Home > The IMF and the Bolivian Crisis
by Tom Kruse
BOLIVIA WATCH (znet.org)
October 15, 2003
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.