LIMA, PeruBolivia has been shaken by violent protests that have pushed Evo Morales’ populist government against the ropes for the first time since he assumed power five years ago. There have been other political crises under his tenure, but now the revolt has come from his own political base.
On Dec. 26, Morales decreedwhile on a visit to Venezuelaan increase of various fuel prices, all of which had been heavily subsidized for years. The risebetween 57 percent and 82 percentset off mass reactions by unions, grass-roots organizations and civic associations after prices of transportation and food immediately rose. Following a series of demonstrations that left scores of people injured, Morales was forced to repeal the measure. The result is that radical groups such as the Federacion de Juntas Vecinales in El Alto, a Morales bastion that overlooks the capital, La Paz, plus the all-powerful Bolivian Workers Confederation, the transport union and even coca growers have been given a veto power over key areas of policy, particularly energy. Morales is now a hostage of the groups that once helped him topple two democratically elected governments in the early part of the last decade and paved his path to power.
What has happened in Bolivia holds two essential lessons for the rest of Latin America. First, the populist socioeconomic model is untenable. Second, the logic of authoritarian populism points toward ever-greater radicalization precisely because that socioeconomic system is untenable.
Morales nationalized the oil and gas industry in May 2006. He announced that foreign companies would no longer exploit the Bolivian people by plundering their natural resources, that his country would achieve total energy independence and that the wealth earned would serve to redistribute income to the poor. Similar measures taken twice in Bolivia’s history had not worked. It was only a matter of time before Bolivia, whose subsoil is awash with hydrocarbons, would confront an energy crisis and therefore social chaos.
At first, everything seemed fine. The high export prices achieved by the natural resources meant that Bolivia’s revenues rose by 200 percent in seven years (it took the United States four decades to do the same). Numerous social programs bearing the names of historical figures allowed the authorities to put in place a vast system of patronage and dependency.
While this was happening, the companies that used to invest in oil ceased to do so because of the low domestic prices mandated by the government. Some put their money into natural gas under draconian conditions; others gave up. The government’s oil and gas entity, YPFB, which was supposed to rid Bolivians from imported fuel, was forced to make up for the fall in production and refining capacity by buying substantially more gasoline, diesel fuel and liquefied petroleum gas at high international prices. Soon, the bill was more than $600 million per year. Since the domestic price of fuel was heavily subsidized, the cost added to an already gaping fiscal deficit. In 2010, a year in which the high price of commodities provided the Morales autocracy with record amounts of revenue, Bolivia’s budget deficit, official statistics notwithstanding, reached the equivalent of 5 percent of the country’s gross domestic product.
Morales finally decided he had no choice but to bring the prices back to reality, decreeing the rise. His argument was that subsidized fuel was feeding a smuggling industry that was siphoning off the nation’s energy to neighboring countries. He was right, of course. Subsidized prices always have this effect. But that was only one of many problems occasioned by the madness of his energy policy. In any event, the groups that backed him during the various confrontations that have marked his time in office, mostly pitting him against center-right groups, the middle class and business organizations based in the eastern province of Santa Cruz, turned on him savagely, threatening Morales with the fate that had befallen his predecessors.
All of which confirms a simple truth: Morales does not command his troops. They command him, as is common with Latin American populism. When populist policies fail, the populist troops want more nationalizations and more centralization of powerand more scapegoats. The leader can either lead them where they want to go, which is what Hugo Chavez is doing in Venezuela, or perish politically (or physically). Morales has decided he intends to stay in power and bend to the troops desperate for cheap fuel and the grave consequences of such an action.
Alvaro Vargas Llosa
Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.
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