The IMF and the Bolivian Crisis

The Oldest Soul, Sunday, October 19, 2003 - 11:53

Tom Kruse

...politically, Bolivia faces a dramatic crisis: as never before, governments and the "political class" - as it is referred to here - face a deep crisis of legitimacy...

The current crisis in Bolivia is social, economic and political. Socially, despite improvement in service coverage, poverty and vulnerability have been increasing. The vulnerability of families to shocks and displacement, especially among the rural poor, has worsened dramatically. Economically, growth has been poor, and accompanied by growing structural unemployment and underemployment. Over 7 of 10 new jobs created in the past 15 years have been in the "informal" sector. And politically, Bolivia faces a dramatic crisis: as never before, governments and the "political class" - as it is referred to here - face a deep crisis of legitimacy.

These three areas of crisis are clearly linked to policies imposed by the international financial institutions, in particular the International Monetary Fund. Research shows clearly that the policies prescribed by the IMF have, among other things, not produced strong or sustainable growth; opened countries, communities and families to new vulnerabilities; exacerbated inequalities, which puts a brake on growth, stresses political systems to the breaking point, and engenders new and powerful forms of criminality and social tension.

Bolivia has been a model student of such "reforms", and is now also a showcase for the contradictions and crisis these policies engender. After almost 2 decades or "reform" and structural adjustment, Bolivia is growing slowly if at all; Bolivians are increasingly vulnerable and poor; while society n general is increasingly inequitable and patently unjust. Mention should be made of the political aspect. IMF policy prescriptions have systematically removed essential economic policy decisions from political process. This "emptying out" of substantive political has much to do with the crisis of legitimacy of the "political class". Successive governments are limited to administering policy prescriptions. The IMF has recognized the call by Civil society organization to include "macroeconomic issues" in PRSP dialogs, but disingenuously (cynically?) suggest that such issues must be taken up by national governments - the same governments whose hands are tied by IMF conditionalties.

The current crisis in Bolivia bears the imprint of IMF policies, both in terms of background conditions and immediate causes. Anemic growth due to factors both internal and external to Bolivia have resulted in a dramatic fiscal crisis; the deficit is now estimated at over 8%. IMF prescriptions have been for more austerity and belt tightening: on the expenditure side the IMF calls for "flexibilizing" government spending, which means adjusting public sector salaries to national economic performance; and permitting the devaluations to erode the value of pension payouts. The anti-poor nature of these measures should be clear.

On the income side more and more effective taxation, which in essence means getting more people, largely poor and middle class, to pay more taxes; and the effective start of natural gas exports. Bolivia has enormous reserves of natural gas. However, how the gas is to be exploited, and who the benefits will accrue to, are heated political issues in Bolivia. There is good reason fro the heated debate: Bolivia has passed through 3 major cycles of non-renewable commodity exports: silver through the 19th century, guano and rubber later that century, tin in the 20th century. These cycles for exports never laid the basis for a prosperous, productive and just society. On the contrary, Bolivia is one of the least prosperous and most unjust societies in Latin America. The question Bolivians are rightly asking is, "how will this next round of non-renewable commodity exports be turned into real development?"

Two things are clear to Bolivians: politicians, under the stewardship and dictates the IMF, have proven they are absolutely untrustworthy in managing the economic affairs of the country. In this context, the IMF has been consistently applauding and/or promoting the political class' rush to export gas under conditions and agreements that are destined to turn this next cycle of exports into another sad chapter of squandered wealth and underdevelopment. This can be seen in the last Stand By Agreement with Bolivia signed in mid 2003, and subsequent reviews of the same in August and September of 2003.

The "gas issue" is perhaps the single most important political and development issue in Bolivia today. Some sectors in Bolivia say first value added activities should be created in Bolivian and no to exports; others call for going slow to ensure exports will in fact benefit the country, contributing to the productive capacity, productivity and reducing poverty. In all cases, there call is for transparency and voice in a process that will have enormous impacts on Bolivia's future. But the IMF's position works in the opposite direction, supporting the rapid conclusion of obscure deals made by un-transparent multinationals and unaccountable politicians, impossible for people to know about, much less evaluate or have voice over. It is clear that the IMF's position on this issue - and antidemocratic practices generally over the last decades - has only exacerbated the lack or transparency and structural absence of voice, in turn adding fuel to the fire that today consumes Bolivia.

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