Alvaro Vargas Llosa on Bolivia

The United States is not paying near enough attention to the worsening ideological conditions in Latin America, even after the disaster of the Bush visit to meetings in Argentina. Alvaro Vargas Llosa, who has emerged as perhaps the most astute observer of the Latin American political and economic situation, describes what is occurring in Bolivia. Here, thanks to RCP. Excerpts:

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December 6, 2005

Bolivia's Nightmare

By Alvaro Vargas Llosa

The forces of Latin American populism are arrayed behind Evo Morales, the former coca grower who toppled two Presidents of Bolivia through violent street action and promises a nationalist revolution if he wins the elections on December 18th. Although he is ahead in the polls, a parliamentary vote will decide who the next President is if no candidate gets more than 50 percent of the ballots. But even if Morales does not, the next President, possibly center-right candidate Jorge Quiroga, will be at the mercy of Morales' movement.

Unfortunately, Morales is not a character in a Romantic novel by Chateubriand, the 19th-century French author who assuaged Europe's bad conscience by idolizing indigenous Latin America. This is a real-life tragedy that will have lasting consequences for Bolivia.

Evo Morales and his party, MAS, have led a successful crusade against foreign investment in Bolivia the last couple of years. Foreign investment has dropped to one tenth of what it was in 2003. By forcing the cancellation of foreign contracts and the introduction of confiscatory new taxes, Morales has prevented Bolivia from developing natural gas reserves amounting to 52 trillion cubic feet.

Morales represents a particularly toxic mix of nationalism and populism that has re-emerged in South America in the last few years. His movement has potential "spill-over" effects in the countries that border Bolivia, including Peru, where Ollanta Humala, another nationalist populist, is rising fast in the polls.

One only needs to look at Morales' own life story to realize his own deprivation, like that of so many other Aymara Indians, was the result of nationalism, populism, and socialism, and not, as he maintains, of globalization.

Why did he become a coca grower in the 1980s? He was born in Isallavi, in the tin-mining region of Oruro, at a time when tin mines lay in ruins. The reason for their decline was the 1952 revolution, which "nationalized" them and created a bureaucratic mining entity known by its acronym COMIBOL. The revolution raised miners' salaries by 50 percent but failed to keep up investments, so production collapsed. Eventually, thousands of families, among them the Morales family, had to move elsewhere.

Now Evo Morales wants to do to the natural gas fields of Tarija what the 1952 revolution did to the tin mines of Oruro and other parts of Bolivia.

Where did Evo Morales go to escape the consequences of those policies as a young man? He went to the Yungas, near La Paz, to try agriculture. What did he find? In 1953, the revolutionary government had undertaken land reform, expropriating those estates it deemed unproductive and handing them to some peasant associations. Restrictions on property rights were so abundant and legal frameworks so dodgy that a few years later Bolivia had to import food because its unproductive minifundia were useless. Unlike Taiwan's agrarian reform, which created a property-owning mass of peasants, Bolivia's revolution undercapitalized the land. So when Evo Morales arrived in Yungas, he realized agriculture was in no better shape than mining.

Now Morales is proposing to do to his country's farms precisely what was done to the land in 1953. He wants to expropriate "those that are unproductive" and hand them over to peasant cooperatives under the same restrictions that made economies of scale impossible five decades ago.

Where did young Evo go after Yungas? To the rainforests of Chapare, which offered the only opportunity available to him. That opportunity was coca -- coca not exactly geared towards the production of shampoo, toothpaste, and medicines. In Chapare, the new coca grower rose through the ranks of unionism, until he emerged in 2000 as a voice against foreign capital and the insufficient free-market reforms of the 1990s, which he blamed for social ills that were the result of five decades of nationalism and socialism's ill-fated attempt to correct the oligarchic legacy of the colonial era.

Morales accuses U.S. capitalism of impoverishing Bolivia. But the U.S. should actually be faulted for funding populism and socialism! Between the start of the 1952 revolution and Morales' internal migration in the 1980s, nine tenths of the money Bolivia received from abroad were grants and soft credits from the U.S. By 1957, the United States was subsidizing 30 percent of the government's budget. With this encouragement, more nationalizations took place in the late 60s under general Ovando and in the early 70s under general Juan José Torres. Needless to say, the protectionist policies in vogue throughout the region, including import substitution, were dominant under most Bolivian governments.

It is hardly surprising that in those circumstances thousands of families should have turned to coca. Then, caught up in the anti-drug effort, they saw their livelihood almost disappear at the end of the 1990s when coca leaf was reduced from close to 100,000 acres to 7,000 acres through eradication efforts (another 24,000 acres are legally grown elsewhere). Morales emerged as a national hero.

In the last few years, Morales, not the most radical among the radicals, has held his country by the throat, squeezing it every time it gulped for air, as when it tried to export gas to the U.S. through Chilean ports. Inevitably, the reaction to this populist leader in the more modern parts of the country has fueled the separatist cause of south-eastern regions like Santa Cruz. The result is a powder keg of a country that Bolivia has become.

Good luck on December 18th!

(Alvaro Vargas Llosa is a Senior Fellow and director of The Center on Global Prosperity at the Independent Institute. He is the author of Liberty for Latin America.)