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Dennis Leech reports that the Bolivian socialist success story is now endangered by political rivalry between the two leading leftists
Socialist governments in Bolivia have delivered great things for the people, but they are being jeopardized by worsening economic conditions and political rivalry.
The economic achievements of the socialist presidents Evo Morales and Luis Arce have been truly impressive. Morales was elected in 2005 under the banner of the Movement for Socialism (MAS) and implemented a radical political and economic transformation, marking a complete break with the failure of the free-market policies that had been in place since the 1980s. Following his election for a fourth term in 2019 he was ousted among allegations of electoral irregularity and replaced by a right-wing interim president who promptly returned to neoliberalism. In new elections a year later, however, Luis Arce, Morales’ chosen candidate, was elected on a large popular vote, and the MAS reform programme resumed. The compromise was that Morales was to be the party leader but with no government role.
Luis Arce has been closely allied to Morales from the start of MAS. As finance and economy minister he was the mastermind behind their so called “New Economic Social Communitarian and Productive Model”, a remarkable toolkit of homegrown and heterodox policies. The Wall Street Journal called him the “architect of the Bolivian economic resurgence.”
MAS under Morales made radical political and constitutional reforms: putting the state at the centre of economic transformation, renationalizing the important hydrocarbons sector, extending public ownership of natural resources, introducing redistributive investment and wage policies. They used the surplus revenues that now accrued to the state, instead of private capitalists, for progressive social measures to reduce poverty in what is still the poorest country in South America. They invested in import substitution programmes to reduce balance of trade deficits and employed central bank monetary policy to support spending (what we in the UK call quantitative easing).
Bolivia could do this, in part because of the high prices they got for natural gas exports, but also by refusing to accept loans from the IMF, and other capitalist banks, enabling it to break free of the restrictions imposed to satisfy conditions such as privatization, deregulation and cutting public services that would be both politically unacceptable and economically questionable. When Morales came to power in 2006 Bolivia had been subject to IMF loan agreements for 20 years, and its GDP per capita was lower than it had been in 1980 due to a presidential veto of any attempt at government control over the economy. The country was hit badly by Covid but the economy recovered well.
The IMF was naturally not a fan of the New Economic Social Communitarian and Productive Model but in 2022 it paid it a great compliment: “Bolivia has made great strides in reducing poverty.Per capita GDP has more than tripled since 2005, while social programs and higher wages have improved income distribution. From 2000 to 2021, the poverty rate fell from 66.4 to 36.3 percent, extreme poverty declined from 45.3 to 11.1 percent, life expectancy rose from 62 to 72 years, and the primary school completion rate increased from 84 to 99 percent. These were major and enduring achievements.“ And all that time the inflation rate was one of the lowest in the world, certainly the lowest in South America, a great achievement since Bolivia had suffered hyperinflation in the 1980s.
More recently, however problems have emerged, both economic and political. The economic model depended heavily on sustained GDP growth which has been hit by reduced revenues from natural gas, Bolivia’s principal export. This has made it harder to fund redistributive social programmes and the country has had to rely on monetary financing. The country’s reserves of foreign currency have become dangerously depleted as the central bank has used them to maintain the exchange rate against the dollar and pay for subsidised fuel imports. The risks of economic collapse bringing hyperinflation and dictatorship are real.
But this urgent need to modify economic policy in a more sustainable direction, though still within the terms of MAS, is exacerbated by the growing political rivalry between Morales and Arce over the party’s candidacy in next years’ presidential election.
Morales has indicated his intention to stand again despite the two-term constitutional rule. He has already served two terms since this limit was introduced (while he was president). He supported a referendum to remove the limit in 2017, when he was president, which was lost, so his candidacy and election in 2019 was arguably unconstitutional, and therefore he had to stand down. He argues that a term limit takes away his human right since in its application it is not a general principle but affects only him. Moreover, he is the leader of the Cultural Democratic Revolution that has transformed the plurinational country.
Morales retains the strong support of the poorest strata in many rural areas. His allies in Bolivia’s Congress are a large bloc who have consistently held up President Arce’s attempts to take on debt that would relieve the pressure. Bolivia sits on the world’s largest trove of lithium, but lawmakers won’t give Arce approval to let foreign companies extract it. Arce calls this gridlock an “economic boycott” aimed at subverting his presidency.
He has called for new referenda on fuel subsidies, presidential re-election and the distribution of seats in parliament. He said “Difficult moments require firm, mature, thoughtful decisions and human beings who do not falter in the face of adversity.” Issues having to do with fuel supply and a shortage of dollars “are being used politically by some groups to create unrest,” said Arce, adding he would rather see the people decide “whether or not we maintain the subsidy” for hydrocarbons. “I am convinced that the wisdom of the people will be the guarantee that allows us to overcome the obstacles that we now face and that without a doubt we will overcome together …”