Chavez-style Economics Fail Miserably in Bolivia

Things continue to get worse for Bolivian president Evo Morales. Last December, his country erupted in massive street protests when Morales abolished fuel subsidies and thereby caused an abrupt spike in gasoline and diesel prices. Chastened by the violent backlash, he quickly reversed his decision and restored the subsidies. A few weeks ago, fresh anti-government protests began. Spearheaded by the most powerful Bolivian trade union (the Central Obrera Boliviana), the demonstrations were aimed at winning a 15 percent salary increase for teachers, miners, policemen, and other public-sector workers. Morales had proposed a 10 percent pay hike, but only for certain employees. The unions wanted more, and they launched a general strike to secure their demands. Labor activists set off dynamite and clashed with riot police, who used tear gas and water cannons to repel the unruly mobs. On Monday, the unions agreed to end their strike and accept a broad-based 12 percent pay increase. Meanwhile, the government appeared to backtrack from its declared plan to nationalize various mines owned by Pan American Silver and Glencore International, citing union opposition.

For the time being, Morales has quelled the unrest. But the recent strike — along with the fuel protests in December — showed that the former coca grower has lost the support of many poor and working-class Bolivians, who helped him secure reelection with 64 percent of the vote in December 2009. The unions were once bastions of pro-Morales sentiment — in fact, Morales himself was a top union leader before entering politics — but they are now among his fiercest critics. Morales took office with bold promises of reducing widespread poverty and deep inequality. Instead, his policies have spooked foreign investors, spurred capital flight, slowly destroyed the vitally important Bolivian energy sector, and increased social polarization. As of January, his approval rating stood at just 36 percent, according to the Ipsos Institute. A more recent poll found that if Morales ran for reelection today, he would receive only 22 percent of the vote.

Bolivia’s decline reflects the utter and complete failure of Chávez-style economics. Morales is a prominent disciple of the Venezuelan dictator, and he has closely followed Hugo’s playbook. He has weakened the rule of law, undermined democracy, and nationalized a significant portion of the economy while seeking to implement an ambitious land-redistribution agenda. Bolivia has the second-largest natural-gas reserves in South America. Yet Morales nationalized the industry in 2006, with predictably negative consequences. Last summer, the president of the Bolivian Chamber of Hydrocarbons told the Financial Times that his country’s natural-gas reserves were shrinking “because there have not been any significant investments in the past five years.”