By Dan Steinbock
Dr. Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/
Recently, thousands of Bolivians took part in protests in San Francisco square in La Paz demonstrating against President Evo Morales bid to extend term limits. While a referendum rejected his proposal to reform the constitutions to end current term limits, Morales Movement to Socialism (MAS) party requested the highest court to remove legal limits, which bar officials from seeking re-election indefinitely.
The narrow urban middle classes have expressed concerns that Morales was attempting to tighten his grip on power in a way that was reminiscent of President Nicolas Maduro in Venezuela. But Bolivia is not Venezuela and Morales is not Maduro and the country is thriving after a decade of progress under Evo Morales.
A decade of progress
As Bolivias first president to come from the indigenous population, Evo Morales began his political career as a trade unionist, like Brazils former President Lula. He has focused on greater equity, and poverty reduction. From 2006, when the per capita income in Bolivia was less than $4,200, today, it exceeds $7,550. At the same time, Gini index, which measures income inequality, has plunged from more than 58 to 47.
Figure: Bolivian Per Capita Income and Gini Index, 2005-2015
Sources: Per capita income, IMF; Gini Index, World Bank.
During the past decade, Bolivias trading relations have shifted, however. Today, the US and Japan account for 20 percent of Bolivian exports, whereas the share of Brazil, Argentina, and China is twice as high. Similarly, the US and Japan account for 15 percent of imports, whereas the share of China, Brazil, and Argentina is 50 percent.
No more dependent on World Bank and IMF?
Unlike some of his predecessors, Morales has vocally criticized neoliberal policies and sought to reduce Bolivias dependence on the World Bank (WB) and International Monetary Fund (IMF). Morales MAS represents a progressive alliance of indigenous people, mestizo working class, particularly miners, and socialist intellectuals. While 70 percent of Bolivians are mestizos, 20 percent are indigenous. Not surprisingly, his policies continue to be criticized by the domestic elite and US-led international organizations. Nevertheless, Morales has a strong track record in people first policies, which shun the power of capital and highlight the importance of a truly independent Bolivia.
“A day like today in 1944 ended Bretton Woods Economic Conference, in which the IMF and WB were established,” Morales tweeted last June. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.”
In the past, Bolivia’s dependence on these agencies was so great that the IMF actually had an office in government headquarters and even participated in their meetings. That was very much in line with the economic interests of the ruling oligarchy, which MAS perceives as anti-national.
From neoliberal inequities to inclusive growth
Since the postwar era, some of Bolivias largest struggles have targeted economic policies carried out by the IMF and the WB, particularly privatization and austerity measures, including cuts to public services, wage reductions, and the weakening of labor rights.
After Morales came to power in 2006, hydrocarbons have been nationalized, while social spending on health, education, and poverty programs has increased by over 45 percent. Poverty has been reduced from 60 percent to less than 40 percent and the rate of illiteracy from 13 percent to 3 percent. Even as much of Latin America lingers in an economic slowdown, Morales Bolivia has thrived as GDP has been tripled with an average growth of 5 percent annually, even as the minimum wage has been quadrupled.
Nevertheless, the new normal of lower commodity prices and Bolivias critical economic transition translate to a precarious phase of development. In September, Morales asserted the country is entering the industrialization stage. Consequently, sharply lower commodity prices pose challenges to making further progress towards the objectives laid out in the Patriotic Agenda 2025, including eradication of extreme poverty, better access to health and education, and state-led industrialization.
Historical Precedents
In Bolivia, historical precedents do not bode well. In the mid-1960s, after 12 years of progressive rule by the Revolutionary Nationalist Movement (MNR), a military junta captured power in Bolivia, while the US Central Intelligence Agency (CIA) provided both training and finances to the Bolivian military dictatorship. Until the 1980s, they paved the way to decades of weak governments and violent military coups. Moreover, U.S. efforts at regime change in Venezuela and indirect interventions in Brazil highlight the likelihood of intensified pressures by Washington that could well undermine the progress of the past decade in this nation of 11.4 million people.
What next?
As the authorities implement their 5-year development plan Plan de Desarrollo Económico y Social 201620 last decades sizable fiscal and external current account surpluses have turned into large deficits. Real output growth is projected at 3.7 percent in 2016, on the back of large twin deficits and rapid credit growth, and is expected to converge towards 3.5 percent over the medium term, consistent with the new commodity price normal.
Obviously, Bolivias right-wing opposition wants to make sure that Morales cannot run for a fourth term in the 2019 race. Yet, as Justice Minister Hector Arce has said, any constitutional reform needed can be implemented when the will of the people is at stake.
While Morales western critics are suspicious about his bid to extend term limits, Morales knows only too well that his departure could strengthen the opposition that is centered in the wealthy eastern lowland province of Santa Cruz, the narrow urban middle class, and the conservative oligarchy.
The struggle for Bolivias future is about to begin.
Featured Image Source: Visual Hunt