The Foreign Service Journal, April 2006

life, or as a conscious popular protest against the so-called Wash- ington Consensus. Little more than a half-decade ago, Bolivia was Latin America’s poster child for political and eco- nomic reform. Beginning in 1982, the country enjoyed a quarter-cen- tury of uninterrupted democracy, a milestone in Bolivia’s turbulent his- tory pockmarked by military coups. The “New Economic Policy” — put into place in 1985 by Bolivia’s great- est political figure of the 20th century, Víctor Paz Estenssoro — moved the country to the front lines of economic liberalization in Latin America, initiating a reform process broadened by subsequent administra- tions, especially the first government of Sánchez de Lozada (1993-1997). These reforms put an end to Bolivia’s inflationary cycles, vastly downsized the public sector, stabilized the currency, liberalized trade and investment, linked a new pension system to the capitalization of former state enter- prises, and established a new hydrocarbons regime that attracted unprecedented levels of foreign investment and led to the discovery of enormous natural gas reserves. Economic reforms were accompanied by large public investments in health and education. Under Goni, a series of important laws were passed that fundamentally altered political life in Bolivia. In 1994, the Law of Popular Participation decentralized public authority by creating municipalities around the country, providing them with resources and allowing for the direct election of mayors and municipal authorities. A further decentralization law the following year broad- ened the powers of local government, and the constitu- tion was amended to lower the voting age from 21 to 18 years. Reduction of the voting age, coupled with ener- getic voter registration campaigns, nearly doubled the number of registered voters between 1987 and 1999. Bolivia’s liberal reform regimes between 1985 and 1998 produced some impressive results. Inflation was brought to heel. GNP rose during the late 1980s and reached a steady range of 4.3 to 5 percent annual growth throughout the 1990s; unemployment was reduced; infant mortality fell sharply; life expectancy increased; child immunization rose impressively; illiteracy plummeted; major gains were made in access to education and potable water; pover- ty rates fell; and large numbers of indigenous peoples became bilin- gual by learning Spanish. Stimulated by the liberal 1996 Hydrocarbons Law, foreign invest- ment in exploration and production of petroleum and natural gas result- ed in a tripling of proven petroleum reserves and a fourfold rise in proven gas reserves. Investment in hydrocarbons increased by 600 per- cent between 1996 and 1998. By 2004, taxes and fees related to natural gas constituted some 37 percent of overall Bolivian tax revenues. With the conclusion of a major gas pipeline to Brazil in 1999 and with plans to resume gas sales to Argentina and expand markets to other countries in the Southern Cone and in North America, the door appeared open for a long-term role for natural gas as a motor for economic development. By 2002, however, the liberal reform process in Bolivia began to unravel, paralleled by a breakdown in effective governance that became manifest soon after the election of Goni for a second term in 2002. An econom- ic downturn in 1999, accompanied by a spike in unem- ployment, opened the door to widespread protests that eventually brought down Goni in October 2003 and Mesa in June 2005. Longer-term problems not addressed by the liberal reforms of the 1990s helped stoke the fire of protest, especially the persistence of extreme poverty in indigenous rural areas, deep disparities in income distri- bution and a rigid class structure based on ethnic origin, with the indigenous majority at the bottom. Decline of Traditional Parties The clearest manifestations of the crisis, nonetheless, were political. The system of government based on coali- tions of Bolivia’s traditional political parties that was start- ed in 1985 had run out of gas by the time of Goni’s sec- ond, truncated presidency. At the head of the once-pow- erful Movimiento Nacionalista Revolucionario (National Revolutionary Movement), Goni won the 2002 presiden- tial vote with a mere 22 percent, besting Evo Morales by about two points. Goni’s subsequent government was weak from the start, in an environment where political power was dispersed among splinter parties, civil society F O C U S 56 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 6 Not averse to using force and the threat of force to advance his agenda when in the opposition, Morales must now wear the other shoe as president.