donors’ technical and financial assistance can also help carry out the constituent assembly and regional autonomy processes. A third tier of EU and U.S. cooperation with Bolivia should stimulate alternative development as part of an expanded and integrated rural governance/development strategy. Ultimately, reduction of rural poverty through licit activities is the best option for reducing the pressure on poor farmers to grow coca leaf.

Bogotá/Brussels, 3 July 2006

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