February 25, 2011
A combination of widespread drought, followed by intense flooding in some regions; accusations of commodities speculation; alleged smuggling operations sending large amounts of contraband Bolivian goods to neighboring nations; worldwide food price increases; plus Bolivian government plans to control the prices of certain staple goods has caused strikes, protests and nation-wide sugar shortages in recent weeks. This uncertainty has highlighted growing concern about the rising cost of living for average Bolivians.
Continued fallout from the December “gasolinazo”
Basic commodity prices inflated in December after the Bolivian government decided to remove state subsidies. This move immediately caused gasoline and diesel prices to rise by 73 and 82 percent, although the price of natural gas, which is used for cooking and in some vehicles, did not change. The Morales administration justified the initiative by arguing that subsidized prices stimulated intense fuel contraband outside of Bolivia.
The measure led all other prices to increase exponentially, beyond the purchasing power of the majority of the population. Although increasing food costs followed international trends, many Bolivians remain frustrated that these prices have not returned to previous levels, despite retraction of the temporary fuel hike. Protests surrounding the so-called “gasolinazo” hike represented the strongest demonstrations against the MAS government to date. Some sectors even demanded President Morales’ resignation. On New Years’ Eve the Morales administration announced plans to withdraw the increase, returning subsidies to their former level.
Disappointed citizens also resented Morales’s decision to impose a large fuel price increase, a strategy formerly employed by traditional party governments and vehemently opposed by MAS in the past. Disputes over these measures contributed to President Carlos Mesa’s decision to resign in 2005. By resorting to tactics used by previous neoliberal governments, the MAS government mistakenly eroded its public credibility. Different social sectors asked that price increases be implemented gradually. Bolivians also perceived that the surprise announcement of the measure between Christmas and New Year as unfair, generating widespread insecurity about future policy initiatives.
Contrary to assertions in the international press, the aborted fuel price hike did not increase support for the divided political opposition, despite the Morales administration’s clumsy handling of negative feedback. Although the government’s retraction relieved the general population, it also created a perception that the MAS government can be forced to back down, leading to current increased social pressure. The Administration will likely attempt to present a firm new posture in an effort to appease various sectors’ demands and strikes. However, the assertion that opposition to the measure “underscores that the leader’s popularity isn’t secure, even among [Morales’] own constituency,” is a gross exaggeration.[i]
State control of sugar sales paired with price increase stimulates shortages and complaints
In October 2010, the Morales administration designated the Food Production Support Bureau (EMAPA) as the overseeing organization in control of sugar distribution. In January 2011, rising prices for sugar caused widespread shortages and affected tens of thousands of informal intermediaries who previously made small profits from sales. Organized protestors who opposed the rising price of sugar blocked transportation and flights out of major cities, and large-scale sellers withdrew their sugar stocks from the market in hopes of greater price increases. This deadlock generated several weeks of scarcity for consumers as sugar disappeared temporarily from the market.
In early February, President Morales left a ceremony in Oruro, traditionally a stronghold of support for his administration, after members of the regional workers union (COD) booed and whistled throughout the President’s speech. This reaction further indicated popular frustration with the MAS response to rising prices. Morales prematurely departed Oruro after demonstrators threw dynamite near the event. Although this practice is common among miners’ and laborers’ protests in Bolivia, it is unusual for a group that has historically voted for Morales’ measures to use this strategy against the president.
Urban public transportation strike continues to frustrate public
Transportation strikes continue in most major cities, despite the lifting of road blockades. On February 24, the official inauguration of the Carnaval season, transport workers signaled they would lift blockades and return to work, compromising on a 4 US cent fare hike, instead of the originally imposed 7 cent increase.[ii] However, blockades continue in all cities except Santa Cruz, where transportation unions reached an agreement with neighborhood organizations to raise the price.
The Morales administration rejected petitions to increase fares, stating that its decision to reinstate gasoline and diesel subsidies in December represented a considerable concession to the protesting sector. However, the central government offered to establish retirement benefits for transportation workers, reduce import taxes on vehicular replacement parts, and designate approximately 8 million dollars to expand an existing program that converts busses to natural gas (providing fuel savings of approximately 70 percent). These offers would mean a greater profit for public transportation drivers who earn an income based on the number of passenger fares they collect, minus fuel and other costs. Beyond these proposals, the Morales administration sustained that new autonomous departmental and municipal governments have a legal mandate to negotiate locally with groups on strike.
Although transport unions claim that the rising cost of staples and food products forced them to call the strike to support their families, the great majority of passengers and citizens vehemently oppose the measure. Strike dissenters argue, especially in Cochabamba, that most drivers significantly increased profits by switching to natural gas, and that the general population is hardest hit by swelling food and other prices. Usually the government and various unions negotiate wage and benefit increases in March or April. Families who depend on the large informal sector of the Bolivian economy receive no corresponding increase in income. The general population also complains that price hikes demanded by drivers would not respect traditional discounts for school-aged children, leading to even higher costs per family.
During strikes in Cochabamba and La Paz, disgruntled passengers insulted and berated union members who participated in marches and limited, centrally-located blockades. Although there were isolated acts of vandalism, such as transport workers burning down a public notice board in Cochabamaba’s central plaza, news agencies reported no significant confrontations with security forces or major injuries related to demonstrations.
Santa Cruz transport workers signed an agreement with local neighborhood associations for a four-cent ($US) increase, but municipal authorities assert that the accord is legally invalid. Since coins under 50 centavos are scarce in Bolivia, it is likely that in most cases drivers would earn the full increase they demanded, if neither riders nor drivers could give the right amount of change.[i] In an environment fraught with corruption, it is also easy to imagine drivers refusing to give change under a false pretext that they don’t have the coins.
Diverse reactions to the protest highlight that, although Bolivia’s macro-economy is relatively strong, and there have been two minimum wage increases during Morales’ tenure, low-income families (the great majority of Bolivians) still struggle to meet their basic needs. A four or seven-cent public transportation fare hike, paired with increasing food prices, would represent a substantial economic sacrifice for the average citizen,[ii] and would likely present significant challenge for the Morales administration.
Many different unions and social movements are now expressing concern that the MAS government has failed to address their long-term demands. This issue is further complicated by the fact that many of these petitions are conflicting and difficult to appease within the current national budget. After overcoming many hurdles to achieve constitutional reform and establish important legislative changes, the Morales administration now has to confront the specific demands of different groups who supported those measures and expect concrete returns. MAS must find a balance between compromising with its social movement and union support base, while seeking long-term economic stability. This is a difficult agenda to fulfill, because the immediate demands of these groups preclude the ability to gradually lift subsidies down the road. The Morales administration must carefully consider its next steps toward national reform.
Although the Morales administration is correct that such strong subsidies are unsustainable and foment contraband, a negotiated graduated reduction or elimination paired with salary increases for key sectors would likely receive greater public approval.
[i] For example, a passenger could only have a 2 Boliviano coin to pay for their fare, and the driver might not have the necessary 20 centavos to return their change.[ii] A family of four, who each have to take at least two buses to get to and from school or work, could see an increase in daily spending of at least $1.20. Minimum wage in Bolivia is less than $100 per month, so the daily transportation expense could represent a significant percentage for many individuals.
[i] Arostegui, Martin. “Bolivia Restores Subsidies for Fuel.” Wall Street Journal, 3 January 2011.
[ii] Bolivian passengers formerly paid 1.50 Bolivianos (about $0.21). Drivers are now demanding the fares be raised to 2 Bolivianos (about $0.28), although it seems likely that in most major cities the negotiated price will stay at 1.80 Bolivianos (about $0.25).