INESAD
Rodrigo Paz inherited a broken economy. It is getting harder and harder to fix
When he became President of Bolivia in November, Rodrigo Paz was riding high. His election ended 20 years of almost uninterrupted left-wing rule by the increasingly autocratic Movement to Socialism (MAS). Now his centrist government is beset by violent protest. Dynamite-wielding protesters have blockaded La Paz, the seat of government. The city is running short of food and fuel. Banks are too frightened to open. Various groups are demanding that Mr Paz step down.
He promised to liberalise the economy while protecting welfare. The MAS had run annual fiscal deficits of around 10% of GDP, and the central bank was all but out of dollars. Voters ejected the party because of biting inflation and chronic fuel shortages. But these problems have continued. A batch of adulterated fuel damaged more than 10,000 vehicles, infuriating their owners. An agrarian reform passed in April angered indigenous people, who saw it as a sop to agribusiness. Mr Paz repealed it, but the general workers’ union and peasant groups demanded his resignation anyway. The peasants set up the road blocks.
Thousands of supporters of Evo Morales, a former president, arrived in La Paz on May 18th to join the protests. Mr Morales led the MAS to power through just this sort of street politics. He is hiding out in the coca-growing tropics, evading an arrest order for statutory rape. (Mr Morales says the allegations are politically motivated.) He and his new party, Evo Pueblo, want to exploit the moment.
Even if Mr Paz can defuse these protests, there will be more. The IMF reckons the economy will contract by 3.3% this year, with inflation rising to more than 20%. Mr Paz’s relationship with the highland indigenous and peasant groups—whose votes were crucial to his election—has already broken down. Their blockades have toppled governments in the past.
The economic adjustment has barely begun. External factors have not helped. After Mr Paz cut fuel subsidies, the war in Iran sent prices soaring. The fiscal deficit in the latest budget was still 9% of GDP. At the official exchange rate the currency remains overvalued. Reforms to encourage investment in natural resources have yet to materialise. “The government is moving, but very slowly, very timidly,” says Beatriz Muriel of INESAD, a think-tank in La Paz.
The Americans are watching. “The United States stands squarely in support of Bolivia’s legitimate constitutional government,” Marco Rubio, the secretary of state, said on May 20th. “We will not allow criminals and drug traffickers to overthrow democratically elected leaders in our hemisphere.”
