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Bolivia’s Elusive Pursuit of Normal Capitalism
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Ideological blinders and sheer ignorance of elementary facts frequently prevent politicians, journalists and political activists from understanding developments in Latin America.

This infirmity is not confined to any single point in the political spectrum – even if the ostensible political preference and perspective may be at polar opposites.

A reading of the pronouncements and writing on the Bolivian government led by President Evo Morales and his ideological mentor, Vice President Garcia Linera, is a case in point. The Bush Administration, taking Morales nationalist rhetoric at face value, describes Bolivia as part of a new radical axis spreading from Cuba and Venezuela to Bolivia. On the left, most writers and journalists, enamored by the same nationalist rhetoric and congenial diplomatic ties of the Bolivian government to the above-mentioned countries, hail President Morales as part of a new wave of ‘leftist’ presidents in the region.

If one passes from the highly publicized rhetoric and Washington’s vindictive trade reprisals against Bolivia, to the specific policies of President Morales’ government the entire notion of a radical, incorruptible, nationalist regime empowering Indian communities comes into question.

This essay will examine the evidence regarding the character of Morales’ regime in crucial policy areas of gas pricing, foreign ownership and exploitation of raw materials, petroleum and gas (the so-called ‘nationalization’), agrarian policy (‘agrarian revolution’) and the constituent assembly (‘re-founding the republic’).

Based on this empirical discussion, it becomes clear that the political vision informing the Morales-Linera regime is closer to that of a ‘populist conservative’ than to anything resembling a radical nationalist government. The real aim of the government is to transform Bolivia into a ‘normal capitalist’ economy rather than anything resembling a progressive egalitarian society.

The 6-Month Review

President Morales in reviewing his first six months in office, emphasized exactly the same points which any orthodox neo-liberal would be proud of.

He spoke of budget surpluses in the face of failing health, education and emergency services and when rural school teachers continue to receive less than $3 US dollars a day.

He spoke of rising foreign exchange reserves when his ‘plans’ to industrialize the country has yet to even commence. Accumulating US Dollars or Euros in bank vaults when artisans, peasants and small workshops lack credit, may make foreign creditors happy, but it does nothing to promote employment.

He spoke of balancing the budget when what is lacking is public investment in infrastructure, new rural schools and clinics which tend to the needs of the poor and reduce the informal sector from over 80%. Balanced budgets, trade surpluses and growing foreign reserves please foreign investors and local big businesspeople because they secure hard currency to remit to their home offices, facilitate lucrative financial transactions and provide low interest loans from the Government development ministries.

President Morales’ public affinity for neo-liberal orthodoxy was matched by vague references to ‘social improvements without any accompanying statistics. For example, he cited raising the minimum wage. In fact he raised it by less than $5 US dollars a month to $55 – forgetting to mention that during his electoral campaign he promised to double it but later opted for an austerity budget reminiscent of his neo-liberal predecessors.

Morales’ example of budget austerity is being followed by the local MAS prefects, who in many cases have not even spent their growing share of the oil and gas revenues in local projects, job creation or improving social services. Morales, in his 6 month review, chided local prefects and mayors for failing to allocate their funds to local projects, blaming his local leaders for his own lack of any concrete social reform programs.

Until December 2005 Bolivia was selling its gas at ¼ of the world price to Brazil and Argentina at $3.8 US dollars 1 MMBTU – (million British thermal units) instead of the going price of $15.38 USD. The loss resultant to Bolivia was over $500 Million US dollars each year. With Evo Morales’ presidency, Bolivia attempted to renegotiate the price of gas with Argentina and Brazil to end a situation of outright pillage, theft and corruption. The Brazilian President Lula Da Silva and its semi-privatized oil firm, Petrobras, refused to consider a price change and continued to receive gas at the depressed oil rate. Argentine-Bolivian government officials negotiated a new price of $5 per MMBTU which increased Bolivia’s revenue $70 Million US dollars a year. President Evo Morales hailed the new contract as a “great victory for the Bolivian people.” In fact it was nothing of the sort. At the time the new contract was signed, the price had varied from $5.90 to $7.30 per million BTU. By August 1, 2006 prices had risen to between $6.80 to $8.40 (Financial Times, August 1, 2006). In other words, by August 1, 2006, for every million BTU Bolivia was losing between $1.80 and $3.40 dollars per million BTU. Put another way, the ‘new revolutionary’ contract with Argentina was costing Bolivia over $100 million US dollars a year in gas revenues.

Even if we accept the lowest world price of gas at the time of signing in May ($5.90 per million BTU), Bolivia was still receiving 20% less than the world price of gas. What is worst, Brazil continued to drag out ‘negotiations’ as it receives gas at 40% of world prices, saving over $125 millions US dollars per year.


While Morales domestic double discourse still continues to mystify the great majority of Indian-peasant organizations, it has made absolutely no impact on the multi-national corporations. Morales’ plea to Lula Da Silva to at least agree to moderately increase gas prices has fallen on deaf ears. Petrobras, the largely privately-owned Brazilian “state” oil corporation, has convinced Lula to keep out of the negotiations and he has complied, leaving Morales negotiating team with no policy to counter Petrobras’ intransigence over the past 3 months. To pressure Bolivia to accept the current price of $3.6 BMT (half to a fourth of the world price???), Petrobras has negotiated a joint gas venture with Bolivia’s supposed partners, PDVS in Venezuela, and announced big investment in exploratory projects within Brazil. In response to Brazilian intransigence, Morales’ inept and incompetent Minister of Hydrocarbons, Andres Soliz Rada, mentioned possible sales to Mexico and Chile at world market prices (up to $12 BMT). Yet no concrete proposals or negotiations with Mexico or Chile have even begun despite numerous signs that Brazil would insist on not changing its contract. Moreover, Soliz Rada totally ignores Morales’ long-standing policy of not selling gas or hydroelectric power to Chile unless it accepts Bolivia’s historic demand for an opening to the sea. Morales vehemence in attacking previous neo-liberals, like former President Sanchez de Lozado, energy-trade agreements with Chile is now conveniently forgotten, given the total disarray of his trade and energy policies.

The same bizarre contradictions have emerged with regard to Morales foreign investment policies: at the end of May, Bolivia agreed to allow Jindal Steel and Power to exploit the 40 billion tons of iron and manganese reserves embedded in the Mutun mountains under profit sharing terms with would have embarrassed Sanchez de Lozado or even the traditional “Rosca”. From June to the end of August, the Morales regime maintained hermetic silence of the terms for revenue and profit-sharing. The Minister of Mines and Metallurgy, Walter Villarroel, originally responsible for the horrific terms went absent during a meeting to discuss the Mutun deal, claiming other commitments of minor importance. In fact, Jindal has brought over top Indian Government officials to pressure Morales to acquiesce in what could be the ‘model’ of 21st century neo-liberal pillage. Faced with Minister Villarroel’s sellout and the highly embarrassing consequences, Morales economic cabinet has resorted to continual evasions, postponing any public statements on the real issues being ‘negotiated’ ( August 9, 2006).

Disarray is also evident in the negotiations with Brazil. Minister Soliz Rada called a conference to announce that a deal on the price of gas was nearly completed and he was sending a delegation to sign the agreement, while on the same day in Brazil, the Director of International Affairs of Petrobras, Nestor Cuñat Cervero, declared that all negotiations were suspended, there was no deal and Brazil would dcontinue to pay the old price as usual.

The multi-nationals, whether in Repsol Argentina, Jindal Steel of India or Petrobras of Brazil seem to know they are dealing with incompetent Ministers who opportunistically mouth radical ‘nationalist’ rhetoric but who in practice can be squeezed for major concessions compatible with the worst terms found in any neo-liberal regime.

The key to understanding the politics of the Morales regime, his ministers, vice president and his own political behavior is to identify the class character and social references to the key actors.


The new governing elite shares with its neo-liberal predecessors the same defense of large-scale private landholding, foreign investment in energy, gas, banking and metals: it defends the established military, police, judiciary hierarchy; like its neo-liberal counterparts, it proposes fiscal and other incentives to attract foreign investment, promises to protect existing high rates of profits; even more so than its liberal predecessors, the Morales regime has implemented tight fiscal budgetary policies, holding wages and minimum salaries to minimal increases, balancing the budget and accumulating foreign reserves as a model public of the IMF.

The regime promises absolutely no structural changes: Land distribution will take place largely in uninhabitable, infertile publicly owned forest lands far removed from roads and markets; income inequalities will not be modified by any progressive taxes and no major infrastructure, housing, health or educational building programs are under construction. Most of the additional income from gas, petrol and metals have gone into Bank reserves, internal and external debt payments, budget balancing, a 13% raise for the military (twice the rate for striking school teachers and police) and patronage spending.

The main difference between Morales regime and its neo-liberal predecessor is in its class composition, ideology and foreign policy. The bulk of the ministers and advisers of the Morales regime are situated in the middle class: they replace the previous ‘oligarchs’, upper middle class technocrats and business elite; they stand above the workers, lower salaried workers and poor peasants. As one writer notes, “the social origins of the new government elite is mainly peasant, mining, artisan and other humble origins for the majority, their current patrimony exceeds $50,000, a condition that approximates the middle class and its life style. If we add to that the predominance of middle class intellectuals, we have a government that is mostly urban middle class.” ( 1. Lorgio Orellana Aillon “Hacia una caracterización del gobierno de Evo Morales” Osal no.19, p45-54). What is clear is that the popular social origins and base is reflected in the demagogic nationalist-popular ideology, whereas the actual neo-liberal policies practiced reflect the upward mobility and new social references among the traditional economic ruling class. Lacking their own economic base, they seek through the state apparatus and ties with foreign and domestic capital to create an upward path to power, wealth status and eventually entry into the economic elite.

The political profile confirms the social class basis of the new economic elite. President Morales named 16 Cabinet ministers of which 7 have been called into question by the mass movements which brought Morales to the Presidency. While the overseas commentators and publicists praised the presence of several “Indians” and four women in the Cabinet, the popular movement in Bolivia were dismayed by the policies and past trajectories of nearly half of the new ministers. Salvador Ric Riera, a conservative Santa Cruz businessman and reputed multi-millionaire accused by the local trade union leaders of money laundering and other shady activities, was appointed Minister of Public Works and Services. In all previous regimes, Public Works was one of the most notorious for its corruption, especially in allocating public highway construction contracts. Given the importance that Morales has given to fighting corruption, most activists were appalled by the appointment of Riera, who was a last minute financial contributor to Morales campaign. His appointment is seen as a concession to a section of the Santa Cruz oligarchy.

The key Ministry of Mines was handed to Walter Villarroel who defected from the rightwing UCS to jump on the Morales bandwagon. His appointment was denounced by the mining leader, Cesar Lugo, because of Villarroel’s previous sting in government in which he helped to dismantle the Bolivian Mining Corporation (COMOBOL) and for privatizing one of the biggest iron mines in the world. He has also been attacked for supporting previous neo-liberal President Carlos Mesa and counterpoising private co-operatives to strengthening state enterprises under worker control.


The strategic Ministry of Defense was assigned to Walker San Miguel Rodgiguez, a lawyer and former director of Lloyd Bolivian Airlines (LBA) accused of covering up the illegal privatization of the former state airlines. Currently the Pilots Association has asked the state in intervene in the firm to investigate crimes and irregularities. The Minister of Defense is a long-time members of the right-wing MNR and a former supporter of ex-President Sanchez de Lozada, the President who massacred scored of protestors in 2003 before he fled into exile to the US. Hardly an ‘incorruptible’ and proper selection to head up the military!

The Teachers Confederation has rejected Morales appointment of Felix Patzi Paco as Minister of Education because he has no background in the profession, has no knowledge of the field and is clearly unqualified to confront the current crisis in education.

The Labor Confederation (COB) has strongly criticized the appointment of Luis Alberto Arce to head the Finance Ministry. He has long been connected with the international financial institutions (IMF, World Bank and Inter-American Development Bank) and a long-term supporter of their regressive structural adjustment parameters for the rest of the ministries, including investments, revenues and social expenditures.

The Foreign Ministry is run by a former City Counselor for El Alto, David Choquehaunca. He has been a close collaborator of corrupt neo-liberal ex-President Jaime Paz Zamora. He can defend his free market policies in both Spanish and Aymara.

Evo Morales’ appointment of Abel Mamani to the Ministry of Water was strongly contested by the leaders of the Federation of Neighborhood Councils (FEJUVE) in El Alto, the key organization that ignited the insurrections that toppled two former neo-liberal presidents and gave Morales a resounding 70% majority in El Alto. Morales and Mamani acted without consulting the popular assemblies of FEJUVE despite the centrality of the water issue in El Alto. Moreover, Mamani, a former leader of FEJUVE was criticized for mishandling funds and failing to pursue the universal demand for nationalization of foreign-owned water distribution rights in El Alto. The neighborhood groups were less impressed by Mamani’s facility in speaking Quechua than by his lack of militancy and political opportunism.

The social movements praised Morales’ appointment to Hydrocarbon (Andre Soliz Rada) who promised to promote the nationalization of gas and petroleum, Justice (Casmira Rodriguez Romero, a leader in the Domestic Workers Union), Labor (Alex Galvez Mamani, a former leader in the Factory Workers Confederation. Regarding the rest of the Ministers, there was neither serious opposition nor praise. However it should be noted that Soliz Rada of Hydrocarbons was a former leader of the center-right CONDEPA party which cohabitated with former neo-liberal presidents, even as he polemicized against the illegal sell-off of state petroleum resources. The head of Peasant and Agrarian Affairs was a Santa Cruz intellectual with no ties to the major peasant movements in the Andes or Cochabamba. The key economic posts are strongly tilted toward technocrats and liberals while the ‘social ministries’ are in the hands of leftists. While this gave the impression of diversity of representation, in fact it was the economic ministry (Finance), which established the economic parameters for budget allocations, which profoundly influence any social change.

The upwardly mobile middle class social movement leaders and political opportunists who predominate in the Morales regime have been outside of the economic establishment but they want to be in it! They are banging on the door of the Big House, trading on their pseudo-nationalist demagoguery and multi-cultural followers, to secure entrance, guaranteeing to the elite in exchange to maintain macro-economic stability, fiscal austerity and large foreign exchange reserves. However, because they have demobilized the mass movements, and have already provided guarantees to big property holder and high profits to foreign investors, the economic elite see no reason to make social concessions or share profits with these upwardly mobile petit bourgeois.

Both foreign investors elites and domestic oligarchs see through the ‘statism’ of the Morales regime, they detect no inclination toward socialism, but rather the opportunistic use of private-state ‘partnerships’ as a vehicle for social climbing and sharing lucrative profits, while holding down wages and salaries. The contradictory behavior of these upwardly mobile middle class politicians, alternating between radical rhetoric to the masses and concessions to the elites, reflects their constant need to pressure the elite for acceptance as a legitimate negotiating partner and their need for elite collaboration to contain mass discontent.

In foreign policy, Morales’ attempt to ride two horses going in opposite directions has proved disastrous: His attempt to conciliate trade agreements with the US and its neo-liberal clients in the Andean pact with his economic and ideological ties to Venezuela has led to a double failure. Washington’s polarizing policy of ‘Bush or Chavez’ – has undercut Morales eclectic ‘balancing act’.

A similar process of domestic polarization is slowly emerging: The upper classes having secured their property, profits and institutional power, far from being appeased have upped their demands for more economic concessions and greater social control; the lower paid wage, salaried classes, namely the minersof Huanami, the school teachers of La Paz, the landless workers in Santa Cruz and the highland Indians are increasingly restive, more strikes and demonstrations, bigger land occupations, and more frequent highway blockades are in the offing.

Caught between its social past and the demands of its mass constituency and its aspiration to join the economic establishment, the Morales regime is likely to pacify neither and likely will face a deep regime crisis as the polarization deepens.

Why does a government which claims to be ‘revolutionary’ or even ‘reformist’ and has the backing of over 60% of the electorate negotiate such disadvantageous gas contracts, at a time in which world demand exceeds supply, when gas prices are rising? More generally, how does the Morales regime’s policy on gas fit into its overall economic and social strategy?

There are several plausible explanations for the failure of the Morales regime to secure world market prices.

1.Inexperience and incompetence
2.Regime conservatism and decisions based on political rather than market criteria


There is no doubt that the regime has a shortage of specialized negotiators capable of leveraging world prices into much higher prices than thus far obtained. Nevertheless, experts have been contracted with regard to auditing past contracts for illegal agreements and have identified clauses allowing for renegotiating contracts. Moreover international prices can be found on numerous web sites with a simple search. Despite the shortages of experts, the information on international prices surely was available – therefore the problem is not ignorance. What is a serious problem is negotiating competence – the use of information and the capacity to play off the competitive consumers and develop alternative markets with higher prices.

Much more serious are the ideological and political constraints derived from Evo Morales and Linera’s attempt to pursue the ‘normalization’ of capitalism via ‘center-left’ alliances. Morales secured Venezuelan trade, aid and investment contracts form the Chavez government, which strengthened local agro-exporters, the exploitation of gas and oil via joint ventures and increased Bolivia’s capacity to explore and exploit new oil fields. Cuba provides social assistance in the fields of health and education. But Argentina, Brazil and Spain (other misnamed ‘center-left’ regimes) followed the lead of their multinational corporations and their own neo-liberal priorities and initially refused to support Morales’ attempt to normalize Bolivian capitalist development. They insisted on privileged prices, amounting to pillage, extremely low taxes (well below world standards) and royalty payments and continued lax regulations and auditing of their production, revenue and sales books.

Morales regime is basically concerned with foreign capitalists investing according to accepted bourgeois norms: paying adequate taxes, accepting joint ventures in mineral and production areas, increased investment especially in lucrative petrol, iron and other minerals and compliance with normal regulatory and auditing norms. In exchange, Morales has opened the door wide for foreign investment including in the exploitation of strategic raw materials, providing long-term stable judicial guarantees to investors, relatively low levels of taxation, a stable currency, an ‘austerity budget’ with tight controls over public spending, salaries and pensions in line with IMF guidelines.

This economic framework is based on a strategic alliance with local and international capitalists, large-scale ‘productive’ agro-exporters and pro-business technocrats in the public sector. To proceed with this development strategy requires avoiding any confrontations with the neo-liberal regimes in Brazil and Argentina and their multi-national corporations in Bolivia. In other words Morales/Linera’s ‘center-left’ capitalist normalization policies function as a straitjacket limiting Bolivia’s investment, trade and negotiation options. To demand world market gas prices, for example, with Argentina would have led to conflict with President Kirchner. The Argentine government would have had to face the problem of raising prices to consumers or increasing budgeting allocations for subsidies. The first option would have a domestic popular political cost, the second would have lessened the amount of government funds available to subsidize Big Business and meet foreign debt payments. The price of $5 dollar per MBTU, which Kirchner secured from Bolivia, was politically manageable and provided a lucrative profit, given that Argentine gas sales to Chile were $7.50 dollar per MBTU.

The Lula regime took a hard line, accustomed as it was to low prices, contraband sales, corrupt Bolivian regulators, across the border colonists occupying a broad band of Bolivia. Foreign Minister Amorin and the head of the largely privatized ‘State’ oil giant, Petrobras, relied on the expressed weakness of the Bolivian negotiators: At no point did Bolivia pose an alternative trading partner or raise the issue of reduced gas flows. The Brazilians just ignored calls for negotiations; they refused to consider Bolivia’s moderate demands. They threatened international adjudication to avoid even re-opening contract clauses, despite the ample judicial precedents for doing so throughout the world. Morales considering Lula a ‘partner’ lowered Bolivia’s negotiating posture, attributing Brazil’s hard line to the forthcoming presidential elections. According to Morales, Bolivia should sacrifice up to $100 million in revenues to fund Bolivian development in order to not to jeopardize Lula’s re-election, when presumable he would agree to the new prices. Lula in the meantime will pay Morales back by financing a vast multi-billion dollar gas development program in Brazil and Venezuela scheduled to come on production in 2008, which will eliminate most gas imports from Bolivia.

Clearly Morales’ ideological-class commitments which underlie his efforts to create ‘normal capitalism’ in Bolivia has had an extremely high cost not only with regard to harsh constraints in social budget expenditures, but even worst in terms of large-scale losses of revenues by under pricing gas sales.

Once it became abundantly clear to major foreign MNCs and their governments that there was no way to go back to the times of unregulated pillage, including virtually no taxes, and corrupt government officials in high places, and once realizing that Morales was a reliable and convinced proponent of foreign investment, foreign capital dropped their threats and proceeded to exploit the vast new opportunities for exploiting raw materials at a time of peak world prices. On July 2, 2006 the biggest Spanish companies, including Repsol-YPF (the big petroleum company of dubious reputation) and Iberdrola (the big electrical and power company) announced big increases in investment (Hoy August 2, 2006). To facilitate the operations of the MNC and avoid any problems, Morales appointed a special government agent to deal with any inconveniences, which the companies might face. Morales emphasized, “Taking account of the internal norms of the country, foreign private capital is guaranteed”. Morales went on to emphasize the need for foreign capital to expand and deepen its investment in the exploitation of primary products with the hope that some processing would occur (what he vaguely refers to as ‘industrialization’).

While corruption still takes place, even during the first six months of the government, it takes a secondary place in the government’s dealings with foreign investors. Morales proposal to foreign investors is that they will pay a moderate increase in taxes rather than bribes to corrupt officials. Moreover since he has sidelined popular structural reforms, his regime’s legitimacy increasingly rests on a ‘moralizing’ honest, anti-corruption image. Hence his big play on reducing his own salary and that of top executives as a tool to justify marginal increases to miserably paid public employees and minimum wage workers.


In many ways Morales is closer to a ‘multicultural conservative’ than a social liberal, let alone social reformer or even more preposterous – a ‘social revolutionary’. Contrary to the radical rhetoric of his erstwhile overseas supporters, Morales reiterated his decision “to neither expropriate nor expel” a single petroleum enterprise ( August 2,006). He also clarified, to the welcoming ears of foreign investors, that “with the nationalization (of the Bolivian hydrocarbons decreed this past May) nothing has been expropriated and we have not expelled anybody”. Bolivia merely transferred the shares of the state pension funds to the government, bought another 4% and became a ‘partner’ of the petroleum MNC. The net economic effect in terms of the foreign MNC profits and control is very small, but the political and social advantages are enormous: they now have the direct backing of the government against workers and nationalists who seek better wages and expropriation.

The conservative character of the Morales regime is evident in its relationship to the new multi-billion dollar privatization of the Mutun iron mine, its positive view of free trade accords and its defense of agri-business. The Mutun agreement with the Indian multi-national corporation, Jindal Steel, appears to be a case of incompetence, political-ideological concessions (to Santa Cruz) and perhaps outright corruption. In the first place, consistent with Morales promotion of large-scale foreign investment in natural resources, the fabulous 40 billion ton Mutun ‘Mountain of Iron and Manganese’ was opened for private bidding, following in the footsteps of previous neo-liberal presidents. In line with his policy of ‘transparency’ and ‘moralizing capitalism’, Morales extended the bidding process and included clauses requiring ‘the processing’ or ‘industrialization’ of a portion of the iron ore and an extremely limited ‘revenue sharing’. Competitive bidding evaporated and only Jindal Steel’s bid was considered, even as its terms were extraordinarily favorable to the resource exploiting Indian mining corporation. Such were the lopsided benefits that the Morales government has not, after several months, revealed its terms. Jindal’s CEO, however in an interview in India, revealed that profits would be shared on a 90%-10% (in favor of the private MNC) basis. Industrialization would follow at a later stage of the exploitation and would be largely based on ‘simple transformation’ from ore to pellets. Given the extraordinary demand for iron ore and the historic high prices as a result of China’s booming demand (China being the world’s leading steel producer), the terms of the Morales-Jindal agreement are, even by Bolivia’s past standards, a singular disastrous agreement both to the country’s treasury and its economic development strategy of ‘normal capitalism’.

While Morales assures the bankers and foreign investors of his neo-liberal orthodoxy, by emphasizing budgetary austerity, growing foreign reserves and trade surplus, the president of the state petroleum company (YPFB) complains that it “lacks economic resources” to carry out its new functions as a major actor in the new energy policy. Lacking investment funds to develop gas and oil exploitation, YPFB is looking for new foreign investors, thus effectively undercutting Morales’ claims to ‘nationalizing’ the oil and gas industry ( August 8, 2006). With regard to the ‘nationalization’ process, Andres Soliz Rada, the Minister of Mines and Hydrocarbon, admitted that the Bolivian State, more specifically YPFB holds only a minority of representatives on the board of directors of the ‘nationalized’ oil and gas company. Foreign MNCs still control the majority and therefore decide ( August 8, 2006). While the Morales Nationalization Decree spoke of possession and total and absolute control of hydrocarbons, Minister Soliz Rada confessed that YPFB only controls a small part of the production process. It is the foreign investment controlled majority of the Board of Directors which has strategic decision-making power to approve or reject contracts with foreign petroleum companies, before they are submitted to Congress. The majority of stock of the largest oil companies are still owned by foreign investors, including Chaco, Andina and Transredes, as well as the biggest oil refineries (owned by the Brazilian giant, Petrobras, CLHB and Transredes) ( August 8, 2006).

In other words, Morales is sacrificing his own ‘nationalized’ state directed petrol sector for a certificate of good conduct from the IMF – which indeed was full of praise for his tight fiscal and monetary policy.

Meanwhile the Brazilian privatized ex-state petroleum company (Petrobras) continues to exploit Bolivian gas at on-third of the world prices (between $3-4 US dollars per mBMT), with and without any ‘Presidential’ decrees to the contrary. In fact given the weakness and/or incompetence of the Bolivian government, Petrobras announced it would increase its production from 24 million BMT per day to 30 million.

Morales budget speak loudly for his neo-liberal priorities: Subsidies for agro-business and cheap gas prices for Argentina and especially Brazil, and incremental salary and minimum wage increases. On August 7, the Morales regime announced a 16% increase for the armed forces, three times the raise granted to rural school teachers and twice the minimum wage. When the executive secretary of the Bolivian Workers Confederation (COB), Pedro Montes, asked for a similar raise for wage workers, Presidential Spokesperson, Juan Ramon Quintana flatly rejected a raise for workers of any kind for any sector: “There is no chance for a raise…We have a general socio-economic plan and a budget which is in place.” He went on to add in the language of neo-liberal ‘trickle-down’ economic dogma that “a better redistribution of income depends of economic growth ( August 7, 2006).

The highly unfavorable terms on the exploitation of Mutun iron mine which Morales negotiators originally agreed to with Jindal Steel and Power (90%-10%) has led to attempts by the government to delay the final signing and a series of closed meetings. Indicative of the scandalous terms, the entire agreement has still not been revealed, provoking the ire and mobilization by the ultra-rightwing ‘civic groups’ who, acting in favor of Jindal, call for the immediate signing of the contract. Once again, Morales’ haste and imprudence in signing off to foreign investors, and then proclaiming his nationalist credentials, has led his regime to resort to demagogy and worst contract terms than he could have obtained if he had outright expropriated or simply proclaimed as a joint venture.

In part Morales moved hastily into the Mutun contract to satisfy the clamor of the Santa Cruz oligarchy and their political acolytes for a rapid sell-off, after he initially extended the time frame for the bidding. Given the extraordinarily favorable terms which Jindal secured, one must suspect a political need to pacify the local regional elite which hopes to get spin-offs from the exploitation—and a quick source of revenues at the expense of long-term returns and strategic control. Nevertheless in the past, cases such as the Mutun contract, where disadvantages so outweigh any local gains, later investigations have revealed that bribery and incompetence were important factors ‘greasing’ the state’s contract approval.


The Mutun agreement is emblematic of Morales identification with big business as the vehicle for developing ‘normal capitalism’. Morales’ agreement with Jindal was an especially provocative move given the revolutionary anti-imperialist uprisings of the previous three years and certainly lends even less credibility to his claim to be ‘nationalizing’ the economy. His reiterated defense and promotion of foreign-owned petroleum companies confirms the view that his nationalist rhetoric is a cover for a conservative-liberal practice.
On Agrarian Reform

Despite Morales fiery discourse on the coming ‘Agrarian Revolution’ on the Day of the Indian (Día del Indio) * on August 2, 2006 in the historic locale of Ucureña, Bolivian agricultural experts are extremely dubious that any significant changes are in the offing. (*As usual Morales, the theatrical entrepreneur, went all out – lining up 500 new tractors to be sold and a couple thousand land recipients, during a costume extravaganza with thousands of Indians engaged in traditional Andean rites, dances and other festivities.)

In the first place while claiming to eliminate in the future, uncultivated latifundios and respecting productive estates, he has accepted with inconsequential modifications the existing neo-liberal agrarian law which directs the work of the national Institute of Agrarian Reform (INRA) which provides numerous escape clauses which allow big landholders to avoid expropriation.

Among the ‘modifications’ to the INRA legislation, the Morales regime promises to respect all landed estates, no matter their size, which fulfill a social and economic function. The latter includes ‘fallow lands, future lands destined for production and ecological reserves.’ Even the most notorious land speculators holding the least productive lands can justify their uncultivated land by claiming one or the other of these categories. Under these conditions the government effectively excludes any basis for converting unproductive land to the agrarian reform. The process of designating uncultivated land for expropriation under these conditions will be subject to costly and prolonged juridical and administrative litigation over what is ‘fallow’ and what is ‘unproductive’, what is ‘ecological’ and what is ‘speculative’, and when land will become ‘productive’ and when it can be called ‘idle’ land. The very term ‘productive’ is also open to controversy: Do two cows per thousand acres mean productive? Or do 20 acres of corn on a 10,000-acre estate remain a ‘potentially productive farm’?

Given the Morales regime’s self-imposed constraints on the expropriation of large fertile landholdings, the only land available for redistribution to the mass of impoverished and malnourished peasants and indigenous farmers are extensive zones of heavily forested state-owned lands which are not suited for farming or cattle raising. Moreover these public lands are distant from urban markets, lack roads and other infrastructure and, according to local Bolivian agronomists, are inaccessible. Even one of Morales vice ministers, Alejandro Almaraz of the Land Ministry admitted as much: “There are 2.5 million hectares of public lands available for peasants and Indians. Most of this land is covered by forests and is not for cultivation or cattle-raising.” Almaraz admitted that redistributing theses lands would not resolve the land problem, especially where a ‘hundred family clans’ control the most fertile and productive lands while 2 million peasant families live on miserable plots of land (‘minifundio empobrecedor’).

Morales and his team of intellectuals can still ‘mesmerize’ the peasant and Indian masses: On the ‘Day of the Indian’ thousands filled the Plaza of Ucureña frequently interrupting his speech with applause and cheers, especially when he made reference to “ending the unproductive latifundios” – Morales, needless to say, did not mention the ‘exceptions’ to ‘unproductive’ farms.

In fact Morales ‘new agrarian policy’ is directed at stimulating the development of the latifundios. According to CEDLA (The Center for the Study of Labor and Agrarian Development), “The agrarian revolution of the governing party – MAS (‘Movement to Socialism’) is based on respect for the pro-entrepreneurial INRA law – approved during the first government of neo-liberal ex-president Gonzalo Sanchez de Lozado (overthrown in October 2003 by a popular insurrection) – and which in practice legalizes the concentration of the best lands in the hands of the largest landowners. The Government’s proposed modifications of the INRA law is oriented toward deepening the capitalist development, ratifying the original spirit of this norm promulgated in 1996 (under the neo-liberal presidency)” ( August 5, 2006).

Morales’ ‘agrarian revolution’ is an attempt to create a social basis among poor peasants to sustain his proposed ‘partnership’ with foreign resource exploiting MNCs. The Morales regime has forcefully defended the powerful agro-business elite’s ownership of huge plantations and the low minimum pay of rural farm workers while he has been actively pursuing new markets for exports. Morales has never proposed the expropriation of any large or small rural enterprise. His agrarian reform policy revolves around the expropriation of ‘unproductive’ or unexploited rural properties, which are considerable. Nevertheless given the fact that the same agro-business elites, which Morales defends and promotes, possess large tracts of uncultivated and fallow speculative fields, he has encountered stiff political resistance among his partners in capitalist development. As a result of congressional delays in enacting Morales’ moderate non-elite threatening ‘agrarian revolution’, Morales has resorted to veiled threats of extra-parliamentary social mobilizations, which his advisers quickly retracted. In the final analysis, Morales’ agrarian economic policy revolves around the promotion of the big agro-export elites; his agrarian reform is based on the expropriation of the least fertile and most remote uncultivated state lands. His policy is directed at creating a social base of conservative small holding land reform beneficiaries to support his larger strategy of normal capitalist development, giving the regime its conservative ‘populist’ coloration. Vice President Garcia Linera has frequently met with agrarian and business elites to assure them that only ‘illegally occupied’ land, which would be decided via a prolonged judicial-administrative process, would be expropriated.


Morales trade policy seeks to expand trade aid from Venezuela and Cuba while retaining the trade preference with the US and the Andean Community. In contrast to Morales’ domestic policy, which has succeeded in demobilizing mass movements while he signs on to new multi-national investment agreements, his foreign trade policy of supporting Cuba and Venezuela as well as the free market defended by Washington, Bogotá and Lima has failed. The US has denied tariff preference to Bolivia and Colombia and Peru have signed on to free trade agreements with the US, which will cost Bolivia the loss of its soya markets as well as other agricultural sales. Unlike President Chavez, who withdrew from the Andean Community (CAN) following Peru and Colombia’s signing of the free trade agreement, Morales stayed on, trying to balance his left alliance with Cuba and Venezuela with his loyalties to Bolivia’s agro-export elites linked to CAN and the US. The failure of Morales’ balancing act means that Bolivia must seek out new markets, new trading partners or face the problem of hundreds of firms going into bankruptcy and the loss of up to 100,000 jobs, according to the Federation of Private Employers (, August 8,2006). Vice President Garcia Linera and Morales’ strategy of extracting concessions from left-wing countries through ‘anti-imperialist’ rhetoric and pursuing free market trade with the US has not succeeded in convincing either Washington or its Peruvian and Colombian clients.

Given Morales’ dilution of his ‘reformist’ programmatic agenda and the low expectations that the constituent assembly will accomplish very much in ‘re-founding’ the country, all the Latin American presidents who initially promised to attend found reasons to stay at home.

Morales’ version of the Constituent Assembly, its election, composition and agenda is the exact opposite to that conceived originally by the mass social movements over the past 5 years. The original demands called for elections convoked by the social movements with representation based on the social constituents of the mass movement—peasants, workers, street vendors and the unemployed. Morales totally rejected this popular initiative and in agreement with the traditional oligarchic parties, convoked elections based on the same geographic units as in the past, in which the same discredited parties would compete for office. The ‘program’ to ‘re-found the republic’ was based on the existing corrupt, decrepit, and elite judicial, political, economic, administrative and military institutions. Through the MAS majority in the Assembly, Morales sought to legitimize his pseudo-nationalization of the petrol-gas industry and an agrarian ‘revolution’ which doesn’t affect the 20,000 ??? families which own 80% of Bolivia’s fertile lands. What he will secure are vacuous rhetorical declarations calling Bolivia a ‘multi-ethnic; state.

Meanwhile some of the major Indian and peasant organizations which support Morales have seen through the reactionary content of his Constituent Assembly and socio-economic development plan and have demanded the creation of an elected ‘Fourth Power’. This body would be elected by the major social movements to monitor and oversee the judicial, legislative and executive branches of government to see that the laws and administrative policies conform to popular interests and do not prejudice their access to land, employment, livelihood and social services ( – August 5, 2006).

The fact than an important section of Morales electoral base is demanding oversight over his regime and its legislators highlights the growing popular skepticism over his theatrical cultural gestures, political co-optation of social movement leaders and his empty socio-economic demagogy in the midst of the continuing malnutrition that affects over 50% of the rural population that lives in extreme poverty on less than $1 dollar a day.

A good example of how President Morales has undermined mass movements without meeting their most elementary demands is his treatment of the ‘water struggle’ in El Alto. Throughout 2003-2005 there were massive protests, hunger strikes and attacks on the French multinational corporation, Suez-Aguas del Illimani, which was charging extortionate rates (7 times the minimum wage) to extent the sewage system to the 50% of the population lacking a sanitation system. A date was fixed on July 29, 2005 for the expulsion of the MNC. Subsequent to his election in December 2005, Morales named the leader of the social movements in El Alto, Abel Mamani, as Water Minister, with the promise to attend to the water grievances of the people in El Alto. Nine months later nothing was changed, Suez-Aguas continued to charge exorbitant rates, 50% of the residents lacked sewage connection and Mamani, drawing a Minister’s salary and perks, has flushed the July 2005 agreement down the toilet. (“De que sirvio la Guerra del agua Alteña?” Argenpress Dec. 8, 2006). His new job is to defend a neo-liberal regime’s ‘austerity budget’ – not attend to the needs of the social movements, which elected Morales and led to his ministerial appointment. The Mamani co-optation experience has been repeated with all the other social movements including leaders from the Indian, rural teachers and mining co-operative movements.

Even Morales’ much vaunted anti-corruption ‘moralization’ of government image has been tarnished in the especially delicate area related to the pseudo-‘nationalization’ of petroleum and gas. According to Morales nationalization decree of May 1, 2006, the Bolivian State Petroleum Company under the leadership of the Ministry of Hydrocarbons would take direct control of all the petroleum and gas sales and trade. Less than 3 months later, the oversight and supervisory executive body – the Superintendencia de Hidrocarburos blocked an agreement signed by YPFB to sell petroleum to Brazil via an intermediary company, Iberoamerica Trading SRL, which would have prejudiced Bolivia to the sum of $38.5 million. What is worse, the Ministry originally publicly supported YPFB’s dealing. A joint statement on July 26, 2006 claimed the agreement was beneficial to the country. The Minister or Hydrocarbons, Soliz Rada, pressured the Superintendencia, to approve the illegal transaction (which they refused to do) and later when the scandal was aired in the mass media, attempted to distance himself from the agreement letting the blame fall on YPFB. What adds suspicion that both the Ministry and YPFB were involved in corrupt dealing is the fact that the intermediary with whom they were involved, Iberoamerica, is currently on trial for past corrupt dealings, tax evasion and contraband. Morales refused to reprimand the Ministers, the head of YPFB or support the Superintendencia, even as they stand in contradictory positions.

Morales’ “nationalization”, which is based on absolute executive control in collaboration with multi-national corporate executives, excludes workers’ control or oversight. This makes it highly susceptible to corrupt practices, especially since many of the key policymakers are drawn from past neo-liberal regimes. President Morales’ pursuit of “normal capitalist development” is based on an alliance among elite Bolivian business groups, multi-national capitalists and rural Indian land reform beneficiaries. This contradictory alliance, managed by co-opted social movement leaders and the MAS political machinery is very precarious. His dependence on private capital – both foreign and domestic — his reliance on traditional CAN and US markets, and his incapacity to move his social reform agenda forward, is slowly undermining his attempt to consolidate his conservative ‘populist’ regime. His much-proclaimed “Constituent Assembly” based on the old parties and without a clear-cut reform agenda has failed to impress the urban and social movements, even among those sympathetic to his regime. Morales’ lack of any concrete socio-economic changes has led his supporters in the mass-Indian and peasant movements to call for an alternative body – a Fourth Power – to his failed Constituent Assembly.

Slowly and inexorable, Morales and Linera’s vision of converting Bolivia into a ‘normal capitalist’ country based on balanced budgets, foreign investment, mineral and agro-export growth, and a domesticated trade union and social movements, willing to accept incremental changes is coming apart. The elites are pushing for greater concessions, clamoring for free trade agreements with the US, greater constraints on land expropriation, and, in the case of Brazil, an outright refusal to even negotiate a fractional increase in the price of gas. Morales has seen the original novelty and world celebrity of the “First Indian President” disappear. Today he confronts hardnosed, multinationals backed by ‘center-left’ neo-liberal regimes who refuse to pay even one-half the world price of gas and who corrupt new officials in order to obtain mineral exploitation contracts.

If and when Morales’ mass Indian and peasant supporters catch on to the socio-economic costs of ‘normal capitalism’ and the empty promises of the ‘populist’ conservative regime, it could mark the early and tragic end of another popular leader blinded by Presidential ambitions and the good graces of oligarchic power.

(Republished from The James Petras Website by permission of author or representative)
• Category: Economics • Tags: Bolivia 
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