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Bolivia: Two years of ’post-neoliberal’ Indigenous nationalism — a balance sheet

Bolivia Rising | 31 August 2008

Bolivia: Two years of `post-neoliberal’ Indigenous nationalism — a balance sheet

By the Bolpress editorial board, translated by Sean Seymour Jones for Links International Journal of Socialist Renewal

State intervention in economic activity — the nationalisation of businesses, restrictions on exports and price controls, among other measures — doesn’t appear to be contributing to the materialisation of the structural changes postulated by the National Development Plan (PND) of the Movement Towards Socialism (MAS). This is the evaluation of business leaders, analysts and political leaders from the right-wing opposition in Bolivia. However, according to the government of President Evo Morales, the brutal and desperate reaction of the dominant classes "in relegation" proves that something is changing.

Many documents issued recently by institutes and conservative pressure groups conclude that the "out of fashion statism" of the MAS doesn’t guarantee the macroeconomic stability or controlled inflation; while its "radical” “ideological” postulates in international trade “isolate" the country and scare off investment. [1]

In almost every case, the conservative groups analyse the economic policy of the MAS from the point of view of liberalism as the only valid paradigm for interpreting reality, and they criticise the government for not gambling on the unrestricted free market and big private business as key factors of economic development.

Growth of the economy

The government’s PND projected an economic growth of 5.3% in 2007, but the National Institute of Statistics (INE) reported 4.6% and the International Monetary Fund (IMF) and the Economic Commission for Latin America and the Caribbean (CEPAL) calculated 4%. The PND expects growth of 6.4% in 2008, although the IMF estimates only 4.7%. According to the right wing’s criticisms, these rates of growth, less than the Latin American average, prove that the country isn’t making use of the increase in the prices of raw materials nor the expansion of world manufacturing demand.

Nevertheless, in macroeconomic terms, the "post-neoliberal" nationalist regime of the MAS and its despised state interventionism has had to more successes in two and half years than economic liberalism did in two decades.

Vice-President Alvaro García Linera recalls that during neoliberalism (1985-2005), Gross Domestic Product (GDP) grew on average 3% per year and never passed 5%. During the MAS administration of President Evo Morales, GDP grew 4.5% on average. The 12 economic sectors studied by the INE in order to measure GDP shows increases in 2007 in production of oil and gas of 11.34%, construction 8.59% and mining 6.07%.

The income of the state rose from on average from US$300 million to $1500 million annually thanks to the nationalisation of the Chaco, Andina and Transredes oil companies; of the refineries in Cochabamba and Santa Cruz; as well as the Vinto foundry, the Huanuni mine and the National Telecommunications Company (ENTEL).

The neoliberal governments accumulated in the Central Bank of Bolivia (BCB) $1700 million in international reserves over two decades. In two years and six months of "Indigenous nationalism", the reserves have exceeded $7000 million.

Inflation

The PND predicted single-digit inflation for the whole period, but two years after its introduction, inflation is in double digits and it has increasingly turned into the principal problem of the national economy.

Many studies carried out by the right-wing opposition identify the determining factors of inflation as: the elevated and disorganised public expenditure towards consolidating the presence of the state in the economy, the uncontrolled growth of the monetary mass with the Juancito Pinto bonds [for primary school students] and the Dignity Income [pension for those over 60 years old], which have created "artificial conditions of wellbeing in certain segments of the population".

The right "relativise" external factors like the increase of international prices, that in its criteria were reduced by state "subsidies" and price "controls" in the internal market. The rise in food prices is a failure of government management, claimed the Confederation of Private Employers of Bolivia (CEPB), despite the Food and Agriculture Organisation (FAO) confirming a while ago that inflation is a world problem, due principally to rising food prices. [2] In Bolivia, the average inflation of 8.3% is in large part the consequence of the rise in the price of flour by 69%.

García Linera comments that in 20 years of economic policies imposed by the IMF, the average inflation was 11.5%, although in the government of Jaime Paz, when the head of the opposition National Unity (UN) party Samuel Doria Medina was the minister of planning, the indicators reached 18%.

Free trade and investment

The Bolivian Institute of Foreign Trade (IBCE) and Podemos senator Luis Vásquez warn that the MAS government’s "deficient", "immature" and "unprofessional" foreign and commercial policy was isolating the country, with very high political, historic and economic costs.

The right laments the "isolation" of the Bolivian economy from the global currents of trade because it has put three crosses against the free trade agreement with the United States and there isn’t the will to take part in an agreement with the European Union, the "biggest markets on the planet". The National Chamber of Exporters of Bolivia (CANEB) estimates that at least 70% of the external markets are at risk of being lost due to divergences with the United States and Peru.

National exports rose from an annual average of $1100 million during neoliberalism to $2588 million in May 2008, with the expectation of reaching $5500 million in December through sales of hydrocarbons, minerals (lead, silver, zinc, tin, tungsten), agroindustrial products, manufactured goods, textiles, furniture and others. This information, the vice-president assures, demolishes the arguments that the present economic model is isolating Bolivia from the world. [3]

The nationalisations and the withdrawal from the International Centre for Resolution of Relative Differences in Investment (CIADI), to mention some anti-business actions, increased legal insecurity and make the foreign investment generating sources of work flee, the opposition charges.

The governments of Hugo Banzer (1999-2001) and Gonzalo Sánchez de Lozada (2002-03) said that the Bolivian state invested between $400 million and $450 million, and private business $800 million, although later it confirmed that there was no such investment. García Linera assures that at present, the state is the motor that drives the economy with an investment of between $1100 million and $1700 million. [4]

In a role as "spokesperson" of the EU, Senator Tito Hoz de Vila (from Podemos) says that Europeans hope for a "much more protagonist and less obstructionist role for Bolivia, the country that receives the greatest cooperation and that most holds back the negotiation with the European Union". Hoz de Vila demands the foreign affairs department replace the "radical" Bolivian negotiating team headed by the "intransigent" ambassador for trade and integration affairs, Pablo Solón, who "hinders" the negotiations and doesn’t suit the current reality.

All the arguments of the right are based on an assumption that the liberalisation of trade "promotes development" and access to the European market of 500 million inhabitants will generate investment, more employment and hard currency, and will drive the economy. It is true that "free trade" enriches a few, it doesn’t benefit in the short term and its impact on the economies of the Andean countries will be "very small", recognised the United States Trade Representative (USTR) in 2004. [5] One can expect the same from the European FTA, whose normative standards are more radical than those agreed to in the WTO.

According to the European directive relating to legal protection of biotechnological inventions (Directive 98/44/CE, Art. 5.2), "an element isolated from a human body or produced through a technical procedure, including the partial sequence of a gene, can constitute a patentable invention, even if the structure of this element is identical to a natural element".

Ex-director of the National Service of Intellectual Property (Senapi) Claudia Solares warns that under those conditions, and without the capacity to innovate the patents, above all pharmaceuticals, Bolivia could promote biopiracy and the theft of genetic resources if it signs a treaty with Europe.

Within the framework of the negotiations of the General Agreement on Trade and Services (GATS) of the WTO, the EU requested that some developing countries withdraw their demands for obligatory loans to small and medium-sized business, contradicting a wide sector of the international community that consider that the growth of the agricultural production in developing countries [through these businesses] is key to confronting the causes of the food crisis.

The governments of the Community of Andean Nations (CAN) hoped to resolve the problem of migration in the negotiations with the EU. But after the passing of the [anti-immigration] Return Directive, repudiated even by the Vatican, the presidents of Bolivia and Ecuador asked what sense does it make "to associate ourselves" with a Europe that proposes the free movement of goods and capital but at the same time criminalises the migration of human beings? It appears that there is only globalisation of business, looking for markets and money, complained Evo Morales.

The liberal right blame Evo Morales for the political crisis in the CAN, when those responsible for the fracture are the governments of Colombia and Peru because they subordinate Andean integration to free trade agreements. Peru’s President Alan García hopes to modify Decision 486 of the CAN over intellectual property in order to make it compatible with the Peru-United States FTA, putting at risk the process of Andean integration. Peru would be willing to abandon the CAN, which represents scarcely 20% of its exports, in order to sign an agreement with the EU.

The local right tend to exaggerate the conflicts and the lack of cohesion between Andean countries. They blame the "radicals" for the suspension of the fourth round of negotiations that should have taken place between July 7 and 11 in Brussels because they don’t understand the political changes in the CAN, where the "Washington consensus" has been broken, and a healthy debate of ideas has emerged that from time to time becomes heated.

Ecuador and Bolivia are both in processes redefining the use of their natural resources, the role of the state in the economy, the procedures for approving international agreements and many other central aspects of the liberal economy rejected by more and more people every time in Europe and the United States. [6]

Loyal to the free market, Colombia and Peru seek an immediate trade agreement with the EU and differ with their partners, but respect their visions of development, unlike the arrogant EU that has threatened Morales and Ecuador’s President Correa to accept an FTA or leave the negotiations.

Bolivia’s foreign minister David Choquehuanca invited the opposition members of Podemos to accompany the negotiating team in the next rounds so that they might inform themselves and see that Bolivia and Ecuador are not slowing down the negotiations, but rather advancing with prudence, conscious of the enormous risks of the CAN-EU agreement.

Structural changes

Bolivia’s prosperity is explained principally by the high international prices of raw materials and energy. Nevertheless, the macroeconomic successes are also due to the state gradually retaking control of the economy and intervening directly in the market as a producer of goods and services.

The question is whether the recovery of the state is enough in order to consolidate the structural changes promised in the National Plan of Development. The vice-president assures that although sometimes they pass unnoticed, the changes in the economic structures of the country advance much faster than the political transformations.

The four pillars of the old national economy were the oil companies, agribusiness, the medium and large mines, and the banks, sectors that were owners of almost all the fundamental wealth of the country. Now, says García Linera, the new nucleus of power is the state together with micro, small and medium, private and community, urban and rural productive units, considered the promoters of national development and the principal generators of employment.

The transnational and large national private companies which had been privileged by the [pre-MAS] neoliberal state for more than 20 years have lost political and economic influence, especially the extensive networks of local intermediaries that prospered in the shadow of the energy transnationals, and the agribusiness bunker that monopolised the production, marketing and processing of grains.

Broken down and weakened, the old dominant classes "in decline" reacted with brutality and desperation through the radical right-wing groups in the Senate, civic committees and prefectures in the east of the country. García Linera observes that these people blackmail, threaten, beat and boycott the economic and social program of the constitutional government because "we have taken their money, not for us" but for the state to construct schools, to provide health services, to increase salaries and assure productive investment.

Hydrocarbons

Right-wing analysts emphasise that in the two years since the nationalisation hydrocarbons (with three ministers of hydrocarbons and five presidents of the state oil company YPFB involved), Bolivia stopped being the centre of energy distribution for the Southern Cone, and pays fines for not fulfilling export commitments. Homes and industry suffer rationing of natural gas; Bolivia lacks fuel for transport and agriculture, and the proven reserves of gas are running out. The investment carried out in the sector is 16% of that planned in the PND.

According to García Linera, the foreign oil companies incorporate the most important and influential group of the Bolivian economy: they had ownership over the gas and oil reservoirs, the towers, drilling and piping equipment; they controlled the exploitation, transportation and marketing, and the export prices. Around the oil power moved a regional network of intermediaries and subcontractors and traders, above all in Santa Cruz and Tarija.

This oil group has been "dethroned" by Law 3058 (nationalisation through the purchase of shares), and the entire gas production chain (trade, transport, refining, prices) became the property of all Bolivians. The participation of the state in the oil rent rose from 27% to 72-75% and its income rose from $500 million to $2000 million.

The oil companies kept the drilling towers and their equipment; their profits decreased from between $1000 million and $1300 million to $400 million or $500 million. The intermediaries and subcontractors of Santa Cruz and Tarija that lived as "ticks" on the oil companies don’t have anywhere from which to suck and they have remained without a source of profit.

Agribusiness

The nationalism of the 1952 Bolivian revolution created state companies and development corporations to drive agricultural production and managed to cultivate 1.5 million hectares of foodstuffs in 1985. Afterwards, the neoliberal state, whose premise was export or die, invested large quantities of money in order to strengthen a single rural actor, big exporting agribusinesses, forgetting the small and medium-sized producers that supply the internal market.

Neoliberalism left the farming sector in a deplorable state, without investment and with profound inequities. Ninety per cent of cultivable land is concentrated into the hands of 50 or 60 families; 600,000 small producers have to make do with the remaining 10%. Ninety per cent of the credit portfolio of the whole financial system is in the hands of 7% or 8% of the companies in the country, therefore more than 90% of the economic units gain access to 9-10% of the credit.

In the last five years, food production declined and the majority of the area was assigned to agribusiness production for exportation. The previous governments were only interested in the economic indicators and in generating hard currency with exports; its priority wasn’t to feed the people.

Until 2003-2004, cattle farming and the export-orientated agribusiness production of soya, sugarcane, maize and rice was the second group of economic power, says García Linera, integrated by national and foreign businesses such as FINO, IOL, Gravetal, ADM and Cargill, which formed solid networks with big, medium and small, national, Brazilian, Colombian and Menonite [religious sect] producers and other owners of large extensions of land. The whole sector managed $600 million annually, and in 2006-2007 their rent decreased to $550 million.

The neoliberal state couldn’t invest directly in the economy or in the farming sector and neither could it control the distortions in prices; everything was in private hands and of free supply and demand. Nevertheless, the state transferred to the agribusiness sector between $100 million and $140 million each year.

In a meeting in July 2007, the leaders of the National Farming Confederation (Confeagro) asked President Morales to guarantee that $150 million "as was done before, in buildings, technical support and technical reprogramming". Morales didn’t give them a cent and decided to utilise the $150 million and another additional $300 million in promotion programs for small and medium-sized producers of rice, wheat, maize and soya.

The model of rural productive development changed: the state recovered its role of regulation and control of the market and converted itself into a rural productive actor, explains minister of rural development, farming and environment Susana Rivero.

Now the state intervenes in the market. It knows how much each area produces, how much the producer gets and how much should be paid by the consumer. It has imposed a "just price" — the result of the cost of production and the purchasing power of the people — because it isn’t just that the big businesses impose "international" prices on Bolivia, where the work force is cheap and there is a diesel subsidy and tax exemption in the rural sector.

The state also recovered its planning role through the Production and Markets Monitoring System (SISPAM), and now knows where it has to invest as a productive rural actor through the Food Production Support Company (EMAPA), that assists small and medium-sized producers of rice, wheat, maize and soya.

The most interesting thing of all is that the state involved itself in the soya business, which it was outside of for more than 20 years, and it started to fracture a solid business group. The state began to gradually control, buy and finance from 3000 to 10,000 tonnes of soya, and this year expects to manage up to 80,000 tonnes. This is scarcely 10% of total production, but the important thing is that the state is incorporating itself in the production chain by buying soya from the small producers, highlights García Linera.

A tonne of soya costs between $390 and $395 in the Santa Cruz market, but the State pays $410. The small peasant producer and the state both win. The state makes use of the higher prices, rehabilitates industrial productive groups and rice- and maize-farming industry groups. Soon it will invest in the cultivation of 10,000 hectares of wheat in the Abapó-Isosog zone.

Food for Bolivians and incentives for the small and medium-sized food producers (in the area of meat, vegetables and even the industrial farming) are the priorities of the government’s New Model of Rural Productive Development and of the New Policy of Food Security and Sovereignty. [7]

Big business and conservative political parties criticise policies that favour small and medium-sized industries, and cooperatives and other forms unions of artisans and individual rural producers, and discriminate against the "formal" exporters of manufactured goods and grains. [8]

Moreover, they complain that the PND aims to distribute 30 million hectares of land between 200,000 peasant families, and will investigate 56 million hectares by 2010. They fear that modifications to the Law of the Institute of Agrarian Reform 2006 opens a broad space of discretion in the definition of the social-economic function of the land that could threaten their properties.

The government isn’t merciless or in combat with the big productive sector or private business in general; to the contrary, it respects private property and its capacity for reasonable profit, and its policy of redistribution of land hasn’t affected the interests of the big producers.

The results of the investigation of land in the last two years demonstrate that the agrarian policy isn’t "anti-business". In the neoliberal decade (1996-2005) approximately 1.2 million hectares of the land of medium and large farming businesses was investigated. In the two years of the MAS government, 888,000 hectares categorised as medium and large farming business were investigated.

With public financing, the Centre for Tropical Agricultural Investigation (CIAT) Institute improved soya, rice and wheat seeds in the lowlands. The government supports the cattle farming sector affected by the floods with an investment of more than $2.8 million in veterinarian supplies and mineral salts. It will attend to 70% of the cattle herd of the Beni producers.

Minister Rivero temporally restricted the exports of oils and other products because some businesses "had hoped to utilise the people in order to hurt the government, but I’m here to defend the popular economy and not the economy of a handful of families that have already had more than 20 years of filling their pockets at the expense of the people".

In order to moderate the increase in prices and guarantee internal supply, the government temporally prohibited the export of various types of meat, some grains like rice, maize, wheat, as well as fixing a band of prices for a litre of oil between 10.50 and 12.99 Bolivianos ($1.43 and $1.76). It applies new monetary, fiscal and foreign exchange policies aimed at strengthening the productive sector. It is considering a law of food subsidy, especially for bread.

The president of the Confederation of Private Businesses of Bolivia (CEPB) Gabriel Dabdoub announced that it will demand that the government go before the International Labour Organisation and even go before the Organisation of American States (OAS) for vetoing exports, which in his view is an "attack" against the freedom to work. Nevertheless, this will fall on deaf ears given that the Bolivian government isn’t the only one that regulates exports, fixes quotas and price bands, or creates strategic food reserves. [9]

According to Rivero, the Bolivian government has changed the strategy of development to bring food closer to the population and reduce the asymmetries between small, medium and large producers. The government supports small producers with donations, supplies and credit at 6% interest because they do not have access to finance from banks like the large producers.

What are the results of the change? The "neo-statism" of the MAS has increased the area of land cultivated for food from 2.1 million hectares in 2005 to 2.5 million hectares in 2008. Now there is a surplus in production. With an investment of $90.3 million in production, the farming sector grew 2.13% in 2007.

Rich and influential agribusiness has asked for prominence and regional power not only because it stopped receiving hundreds of millions of dollars from the state, but because it has been displaced by the mining exports of Oruro-Potosí that now generate more money than the entire department [province] of Santa Cruz.

Mining

The third power group of the old economy was the mining sector under the control of transnationals, cooperatives and small producers, which as a whole managed $500 million. Presently mining continues in the hands of foreign private business, medium-sized mining companies and cooperatives. In fourth place appears the state, which has gradually profiled itself as an exporter.

García Linera identifies two important changes in the mining sector. First, the displacement of the regional power of Santa Cruz to the west (today the second-most productive force is Oruro-Potosí and part of La Paz; there’s more silver in Potosí than in all of the rest of Bolivia); and second, the entry of the state into the mining sector with Huanuni and Vinto, and with four projects of exploitation of tailings left by the ancient mining that will be come into effect at the end of 2008 and the start of 2009.

The opposition charges that the uncertainty provoked by the changes in the mining taxation regime has paralysed investment and production, not making use of the high international prices. Vice-President García Linera reminds them that in the neoliberal period, mining exports reached $280 million annually on average, and $1200 million in May 2008, almost as much as gas and oil. In the first quarter of this year, the mining sector contributed almost 54% to GDP.

Until 2005, the state received 20% of mining profits and 80% was going to the private sector. With the new law on tax and mining royalties, in 2008 the distribution was 55% for the state and 45% for the private sector.

Conclusions

The MAS government inherited an old power structure with four groups; it partially displaced three of them and left intact the fourth group, the banks. The bankers managed between $50 million and $80 million annually and it is calculated that in 2007 they earned $100 million thanks to mining in Potosí. The radical modification of the economic power structure in Bolivia isn’t visible, but is stronger than the changes in the political structure, says García Linera.

Previously agribusiness was the second-biggest sector in the economy and now it is mining; previously it was all private mining and now mining is private and state. The state has replaced the oil companies as the head of the economy and its participation in the generation of productive wealth increased from 0.8% to 8%. In total, in two and a half years of government, the participation of the state in the Bolivian economy has passed from 13% to 22%, which is still very far from 50%, recognises the vice-president.

"Neo-statism" constructs a producer state that invests hydrocarbon resources and those from mining in the development of the national productive apparatus with the aim of organising a strong, diversified industrial base without plundering nature.

The state has started to diversify into petroleum, telecommunications, agriculture, partially in mining with Huanuni, el Mutún and the Salar de Uyuni. Besides this, it creates new things like the thermoelectric project in the Chapare; liquid separating plants in Santa Cruz and Yacuiba; paper and packaging plants; small citrus fruit and milk processing plants; two cement factories in Oruro and Potosí and two sugar mills in Tarija and in the north of La Paz. The cement factories and two sugar mills are still just projects on paper, but the rest are under construction, according to García Linera.

The government certifies that its proposals are better than the "rentist" state capitalism of the past and has little to do with the experience of the development corporations of the 1960s and 1970s. In those experiments, the state exploited natural resources and raw materials and returned the profits to the economy in a rentist manner.

The rentist logic of the old state was to live off natural resources and distribute the profits to whoever yelled the loudest. Public companies like YPFB or the Bolivian Mining Corporation (Comibol) never had a deficit but their surpluses were plundered and wasted without any criteria of productive strategy, comments Teresa Morales, ex-minister of state and postgraduate researcher of development sciences at UMSA.

Now the state industrialises natural resources according to the necessities of the domestic productive apparatus and strengthens the community, empowering the small-producers economy in general which constitutes 85% of the economically active population.

It strengthens the productive role of the state because only the authority of the state is capable of reordering the economy with equity. It’s not a question of state capitalism but of a state "communitarism" with a new paradigm of development.

In the old paradigm of liberal Western development, major economic growth and the increase in GDP were synonymous with social wellbeing. Liberalism understands wellbeing of human beings as the increase of material consumption of goods and services.

"Post-neoliberal" Indigenous nationalism set out a new civilised paradigm based on Indigenous peasant logic, according to which human wellbeing doesn’t depend on frenetic consumerism or the blind industrialism that causes environmental crises.

According to the MAS, "living well" or human wellbeing has multiple dimensions: harmony between the material and the spiritual, satisfaction of necessities with austerity, and symbolic accumulation of affection, appreciation, social recognition, self-esteem and self-confidence.

In summary, wellbeing isn’t only material, but also symbolic, social and emotional. The most important part of living well is harmony between the individual and the collective, or the harmony between the human being and the environment. The logic is: I am well only as much as my environment and my community are well.

Sources

1. Análisis de la coyuntura política en la Vicepresidencia de la República el 6 de junio de 2008 (resumen del senador Gastón Cornejo) (Analysis of the political situation in the vice-presidency of the Republic, June 6, 2008 (summary by Senator Gastón Cornejo));

2. Press reports from the Ministry of Rural Development and Farming;

3. The Palabra Clave ("Key Word") program led by journalist Juilo Peñaloza and broadcast by Erbol.
Posted by Bolivia Rising on Sunday, August 31, 2008