Editor's note:

As the most recent crisis in Bolivia unfolded in October 2003, many observers of the IMF and World Bank were not surprised to learn of the large protests in La Paz and other cities. For several years, trade unions, indigenous groups, women's groups, coca growers, and others have been agitating against governments that have been all-too-willing to swallow whole the neo-liberal policy requirements of the Bretton Woods institutions and the U.S. government. The latter force has been most interested in prosecuting its "war on drugs" in the country, trying to eradicate coca even though almost all of what is grown today is not converted into cocaine and is used in the traditional, non-harmful manner by Bolivians.

As Bolivia has emerged as a poster-child of IMF/World Bank policies, the people have continued to slip further into poverty. The March/April 2000 uprising in the country's third-largest city, Cochabamba, against the World Bank/Bechtel Corporation plan to privatize water provision, not only succeeded in expelling Bechtel from the country, but put the issue of water privatization on the map, along with the potential of powerful resistance movements.

Protests had been going on for four months as the policies of the recently-elected President, Gonzalo Sánchez de Lozada, commonly known as "Goni," continued to fail the people. When repression intensified, including mass slaughter of protesters, the popular actions themselves only got stronger. Goni was finally forced to resign on Friday, October 17. He was succeeded by his vice president, Carlos Mesa, who is currently enjoying a honeymoon with both the population and the international community. The underlying causes of the crisis, however, have not gone away, and the future for Bolivia remains uncertain. Below are excerpts from two articles written by colleagues with extensive experience in Bolivia during the culminating week of protests. The first is by Tom Kruse, who has lived in Cochabamba for several years, and the second is by Nadia Martinez of the Sustainable Energy & Economy Network in Washington, DC.

The IMF and the Bolivian Crisis

By Tom Kruse
CEDLA (Centro de Estudios para el Desarrollo Laboral y Agrario) - La Paz/ Cochabamba, Bolivia

The current crisis in Bolivia is social, economic and political, and bears the clear imprint of IMF policies. Despite improvement in social service coverage, poverty and vulnerability have been increasing. The vulnerability of families to shocks and displacement, especially among the rural poor, has worsened dramatically. Economically, growth has been poor, and accompanied by growing structural unemployment and underemployment. Over 7 of 10 new jobs created in the past 15 years have been in the "informal" sector.

Bolivia has been a model student of IMF "reforms", and is now also a showcase for the contradictions and crisis these policies engender. After almost two decades of "reform" and structural adjustment, Bolivia is growing slowly, if at all. Bolivians are increasingly vulnerable and poor, while society in general is increasingly inequitable and unjust. IMF policy prescriptions have systematically removed essential economic policy decisions from the popular political process, and successive governments have been limited to administering IMF policy prescriptions. The IMF claims to recognize the call by civil society organizations to include "macroeconomic issues" in Poverty Reduction Strategy Paper (PRSP) dialogs, but disingenuously suggests that such issues must be taken up by national governments - the same governments whose hands are tied by IMF conditionalities.

Both in terms of background conditions and immediate causes, the current crisis in Bolivia seems to be occurring in the shadow of IMF policies. Anemic growth due to factors both internal and external to Bolivia has resulted in a dramatic fiscal crisis; the deficit is now estimated at over 8%. IMF prescriptions have been for more austerity and belt tightening: on the expenditure side, the IMF calls for "flexibilizing" government spending, which means scaling public sector salaries to national economic performance and permitting devaluation to erode the value of pension payouts.

The IMF has advised Bolivia to bolster its income with more effective taxation, which in essence means getting more people--largely poor and middle class--to pay more taxes. The inauguration of flows of natural gas from the country's enormous reserves has been eagerly awaited, but the way in which the gas is to be exploited, and who the benefits will accrue to, are heated political issues in Bolivia. Bolivians have seen their natural resources - silver, guano, rubber, and tin - extracted and exhausted over the last two centuries, with little durable development to show for it. The question Bolivians are asking about their natural gas is, "how will this next round of non-renewable commodity exports be turned into real development?"

The IMF has been consistently applauding and/or promoting the political class' rush to export gas under conditions and agreements that are very likely to turn the gas into another sad chapter of squandered wealth and underdevelopment.

The "gas issue" is probably the single most important political and development issue in Bolivia today. Some sectors are calling for the development of value-added activities before any gas is exported, while others call for going slow to ensure exports will in fact benefit the country, contributing to its productive capacity and productivity, towards the end of reducing poverty.

In all cases, there call is for transparency and participation in a process that will have enormous impacts on Bolivia's future. But the IMF's position works in the opposite direction, supporting the rapid conclusion of obscure deals made by non-transparent multinationals and unaccountable politicians. It is clear that the IMF's position on this issue - and antidemocratic practices generally over the last decades - has only exacerbated the lack or transparency and structural absence of participation, in turn adding fuel to the fire that today consumes Bolivia.

Bolivia: The Issues and Response

By Nadia Martinez
Institute for Policy Studies/ Sustainable Energy & Economy Network (SEEN), Washington, DC

The issues

Bolivia has the second largest gas reserves in South America, afterVenezuela. The state oil company was capitalized (partial privatization) during Sánchez de Lozada's first term as President (1993-97). This is when Enron came into Bolivia as a "strategic partner" in the gas industry; Enron still owns most of the gas networks in the country. Since Enron's collapse in the US, and as the problems associated with the Bolivia-Brazil and the Cuiaba pipelines began to surface internationally, Bolivians began asking for a congressional investigation of the entire privatization process and the way in which Enron came into the country (see Bolivia case study in Enron's Pawns). Since then, the export of gas from Bolivia has been the biggest political debate in that country.

The Pacific Liquefied Natural Gas (LNG) project to extract gas from the central part of the country, transport it to the Pacific coast and export it to Mexico and the US, has been on the table for over a year. The gas consortium is made up of Spanish-owned Repsol-YPF, British Gas and Panamerican Gas, a subsidiary of BP. Initially, one of the main areas of contention in the project was from which port the gas would be shipped, Chile or Peru. Given the historical animosity Bolivians have for Chileans, an animosity that dates back to 1879 when Chile captured land allowing Bolivia's access to the sea, this project has stirred anger to a boiling point. Other neo-liberal policies by the President in recent years had already reawakened angry memories of the privatizations of a number of Bolivia's public assets since the 1980s, projects which have failed to bring the promised prosperity to the public, and only enriched wealthy local and foreign business interests. Estimates are that Pacific LNG stands to generate US$1.3 billion in annual revenue as a result of the Bolivia-Chile gas pipeline, though the deal would return as little as US$40 million annually to the Bolivian treasury in the form of taxes and fees.

Another major issue that has stoked Bolivians' fury is that Sánchez de Lozada owns a large stake in several mines, through a mining company called COMSUR, the largest mining company in the country. Another of his mines, the Don Mario mine, is under investigation by the World Bank's International Finance Corporation (IFC) Compliance Advisory Ombudsman's office (CAO).

Many of Sánchez de Lozada's mines were acquired by COMSUR after the President privatized the state mining company, Comibol. His stake in the company was being held under a trust until his term was over, at which time he was set to resume control of it. His mines have benefited from the extraction of gas (as in the case of Don Mario) which is used as an energy resource to power, for example, gold mining. Cooperative miners want to make these mines cooperatives so that small scale miners and local people can also benefit from the revenues generated by them. Recent allegations have surfaced that COMSUR also owns a mine in northern Chile (La Escondida), and that this may be part of the reason why the President chose Chile over Peru as the export terminal location.

Don Mario and the IFC

The Don Mario mine is a gold mine in the Chiquitano dry tropical Forest, in the Bolivian state of Santa Cruz that is partially owned by COMSUR. The World Bank's International Finance Corporation (IFC) also has equity in the mine (around11%), and has, on different occasions, provided financing to COMSUR. Environmental and indigenous groups who fought against the building of the Cuiaba pipeline in 1999-2000 warned that if the pipeline was built through the Chiquitano, forest there was the possibility that this mine-which, until then, was dormant--might reopen. The Overseas Private Investment Corporation (OPIC), who was considering financing, and Enron, the pipeline's owner, both assured civil society groups that this would not happen. Last year, when SEEN traveled to Bolivia to do an assessment of the pipeline's impacts two years after construction, we found that the mine was in fact reopening, and that the government had approved its operating license in 1999. There was an additional 5km-long pipeline stemming from the Cuiaba Pipeline, being built to provide gas from the pipeline to the mine. When the local communities discovered this, they denounced it, the fact that no environmental impact assessment existed, and that they had not been consulted, among other things. Furthermore, they demanded that OPIC and Enron take responsibility for this as a secondary impact of the Cuiaba pipeline.

Shortly after the Enron scandal broke in the US, OPIC, the number one public financier of Enron globally, withdrew its support for the Cuiaba pipeline project. However, the damage had been done: the project was underway, including the gas shunt to Sánchez de Lozada's mine, despite promises to the contrary, and Enron continues to maintain its role as partner in the project.

In May 2003, the indigenous representative organization, Coordinadora de Pueblos Etnicos de Santa Cruz (CPESC) filed a claim with the IFC's CAO. The claim alleged that, given IFC's partial ownership of the mine, they had provided financing for COMSUR's illegal operations and should be held accountable. The CAO accepted the claim, traveled to the region in August to conduct the investigation, and were due to report their findings in early September, when the crisis erupted in Bolivia. To date, the CAO has not released the report, and it is likely that they are stalling now, given the current situation in Bolivia.

The US response

The Bush administration was very friendly with Sánchez de Lozada, who had proven his willingness to go along with the Washington Consensus at every turn, and appears to have been rewarded heavily for doing so. State Department spokesman Richard Boucher announced, in the thick of the crisis marked by violent state repression, that the United States "will not tolerate any interruption of constitutional order and will not support any regime that results from undemocratic means." This response is ironic given Washington's attitude toward the coup in Venezuela in April 2002, when the US was quick to acknowledge the new government that attempted, but failed, to oust President Hugo Chavez.

However, it is consistent with the position that the Bush Administration has expressed since the elections in Bolivia in 2002, where it very openly opposed the candidacy of Evo Morales, the coca growers' leader, who is very popular with the poorest constituents in the country, and very critical of the neo-liberal economic model. Now that Sánchez de Lozada has stepped down, it remains to be seen what position the Bush Administration will take with his successor, Mr. Mesa. The Bolivian people's position, however, could not be clearer. In the face of growing inequality, poverty, and oppression, they continue to voice their needs, and are indeed a force to be reckoned with.

The IMF has been consistently applauding and/or promoting the political class' rush to export gas under conditions and agreements that are very likely to turn the gas into another sad chapter of squandered wealth and underdevelopment.