“I'm here to resolve problems,” Bolivian President Evo Morales, the country’s first Aymara Indian leader, recently told the Miami Herald. “My job is to take care of the poor.” Thus far, statistics make those two goals appear mutually exclusive. After Morales’ first year in office, revenues are booming due to high natural gas prices, but Bolivians appear more divided than ever. The opposition’s agitation for regional autonomy has increased in recent months: In January, clashes between opposition groups and Morales supporters in Cochabamba, a city in central Bolivia, left two dead and more than two hundred wounded. These regional tensions are fueled by the government’s windfall, says Florida International University’s Eduardo A. Gamarra in a new Council Special Report. If Morales does not adopt a more moderate approach and up investment spending, he will face growing public disenchantment, warns the Economist.
Last year, Morales announced the controversial nationalization of the oil and gas industry in the spring, giving foreign investors a six-month deadline to comply with his demands or leave. While popular among Bolivia’s poor, the nationalization strained relations with its neighbors, particularly Brazil, which imports roughly half of its gas from Bolivia. After a year-long dispute, the two countries reached a new deal February 15 that should boost Bolivia’s revenues (Bloomberg) by $100 million a year.
Hydrocarbon nationalization boosted government revenue, but it also augmented the opposition’s lobbying for regional autonomy. Hence, the furor over what might seem like a technicality—the percentage of the constitutional assembly required to amend Bolivia’s constitution. After claiming a simple majority, rather than a two-thirds vote, could approve the changes, Morales’ party, the MAS, backed down (VOA) in January to break a months-long assembly deadlock. People in Cochabamba are asking, “Is Morales becoming—or has he already become—the wielder of illicit power he once made his name by protesting against?” says the Bolivia-based Democracy Center’s blog.
In foreign policy, too, Morales has caused controversy. His background as a coca union leader, his alliances with Venezuela and Cuba, and his vocal criticism of U.S.-led trade initiatives have raised hackles in Washington. Though Bolivia was named eligible for $600 million in grants through the U.S.-run Millennium Challenge Corporation in November 2005, the funds have yet to be dispersed and one international donor says the compact is “in the freezer.” Bolivia’s trade benefits under the Andean Trade Preference and Drug Enforcement Act (PDF) are set to expire in June, but Morales has made it clear he has no interest in a free trade agreement with the United States.
Washington has limited bilateral options, so it should work with Bolivia’s neighbors—Chile, Argentina, and Brazil—to help mend the country’s internal divisions, suggests the Council Special Report. “In order to prevent a further escalation of violence and social unrest, the United States must prioritize conflict prevention over any particular item on the traditional U.S.-Bolivia policy agenda,” writes Gamarra. Yet the 2008 foreign aid budget proposes cutting counternarcotics aid to La Paz, a shortfall Venezuelan President Hugo Chavez is happy to offset by underwriting coca production (ChiTrib) in Bolivia.