Bolivia is in the midst of its most dangerous power struggle since the mid-1980s and still smarting from the violence of 2003, which left nearly 100 people dead and forced the resignation and flight of President Gonzalo Sánchez de Lozada after barely six months in office. A series of highly divisive issues, particularly over the extraction and export of natural gas, demand swift resolution. Unless the Mesa government, with sympathetic assistance especially from the U.S., can forge a new public consensus, the country's hard pressed democracy, and perhaps its continued unity will be in doubt.

The social contract underpinning that democracy is shredded and further violence is a constant threat. In addition to natural gas, polarising issues include the country's economic model; regional autonomy; demands by the majority indigenous peoples for greater representation; and reconciling respect for traditional coca practices with international mandates, pressed by the U.S., against illicit drug trafficking.

Contentious debates on all of these issues allow little room for mediation and reconciliation. If middle grounds cannot be defined and agreed, Bolivia is headed for tumultuous times. The country's direction could change overnight with the 18 July 2004 referendum on the gas issue, the elections for a constituent assembly that is expected to write a new constitution in 2005 or, in the worst case, through non-democratic means.

The growing split between Bolivia's regions has been amplified by the confusion and conflict over the ownership, sale, and beneficiaries of the natural gas reserves. Santa Cruz and other commercially-oriented lowland cities often prefer to ignore the politics of La Paz, but radical movements in the highlands are determined to stop them from exporting the gas located in their region. Business interests in Santa Cruz and Tarija have little choice but to go on the political offensive if they want to open export markets for the gas. Until now, their calls for secession have been more rhetorical than real. If the referendum turns current laws, contracts, and policies upside down, however, the rhetoric may lead to action.

Indigenous movements are gaining strength throughout the Andes, and the Bolivian movement has already shown the potential for violence. Populist movements are taking issue with the current political and economic rules of the game, which have largely been written by foreign interests and domestic elites. Animated and angry, they are clear about what they oppose -- economic policies that are at best trickle-down and at worst exacerbate income inequality -- but they are not offering practical alternatives, and are shedding more heat than light on the important economic and social issues.

The challenges for the Mesa government are enormous. Keeping a political course that satisfies all sectors of society seems impossible. A major effort at making policy more transparent, including an effective public explanation of the hydrocarbon industry's complexities, seems the only way to prevent Bolivia from coming to blows or breaking up over its newfound treasure. Addressing multiple economic, ethnic, and social problems requires political parties, social movements, and business associations to forge a new national consensus on how to use natural resources for the development of the entire nation and substantial poverty reduction.

Quito/Brussels, 6 July 2004