Some wages say that, like the state of Mississippi, Bolivia exists to make others look good by comparison. Tragically, poor Bolivians bear every day the cumulative consequences of four centuries of bad government. Unfortunately, votes they cast this past week are likely to deepen their misery.
Once again, Bolivia is an example of how not to run a country.
Bolivia suffered from hundreds of changes in government–mostly military or authoritarian–with scattered periods of democracy in the last century. The last military government ceded power in 1982, and the country has enjoyed imperfect democracy since then.
Like neighboring nations, Bolivia suffered from hyper-inflation in the 1980s. The government of Gonzalo Sanchez de Lozada, president from 1993 to 1997, curbed inflation, brought taxing and spending into some semblance of order, and privatized many bloated, bankrupt state-owned companies. A legally elected former military president succeeded Sanchez de Lozada, who eventually returned to power in June 2002 after winning the largest fraction of the vote in a multiway race.
But last October, Sanchez de Lozada left office after violent protests around a number of issues, including a controversial new project to export natural gas.
Vice President Carlos Mesa replaced Sanchez de Lozada. After scuttling a proposal for gas exports to flow through Chile, Mesa has clung to office during the last 10 months.
The recent referendum covered several gas industry questions. A majority approved implementing some export plan. However, a proposal to limit foreign ownership of gas deposits and any new foreign investments in gas production and transport also passed. The government is now committed to re-establishing a Bolivian government-owned gas business.
Unfortunately, the whole experiment has been tried before. Repeatedly. Bolivia underwent a genuine revolution in 1952 that displaced most foreign-owned economic activity. It went through more than three decades in which Bolivian government firms dominated the mining and energy sectors.
It was precisely the incompetence and waste of resources of these state enterprises that caused Bolivia’s economy to stagnate and its foreign debt to balloon. The economic plan of the last two decades was a direct result of this model.
Developing gas deposits requires billions of dollars the government does not have and simply cannot obtain given its financial state. Foreign firms have invested some $2 billion since being allowed into Bolivian gas exploration in 1996. If the referendum results are implemented, such private foreign investment will dry up.
Many poor Bolivians are frustrated because their country’s gas deposits, which are about the same as Canada’s have not served to visibly improve their lives. They have just voted to reduce the change that will ever happen.
The situation in the Andes is ominous. Bolivia, Peru and Ecuador all have weak governments effectively deadlocked with popular movements that oppose most constructive changes. Things will get worse.
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.