Bolivia’s Ascent to Economic Outlier in a Struggling Region

Author: Anna Quinn, Loyola University

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Millions of Bolivians travelled to polling stations on Sunday, October 12th to cast their votes in the 2014 presidential election. Even before the votes had been counted, news reports around the world predicted a landslide victory for incumbent President Evo Morales. These sources were proven correct when Morales declared victory the next day. Standing in front of a cheering crowd in the capital city of La Paz, Morales proclaimed, “We thank the Bolivian people for this new triumph.” Exit polls revealed that Morales won 60% of the votes, his closest opponent only gaining 25%, according to the BBC.

President Evo Morales, who had originally been elected in 2005, was the country’s first president to come from the indigenous population. Morales’ election marked a significant achievement on the part of the indigenous population in Bolivia, who have been marginalized by the government’s policies throughout Bolivian history. But it was this segment of the population that propelled Morales to his initial victory, and continues to make up a large part of his support base. According to Aljazeera, “the impoverished and indigenous majority of Bolivia identified with Morales’ humble beginnings; unlike the standard racist and elite presidents of the past, Morales was seen as one of their own.”

His indigenous heritage is by far not the most unique thing about Morales’ presidency, however. Perhaps because of his humble beginnings, Morales has become a champion of progressive, socialist policies that have boosted the lower class and the country’s economy as a whole. In 2005, Morales began his plan to nationalize the mining, electricity, telephone and railroad industries of Bolivia. For example, he gave control of Bolivia’s hydrocarbon industry to the state with Supreme Decree 2870, which mandated that corporations give 82% of their profits to the state, compared to the previous 18% that was required. These kinds of policies have provided the state with a large sum of funds, allowing Morales to end his first year in office with no fiscal deficit, the first time to happen in Bolivia in 30 years.

With the state’s newfound wealth, Morales launched a series of programs aimed at helping the lower classes. Morales set up a literacy campaign to eradicate the 16% illiteracy rate in Bolivia. The campaign was successful, as UNESCO has recently declared the country illiteracy-free. Morales also increased the minimum wage in Bolivia by 50%, launched a program to increase the percentage of the indigenous population attending college, and reduced poverty levels by 32.2% from 2000 to 2012. According to the UN, this is the highest rate of poverty reduction in Latin America during this decade. Similarly, a report from the Center for Economic and Policy Research (CEPR) in Washington stated, “Bolivia has grown much faster over the last eight years than in any period over the past three and a half decades.” It is clear that Morales’ progressive policies have worked in favor of the Bolivian economy and the majority of the population.

It is especially interesting to look at the success of Morales’ policies in light of the economic activities of other countries. As Aljazeera reported, “Morales wasn’t alone, he was joining a wave of presidents across the region who championed progressive and anti-imperialist policies, from Argentina to Venezuela.” Both of these countries have implemented similar socialist policies as Bolivia. In 2003, Argentina, for instance, renationalized many of the industries that had previously been privatized in the 1990s. Argentina put their postal service, water utility services, pension funds, airlines and energy firms under state control again. Similarly, Venezuela took state control of their oil company after their recession reached its lowest point in 2003.

However, even though these other countries seem similar to Morales on the surface, their success rates differ dramatically. Argentina is currently experiencing economic problems as its currency plunges and its debt increases. Venezuela has one of the world’s highest inflation rates and is struggling to provide food and services to its citizens. As the New York Times notes, “tiny, impoverished Bolivia, once a perennial economic basket case, has suddenly become a different kind of exception—this time in a good way.” The question then becomes: why? Why has Bolivia seen somewhat unprecedented growth while other countries with similar ideologies and policies continue to struggle?

Perhaps it is what many news outlets are calling Morales’ “pragmatism.” The New York Times explains that, “While Mr. Morales remains firmly in Latin America’s leftist camp, on many economic matters he fits within a broader trend away from ideological rigidity in the region.” The Times compares Morales to leaders in Peru, El Salvador, Columbia and Uruguay who have taken steps toward a more moderate, yet still leftist, approach. This analysis seems to hold up when looking at some of the differences between Bolivia and countries like Venezuela or Argentina. For instance, despite his past of berating institutions such as the World Bank and the IMF, Morales has become much more cooperative with such organizations. He has recently supported their initiatives to help quinoa farmers and, unlike Venezuela and Argentina, takes part in their annual economic reviews. Morales has also shown pragmatism and economic prudence in his collection of a large rainy-day fund for his country. Bolivia currently has upwards of $14 billion, more than half of its gross domestic product, reserved for economic hard times. According to the IMF, this is the highest ration in the world of international reserves to the size of its economy. Hernan Luis Torres Nunez, a frequent economics commentator on the Venezuelan community, also praised Morales for his ability to negotiate with and instill confidence in the industrial bourgeoisie to continue their economic investments. Nunez summarizes these reasons for Bolivia’s success quite nicely, stating, “Evo Morales has declared himself a Marxist … however, it would appear that he is also a pragmatic man who understands that socialism of the 21st century has to be radically different than that of the 20th century, something that [Jorge Giordani, Venezuela’s former prime minister] could never understand and less so put into practice.”

These socialist policies, and hopefully their success, do not seem to be ending in the near future. Morales’ victory on Sunday began his third term as president, the last term he is allowed to serve because of limits set in the Bolivian Constitution. While there have been some who predict he will try to amend the Constitution in order to serve another term, Morales claims he will be stepping down at the end of his third term in 2020. He told BBC that he has not even considered changing the Constitution and is most likely to return to work on his farm in Central Bolivia in 2020 and spend his time “visiting old friends.” His impending retirement has caused some unrest, as many wonder who will take his place and whether his policies can continue to be successful. Because Bolivia’s gas exports go to Brazil and Argentina on long-term contracts, for instance, some worry that the economic problems in those countries might inevitably cause problems for Bolivia as well. Jose L. Valera, a lawyer based in Houston who represented energy companies that do business with Bolivia has said, “this is not sustainable in the long term, the model is not designed to generate substantial profits for an oil industry that is going to then be incentivized to reinvest in Bolivia.” Skeptics also show concern over what will happen to the Bolivian economy should natural gas prices fall. But Morales remains confident about the future of his country: “This is a government plan, it is not the plan of a [specific] president,” he told BBC Mundo’s Ignacio de los Reyes, “whoever comes after 2020 will need to commit to our patriotic agenda, therefore there is no need for Evo to be president until 2025.” While it is clear that there is significant disagreement over Bolivia’s future, only time will tell if the success of Morales’ policies will continue in the current political climate of the region, even after he leaves office.

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