BOLIVIA'S DIVISIONS: TOO DEEP TO HEAL? 6 July 2004 Latin America Report N°7 Quito/Brussels TABLE OF CONTENTS EXECUTIVE SUMMARY AND RECOMMENDATIONS................................................. i I. INTRODUCTION .......................................................................................................... 1 II. HISTORICAL SYNOPSIS ............................................................................................ 2 III. THE MESA ADMINISTRATION ............................................................................... 4 IV. THE POLITICAL AND SOCIAL OPPOSITION ...................................................... 7 A. EVO'S EVOLUTION AND THE MAS TODAY...............................................................................7 B. LABOUR ORGANISATIONS: THE STREET-BASED OPPOSITION.................................................8 C. OTHER POLITICAL PARTIES...................................................................................................9 D. THE CATHOLIC CHURCH AND NGOS ..................................................................................10 V. SPARKS THAT COULD SET THE COUNTRY AFLAME ................................... 11 A. NATURAL GAS ....................................................................................................................13 B. CAMBAS AND COLLAS ........................................................................................................14 C. THE COCA LEAF .................................................................................................................17 D. THE ECONOMY ...................................................................................................................18 VI. CONCLUSION ............................................................................................................. 20 APPENDICES A. MAP OF BOLIVIA.................................................................................................................22 B. GLOSSARY OF ACRONYMS ..................................................................................................23 C. ABOUT THE INTERNATIONAL CRISIS GROUP .......................................................................24 D. ICG REPORTS AND BRIEFING PAPERS .................................................................................25 E. ICG BOARD OF TRUSTEES, INTERNATIONAL ADVISORY BOARD AND SENIOR ADVISERS ....26 ICG Latin America Report N°7 6 July 2004 BOLIVIA'S DIVISIONS: TOO DEEP TO HEAL? EXECUTIVE SUMMARY AND RECOMMENDATIONS Bolivia is in the midst of its most dangerous power highlands are determined to stop them from struggle since the mid-1980s and still smarting exporting the gas located in their region. Business from the violence of 2003, which left nearly 100 interests in Santa Cruz and Tarija have little choice people dead and forced the resignation and flight of but to go on the political offensive if they want to President Gonzalo Sánchez de Lozada after barely open export markets for the gas. Until now, their six months in office. A series of highly divisive calls for secession have been more rhetorical than issues, particularly over the extraction and export real. If the referendum turns current laws, contracts, of natural gas, demand swift resolution. Unless the and policies upside down, however, the rhetoric may Mesa government, with sympathetic assistance lead to action. especially from the U.S., can forge a new public consensus, the country's hard pressed democracy, Indigenous movements are gaining strength and perhaps its continued unity will be in doubt. throughout the Andes, and the Bolivian movement has already shown the potential for violence. The social contract underpinning that democracy is Populist movements are taking issue with the shredded and further violence is a constant threat. current political and economic rules of the game, In addition to natural gas, polarising issues include which have largely been written by foreign interests the country's economic model; regional autonomy; and domestic elites. Animated and angry, they are demands by the majority indigenous peoples for clear about what they oppose -- economic policies greater representation; and reconciling respect for that are at best trickle-down and at worst exacerbate traditional coca practices with international income inequality -- but they are not offering mandates, pressed by the U.S., against illicit drug practical alternatives, and are shedding more heat trafficking. than light on the important economic and social issues. Contentious debates on all of these issues allow little room for mediation and reconciliation. If The challenges for the Mesa government are middle grounds cannot be defined and agreed, enormous. Keeping a political course that satisfies Bolivia is headed for tumultuous times. The all sectors of society seems impossible. A major country's direction could change overnight with the effort at making policy more transparent, including 18 July 2004 referendum on the gas issue, the an effective public explanation of the hydrocarbon elections for a constituent assembly that is expected industry's complexities, seems the only way to to write a new constitution in 2005 or, in the worst prevent Bolivia from coming to blows or breaking case, through non-democratic means. up over its newfound treasure. Addressing multiple economic, ethnic, and social problems requires The growing split between Bolivia's regions has political parties, social movements, and business been amplified by the confusion and conflict over associations to forge a new national consensus on the ownership, sale, and beneficiaries of the natural how to use natural resources for the development of gas reserves. Santa Cruz and other commercially- the entire nation and substantial poverty reduction. oriented lowland cities often prefer to ignore the politics of La Paz, but radical movements in the Bolivia's Divisions: Too Deep to Heal? ICG Latin America Report N°7, 6 July 2004 ii RECOMMENDATIONS To the Catholic Church: To the Government of Bolivia: 7. Continue to promote dialogue and be available for mediation, reach out to extremist parties as 1. Invest political and financial capital in a well as the silent, moderate majority of nationwide grassroots communication effort to Bolivians who desire peaceful and democratic demonstrate to the Bolivian people how the solutions, and, if asked, join the high level production and sale of natural gas can be commission on hydrocarbons management. harnessed to jump-start economic development, and benefit the country's poorest citizens. To the U.S. Government: 2. Create a high level commission on hydrocarbons 8. Support an independent study to determine how management composed of recognised and much coca is required to meet legal demand. respected personalities to: 9. Ensure that USAID alternative development (a) supervise negotiations on gas issues, programs keep pace with coca crop eradication including exports, transparently; and complement support for Bolivian law (b) ensure that all revenues are fully accounted enforcement and interdiction of drug for and not less than half are dedicated to trafficking, and Inter-American and United social programs responsive to local needs, Nations drug control efforts, with greater particularly in the highlands; and emphasis on education and treatment programs to reduce domestic demand for cocaine and (c) study the feasibility of, and the steps other illicit drugs. necessary for, using natural gas for domestic industrialisation projects. 10. Respect the outcome of the 18 July 2004 referendum and work with the government and 3. Promote political decentralisation by restoring civil society to help implement the gas popular participation in elected local management alternative that Bolivians decide governments capable of addressing local needs to be most conducive to integral development and able to obtain the resources (from federal on behalf of the poor. revenue-sharing or local tax revenues) to finance their operations, but with mechanisms 11. Engage in dialogue with all parties -- including of transparency and accountability. the MAS -- that respect democratic norms and reject violence. 4. Reach out to business groups from Santa Cruz, Tarija, and elsewhere, and demonstrate that their To the IFIs (World Bank, IMF and IDB): fundamental interests are not threatened by changes in national legislation that regulates the 12. Undertake, in conjunction with the government natural gas industry. and civil society, a communications effort to enhance the transparency and effectiveness of To the MAS Party: IFI programs, and explore additional ways to promote greater investment in human 5. Play by democratic rules and publicly reject development, more emphasis on poverty the possibility of coming to power by other reduction, and reduction of inequalities as part means, strengthen internal party consensus of economic development policy reform and democratically to establish a clear public lending programs. position on core issues, such as natural gas, and shape the debate in rural and indigenous 13. Produce a rural poverty impact statement to communities about what can realistically be help the international community and the done with that gas to promote both government better understand the impact on the development and reconciliation. rural poor of proposed trade, macroeconomic, and natural resource policies; develop 6. Open the party to democratic, grassroots complementary programs; and encourage