Towards Democratic Viability: The Bolivian Experience (St. Antony's)

Towards Democratic Viability The Bolivian Experience

Edited by John Crabtree and Laurence Whitehead

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St Antony’s Series General Editor: Richard Clogg (1999– ), Fellow of St Antony’s College, Oxford Recent titles include: Louise Haagh CITIZENSHIP, LABOUR MARKETS AND DEMOCRATIZATION Chile and the Modern Sequence Renato Colistete LABOUR RELATIONS AND INDUSTRIAL PERFORMANCE IN BRAZIL Greater São Paulo, 1945–1960 John Crabtree and Laurence Whitehead (editors) TOWARDS DEMOCRATIC VIABILITY The Bolivian Experience Steve Tsang (editor) JUDICIAL INDEPENDENCE AND THE RULE OF LAW IN HONG KONG Karen Jochelson THE COLOUR OF DISEASE Syphilis and Racism in South Africa, 1880–1950 Julio Crespo MacLennan SPAIN AND THE PROCESS OF EUROPEAN INTEGRATION, 1957–85 Enrique Cárdenas, José Antonio Ocampo and Rosemary Thorp (editors) AN ECONOMIC HISTORY OF TWENTIETH-CENTURY LATIN AMERICA Volume 1: The Export Age Volume 2: Latin America in the 1930s Volume 3: Industrialization and the State in Latin America Jennifer G. Mathers THE RUSSIAN NUCLEAR SHIELD FROM STALIN TO YELTSIN Marta Dyczok THE GRAND ALLIANCE AND UKRAINIAN REFUGEES Mark Brzezinski THE STRUGGLE FOR CONSTITUTIONALISM IN POLAND Suke Wolton LORD HAILEY, THE COLONIAL OFFICE AND THE POLITICS OF RACE AND EMPIRE IN THE SECOND WORLD WAR The Loss of White Prestige Junko Tomaru THE POSTWAR RAPPROCHEMENT OF MALAYA AND JAPAN, 1945–61 The Roles of Britain and Japan in South-East Asia

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Eiichi Motono CONFLICT AND COOPERATION IN SINO-BRITISH BUSINESS, 1860–1911 The Impact of the Pro-British Commercial Network in Shanghai Nikolas K. Gvosdev IMPERIAL POLICIES AND PERSPECTIVES TOWARDS GEORGIA, 1760–1819 Bernardo Kosacoff CORPORATE STRATEGIES UNDER STRUCTURAL ADJUSTMENT IN ARGENTINA Responses by Industrial Firms to a New Set of Uncertainties Ray Takeyh THE ORIGINS OF THE EISENHOWER DOCTRINE The US, Britain and Nasser’s Egypt, 1953–57 Derek Hopwood (editor) ARAB NATION, ARAB NATIONALISM Judith Clifton THE POLITICS OF TELECOMMUNICATIONS IN MEXICO Privatization and State–Labour Relations, 1928–95 Cécile Laborde PLURALIST THOUGHT AND THE STATE IN BRITAIN AND FRANCE, 1900–25 Craig Brandist and Galin Tihanov (editors) MATERIALIZING BAKHTIN C. S. Nicholls THE HISTORY OF ST ANTONY’S COLLEGE, OXFORD, 1950–2000 Anthony Kirk-Greene BRITAIN’S IMPERIAL ADMINISTRATORS, 1858–1966 Laila Parsons THE DRUZE BETWEEN PALESTINE AND ISRAEL, 1947–49 M. K. Flynn IDEOLOGY, MOBILIZATION AND THE NATION The Rise of Irish, Basque and Carlist Nationalist Movements in the Nineteenth and Early Twentieth Centuries

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Towards Democratic Viability The Bolivian Experience Edited by

John Crabtree Research Associate Latin American Centre St Antony’s College Oxford

and

Laurence Whitehead Official Fellow in Politics Nuffield College Oxford

in association with St Antony’s College, Oxford

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Editorial matter and selection © John Crabtree and Laurence Whitehead 2001 Chapters 1 and 2 © Laurence Whitehead 2001 Chapters 3–11 © Palgrave Publishers Ltd 2001 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2001 by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin’s Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). ISBN 0–333–80210–1 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Towards democratic viability : the Bolivian experience / edited by John Crabtree and Laurence Whitehead. p. cm. — (St. Antony’s) Includes bibliographical references and index. ISBN 0–333–80210–1 1. Democracy—Bolivia. 2. Bolivia—Politics and government. I. Crabtree, John, 1950– II. Whitehead, Laurence. III. St Antony’s series. JL2281 .T69 2000 320.984—dc21 00–066554 10 10

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Contents

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Notes on Contributors

x

Introduction

Part I Context 1 The Viability of Democracy Laurence Whitehead

3

2 The Emergence of Democracy in Bolivia Laurence Whitehead

21

3 Economic Vulnerability in Bolivia Juan Antonio Morales

41

Part II

Poverty and Exclusion

4 Exclusion, Participation and Democratic State-building George Gray-Molina 5 Rural Poverty and Development Jorge Muñoz

63 83

6 Technology and Rural Productivity Diego Sánchez de Lozada and Carlos Valenzuela

100

7 Human Development in a Multi-ethnic Society Fernando Ruiz-Mier

120

Part III

Institutional Problems and Responses

8 Party Politics, Intermediation and Representation Pilar Domingo

141

9 The Private Sector and Democratization Horst Grebe López

160

10 Legal Security in Bolivia Eduardo Rodríguez Veltzé

179

v

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Contents

11 Accountability in the Transition to Democracy Antonio Sánchez de Lozada Conclusions John Crabtree and Laurence Whitehead Index

195 216

235

Contributors John Crabtree is a research associate of the Latin American Centre, Oxford. He first wrote on Bolivian politics in the late 1970s and early 1980s. He was La Paz correspondent for The Economist and The Guardian (1980–3). From 1985 to 1997 he was Latin American editor at Oxford Analytica. He has written widely on Latin American politics, with a focus on the Andean countries. Pilar Domingo is a lecturer in politics at Queen Mary and Westfield College, University of London. She received her D.Phil. at Oxford in 1997. Her research interests include political institutions and government, justice systems, and the politics of human rights in Latin America. Her specialist interest is in Mexico and Bolivia. George Gray-Molina is a doctoral candidate in politics at Nuffield College, Oxford. His dissertation focuses on the politics of Popular Participation in Bolivia (1994–9). He has worked on poverty, decentralization and public policy reform for the Inter-American Development Bank and the Fundación Diálogo. He has acted as social policy adviser for the Harvard Institute for International Development. His upcoming research focuses on pro-poor policies in Latin America. Horst Grebe López is the president of the Bolivian Society of Political Economy and executive director of the Instituto Prisma. Between 1994 and 1998, he was executive director of the Fundación Milenio, prior to which he was academic coordinator for FLACSO’s Bolivian programme. He has had academic teaching positions in universities in Mexico and Venezuela, as well as in his native Bolivia. Juan Antonio Morales has been the president of the Central Bank of Bolivia since 1995. Born in Cochabamba in 1943, he obtained his bachelor’s and master’s degrees in economics at the Catholic University of Louvain, Belgium in 1967, and his Ph.D. in economics at the same university in 1971. Dr Morales has taught at the Catholic University of Bolivia in La Paz for 26 years, and has been a visiting professor in several universities in the Americas and Europe. He has written extensively on economic stabilization and the political economy of economic reform. Jorge Muñoz is an economist at the World Bank, working on land reform and rural development strategies in Africa, and has recently vii

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completed a study of land markets in Bolivia. He was previously the Harvard Institute for International Development’s senior resident adviser to the Bolivian government on a range of social policy issues. He received a Ph.D. in agricultural economics at Stanford University. Eduardo Rodríguez Veltzé was appointed a member of Bolivia’s Supreme Court of Justice in 1999, prior to which he was deputy comptroller for legal services in the office of the Comptroller General. He is a professor of civil and administrative law at the Catholic University and the Universidad Andina Simón Bolívar. He studied law at the Universidad Mayor de San Simón in Cochabamba and public administration at the Kennedy School at Harvard. Fernando Ruiz-Mier is a partner at KPMG Bolivia. Between 1993 and 1995 he was National Secretary for Social Policy and Investment in Bolivia. As such, he was particularly involved in health and educational policy at the time that education and decentralization reforms were being enacted. He holds a Ph.D. from Purdue University, and his professional experience ranges from service in public and international organizations through to teaching and consulting. Antonio Sánchez de Lozada is a consultant and speaker on poverty alleviation, watershed management, participatory local government and democratic accountability. He was a Bolivian Senator (1993–7), and Comptroller General of the Republic (1982–92), in which capacity he initiated the Integrated System of Financial Management and Control (SAFCO). Between 1969 and 1971 he was Minister of Finance and Bolivian Ambassador to the United States. He obtained his bachelor’s and master’s degrees at Cornell University in 1953 and 1956. Diego Sánchez de Lozada is a consultant on agricultural research, rural development, natural resource management and agro-industrial processes. As well as founder member of the Bolivian Soil Science Society, he is a lecturer at the Universidad Mayor de San Andrés, La Paz. He has conducted research on pre-Columbian agriculture and environmental biophysics in the Bolivian Altiplano. He received his master’s degree and doctorate in soil physics at Cornell University in 1992 and 1996. Carlos Valenzuela is the director of the Center for Aerospace Surveys and Applications at the University Mayor de San Simón in Cochabamba. He received his master’s degree in 1977 from the International Institute for Aerospace Surveys and Earth Sciences (ITC) at Enschede in the Netherlands, with which he maintains a close working relationship.

Contributors

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He received his doctorate in 1985 from Purdue University. He has written two books on geographic information systems and remote sensing, as well as numerous technical papers. Laurence Whitehead is an official fellow in politics at Nuffield College, Oxford. He is also co-editor of the Journal of Latin American Studies and series editor of the Oxford Studies on Democratization. He first published on Bolivia in the 1960s, and has written numerous articles and other contributions since then. He has also published widely on the process of democratization in Latin America more generally.

Introduction The Bolivian experience with democratic reform has attracted considerable policy attention in recent years. The unique nature of its democratic transition, as well as the ambitious market and state reforms implemented since the 1980s, have been followed with interest by academics and development practitioners alike. Early in 1999, the World Bank presented its new Comprehensive Development Framework, which aimed at moving towards a more holistic development agenda, partially based on the Bolivian experience. The bank’s president, James Wolfensohn, appraised the ‘Bolivian model’ as a more inclusive and participatory framework for development practice in the future. 1 Despite such acclaim, the Bolivian reforms have also suggested the fragility and uncertainties of democratic change. Successive waves of reform and counter-reform since the 1950s have provided a special backcloth against which to judge the viability of democracy in a country of such widespread poverty, regional and ethnic diversity and persistent exposure to both international and domestic shocks and crises. This book examines the concept of democratic viability. It aims to present a detached and long-term assessment of democratic change that allows a political and historical appreciation of viability over time. By selecting Bolivia as a case study, it applies this concept to a country where the difficulties in creating and sustaining democratic institutions are more manifest than in many Latin American countries. The book should therefore be of interest to students of democratization as well as those interested in Bolivia or, indeed, the rest of Latin America. The concept of ‘democratic viability’ involves evaluating the achievements and limitations of Bolivian democracy in a multifaceted and less exacting way than is common in much of the literature.2 Often the conditions required for democracy are of an ideal type, which in practice are difficult or even impossible to achieve. New yardsticks are therefore introduced for measuring democratic advance, yardsticks applicable not just to Bolivia but to other neo-democracies as well. These go beyond the simple criterion of persistence to include legitimacy, institutionalization, civil society, citizenship and efficacy in performance terms. Such measures of democracy are interconnected and form part of a lengthy, complex process, in which not all of the elements are present in the same proportions; indeed some less-than-democratic elements may persist x

Introduction

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which, because they are historically rooted, may help rather than hinder the process of democratization. A democracy may therefore be viable, although not all the requirements for ‘consolidation’ are present; equally, a democratic regime may seem ‘consolidated’, yet the economic and social conditions of the country in question may mean that in the long run there are grounds for doubting viability. Bolivia, with its pervasive poverty and widespread social and political exclusion, may be an example of the latter. The book thus seeks to introduce a more comprehensive method of analysis involving a number of different ways of thinking about democracy. In particular, it seeks to judge the process of democratization not so much in relation to universal standards but to the way in which institutional structures and practices are grounded in local realities and the extent to which these respond to people’s needs and expectations. Ultimately, whether or not the changes introduced in Bolivia since the early 1980s prove both sustainable and capable of further evolution will hinge on whether they meet the needs of those which they are ostensibly intended to benefit. Of all the countries of Latin America, it is a particularly good test case of ‘viability’. This volume therefore sets out to describe and evaluate recent changes in Bolivia in both the economic and political spheres and to analyse their contribution to resolving the country’s long-standing problems. From a consideration of the limitations and constraints on action, it also offers broad recommendations about the sort of policy responses needed to deepen Bolivian democracy. A wide range of themes is thus covered which we believe are central to the policy debate not just for Bolivia but for elsewhere in Latin America and further afield. However, the topics treated are by no means exclusive, and there are other relevant elements worthy of study in this regard. By relating what we see as the major policy issues to the concept of democratic viability, the book aims both to generate new elements for discussion in the ongoing debate over policies and priorities within Bolivia, whilst also hopefully advancing thinking on democracy and democratization more broadly. The volume is aimed not just at policy-makers and scholars, but all those concerned about the need to bring changes which, in the long run, will strengthen democratic institutions. The approach adopted seeks to privilege a consideration of the historical inheritance and the way in which the past affects the present. It is a country’s past which gives it its specificity and which singles it out from its neighbours. Latin American countries have much in common with each other, but they are unique and need to be treated as such. Only

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with an understanding of the particularity of each country can policies be framed which ‘fit the reality’ and therefore have a better chance of taking root. There has long been a tendency, particularly in the Washingtonbased international financial institutions, to design uniform prescriptions for Latin America which fail adequately to cater for the rich diversity of conditions in individual countries – and even within them. Economically vulnerable, Bolivia has been particularly susceptible to outside pressure over the years and is thus no exception to this tendency. One of the more remarkable features of the reforms introduced in recent years has been the ability of Bolivian governments to take external policy prescriptions and adapt them in ways that complement locally defined priorities. This autonomous approach has also provided an example to other countries, which have come to see Bolivia as something of a pioneer. Grudgingly, it would seem, the Washington institutions are coming round to acknowledging the need to understand better the nature of the reality they are seeking to change and to design policies and instruments which mesh better with that reality. The central question we pose is whether a viable democracy is being established in Bolivia. This involves discussion of a variety of topics that seeks to tease out the relationships between politics and economics and relate them both to the idea of viability. The book is organized into three main sections. The first concentrates on providing the context. The second examines the problems of poverty and exclusion. The third focuses on institutional responses. In the first chapter, Laurence Whitehead sets out a working definition of what we mean by ‘viability’ and the advantages this can bring in trying to characterize Bolivian democracy. Subsequently, in Chapter 2, he goes on to elucidate some ways of thinking about Bolivian political traditions, focusing in particular on the two long-standing strands: constitutionalism and popular mobilization. He seeks to show how these relate to one another at different historical conjunctures, before moving on to consider some of the external and internal influences which encouraged the transition towards democracy in the 1980s. In Chapter 3, Juan Antonio Morales examines the country’s traditional economic vulnerabilities and how these have changed in recent years. George Gray-Molina in Chapter 4 initiates our discussion of exclusion and poverty by focusing on the Popular Participation Programme, which sought to reduce exclusion by creating new mechanisms to involve individuals and grass-roots organizations in resource allocation at the local level. Popular Participation went hand in hand with a radical reorientation in local administration. Jorge Muñoz in Chapter 5 deals with the problem of rural poverty and the requirements

Introduction

xiii

for reducing it. Diego Sánchez de Lozada and Carlos Valenzuela in Chapter 6 relate the problem of rural poverty to those of agricultural productivity, rural technology and natural resource depletion. They suggest the need to involve popular participation through decentralized planning and watershed management. In Chapter 7, Fernando Ruiz-Mier examines the use of the human development paradigm in social policy, particularly with regard to education and healthcare. Chapters 8 through 11 focus on some of the institutional obstacles to democratic viability. Pilar Domingo in Chapter 8 provides a critical examination of the role played by political parties in the process of intermediation between the state and society, and stresses the extent to which the weakness of representative institutions (including political parties) encourages populist responses. The transition from a state-based model of economic development to one in which the private sector takes the lead role is analysed by Horst Grebe López in Chapter 9, who stresses its daunting task in spearheading the growth required for distribution. The need for greater legal security is taken up Eduardo Rodríguez Veltzé in Chapter 10, whilst that of greater accountability and transparency in both the public and private sectors is highlighted by Antonio Sánchez Lozada in Chapter 11. Both legal security and accountability are therefore seen as key prerequisites for democratic viability. These chapters are edited versions of papers mostly delivered by the authors during the Hilary (spring) term at Saint Antony’s College, Oxford in 1998. The seminars provided an opportunity for ‘give and take’ between the authors and invited commentators as well as other specialists. The redrafting of the texts took place through the summer and autumn of 1998, galvanized by two ‘round table’ gatherings convened to evaluate progress and coordinate approaches. One took place at Nuffield Place, near Oxford, at the beginning of July, and the second in La Paz, Bolivia, a month later at the beginning of August. The final text was delivered to the publishers in March 1999. A number of people and organizations have to be thanked for their support. First and foremost is Enrique García and the Corporación Andina de Fomento (CAF), since the CAF responded enthusiastically to the original proposal and agreed to contribute a substantial proportion of the finance required. Similarly, the Latin American Centre at the University of Oxford, Saint Antony’s College and Nuffield College also contributed towards meeting some of the costs, as did the European Centre for the Study of Democratization. Rosemary Thorp, director of the Latin American Centre, maintained an active interest throughout,

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intervening at key points to keep the project on track. She kindly participated at the Nuffield Place roundtable, as did Professor James Dunkerley, director of the Institute of Latin American Studies in the University of London, and Professor Giorgio Alberti from the University of Bologna. John Crabtree Laurence Whitehead

Notes 1

2

See Wolfensohn, ‘Remarks at the Reinventing Government Conference’ the World Bank, Washington DC, Jan. 15, 1999. Also Wolfensohn, ‘A Proposal for a Comprehensive Development Framework’, the World Bank, Washington DC, Jan. 21, 1999. For a recent literature review which adopts a similar perspective to our own, see Daniel Becker, ‘Latin America: Beyond Democratic Consolidation’, Journal of Democracy, April 1999, pp. 138–51.

Part I Context

1 The Viability of Democracy Laurence Whitehead

‘The duty of the true democrat is to see that the population is not destitute; for destitution is a cause of a corrupt democracy.’ Aristotle

1. Democratic viability as a concept As the quotation from Aristotle makes clear, there is nothing new about the claim that a democracy may fail because its members are, or become, too poor and too desperate to live within its constraints. This volume is about the viability of Bolivia’s newly established democracy, and Bolivia is the poorest republic in South America. But before entering into the specifics of the Bolivian case, this introduction considers the more theoretical questions that arise from the idea of democratic ‘viability’. This can be traced back to Aristotle, who in the fourth part of his Politics qualified his search for the best regime as such by the need to identify the regime that would suit given conditions. Like many terms used to sum up complex socio-political processes, ‘viability’ is a metaphor derived from a different, and perhaps more clear-cut field of study. According to the Oxford English Dictionary, a viable plant or animal is one ‘able to live or exist in a particular climate’. A viable seed is one ‘able to germinate’. By analogy a viable democratic regime would seem to be one able to adapt or survive in a given external environment. 1 In a similar vein, ‘consolidation’ is also a metaphor, albeit derived from physical rather than life sciences, meaning ‘to make or become strong or solid’, or ‘to strengthen by combining components’. By analogy, a consolidated democratic regime would be one that became united, or solid, through a process of internal strengthening.2 3

4

Towards Democratic Viability

Most recent political science has emphasized the concept of democratic ‘consolidation’, whereas this study employs the alternative metaphor of ‘viability’. So we should review the first term before contrasting it with the second. The contrast can be further elucidated by comparison with two other terms – persistence and legitimacy. Linz and Stepan (1996) provide a widely used exposition of democratic ‘consolidation’ which can be summarized as follows. An essential precondition is the existence of a state. Then there are five ‘arenas’ to be considered: civil society, political society, rule of law, a usable state bureaucracy and an institutionalized economic society. Taking into account all these realms of collective action, they consider a regime to be ‘consolidated’ when specified behavioural, attitudinal and constitutional conditions are present. Behaviourally, no significant national actors should be making major efforts to secede, spark foreign intervention or overturn democracy by violence. Attitudinally, there should be broad public support for democratic procedures and institutions, with no more than isolated pockets of support for anti-system alternatives. And constitutionally, governmental and non-governmental forces alike should be subject to and habituated to the resolution of conflict within the framework of democratic institutions. This exacting list of conditions can be regarded as a possible endproduct of a rather long and complex process of democratization. It requires many interconnected features which are unlikely to exist, let alone fit together harmoniously at the outset of a democratic transition, or even at the point where transitional uncertainties give way to more predictable post-transition political routines. It provides a high-standard, ‘ideal type’ account of what a fully consolidated democracy would be like, although it also contains many elements of qualitative judgement that may be applied more or less strictly when assessing the claims of any really existing democratic regime. As such, it performs an important analytical service. However, since the standard it sets is so high, there are good reasons – both historical and theoretical – for anticipating that many democratizations will, for an indefinite period, fail to achieve full consolidation thus defined.3 Indeed (as O’Donnell in particular has argued), many democratic transitions – notably in Latin America – may be headed towards substantially different destinations (O’Donnell, 1996). These may be equally durable and even, in their own ways, strong regimes, but not this kind of fully consolidated democracy. Many of the specified conditions may apply, but not the full application of the rule of law. If this was marked and persistent enough, the outcome would not be

The Viability of Democracy

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a ‘fully consolidated’ democracy, but some other variant of a stable (and perhaps more loosely ‘democratic’) regime. Similar observations may apply to the state bureaucracy, economic organization or to the condition of civil society. The various components of a constitutional order – executive, legislature, judiciary, state and municipal government, etc. – may all function, but if there is a persistent ‘war of the powers’ this would not seem to qualify as a ‘democratic consolidation’ on Linz and Stepan’s criteria. Yet the experience of Latin America and elsewhere suggests that such outcomes can be as ‘normal’ and ‘persistent’ as the model they postulate. If consolidation assumes too much about the necessary components of an eventual post-democratization stable regime, what other alternative formulations might fit better with observed realities? Persistence is the most commonly invoked. This seems more straightforward and practical than consolidation. Provided there has been a democratic transition and there is no clear subsequent reversal or rupture of the new constitutional order, then the democratization remains in place. Whatever its incompleteness or internal deficiencies, the acknowledgement of a democratic framework for decision-making means that these can – and should – be tackled by those operating within its confines. All really existing democracies go through periods of stress and institutional weakness when they may appear less than fully consolidated, but so long as basic institutional continuity is preserved, they retain the procedures and potential for self-regeneration. From this viewpoint, the key to democratization is one of simple persistence over time. Persistence also has the merit of being a simple and more or less objectively observable criterion and one that avoids the value judgements and subjectivity of consolidation. However, since we are concerned with the persistence of a democratic regime, regular and competitive elections cannot be eschewed, and it is sometimes suggested that some further easily observable requirement could be added – such as a ‘turnover’ test that relates to change-over in government as the result of elections. But clearly the ‘persistence’ criterion would lose its utility if there was too much controversy over the interpretation of these riders. Strict observance of electoral calendars has also been known in dominant party regimes which, as in Mexico, have been far from democratic. Similarly, it is possible for a democratic regime to persist for decades without producing any party alteration. Japan is an example. Moreover, many of the arenas mentioned by Linz and Stepan – civil society, the rule of law, a state bureaucracy and the economy – can deteriorate within a loose framework of institutional persistence.

6

Towards Democratic Viability

Colombia and Venezuela were both 40-year-old competitive electoral systems whose democratic institutional make-up has been put in jeopardy in recent times. So, although ‘persistence’ has its attractions as an alternative to ‘consolidation’, it too raises difficulties. Between these two, a third possible yardstick is ‘democratic legitimacy’ (Diamond 1999: ch. 3). This requires more than mere persistence, but less than full consolidation. It brings in the attitudinal and behavioural considerations that figure in consolidation, but allows greater latitude with regard to the actual functioning of democratic institutions. In the case of a ‘war of powers’ between executive and legislature, provided that public opinion remains committed to a democratic form of legitimacy, pressure from the electorate will tend to limit the destructiveness of such conflicts by punishing those actors perceived as overstepping the mark. Over the long run, such democratic aspirations should work in a systematic way to strengthen democratization. In the event of a setback – for example in the rule of law or in the performance of the state bureaucracy – the underlying desire for democratic legitimization should help overcome such institutional deficiencies. In principle, therefore, the concept of democratic legitimacy helps us evaluate democratizations by providing the dynamic element missing from mere observation of persistence but without embracing the strict teleology of full consolidation. Yet, while such a criterion may look promising in principle, it is difficult to demonstrate in practice without either lapsing into moralism or falling into a circular type of logic. The moralistic dimension arises if we go beyond the hard evidence of attitudinal and behavioural indicators and assume that that public opinion or civil society must necessarily favour democratization. Whilst this may be the case – especially in Latin America with its relatively recent experience of authoritarian rule – it must be demonstrated rather than taken for granted. So far as the evidence goes, much of it is soft, with more definite indicators tending to deal with results rather than causes. The growing body of survey data tends to show that the ideals of democracy are widely cherished even though democratic institutions and practices are held in low esteem.4 The point at which this abstract preference converts into specific attitudes or behaviour is unclear, either on the part of the electorate or among politicians. The danger of circularity emerges when we turn to more concrete evidence of pro-democratic activity. If we say, for example, that democratic legitimacy is high because the electorate rebuffs anti-system parties, this is an outcome of a pro-democratic orientation rather than proof of its existence. To avoid circularity it is necessary to show that the electorate can be counted upon to act in this

The Viability of Democracy

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way and that this can be independently determined. Convincing evidence is not impossible to find, especially when specific cases are examined in depth over a considerable period of time, but this involves much more than simply recording favourable outcomes. In many post-transition democracies, Bolivia included, successive administrations and electoral cycles are scrutinized for the evidence they yield on whether democratic legitimation remains intact. Key actors remain convinced that this is a provisional condition, subject to abrupt reversal. They are thus unsure where a regime stands on the continuum between bare democratic persistence and full consolidation. Indeed, events can be read in more than one way. The election of the former dicatator, General Hugo Banzer, to the Bolivian presidency in 1997 could be read as confirmation of democracy as ‘the only game in town’ and so open to all. Alternatively, it could be interpreted as proof that anti-democratic traditions live on in the national culture. With these categories in mind, we come to the concept of democratic viability. This concerns more than mere persistence. It makes us consider cases where democracy is losing its viability (through a collapse of the rule of law or the disintegration of civil society), even though its institutional forms may still be in existence perhaps through inertia or because of disagreement over how to replace it. 5 It thus enables us to consider democratization in a more fluid way, taking into account both democratic advance as well as retreat, and raising the issue of whether it may be a cyclical phenomenon rather than just a linear progression. Indeed, a viable democracy may never fulfil all the exacting standards required for full consolidation. Like a plant in inhospitable soil, a democratic regime may be able to adapt and survive, but only by accommodating to local realities. A democracy could be attempted in the absence of a modern state (a possibility which the ‘consolidation’ literature would rule out) highlighting the need for adaptation and accommodation to extreme conditions. It could be attempted in a country with a weak and vulnerable resource base, without the tax base to maintain a fully ‘usable state bureaucracy’. The rule-of-law requirement for ‘consolidation’ may be impossible to meet, but a curtailed democratic regime may survive, perhaps because its electorate and civil society have accepted these shortcomings. Similarly, acute social inequality and heterogeneity may limit the scope for the formation of a broadly supportive civil society to underpin democracy. The concept of viability at least allows us to explore the extent to which such a variant of democratization may be able to reproduce and defend itself.

8

Towards Democratic Viability

The concepts of ‘viability’ and ‘legitimacy’ are, of course, closely associated. Viability also requires supporting evidence which must avoid the risks of circularity. To establish that a democratic regime is viable requires more than merely to establish that it survives. Adaptability is equally difficult to gauge and inevitably involves elements of counterfactual judgement. In favour of viability, however, is the fact that it can involve a wider range of supporting considerations than is appropriate for legitimacy. It appeals to more contextual factors specific to a given country. Adaptation to an adverse environment implies public acknowledgement of the constraints that make it unrealistic or counterproductive to make excessive demands. This implies that in some societies non-standard variants of democracy, well-adjusted to local conditions, can command as much (or even more) legitimacy than the model postulated by ‘consolidation’. However, it also raises some serious difficulties for comparative analysis as well as measurement. How much adaptability to local circumstances is compatible with preserving the integrity of ‘democracy’ as an analytical category? We now turn to seeking to examine some of the ‘axes’ along which we can measure democratic viability. Chosing viability as our framework does not involve opting for one yardstick to the point of repudiating all others, but rather selecting a framework that allows space for including ideas drawn from alternative concepts and approaches with their respective strengths and limitations. In the concluding section, we return to the notion of democratic cycles and the way in which the viability approach may help us to understand their possible dynamics.

2. Democratic viability in the Bolivian context Is a viable democracy being established in Bolivia? That is the core issue for consideration by this study as a whole. The national context and history have to be specified, for this is not an exercise in abstract theory. What are the specific features of Bolivia’s past experience that are likely to support, obstruct or reshape any project of democratization in this particular setting? In order to answer this we need to assemble appropriate evidence, reality checks and objective indicators. What evidence is it most appropriate to assemble in order to assess the progress or lack of progress of Bolivia’s democratization? If we focus on the legitimacy of the regime or the internalization of democratic procedural assumptions, we would need to examine the evidence on electoral behaviour, political attitudes, anti-system protest activities, etc. If institutional consolidation is the main concern, then we should

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consider the stability and structure of the party system, the character and outcome of the legislative process, the accountability of the executive, the reliability of the justice system, or the extent of decentralization. Alternatively, from a ‘civil society’ perspective, the evidence would include the extent and quality of associational life, the scope for interest representation and redress of grievances, the autonomy of the professions and the independence and professionalism of the media. Then, if a viable democracy is required to meet some minimum standard in the delivery of well-being to the citizenry, we could assemble evidence on the upholding of basic rights, the promotion of minimum entitlements, or the provision of disaster relief. Finally, we might need some consideration of ‘performance legitimacy’, or the democratic regime’s capacity to generate support as a result of its economic, political and other achievements. Such a long list of possible areas of enquiry involves casting a wide net. This is inherent in examining such an overarching concept as viability, requiring in-depth analysis both of the history and contemporary reality of a specific country. Problems of measurement abound, especially when we need to weigh up incommensurable indicators in order to judge how permanent these characteristics may be. Moreover, we need to evaluate how these indicators are viewed by Bolivians, as opposed to foreigners and comparativists; democracy may fall short of internationally approved standards but appear viable to the country’s citizens as they consider the past and compare the present with possible alternatives. Such perceptions are a key mediating factor. The following sections of this chapter look more closely at the relationship between these various measures – legitimacy, consolidation, civil society, performance – and how they relate to the concept of viability in the specific Bolivian context. 2.1. Legitimacy There is a fairly close connection between regime viability and legitimacy, but the latter concept focuses more on attitudinal and behavioural evidence. That Bolivia established its democracy as long ago as the early 1980s is not sufficient to demonstrate legitimacy. It could be a case of ‘democracy by default’, arising from the discrediting of both right-wing authoritarian government and socialist alternatives, that left-liberal democracy is ‘the only game in town’, a game that key actors may not have wished to play and with which mass opinion did not identify.6 Some analysts of Bolivian political culture still see revolutionary nationalism, not liberal democracy, as the dominant norm in political life.

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Although various opinion surveys in Bolivia have pointed to a broadly based dissatisfaction with the quality and performance of democratic institutions, such results do not preclude a preference for democracy as a perfectible system of government.7 Amongst the most careful pieces of recent behavioural research is that of René Mayorga, who has studied the rise of the new ‘populist’ parties, Conciencia de Patria (Condepa), Unión Cívica Solidaridad (UCS) and the Kataristas. He seeks to see whether these can be regarded as ‘anti-system’ movements, ‘outsiders’ in their rejection of the democratic rules of the game. His provisional and cautiously worded conclusion is that despite some ambiguities, these new contenders ‘have not undermined the legitimacy of the democratic system’ (Mayorga 1995: 220). The evidence is patchy and incomplete, but there is enough to demonstrate that the question of democratic legitimacy is a worthwhile field for empirical research, not just a tautology, and that – depending on the evidence – Bolivia’s new democracy could be rated as more or less ‘viable’ on this score. The legitimacy of democracy is also conditioned by the country’s dependence on external sources of validation and constraint. Legitimacy of any regime is, in part, associated with its national authenticity, its capacity to respond primarily to the choices of the electorate. This has often been a problem in Bolivia. Since voters often perceive that key decisions are made from outside by foreign agencies, their commitment to democracy is thereby weakened. During the 1997 presidential campaign, for example, the outgoing president argued that one of the major contenders for national leadership could not be allowed to take office since the US embassy would not grant him a visa to enter the United States. Such constraints are, of course, not new.8 Moreover, they underlie public scepticism about some of the liberalizing and modernising reforms of the 1990s. Although it may have been the case that reformers failed to explain themselves or win over public opinion, it was a common perception that only those reforms that secured external funding and endorsement were implemented. Moreover, attempts to enter into consultation and negotiation to modify and legitimize these reforms often proved unacceptable to their foreign sponsors. The issue of Bolivian cooperation with the United States over drug-trafficking of course colours this debate. 2.2. Institutional consolidation This dimension of regime viability focuses attention on the formal institutions of representative democracy: the electoral process, the division of powers between the various branches of government, the neutrality

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of the legal and constitutional rules underpinning all these institutions. In accordance with the conventional terminology, the ‘consolidation’ phase of Bolivia’s democratization was already underway by the late 1980s (Mayorga 1992: 254–9). Indeed, by 1997 one leading observer went so far as to write that ‘Bolivia, happily seems to have found a way to escape the pattern of non-institutionalization leading to delegative democracy that Guillermo O’Donnell discerns in Brazil, Peru, and Argentina’ (Mayorga 1997). Although not yet mature enough to act as a model for imitation, Bolivia’s system of interparty bargaining, postelectoral coalitions, consensual practices, and its congressional election of the chief executive could have an influence on the theory and practice of representative democracy in Latin America. In many respects, Bolivia’s democratic institutions appear to function more effectively than those of various adjoining neo-democracies: successive presidents have each relinquished office after serving a single constitutional term; rival parties have regularly alternated in office in accordance with the shifting preferences of the electorate; the number of registered political parties has remained in two figures since 1980, with around 7 or 8 typically represented in Congress; every possible cross-party combination or coalition has at some point or other been proposed and most have been negotiated; voter turnout is high – always above 70 per cent in major elections; and electoral preferences have rewarded pragmatism and penalized arrogance (Ministerio de la Presidencia 1998). At the same time, the armed forces and the trade unions have been marginalized politically by the party system. Such traits correspond more with the idea of consolidated institutions than the notion of delegative democracy. Even so, this picture, even at the formal institutional level, requires qualification. Each successive president has found it necessary at one point or another to declare a state of emergency or invoke other emergency powers. If political parties are the cornerstone of a consolidated democratic regime, then the verticalist and personalist characteristics of all major Bolivian parties should be a source of concern. If the Supreme Court is expected to uphold impartial rules of the game, and so ‘hold the ring’ for a constitutional order, then it is regrettable that it has fallen short compared to the standards of objectivity achieved by the electoral authorities. Although interparty bargaining and coalitionbuilding might suggest a commitment to the politics of compromise and mutual accommodation, it is equally plausible to interpret these practices in a less favourable light as expressions of opportunism and rootlessness in a weakly institutionalized system (Méndez et al. 1999).

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We need to remember that democratization is typically an incomplete process; that institutional learning and development may require generations rather than decades; and that well-established institutions can persist as much because of their hybrid nature as because of liberal purity or the brilliance of their institutional design. The point about ‘hybridity’ requires some brief explanation, and this will serve as a bridge to the third area of enquiry, civil society. The term hybridity (literally the offspring of two different species or varieties) provides another metaphor, and one conveniently close to that of viability. If a democracy is required to adapt to its environment in order to survive, a major form of adaptation is to establish stable cohabitation with some undemocratic practices that cannot readily be displaced. These exist in most democracies in one form or another. In Latin America, for instance, representative institutions must cohabit with such non-democratic institutions as the armed forces and the Catholic church. While consolidation of democracies presupposes strong, welldesigned and mutually reinforcing institutions of representative and constitutional government, democratic viability also requires some concordat, or a tacit framework of cooperation and coexistence that can reconcile formal political institutions to extra-democratic sources of authority. If civil society does not provide a supportive environment for a democratic regime, institutional stability may be achieved through hybrid arrangements that are not necessarily consistent with full democratic consolidation. Although Bolivia is a country in which neither the army nor the church represents an insuperable barrier to democratic consolidation, it is a society with an array of structures and practices that allocate authority outside the democratic regime. Indeed Bolivia’s partially consolidated formal institutions would seem remote and even irrelevant to many sectors of society if they failed to connect with these hybrid extrapolitical structures. Various forms of indigenous social organization still show considerable resilience in remoter parts of the country and may indeed be expanding in scope and influence. The educational system remains highly stratified and not necessarily supportive of democratic institutionality. There are also various forms of assistential organization, ranging from the traditional revolutionary sindicatos to the gremios that flourish in the informal sector. Similarly, many forms of clientelism persist, some difficult to harmonize with democratic procedures. When studying the process of democratic consolidation in Bolivia it is necessary to consider both how far formal institutions correspond to a liberal organization or whether they connect with the sort of ‘hybrid’ structures

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we have identified. Evidence from this volume and elsewhere suggests that considerable tension remains between the two. Recognizing and evaluating that tension may provide the key to assessing the viabililty of the new Bolivian democracy. 2.3. Civil society and citizenship The preceding discussion draws attention to the connections between formal political institutions and the broader sources of authority that emanate from civil society. A fully consolidated democracy would presumably contain both appropriate institutions and reinforcing connections with the citizenry and society as a whole (Van Cott 2000). A recurrent diagnosis of the weakness of Latin American democracies is the weakness of the sense of citizenship required for new regimes to take root (Méndez et al. 1999). A recent International Labour Office (ILO) analysis of ‘social exclusion’ in Latin America sheds light on this and shows the severity of the problem in Bolivia. Relying mostly on terminology provided by T. H. Marshall and Alain Touraine, it argues that the consolidation of democracy should be regarded as a ‘future goal’ (meta futura), rather than as an established fact, adding that citizenship falls into the same category (Barros, de los Rios and Torche 1996: 13–19). Compared to Bolivia, the same report notes that only Guatemala, El Salvador and Honduras have higher rates of illiteracy and argues that ‘we can only consider included within the concept of citizenship those persons who, by virtue of their ability to handle the criteria and logic specific to writing . . . can fulfil their citizenship roles, in that they possess the means to understand what it involves, and how to conduct themselves with a certain degree of freedom and confidence according to the principles governing the judicial system, and public life in general’. They underline this point by noting that about 10 per cent of Bolivia’s population speaks no Spanish, even though it is the sole language of administration, and that less than half of the population have Spanish as their first language. In conclusion they argue that a substantial proportion of the population is excluded from the category of citizenship ‘to the extent that – in accordance with their cultural norms – they do not share the positive legal framework under which the state operates, . . . [and may indeed] prefer to be governed by their own extra-legal norms.’ The Pronagob study cited earlier addresses the same issues, and comes to some similar conclusions, although overall it takes a more positive view of Bolivia’s progress towards establishing a fairly uniform citizenship. Noting that 28 per cent of those surveyed in the north of Potosí

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department replied that they would respond with violence to the violation of their rights, the study concludes, perhaps a little extravagantly, that ‘the north of Potosi is a time bomb, given the significant relationship between high levels of poverty, high education levels and a disposition towards the use of violence’ (Pronagob 1996: 47). But the report also records that a large majority of the population (67 per cent) perceive themselves as mestizos (and therefore part of the national culture) and that the younger generation formed in the early years of the democracy are most strongly of this opinion. 9 2.4. Performance There are multiple dimensions to regime ‘performance’. Good economic results may, rightly or wrongly, be attributed to a particular type of regime, and so long as those results continue to satisfy, and be interpreted in this way, they will help strengthen popular support for a regime and marginalize its critics. However, a successful regime would be expected to deliver security as well as prosperity, and there are circumstances in which these two dimensions clash and security takes precedence. In general, good regime performance involves trade-offs between competing priorities. Over time, relative success in delivering, say, growth may reduce support for a regime, since this may be taken for granted and as relative failure on other dimensions (security, equity or accountability) becomes more of a liability. Democratic regimes may depend less on ‘performance legitimacy’ than authoritarian ones, since they diffuse responsibility for decision-making and create a wider sense of ‘ownership’ towards public-policy, whether or not this proves successful. Democratic regimes also provide machinery for assessing the balance of public priorities, and for devoting greater attention to those areas of policy where most dissatisfaction is in evidence. Nevertheless, the linkage between regime legitimacy and public-policy performance cannot be disregarded even in the case of long-established and secure democracies. As the quote from Aristotle suggests, it is a linkage that should not be overlooked when analysing the viability of new and incomplete democratizations in societies undergoing profound structural change. There may be multiple dimensions to the required public-policy performance and degrees of tolerance towards failure may be built into democratic decision-making, but unless some overall and long-run record of adequate performance is achieved, both theory and experience suggest that public support for democratic institutions may fade and alternative devices for solving pressing social problems find favour.

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Since 1985, Bolivian democracy has been fairly successful in delivering economic and social stability and in dealing with bouts of protest, but its overall performance in growth and equity terms has been mediocre. 10 Although this modest performance has failed to generate strong popular enthusiasm for the democratic regime, it has sufficed – at least so far – to prevent support slipping away to anti-democratic challengers. Areas of disappointment may lead to specific expressions of malaise, but without undermining the viability of democracy as a general objective. The short-term consequences of policy performance need therefore not lead to democratic breakdown. Demands for change can be focussed on a particular party or institution. This helps to explain why democratically elected presidents in Brazil, Venezuela and Ecuador were impeached or driven from office, why certain political parties with apparently solid structural bases, such as the Alianza Popular Revolucionaria Americana (APRA) in Peru or Acción Democrática (AD) in Venezuela, have suffered abrupt decline. Although the overarching political framework may remain loosely democratic, the balance of powers within the system, along with the structure of incentives faced by individual political actors, may progressively diverge from a stable equilibrium as performance failure places a regime under cumulative stress. Situations of this kind can persist for long periods of time without resulting in democratic breakdown, and so long as the overarching framework remains in place, the potential exists for democratic renewal. On the other hand, cumulative disappointments and retreats within a loosely democratic framework can lead to eventual regime breakdown, even in such well-established democracies as Uruguay and Chile. According to a leading analyst of Bolivian politics (Malloy 1997), elections have tended not to resolve core problems but have been more a question of revolving personnel, and this has contributed to constitutional stand-offs. Malloy argues that, in the elections of the 1980s and the 1990s, the appeal of presidential candidates had less to do with their respective programmes than their ability to confront economic problems within a framework of constitutionalism: ‘In the present context of seeking to define and give shape to effective democratic systems, governmental authority must be continually built and rebuilt; particularly as one moves from one government to another . . . [The] task remains so difficult because of persisting contradictions inherent in the situation and the fact that each problem solving move involves problem creating tensions in other areas.’ Malloy was particularly concerned with the harsh requirements of economic stabilization, and may

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have underestimated the performance legitimacy that can be generated by successful inflation control following an experience of hyperinflation. But his broader analysis of the gap between electoral processes and the requirements of policy effectiveness still resonates in Bolivia. His cyclical view of the region’s alternating experiences of democracy and authoritarianism speaks directly to our central theme of democratic viability.

3. Linear versus cyclical conceptions of democracy The imagery of the ‘consolidation’ metaphor is linear, progressive and mechanical. The imagery of ‘viability’ is cyclical, reversible and biological. The first concerns the conditions or processes leading to a permanent end state. The second concerns the adaptations required for system survival and reproduction in a not always supportive environment. Much contemporary social science is linear in form. But the earliest classical theories of democracy (from which our very vocabulary of democracy and politics derive) were cyclical rather than linear. Growth and decay were associated concepts. This concluding section therefore situates our discussion of ‘viability’ in the context of classical theorizing about the cyclical nature of democracy. Cyclical theories hypothesize the potential for a change of state even when the status quo appears secure. From this standpoint, there can be no ‘irreversible’ processes of democratization, even if the objective indicators appear to suggest the opposite. Using a cyclical theory, there can be no abrupt cut-off point either at the beginning or at the completion of a democratization process. Before the earliest beginnings are visible, the potential to begin is present; when the final stages are complete, the potential for decay is in evidence. Any claim to immutability lies beyond what an empirical analysis can authorize. In providing a method for analysing such potentialities, democratic viability is therefore a key concept for understanding such variations. Such cyclical theories are rooted in the classical view of democracy, as illustrated by Artistotle’s reference to corrupt democracy and even more clearly by Polybius. Polybius is worth quoting extensively:

whenever anybody who has observed the hatred and jealousy which are felt by the citizens for tyrants can summon up the courage to speak or act against the authorities, he finds the whole mass of the

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people ready to support him. But after they have either killed or banished the oligarchs, the people do not venture to set up a king again, for they are still in terror of the injustices committed by previous monarchs, nor do they dare to entrust the government to a limited class, since they still have before their eyes the evidence of their recent mistake in doing so. At this point, the only hope which remains unspoiled lies with themselves, and it is in this direction that they turn: they convert the state into a democracy instead of an oligarchy, and by themselves assume the superintendence and charge of affairs. Then so long as any people survive who endured the evils of oligarchical rule, they can regard their present form of government as a blessing and treasure the privileges of equality and freedom. But as soon as a new generation has succeeded and the democracy falls into the hands of the grandchildren of its founders, they have become by this time so accustomed to equality and freedom of speech that they cease to value them and seek to raise themselves above their fellow citizens, and it is noticeable that the people most liable to this temptation are the rich . . . The result is that . . . they stimulate among the masses both an appetite for bribes and the habit of receiving them, and then the rule of democracy is transformed into government by violence and strong arm methods. (Polybius 1979: 308–10)

The cycle arises either because the rulers chosen by the people courted popularity by mismanaging public affairs to such a point that they brought destitution (the neo-liberals of today would call this ‘populism’) or because with the passage of time and the rise of new generations, memories of tyranny fade and the democrats become less disciplined. In both cases, the result is that democratization creates the conditions for its own eventual eclipse. This view runs counter to the contemporary political science literature, especially that of the ‘consolidation’ school which regards linear progress towards a strengthened democracy as the norm. So far it is difficult to ascertain what sort of cyclical variation might apply to the neo-democracies of Latin America, but contemporary developments in the Andean republics, such as Colombia, Ecuador and Venezuela, suggest that cyclical rather than linear perspectives may still have some explanatory power. In spite of cases of destabilizing ‘populism’ (Peru in the 1980s for example), none of the neo-democracies that

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emerged from the Cold War period have yet to fall into the hands of the ‘grandchildren’ of their founders. In Bolivia, the cycle arguably began in 1978, and democracy survived an initial burst of ‘populism’ (1982–5). Twenty years on, many of those who helped found democracy still occupy positions of political leadership. At most, their ‘children’, as opposed to their ‘grandchildren’, make up the bulk of the political class. Indeed, it was Banzer, the former dictator, who assumed elected office in August 1997, fulfilling an ambition to shed the stigma of a de facto ruler that had caused him to open the way to competitive elections and constitutional rule in November 1977. Memories of the terror and injustices of his rule had apparently faded, or had been superseded by more recent traumas in ways faster than Polybius would have predicted. The next chapter provides an historical evaluation, and offers some grounds for reassurance that the Banzer presidency may not foreshadow an early reversal of Bolivia’s progress towards democracy. This revisiting of a classical theory, formulated 21 centuries ago, directs attention to a series of considerations that are inherent in any cyclical, as opposed to linear, conception of social change. Because it is linear in character, much of the discussion about contemporary democratizations risks assuming a forward march not necessarily warranted by the evidence available. Although the number of democratizations that have taken place since 1974 has risen steadily and the attrition rate has been quite low, the same was arguably the case for communist rule prior to the 1980s. With hindsight, a two-generation cyclical model might fit the communist experience better than a linear model. A cyclical model may yet fit the neo-democracies within the lifetimes of the current generation of ‘transitologists’. Cyclical theories also bring into question the timelessness and the givenness of the analytical categories in question. In Polybius, the nature and social meaning of a democratic system of government take one form at the outset when the people’s minds are filled with memories of the tyrannical alternative, but mutate to a markedly different form towards the end when these fears have faded and other appetites have been aroused. All cyclical theories hypothesize the potential for a change of state even when the status quo seems secure. From this standpoint, there are no ‘irreversible’ democratizations, however strongly the objective indicators may point to the contrary. By the same token, there can be no abrupt cut-off point either at the beginning or at the completion of a democratization process. Analysts of democratization in Bolivia would be well advised to keep this in mind; the concept of viability is designed to provide just such a reminder.

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Notes 1 This metaphor was used by Robert Putnam in his analysis of the effectiveness of democratic institutions in different Italian regions. ‘Where the regional soil is fertile, the regions drew sustenance from regional traditions, but where the soil is poor, the new institutions are stunted’ (Putnam 1993: 182). 2 Similarly ‘transition’ is a passage or change from one form, state or set of circumstances to another – for instance, in a style of art, architecture or even scenery. When applied to political change, the term is also a metaphor that helps understanding of complex social realities. 3 For a useful theoretical discussion, see Schedler (1998). 4 Frequently, this low esteem is referred to as desencanto or ‘disenchantment’ with the practical results of democratization in Latin America and in neodemocracies elsewhere. Some Bolivian data are given in Chapter 2. 5 Not a few communist regimes in the former Soviet bloc ‘persisted’ for some time after they had ceased to be ‘viable’. 6 President Víctor Paz Estenssoro is reported to have said that he was still a revolutionary, not a democrat, but that since the 1980s was a time of democracy he would have to make the best of it. 7 A comprehensive study by Pronagob (1996: 55) on human security in Bolivia makes a series of negative judgements on Bolivian democracy, but concludes (on a slight note of surprise) that ‘a high proportion of the population believes that democracy . . . is a good instrument to create a better democratic future’. 8 Víctor Paz himself was stigmatized in a similar way in 1946, whilst Juan Lechín Oquendo, the labour leader and vice-president, was allegedly ‘vetoed’ by Washington for the presidency in 1964. 9 This can be compared with Yashar (1999). 10 The 1992 population census is the benchmark for subsequent appraisals of the extent of poverty (Ministerio de Desarrollo Humano 1995).

References Aristotle, The Politics (Harmondsworth: Penguin, 1992 edn). P. Barros, D. de los Ríos and F. Torche, Lecturas sobre la exclusión social (Santiago: ILO, 1996). L. Diamond, Developing Democracy: Toward Consolidation (Baltimore and London: Johns Hopkins University Press, 1999). D. Lee Van Cott, The Friendly Liquidation of the Past: Democratization and Constitutional Transformation in Latin America (Pittsburgh: Pittsburgh University Press, 2000). J. Linz and A. Stepan, Problems of Democratic Transition and Consolidation (Baltimore and London: Johns Hopkins University Press, 1996). J. Malloy, ‘Markets and Democracy in Latin America: Some Reflections on the New Economic Policy of Bolivia’, in F. J. Devote and T. S. di Tella, eds, Political Culture, Social Movements and Democratic Transitions in South America in the Twentieth Century (Milan: Feltrinelli, 1997).

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R. Mayorga, ‘La democracia en Bolivia: el rol de las elecciones en las fases de transición y consolidación’, in R. Cerdas-Cruz, J. Rial and D. Zovatto, eds, Elecciones y democracia en América Latina (1988–91) (San José: IIDH-CAPEL, 1992). R. Mayorga, ‘Outsiders y Kataristas en el sistema de partidos, la política de pactos y la gobernabilidad en Bolivia’, in C. Perelli, S. Picado and D. Zovatto, eds, Partidos y clase política en América Latina en los noventa (San José: IIDH-CAPEL, 1995). R. Mayorga, ‘Bolivia’s Silent Revolution’, Journal of Democracy, Jan. 1997. J. E. Méndez, G. O’Donnell and P. S. Pinheiro, eds, The (Un)Rule of Law and the Underprivileged in Latin America (South Bend, Ind.: Notre Dame University Press, 1999). Ministerio de Desarrollo Humano, Mapa de pobreza: una guía para la acción social (La Paz: Ministerio de Desarrollo Humano, 1995). Ministerio de la Presidencia, Comportamiento electoral de la población boliviana 1993–97 (La Paz: Ministerio de la Presidencia, 1998). G. O’Donnell, ‘Illusions about Consolidation’, Journal of Democracy, April 1996. Pronagob (Projecto Nacional de la Gobernabilidad), La seguridad humana en Bolivia (La Paz: Vice-presidencia de la República, 1996). Polybius, The Rise of the Roman Empire (Harmondsworth: Penguin, 1979). R. Putnam, Making Democracy Work: Civic Traditions in Modern Italy (Princeton: Princeton University Press, 1993). A. Schedler, ‘What is Democratic Consolidation?’, Journal of Democracy, April 1998. D. Yashar, ‘Democracy, Indigenous Movements and the Post-liberal Challenge in Latin America’, World Politics, Oct. 1999.

2 The Emergence of Democracy in Bolivia Laurence Whitehead

1. Introduction This chapter is concerned with Bolivia’s ‘needs, perceptions, and traditions’ as they relate to the fitful emergence of a democratic regime in that country. It is historical in format, but the focus is on interrogating the past in the light of the preoccupations of the present and requirements of the future. The history is therefore selective, structured according to the theoretical concerns set out in the previous chapter, and more detailed about the recent past than more distant times. This is not an historian’s history, since it makes more use of schematic comparisons and counterfactual hypotheses than historians would license. Nevertheless, it makes historical assertions, and stands or falls on their accuracy. This chapter divides into two parts. The first identifies two key but disparate strands in Bolivia’s political development and examines the way in which these have coalesced in recent times. The country has a long, rich and quite sophisticated tradition of liberal constitutional government, but one challenged at various points by mobilization from below, often at the behest of caudillos. This constitutional tradition is therefore outlined, noting some of its specificities; attention is then given to the equally rich and complex tradition of popular mobilization against the state and/or the ruling elites. These two traditions must then be interwoven into a single political history characterized by periods of exclusion and punctuated by episodes of abruptly widened political participation. In general, the constitutional tradition restricted participation to a social elite of gente decente, and the participatory tradition tended to overflow and swamp the formal channels set by constitutional proprieties. This provides a theoretical backdrop to an 21

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interpretation of the 1952 national revolution and its civilian electoral sequel (1952–64) and the ensuing 18 years of military government. The aim is to sketch in the distinctive features of authoritarian rule in the post-revolutionary, post-land reform setting, and to indicate how both the constitutional and the participatory traditions contributed to the mounting pressures that eventually drove the military back to barracks. Attention then turns to the turbulent and protracted period of democratic transition (1978–85). While underscoring the elements of ‘democracy by default’ that shaped the outcome, this account also draws attention to the reinvigorated constitutionalism that contributed to that settlement and to the reduced salience of the radical mobilizing tendencies of the ‘popular movement’. The second part of the chapter turns our attention to the circumstances affecting the development of democratic institutions. It is noteworthy that in the 1960s and 1970s most observers of the Bolivian scene did not foresee the emergence of a stable liberal democratic regime. With the advantages of hindsight, it is instructive to ask why this was the case and why the prognosis appeared to be so much more favourable by the 1990s. Three broad areas are examined: the geopolitical factors that retarded the development of democracy in the 1960s and 1970s but which had become more favourable in the 1980s and 1990s; the evolution of socio-structural factors which underlie political processes; and the political economy factors that helped harmonize a process of neo-liberal reform with the development of democratic institutions.

2. Constitutionalism versus mobilization 2.1. A tradition of constitutionalism Well before Bolivia attained independence in 1825, the key institution of the colonial government was proto-constitutional in character. For 250 years in the city of Chuquisaca (present-day Sucre) the five oidores of the Real Audiencia de Charcas (founded in 1561 and dissolved in 1809) constituted an executive, legislative and judiciary for Upper Peru, acting on authority delegated by the sovereign in Madrid and within the framework of the Ley de Indias. Whereas other parts of the Spanish empire were ruled by the exigencies of external defence, Upper Peru was isolated from Spain’s enemies and was governed from the earliest days as much by lawyers as by soldiers. In theory, the Audiencia was a court of appeal, and great emphasis was placed on teaching the relevant

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jurisprudence in the adjoining Universidad de San Francisco Javier. In practice, the authorities acquired a degree of discretion not only on legal but also on military, religious and economic matters that went far beyond the scope of a normal court. The arrogance, arbitrariness and venality of the Audiencia was repeatedly denounced by supporters of independence, but its rule-governed procedures and formal systems of accountability merit attention. At the same time, it is important to note that this isolated and legalistic colonial regime periodically provoked, and then violently suppressed, waves of local and indigenous resistance. In particular, in 1780–1, it was the rigidity of the Audiencia which undercut efforts at conciliation and so provoked the great Indian uprising led by Túpac Amaru.1 Nor should it be forgotten that it was the Spanish oidores of Chuquisaca who, on 25 May 1809, first rebelled against the viceroy in Buenos Aires and the colonial authority he embodied. Exactly 17 years later, on 25 May 1826, in the same city, a constituent assembly dominated by Chuquisaqueño-educated lawyers, was convoked to approve Bolívar’s draft of the first constitution of independent Bolivia. In its 152 articles it established a presidency-for-life (tailored to the requirements of Gran Mariscal Francisco José Sucre), a threefold division of powers, the upholding of the Catholic religion, the establishment of a provisional capital and territorial boundaries, together with other provisions largely derived from the French republican model. The most significant deviation from standard constitutionalism was the avoidance of direct elections (the life president had the power to choose his successor, etc.). The judicial power was to be strong and independent. Neither the presidency-for-life nor the initial boundaries proved durable, but as early as 1839 a Bolivia delinked from Peru had acquired a directly elected presidency with a four-year term, no immediate re-election, and the unusual provision that if the most-voted presidential candidate failed to secure an absolute majority of valid votes cast in elections then the top three candidates would submit themselves for election by Congress. Although such procedural rules were frequently set aside, or honoured in form only, they have remained a source of orientation ever since. Both in the late nineteenth century and again since 1978, this system of presidential election, backed up by Congress, has served as the linchpin of a system of civilian alternation in office regulated by elections. The unbroken tradition of legal education and judicial recruitment has ensured that these principles of constitutional procedure have never been forgotten, despite extended periods when they remained in

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abeyance. The doctores of Chuquisaca thus helped establish a sophisticated constitutional tradition which survived because it was never too constraining. Throughout the West the relationship between constitutional forms and democracy has historically been a fairly distant one.2 Bolivia’s brand of constitutionalism was, until quite recently, particularly far removed from its traditions of popular political participation. The ancient colonial and Hispanic origins of Bolivian constitutional theory provide a partial explanation for this distance. At the same time, oligarchic and accommodationist practices of a legal profession confronted by praetorianism and social disorder provide a further answer. 2.2. A tradition of mobilization Although it was the lawyers of the Audiencia which took the first step towards Bolivian independence, it is symptomatic that it was shortly followed by a quite separate and much more radical strand of revolt. On 16 July 1809, seven weeks after the events in Chuquisaca, a mestizo soldier seized the barracks in the northern city of La Paz, deposed the intendant and the bishop, halted remittances of taxes to Buenos Aires, and even called for a ‘Congress representing the rights of the people’ in which Indians would be represented. This revolt was swiftly crushed, but it set a pattern that was to recur well into the second half of the twentieth century. Whereas traditional elites were periodically attracted to successive constitutional settlements that privileged their legal resources and social advantages, a rival source of authority arose from insurgent challenges which appealed to those for whom the established laws were more a constraint and a threat than a source of protection. Military leaders, sometimes labelled caudillos bárbaros in contrast to the lawyers or caudillos letrados, would mobilize their followers through de facto actions which dramatized their power to override constitutional limitations. Indian and peasant movements intermittently pressed their grievances through direct actions that defied the prevailing legal order. The urban poor, artisans, and later on trade unionists also periodically engaged in local mobilizations, strikes and even insurrections against the prevailing hierarchies. It is essential to underscore the intermittent and heterogeneous nature of such extra-constitutional challenges. Alliances between radical military officers and mobilized indigenous movements were inherently unequal and tended to end in breakdown. Urban mobilizations were often self-destroying or, when successful, provoked a correspondingly forceful backlash from those whose interests they threatened. If

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anything durable was to be achieved through popular mobilization, fresh ‘rules of the game’ would be required, involving new bouts of constitutional experimentation. However, the tradition of popular mobilization was largely distinct from, and tended to clash with, the tradition of oligarchical constitutionalism. Yet, how did popular mobilization relate to the emergence of democracy? As the July 1809 episode illustrates and many subsequent episodes confirm, it offered an avenue for broadening political participation beyond the narrow confines of the gente decente. The un-Spanish, the uneducated and the unpropertied constituted the vast majority of the population. An oligarchical form of democracy that excluded them would be so narrowly based and unrepresentative that it could rank as neither stable nor democratic. This is why successive efforts to widen participation are central to the story of the emergence of democracy in Bolivia. But so long as the traditions of popular mobilization clashed with those of restrictive constitutionalism neither would be successful, and a lasting democracy would remain unattainable. 2.3. Constitutionalism, mobilization and the MNR Here we look at the period beginning with the 1938 constitution, which ushered in a period of economic nationalism and ended with the 1971 military coup that resulted in the closure of the Popular Assembly and the installation of the Banzer dictatorship. During this period the main contenders for power were the armed forces; the nationalist Movimiento Nacionalista Revolucionario (MNR), founded in 1941 and overthrown in 1964; and the leftist Central Obrera Boliviana (COB), founded in 1952 and outlawed in 1965, which grew out from the mineworkers’ federation (FSTMB) founded in 1944. Prior to 1952, there was also a traditional elite with its associated political parties, professional organizations, and social and economic structures of domination. This was disarticulated by the 1952 revolution and is not examined here. The 1938 constitution was a serious attempt to supersede the oligarchical constitutionalism of the 1880 charter and to create a framework of government which would widen access to broader social strata, particularly those mobilized for the disastrous Chaco War with Paraguay (1932–5). One motive was to contain post-war discontent and to pre-empt the danger of mobilization from the return of defeated soldiers. In effect, the suffrage remained limited to adult males who could read and write, the property regime was only slightly socialized, trade union rights were mildly favoured, but agrarian reform was not attempted. The minority of congressmen who advocated more sweeping

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reforms, inspired partly by the 1917 Mexican constitution, were unsuccessful. Yet the issues raised in these debates over the constitution3 dominated the political scene throughout the 1940s and foreshadowed the more far-reaching reforms adopted in 1952 (the introduction of universal suffrage, a sweeping land reform, the nationalization of the tin mines and reorganization of the armed forces). Indeed, the principle authors of the 1952 reforms had been among the more articulate of the consituyentes from 1938. What turned a fairly timid constitutional debate into a more far-reaching series of transformative measures was the entry onto the political stage of new social actors, grouped in parties, unions and armed bands. These had not been present in 1938 to counteract pressures from the old order. The 1952 revolution can be viewed as a major step towards reconciling Bolivia’s competing traditions of constitutionalism and popular mobilization, combining them in a platform of economic nationalism and popular participation. Indicative of the blending of these two traditions was the way that the urban insurrection of April 1952 imposed as president and vice-president Víctor Paz Estenssoro and Hernán Siles Zuazo, the two MNR leaders whose election (under the old rules) had been thwarted a year earlier. Moreover, they took office for the 4-year term mandated by the 1880 constitution, and the MNR continued to respect the established electoral timetable throughout its 12 years in office. 1952 was both a constitutionalizing and a democratizing revolution. However, as the American money doctor, George Jackson Eder, noted after his mission to Bolivia (1956–8), ‘democracy’ was a relative concept. He quoted thus from a front-page editorial in the government paper, La Nación, for 11 December 1956: The MNR governing through the mandate of the national majorities, is the first party in the history of the country which has been characterized by the free exchange of ideas in the domestic sphere. Nevertheless, it is necessary to point out that excesses in the right to criticize positions and actions may be taken advantage of by forces outside the party and enemies of the working classes. All criticism is restricted to that which is useful to the party. The MNR is a party which can take legitimate pride in practising democracy in its purest sense. The sense of democracy makes it an imperative necessity for its party members to respect the opinions of its leaders. Eder’s response was that ‘democracy does not necessarily mean the same thing in all countries, but that it is all things to all men’ (Eder 1992).

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There remained a deep, built-in tension between these two competing sources of legitimacy, namely the constitutional origins of the revolution and the legitimacy it could claim as a product of an armed popular insurrection. So long as these two claims to authority could be kept in tandem the regime was relatively secure. However, when in 1964 President Víctor Paz Estenssoro tampered with the legal basis of his authority by forcing an amendment of the constitution to allow his re-election, the left challenged the decision by invoking the right to popular rebellion. 2.4. Military rule, 1964–82 This tension between constitutionalism and mobilization permeated political life after 1952, surfacing on such crucial issues as the contents of the 1953 agrarian reform, the locus of managerial authority in nationalized enterprises and the distribution of firearms between the armed forces and the sindicatos. The conflict became more open and extreme after the 1964 military coup, with General René Barrientos (who had previously begun securing peasant support through the pacto militar campesino) constitutionalizing his seizure of power by holding the relatively clean and competitive elections of 1966, and the COB carrying its theory of revolutionary legitimacy to its logical conclusion with the Popular Assembly of 1971. 4 Uniting against the Popular Assembly in August 1971, the armed forces brought the COB’s insurrectionary illusions to an end, making it clear that there could be no repeat of 1952. The Banzer dictatorship (1971–8) looks like a typical example of reactionary military rule – the upholder of order, hostile both to popular mobilization and to constitutional guarantees. However, in contrast with General Juan Carlos Onganía in Argentina or General Augusto Pinochet in Chile, Banzer depended greatly on civilian allies and his position inside the military hierarchy was less solid. This helps explain both the timing of his decisions to convene competitive elections – his position as commander-in-chief was time-limited by the high command – and his ability to found a durable political party with civilian roots.5 The 1967 constitution, which had been written for the Barrientos regime, in which Banzer had served as education minister, could be safely reinstated as a framework for what he initially hoped would be a controlled ‘transition from above’. A critical aspect of post-1952 Bolivian society requires attention here to explain why the Banzer dictatorship overestimated its capacity to control the transition, and why the political opening of 1978–80 proved so unstable. Under universal suffrage, a clear majority of the

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electorate consisted of indigenous campesinos, mostly beneficiaries of the 1953 land reform. In the early 1960s, they had been disarmed and brought under control through the pacto militar-campesino, which sought to isolate the radical labour unions from the majority of the rural electorate. The pacto also sought to render all civilian political parties effete, in that they could only reach the majority of voters (if at all) through the armed forces. This seems to have created a sense of overconfidence in the dictatorship concerning the solidity of its electoral appeal. 2.5. Turbulent transition (1978–85) The decision to call elections in 1978 was followed by the dissolution of the pacto militar-campesino. Officialist candidates discovered they had much less electoral support than they had presumed, obliging them to resort to fraud and coercion whilst civilian parties were able to ‘recolonize’ the countryside. Apart from Acción Democrática Nacionalista (ADN), the party system was mostly composed of fragments of the once-united MNR, each led by renowned figures from the revolutionary period. These were not weak or easily discredited parties, and their leaders combined skill and name recognition with experienced support structures. Between 1978 and 1985, Bolivia underwent a protracted transition which ended with a surprisingly conventional and stable democratic regime. Schematically, rival military factions attempted to exercise veto power until 1982, when the elected civilian President Hernán Siles Zuazo – who by this time had become Paz Estenssoro’s main rival – sought to inaugurate a fully democratic regime in the midst of an overwhelming social and economic crisis. The key points are that (i) until Siles agreed in 1985 to cut short his term of office from four years to three in order to restore a degree of governability, there were no agreed rules of the game binding on all parties to structure the processes of political competition; (ii) the first clear loser was the military, which progressively surrendered its veto power, its prestige and its economic privileges as a result of fitful interventions that failed to create order but led to the regime of drug-trafficking generals under General Luis García Meza; (iii) the second clear loser was the labour movement and its ideological partners on the left, not this time because of oppression but because when they obtained a degree of political power under Siles they were incapable of managing the economy; (iv) although there were intervals of popular mobilization in which not only workers but also sections of the peasantry gained increased voice, the transition was marked by the gradual weakening of their capacity to mobilize effectively; and (v) in conditions of more open political expression and

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competition the heroics of confrontational politics were superseded by a growing desire for realistic compromise and competent governance. Constitutionalism gathered strength just as the appeal of mobilizational politics waned. With hindsight it becomes clearer that a process of political learning was going on during this prolonged interregnum, and that the upheavals and false starts thus contributed to the emergence of greater consensus and accommodation. These benefits were less visible at the time, and both the costs and the risks of confrontational politics were unquestionably high. Even in 1985, when more stable and binding rules became established, it is not clear the extent to which there was a ‘positive consensus’ as opposed to weary acceptance among political actors that further polarization was self-defeating. The populace may simply have become tired of political infighting before the political elites realized it. It may therefore be more valid to refer to ‘democracy by default’ than to wholesale conversion to the benefits of constitutionalism. Certainly the main praetorian actors – the military and the unions – were discredited and marginalized rather than persuaded of the benefits of cooperation. In due course, the strengthened political actors – especially the electorally successful parties – began to derive benefits from playing to the rules of the democratic game. Hyperinflation and economic breakdown in these years forced most individuals and groups to care for their material survival rather than pursue sectional conflicts. The new political model was thus reinforced by economic stabilization and the implementation of the neo-liberal model. It was also relevant that the second half of the 1980s saw the waning of the Cold War and the international eclipse of any socialist alternative to the liberal capitalist framework of social organization. These were propitious conditions for the reassertion of long-standing traditions of liberal constitutionalism in Bolivia and the de-radicalization of the post-revolutionary popular movement. Other chapters in this volume analyse various aspects of Bolivia’s democratic progress and the accompanying public policy initiatives since 1985. The focus here is on the extent to which a broader and more inclusive form of democratic constitutionalism has finally succeeded in absorbing and containing the more disruptively mobilizational aspects of Bolivia’s participatory tradition. On the plus side, a wide range of parties have competed in the electoral arena and have alternated in office, both at national and the local levels. This spectrum of democratic actors has included a variety of regional, ethnic and popular sectors, perhaps redirecting their energies from extra-constitutional to

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peaceful legal channels of political expression. The voting process has become more trustworthy (especially since 1991), and significant parcels of power and responsibility have been devolved downwards, for example towards municipalities. To this extent, citizen aspirations and grievances have increasingly been processed through an impersonal constitutional structure. (The most conspicuous exception to this was probably the cocalero movement, a regionally based political current uniting growers of the narcotic coca leaf and so tending to operate at the margins of the law.) On the other hand, it would be overstating the case to argue that Bolivia’s constitutional order now encompasses the full gamut of social interests and aspirations of society, or commands full support as ‘the only game in town’ for settling questions of political contention. The demoralization of the old left, and the de-radicalization of popular movements as a result of the crises of the 1980s, are long-term shifts that favour democratic institutionalization. Yet those institutions then have to work together coherently and deliver results that address Bolivia’s deep social problems, otherwise new forms of extra-constitutional mobilization may arise. Some aspects of local and regional politics already indicate the continuing potential for this. Various of the chapters in this book record recent efforts to adjust the instititutional structure in order to contain such pressures, and at least some partial success can be recorded. But opinion survey evidence indicates that most democratic institutions are not well-regarded, and recurrent proposals for reform (e.g. the 1999 proposals for cleansing and democratizing the political parties) indicate awareness within the political elite that the existing framework of rules is vulnerable to public criticism. Similarly, recent attempts at social policy reform have unsurprisingly made insufficient impact to generate solid structures of support for the present constitutional order.6 Since the early 1980s, Bolivia’s long-standing duel between constitutional and mobilizational forms of political organization has shifted substantially in the direction of the former, especially since constitutionalism now assumes a more representative and democratic guise. But the shift is relative and incomplete, and so long as these two principles are not fully integrated, Bolivian democracy will remain potentially vulnerable to extra-constitutional upsurges of activism.

3. The present regime in historical perspective Even so, the present democratic regime has not only remained in place for almost two decades, it has grown somewhat stronger. In this respect

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it bears comparison with most neighbouring neo-democracies over the same period, and it constitutes an impressive innovation, considering Bolivia’s previous history. The concluding section of this chapter reviews the main types of explanation that could be invoked to account for the recent emergence of a relatively coherent democracy in Bolivia in contrast to previous less successful experiences. Since 1932 only two brief periods – during the 1940s and around 1966 – can be regarded as attempts at conventional democratic governance. Both experiments were short-lived, and few analysts devoted much energy to explaining why; the unsuitability of Bolivia for this type of politics was generally assumed to be clear. Different types of explanation could be advanced and since any one was in itself sufficient it would be superfluous to debate which was decisive. Three main ‘clusters’ of explanation can be invoked: geopolitical, socio-structural and those derived from the political economy. Here, we look at each retrospectively in the light of contemporary experience. 3.1. Geopolitical factors There were three main ‘geopolitical’ reasons for doubting Bolivia’s democratic potentialities, and all three were radically transformed from ‘negatives’ to ‘positives’ between the 1970s and the 1990s: the Cold War, Bolivia’s relations with its immediate neighbours, and the question of internal regionalism. The three interacted and cumulatively reinforced the ‘problem of order’, stimulating authoritarian and militaristic responses and undermining the possibilities for democracy. The Cold War polarized politics and destabilized civilian governments all over South America in the 1960s and 1970s. In Bolivia, it contributed to the 1964 military coup and fuelled the subsequent cycle of instability. An example was Barrientos’ recourse to US military help to defeat Che Guevara’s guerrillas in 1967. Similarly, in 1971 the example of the Allende government in Chile encouraged Marxist radicalism in the altiplano, just when the Brazilian military regime lent support to a reactionary conspiracy in the eastern lowlands. The Banzer dictatorship of 1971–8 was in no small way a product of the Cold War environment. Yet in Bolivia the climate of ideological warfare subsided earlier than elsewhere. Perhaps because of embarrassment over Washington’s association with the overthrow of Chilean President Salvador Allende in 1973, the Carter administration brought influence to bear in support of human rights and the restoration of elected governments in the southern cone, contributing to Bolivia’s initial democratic opening in 1978. Even the Reagan administration regarded the Bolivian military as unsuitable

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protégés, tolerating the restoration of civilian rule in 1982 and even accepting communist participation in the UDP government. The Cold War drew to a close in Bolivia whilst still raging in Central America and elsewhere. Over the past two decades, this geopolitical source of intolerance and zero-sum conflict has faded, being replaced by a new set of ideological influences supportative of inclusionary politics and hostile to unconstitutional rule. Whereas in the 1970s every adjoining country was governed by military regimes, and all but Peru were intensely anticommunist, in the 1990s Bolivia’s neighbours were governed by elected authorities, and parties of the left enjoyed significant support and freedom of expression in the three most important. Neither the successor states of the Soviet Union, nor Cuba nor China, provided resources to the Bolivian left, and although the US military still had a presence its purpose was to combat drug-trafficking and not to suppress ideological enemies. As an associate member of Mercosur, a member of the Organization of American States (OAS) and a participant in the process of hemispheric integration, Bolivia was increasingly locked into a series of external commitments which carried with them a significant degree of democratic conditionality. Thus, in terms of the broad geopolitical environment, factors adverse to the establishment of a durable democracy became reliably supportive. Although Bolivia’s problems with her immediate neighbours antedated the Cold War and continue now that it is over, they are easier to manage and are less polarizing or destabilizing now that the ideological venom has been drawn. In 1971, it was still possible to entertain seriously the hypothesis that a left–right armed struggle in Bolivia might draw in a Brazilian intervention on the one side and/or Chilean on the other. Bolivian nationalists had not forgotten nineteenth-century intrusions and annexations by both these neighbours and were highly sensitive about any risk – however speculative – of what was referred to as polonización (referring to the partition of Poland at the end of the eighteenth century). This more traditional and localized variant of geopolitics also helps to explain the genesis of the Banzer dictatorship and the mechanisms by which it preserved military unity. It is also relevant to the timing of the initial attempt at re-democratization in 1978, the centenary of Bolivia’s loss of its coastal province in the War of the Pacific. From an ideological perspective, the rise of the fiercely anti-communist and authoritarian Pinochet regime in Chile may have seemed desirable to Banzer in 1973, but from a nationalist perspective an assertive Chilean military threatened to revive an historic threat. Given Bolivia’s

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weakness and vulnerability, such geopolitical reasoning implied regional alliance building and fence-mending to counter a Chilean threat. This logic may help explain why Bolivia joined Peru and Ecuador in the first wave of military regimes to respond to Carter’s democratizing policies, ordering elections as a way of preparing for a return to barracks. Subsequently, Peru was followed by Argentina (1983), Brazil (1984), Paraguay (1989) and finally Chile (1990), thus vindicating the argument that the best way to avert conflicts with more powerful neighbours was to switch from the rule of force to the rule of law. Bolivia’s geopolitical vulnerability was also a function of its internal regional tensions and the incomplete nature of efforts at national integration. 7 Until 1954, when the first all-weather road linked the altiplano to the eastern lowlands, the main lines of bulk transport were railways and rivers which tended to link individual regions more to adjacent republics than to one another. The extreme logistical difficulties in supplying the troops during the Chaco War dramatized this lack of internal communications. Strong local identities fed fears of separatism, and probably whetted the territorial ambitions of some neighbouring states. It was such internal geopolitical weaknesses that encouraged ‘Che’ Guevara to select Bolivia as the location for his final guerrilla adventure: they did not provide propitious conditions for the construction of a durable democracy firmly implanted across the whole national territory. In this respect as well, the period since Guevara has witnessed major changes which have diminished such vulnerability, thus improving the prospects for democracy. The network of land communications has become much denser, and even though connections may still be unreliable they do exist. Airstrips now dot the territory, providing rapid access to most localities. The economic dynamism of the eastern lowlands has attracted a mass migration from the overpopulated altiplano and highland valleys, further diluting pre-existing parochialisms. Radios are universal and even the influence of television is far-reaching. A sense of nationality identity has been forged through the communications media, as well as the now ubiquitous school system. All these integrating influences work towards the creation of a nationwide society, reducing the dangers of regionalism and favouring democratic processes of collective representation. The 1952 revolution force-fed these processes of social integration, using centralized and often authoritarian methods. By the 1970s, they had acquired such momentum that government imposition had become less necessary. Although regional and local rivalries still exist, they can be played out through the electoral system

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both at the national level and through more vibrant forms of local representation. Whereas these three geopolitical factors have enhanced the viability of democracy, developments are less clear-cut with regard to the sociostructural and political economy arguments that also used to weigh against democratization. 3.2. Socio-structural factors The four main socio-structural arguments concern ethnic stratification, the incomplete legacy of the national revolution, the zero-sum nature of class conflicts and the sectarianism generated by what could be termed empleomanía. The socio-structural arguments extend from what has already been said about regionalism and national integration. Before 1952, the majority of Bolivians were subject to various explicit forms of social exclusion, even ritualized humiliation. Ethnic stratification was the product of European conquest and meant that constitutional guarantees and civil rights were not only enjoyed by a small minority, but also subject to suspension whenever the ‘indian’ majority was seen as threatening. In practice, the picture was more complex than this, with many regional variations and intermediate gradations. Viewed over the very long run – the relevant perspective here – changes in ethnic stratification were creating shared interests and a tacit division of powers well before 1952. However, it was the social revolution and sweeping land reform of the 1950s that accelerated and crystallized these changes, strengthening the formation of a common Bolivian identity and differentiating Bolivia from other conquest-stratified societies like Peru and Guatemala. Nevertheless the vertical structures imposed on the countryside both by the MNR and then by the pacto militar-campesino reflected continuing fear that in the absence of central authority the newly organized and (to some extent) armed indian and peasant masses could unleash anarchy on the towns. Thus the Falange (FSB) party drew much of its strength, and its desperation, from the conviction of the urban lower middle classes that universal suffrage would mean an inversion of the social order. Democracy could hardly be accepted as long as the victims of the conquest constituted a majority and remained united by their grievances. Over the past twenty years such fears have abated, and the rural electorate has shown itself responsive to competitive politics and capable of participating within a democratic system of rules. Over the same period, other social changes have mediated the underlying ethnic division, and strengthened what one might call a shared mestizo symbolic culture.

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René Mayorga’s article on the Kataristas (Mayorga 1995) provides some evidence of the political manifestations of this process. Nevertheless, ethnic stratification is still present in contemporary Bolivia and it would be rash to conclude that the fears of the past have been completely dissipated. Depending upon other developments, such as the performance of the economy and the responsiveness of the political system, ethnic tensions may subside without ever completely disappearing. Or they may be revived, possibly even in a virulent new form. Beyond ethnic cleavage, the 1952 revolution left other uncompleted legacies. One concerns the relationship between mass mobilization, popular participation and responsible governance. The land reform, as well as the nationalization of the mines and other sweeping innovations, were carried out with a high degree of direct involvement by organized sectors of the community acting in the name of the Revolution. This was long remembered, and fuelled various post-revolutionary campaigns led by the COB and supported by various ‘popular’ sectors. In the 1960s and 1970s, these included mobilization against military rule, against Gulf Oil in 1969 and in support of various radical versions of democracy, notably the 1971 Popular Assembly. Such campaigns then re-emerged during the first transition (1978–80) and under the Siles government of 1982–5. So strong were these memories that this tradition can be considered broadly socio-structural in nature. Whether this tradition continues to perpetuate itself is more open to question. The experience of hyperinflation, the collapse of the UDP government in 1985 (Ibañez Rojo 2000) and the mass dismissals in the state-owned tin mines in 1985–6 dealt a body blow to the COB, as discussed further below. However, the beliefs and assumptions of mobilizational politics may live on well after the organizational forms have failed. In this respect, the cocaleros of the Chapare seem to have taken up the confrontational role formerly spearheaded by the mineworkers. More generally, although after 1985 the Bolivian left was marginalized, the memory of its past achievements continues to influence behaviour across the political spectrum. The 1994 Law of Popular Participation, for example, was promoted by the Sánchez de Lozada administration8 in part because the MNR’s experiences in government had taught it that elections alone were not enough to secure democracy. In a society with Bolivia’s traditions, there was a need for some continuous linkage between the regime and local communities, a link which addressed demands and elicited grassroots participation. If the government did not supply this need, it was feared that anti-system forms of expression would appear instead. Although since 1985 there has been a remarkable shift in attitudes,

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here – as in all socio-structural matters – underlying change is slow and provisional. The final verdict is not yet in on whether the post-1985 reforms have indeed overcome the impediments to democracy arising from the incomplete character of the 1952 revolution. On the narrower question of class conflict, the verdict is probably clearer. During the 1960s and 1970s many commentators – especially those identified with the Marxist left – would have described this as the fundamental cleavage in Bolivia’s social structure, a conflict that could not be mediated by democratic compromise and could only be resolved by outright victory or defeat. The history of the FSTMB and the record of recurrent and highly politicized struggles for supremacy, not only in the mining camps but also in adjacent administrative centres, lent plausibility to this argument. However, the class dimension of these conflicts was always entangled with other, perhaps more potent ingredients, including ethnicity, local identities and the radical nationalist ideology of 1952 premised on cross-class alliances. In any case, it was never proved that a democratic regime would be incapable of mediating class conflict, since this was never attempted. At least some workingclass demands were for democracy, rather than proletarian dictatorship. Finally, the classic working class in Bolivia was always only a tiny fraction of the labour-force. In the 1980s, it shrank still further, losing its capacity to articulate the broader demands of former allies in the peasantry and the informal sector. Thus this particular socio-structural obstacle to democracy was never so formidable as was once believed, and is most unlikely to reappear in a liberalized economy with an endemic labour surplus and a functioning electoral system. The fourth and final socio-structural argument directs attention not to the working class, but to the large numbers of public employees, petty bureaucrats and job-seekers in the state apparatus, who provide the rank and file and indeed much of the leadership for Bolivia’s party system. According to this argument, so urgent are the employment demands of these activists and so limited their career alternatives outside the circuits of political patronage that the parties may be unable to restrict their competitive behaviour within constitutional rules, let alone pursue any strong ideological objectives. Personalism and opportunism thus overwhelms the political process. This sort of interpretation helps explain the factionalism of the MNR after 1952 and its disintegration in the 1960s. It also helps account for some improbable coalitions (such as that between the Paz wing of the MNR and the FSB in 1972, and between the once leftist Movimiento de Izquierda Revolucionaria (MIR) and their ex-persecutors in the ADN in the 1990s). However, it does not

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provide a wholly convincing explanation of Bolivian politics, which does produce substantive and programmatically elaborated packages of change from time to time. In any case, its implications for democracy are ambiguous. On the one hand, it could fuel destabilizing interparty coalition formation. Rather than precluding democracy it may diminish its quality. Finally, even if this argument is valid for the 1960s and 1970s, we have to consider how applicable it remains in the 1990s, following an extended period of state-shrinking and neo-liberal reform. 3.3. Political economy factors The three somewhat linked political-economy arguments concern rentseeking, failures of accumulation and, more recently, the problematic relationship between neo-liberal economics and political democracy. The 1952 revolution reinforced the tendency towards heavy state interventionism and thus created the classic conditions for what has come to be known as a ‘rent-seeking’ style of political economy. For this reason, many analysts would discuss what is here labelled the ‘sociostructural’ issues of class conflict and sectarian job-seeking within a political economy framework. Unquestionably the two perspectives are closely linked. However, the ‘rent-seeking’ analysis postulates a clear and direct relationship between a change in the economic model (from state interventionism to liberalized markets) and the elimination of politicized processes of resource allocation. The view adopted here is that this relationship needs to be checked and verified, rather than assumed. For example, even after 13 years of neo-liberal economics in Bolivia, it is by no means certain that the spoils system of party redistribution has lost its importance, or that those with most money and the best political contacts are no longer seeking and obtaining ‘rent’ through privileged access to the highest levels of policy-making. According to the first line of argument, neo-liberal reforms lead directly and unproblematically towards the implantation of a legitimate democracy and an efficient market economy. According to the second, the new model of political economy may only support a limited degree of change towards a distrusted democracy and a non-transparent market economy. Various subsequent chapters in this book explore the evidence so far available concerning the consequences of neo-liberalism in Bolivia. The overall record is positive, but by no means unmixed. The second political-economy argument concerns the necessity for achieving a high and sustained rate of economic growth in a country as poor and underdeveloped as Bolivia. In the 1960s and 1970s, authoritarians

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Towards Democratic Viability

on both the left and the right asserted that only by concentrating power and forcing up the rate of economic accumulation would it be possible to meet this overriding need. Democracy was thus viewed as an obstacle to development. By the 1980s, this view had become discredited as the growth performance of both the Soviet economies and South American military centralizers proved illusory. Banzer’s dictatorship was one of these disappointments. Nevertheless, the fact remains that since the restoration of democracy, Bolivia has failed to achieve a high and sustained rate of economic growth, and that this remains a substantial and potentially dangerous reproach to the new regime. The consequences of failure to achieve better economic development in such a society are serious. There remain hopes that the benefits of past reforms will soon materialize; yet so far one delay has followed another. The third, and final, political-economy argument concerns the democratic legitimacy of the new economic model. In the 1960s and 1970s, it was widely assumed that Bolivia could not implement a wholeheartedly liberal economic model, whatever its theoretical merits, because none of the main forces in society would understand, let alone approve such an enterprise. Only the most unrepresentative and undemocratic of governments would even attempt such a project, considering the storms of protest and rejection it would elicit. Such assumptions were broadly in tune with those prevailing in the region more generally. In the southern-cone countries, for instance, democratic processes generated an anti-liberal bias in public-policy choices, and only the most hermetic dictatorships embraced neo-liberal prescriptions. During the 1980s, of course, this climate of opinion changed throughout the region. Most of Bolivia’s neighbours suffered wrenching debt crises and periods of hyperinflation, after which it became possible to assemble a broad social consensus in favour of a new liberal economic model. In the 1990s, they are generally pursuing market-friendly policies which enjoy surprisingly sustained support from both elites and the broader electorate. Bolivia has undergone a similar transformation. The hyperinflation of the 1982–5 period proved particularly severe and its legacy long-lasting. In successive elections, critics of the new economic model have felt obliged to tone down their objections or lose electoral support. The same applies at the elite level. In this sense, then, the new model appears to enjoy a democratic legitimacy that would have been hard to imagine before the 1980s. This is a major change in favour of the status quo. However, a modicum of caution remains in order. There is undoubtedly a strong negative consensus opposing any return to the chaos of the early 1980s, but the extent to which the positive virtues of

The Emergence of Democracy in Bolivia

39

the new model have been internalized is less clear. This helps explain the urgency with which the Sánchez de Lozada administration promoted a ‘second wave’ of reforms, intended to overcome residual resistance to the model and create new constituencies to support it. Still, it should not be forgotten that these reforms had to be imposed from above, ‘shock-treatment’ style, for fear that otherwise they would be resisted and even rejected. The enduring legitimacy of the new model has yet to be proven. To conclude, it would seem that the geopolitical factors that previously impeded the development of a durable democracy have swung decisively from negative to positive in the 1990s. The socio-structural factors change more slowly, but here too the record is encouraging. On closer inspection, some of the presumed impediments may not have been so substantial or clear-cut as previously supposed; in any case the detectable changes are in a positive direction. The political economy arguments are closely interwoven with the socio-structural considerations, but when the prevailing economic model changes – as it did in Bolivia in the 1980s – such factors can be rapidly and comprehensively reconstituted. The broadly neo-liberal framework of policy pursued since 1985 seems reasonably compatible with the persistence and even the entrenchment of at least a ‘low intensity’ form of market democracy, even if the full consequences of the new model still need to be elucidated.

Notes 1 For a classic statement see Moreno (1979). This was first published in Santiago, Chile, in 1900. 2 A major author of Bolivia’s early constitutions was Casimiro Olañeta, a leading royalist and aristocratic Chuquisaqueño doctor who only switched to the cause of independence at the very last moment. His 1831 draft is described by his biographer as ‘essentially democratic’. But Olañeta presented his proposals in the following terms: ‘Laws are not provided for a people in the abstract, but for Bolivia, whose citizens in general lack the qualities of education and understanding essential for law-making.’ He therefore proposed rules to exclude from the Congress ‘fixers, furious demagogues, a hairdresser, or miserable cultivators’. Quoted in Gautier (1965: 222–3). 3 For an extensive treatment, see chapter 2 of Gallego (1992). 4 A radical junta allowed the Popular Assembly to occupy the Chamber of Deputies and to set up a purportedly legislative body composed not of elected members but delegates from worker and peasant sindicatos. 5 Acción Democrática Nacionalista (ADN) was founded to back Banzer’s candidacy for president in the July 1979 elections. 6 For a useful assessment of poverty alleviation initiatives, see Van Dijk (1998).

40

Towards Democratic Viability

7 For an illuminating if sketchy interpretation of Bolivia’s history viewed from this perspective, see Roca (1980). 8 A careful reconstruction of the enactment of this law can be found in chapter 6 of Lee Van Cott (2000).

References G. J. Eder, Inflation and Development in Latin America: A Case History of Inflation and Stabilization in Bolivia (Ann Arbor, Mich.: International Business Studies, 1992). F. Gallego, Ejército, nacionalismo y reformismo en América Latina (Barcelona: PPU, 1992). J. Gautier, Casimiro Olañeta (La Paz: Universo, 1965). D. Lee Van Cott, The Friendly Liquidation of the Past: Democratization and Constitutional Transformation in Latin America (Pittsburgh: Pittsburgh University Press, 2000). R. Mayorga, ‘Outsiders y Kataristas en el sistema de partidos, la política de pactos y la gobernabilidad en Bolivia’, in C. Perelli, S. Picado and D. Zovatto, eds, Partidos y clase política en América Latina en los noventa (San José: IIDH-CAPEL, 1995). G. R. Moreno, La Audiencia de Charcas (La Paz: Ministerio de Educación y Cultura, 1979). J. L. Roca, Fisionomía del regionalismo boliviano (La Paz: Los Amigos del Libro, 1980). E. Ibañez Rojo, ‘The UDP Government and the Crisis of the Bolivian Left (1982–85)’, Journal of Latin American Studies, 32, part 1, Feb. 2000. P. Van Dijk, ed., The Bolivian Experiment: Structural Adjustment and Poverty Alleviation (Amsterdam: CEDLA, 1998).

3 Economic Vulnerability in Bolivia Juan Antonio Morales

This chapter focuses on the vulnerability of Bolivia’s long-term economic development. I define economic vulnerability as the high likelihood of long interruptions in a country’s development, causing severe distress to its population. Although drawing attention to vulnerability, the chapter also seeks to underscore at the same time some of the ways in which the Bolivian economy reveals considerable resilience. Like other developing countries, Bolivia has shown itself to be exposed to shocks in its terms of trade with the outside world and susceptible also to supply-side shocks (especially in agriculture), to commotion in its domestic financial markets and, of course, to political instability. Our intention here is to take a long view, although we will give more space and attention to developments since Bolivia initiated its return to democratic government in 1982. Since the early 1950s, Bolivia has adopted some courageous reforms to extricate itself from poverty, to integrate its rural and mostly Indian population into the economy and society, and to reduce its vulnerability to fluctuations in the world economy. The reforms taken in the 1950s, following the 1952 Bolivian National Revolution, were far-reaching. Similarly, those taken since 1985, have had very significant effects; the process of economic liberalization initiated in that year has been among the most ambitious of its kind undertaken anywhere in Latin America. In 1985 itself, the markets for goods and factors were almost entirely freed from state intervention; subsequently in 1993 Bolivia underwent a ‘second wave’ of reforms, under which – amongst other things – most state enterprises were ‘capitalized’ or else privatized in the conventional way. In a few years, Bolivia has passed from being one of Latin America’s most interventionist republics to being one which is virtually a private 41

42

Towards Democratic Viability

economy. However, the results do not seem commensurate with the effort involved. In some respects, the changes have been notably successful; for instance the stabilization of domestic prices since 1985. But in other spheres, the outcome has been disappointing: economic growth has not been very dynamic, whilst the indices of poverty,unemployment and exclusion remain almost as high as ever. The chapter is divided into five parts. The first examines the achievements and difficulties experienced in the attempt to diversify the economy out of a mono-export model, one dependent on tin. How vulnerable was Bolivia of the 1990s to fluctuations in the prices of a handful of key commodities? How much more broadly based was the economy than 30 years before? We then move on to the problems of financing development and how these have changed in the period under review. How weak are the sources of finance? We then look at the roles played by the public and private sectors during the period of state capitalism and afterwards. Does the new balance achieved between the state and the private sectors provide a more solid basis on which to build economic development? In the last two sections, we focus successively on the problems of administrative competence and enduring social exclusion. Is the new administrative framework too technocratic and impervious to political pressure? How far have the reforms gone in reducing poverty or suggesting ways in which it might be reduced? The chapter will undoubtedly raise more questions than it can answer, but these are the themes which will flow through the discussion in the chapters that follow. A breakdown of key indicators for 1986–99 is presented in Table 3.1 below.

1. The traditional export economy and its sequels As other countries of Latin America this century, Bolivia has had to confront the difficulties associated with its historical legacy as a producer of minerals, mainly tin. For the first half of the twentieth century, the country’s balance of payments and any fiscal leeway were critically dependent on variations in the world price of tin, whilst policy-making was effectively in the hands of three mining families (the Patiños, the Hochschilds and Aramayos), the so-called ‘tin barons’. Bolivia’s insertion into the world economy was almost entirely through tin exports and these were its main source of foreign exchange. However, a decline in the originally very high metallic content of Bolivian tin forced producers to invest in new technologies for the recovery of tin. The nature of such technologies led to a high concentration in both production and ownership.

Economic Vulnerability in Bolivia

43

The high profitability of the tin sector and its effects on the exchange rate stunted the development of other tradable activities. With GDP, exports and fiscal income all vulnerable to variations in the international price of tin and to geological risk, Bolivia was highly exposed.1 Moreover, little was done to improve labour productivity through education and training, and sporadic Indian revolts (quelled with much bloodshed) and other disturbances created a climate of domestic political instability. The Chaco War with Paraguay in the 1930s laid bare Bolivia’s weakness, highlighting for a small nationalist elite the need to build a more socially and politically broad-based society and giving rise to the Movimiento Nacionalista Revolucionario (MNR) that led the 1952 revolution. Meanwhile, the development of militant unionism in the tin mines added to political tensions, which burst forth in 1952. As well as giving citizenship rights to all Bolivians, the 1952 revolution brought with it determined attempts to diversify the economy, reduce external dependence on a single commodity (and therefore exposure to terms of trade shocks), and pursue a growth path that would – it was hoped – prove more stable, sustainable and inclusive.2 A number of measures were adopted to this end. The mining industry was nationalized, the landed estates of western Bolivia were divided up amongst peasant producers, and new economic sectors were developed, particularly with the opening up of the tropical Oriente. The period of MNR rule came to an abrupt end with the military coup of 1964, a product more of the exhaustion of the ruling party and its shift to the right than military ambitions per se. Experience showed that the problem was not simply one of choosing a new development model that ignored such basic realities as the small size of the economy or which flew in the face of Bolivia’s comparative advantages. During the 1950s, Bolivia found itself paying a high price for breaking with the logic of comparative advantage; as was often the case in Bolivia, economic dislocation took the form of rapid inflation. Economic crisis led to the return of orthodox economics in 1957 under the aegis of the IMF, with attention focused once again on boosting the tin economy. Yet, when seen over a longer time span, it would seem that the effort involved in the changes of the revolution of 1952 paid handsome returns. In spite of the return to the tin-based matrix in 1957 and thereafter, successive governments continued paying attention to diversification: both within the mining and metals industries and in other spheres, notably oil and agriculture. When the final denouement for the tin industry came in 1985 – with the price crash on the London Metals Market – Bolivia managed to weather the shock, aided by the

44

Towards Democratic Viability

development of new export sectors, notably the dynamic soya industry of Santa Cruz. Moreover, the tin crash virtually coincided with a sudden fall in exports of natural gas to Argentina, the other major export in the 1980s. In part because of its location and its relatively small domestic market, Bolivia was not well suited to development of a domestic manufacturing base. Protective barriers sheltered some domestic industries from competitive imports, but such incentives played a much less important role than in other Latin American countries; Bolivia’s geography provides natural barriers to trade. Rather, the objective of successive governments was to develop the economy of Santa Cruz, especially through the oil and gas industry and the development of cash-crop agriculture and basic agro-industries. Changes in the oil and natural gas legislation in the late 1950s led to the booming oil sector in Santa Cruz in the following decade. The most successful enterprise was the US-owned Bolivian Gulf Oil Corporation. In an unwise move, the military government of General Alfredo Ovando Candia nationalized the company. However, benefiting from these investments, the Bolivian National Petroleum Company (Yacimientos Petrolíferos Fiscales Bolivianos or YPFB) began in 1973 exports of natural gas to Argentina. Gas became the single most important export in the 1980s. The rapid development of Santa Cruz also gave rise to shifts in political power, which saw the rise of an influential cruceño elite, a group which political leaders in La Paz could no longer afford to ignore. Buoyed up by a temporary commodity boom in the mid-1970s and the abundant supply of petrodollars following the 1973 oil crisis, the Banzer administration (1971–8) managed to proceed with the modernization of the economy in important ways. Along with other Andean countries, Bolivia joined the Andean Pact in 1969. The objective of the Pact was to provide an extended regional market and to facilitate a process of industrialization. As such, it sought to reduce dependence on volatile commodity markets. However, as the smallest and least industrialized of the economies of the Andean group, and separated geographically by poor or non-existent communications from its main urban markets, Bolivia was able to take only scant advantage of this attempt at regional integration. Indeed, the Pact proved a disappointment to most of its founder members. In the case of Bolivia, it seemed to make more economic sense to concentrate on the development of economic relations with the much larger economies of Argentina and Brazil, which eventually came together to form Mercosur in the mid-1980s. Nevertheless, the Andean Pact became an important market for some non-traditional Bolivian products, such as soya. As of

Economic Vulnerability in Bolivia

45

2000, Bolivia was both a member of the Andean Pact and associate member of Mercosur. Another departure in the 1980s was the rapid growth of the illicit coca economy, spurred on by the boom in demand for cocaine in the United States. During the 1980s, Bolivia became the world’s second largest coca producer, with this industry becoming an important source of both employment and (illicit) foreign exchange. Nevertheless, rather than reduce Bolivia’s vulnerability, it created new sources of exposure to external pressure, especially from the United States. For instance, the failure of the Siles Zuazo administration (1982–5) to take the tough action against drug-trafficking demanded by Washington contributed to the cutting of aid flows of the international financial institutions, thereby adding to the problems of economic management during a period of high instability. Coca and cocaine continued to have disruptive effects, both politically and economically, after 1985 – even though all governments have stated in strong terms their commitment to fighting drug-trafficking. Only in the last two years of the 1990s did the government record a marked success in reducing coca acreages. The reforms of the mid-1980s sought to modify the traditional model through a fairly far-reaching liberalization of trade. The stabilization package of 1985 eliminated almost all quantitative restrictions on imports and lowered tariffs. Subsequently, a flat 10 per cent ad valorem tariff structure was introduced (5 per cent in the case of a few capital goods items). Trade was liberalized quickly, meeting with little political opposition.3 These reforms sought to turn Bolivia into a more open economy, subjecting domestic producers to greater international competition and eliminating certain anti-export biases. In encouraging a more diversified export base, liberalization should render the country less vulnerable on the trade front. This policy has not yet produced all the results that had been hoped for, but progress towards greater diversification has not been negligible. The country has undergone some diversification of its export base, thanks to a flexible management of the exchange rate that helped shift resources out of the traditional sector, and especially to abundant foreign aid that supported the financing of investment in new sectors.4 Exchange-rate management had to take into account the enduring effects of Bolivia’s low terms of trade since 1985. However, the move toward a more diversified pattern of production and exports has not been without cost. As stated above, investment in new sectors during the 1950s had to wait until the following decade to yield significant profits. In the transition, the economy underwent very

46

Towards Democratic Viability

high inflation and a return to dependence on tin. The extremely adverse tin price shock of 1985, despite its initial high cost, had the merit of stimulating a reallocation of labour and capital into new sectors. Despite the development of hydrocarbon exports, the economy remains highly dependent on a fairly narrow range of commodity exports. Meanwhile, a proportion of the labour displaced from the mines went to cultivate coca in the Chapare region, in the department of Cochabamba. This too brought with it economic and social costs.

2. Vulnerability in the saving–investment balance The 1952 revolution and its aftermath represented the beginning of the state-led model of development, and a high proportion of investment flowed from the public sector. This was not only the case of the mining and the oil industries, dominated by state firms, but also of public investment in infrastructure, agro-industry and manufacturing. In view of the lack of an adequate tax system, Bolivia was precariously dependent on the performance of basic export industries and inflows of foreign aid to finance the model, at least until the 1970s when the recycling of the petro-dollar surpluses gave Bolivia and countries like it access to the sovereign debt market. During the Banzer regime, Bolivia’s external debt grew rapidly and the government was encouraged to borrow by the availability of capital in private international markets at low real rates of interest. Indeed, the government of the time was keen to tap these sources of apparently cheap finance. Ironically, the ability to obtain loans in foreign private capital markets provided a further impetus to the state-oriented economy, with state capitalism reaching its zenith under the Banzer dictatorship. Not only were public-sector investments financed by foreign capital from both official and private sources, but the growth in the domestic banking sector between 1964 and 1982 was also connected with the expansion of external credit. Increasingly, lending operations were made from sources other than deposits, either long-term loans refinanced by the central bank or raised directly abroad. The former, known as ‘development loans’, caused great inefficiency in the allocation of resources and contributed to the build-up of quasi-fiscal deficits. Moreover, the recipients of these loans were notoriously delinquent: state-owned development banks had particularly poor loan books. Many debtors appeared to believe they were receiving grants which needed not be repaid. The state banks thus formed a key part in the nexus of clientelism that developed during this time.

B. As percentage of GDP Consolidated public sector debt Gross domestic investment Gross domestic private cap. formation Foreign direct investment Deficit on current Account Foreign debt1 Net debt transfer Development aid2 88.51 1.89 1.56

−9.32

98.89 1.64 2.38

−7.58

90.95 0.50

−2.91

0.65

2.88

74.01 2.42

0.72

0.74

3.62

3.99

0.84

12.04

−5.60

2.20

16.56

1.59

3.79

1989

12.70

0.32

−5.85

2.20

12.09

2.20

2.20

21.51

13.38

10.66

65.96

0.71

−8.30

0.26

−4.77

2.91

1988

−2.33

2.46

1987

−2.57

1986

Bolivia’s key indicators after reforms

A. Rate of growth Real GDP growth Real per capita growth Consumer prices Population

Table 3.1

3.15

77.58 2.19

2.02

1.35

4.95

12.56

−4.37

2.20

18.01

2.44

4.64

1990

2.99

67.89 1.96

−4.06

1.75

5.79

14.48

−4.26

2.44

14.52

2.83

5.27

1991

4.00

67.05 3.16

−7.25

2.13

6.61

16.32

−4.36

2.44

10.46

−0.79

1.65

1992

3.78

66.04 1.38

−7.13

2.12

7.71

16.66

−6.07

2.44

9.31

1.83

4.27

1993

4.41

70.47 1.48

−1.19

2.14

6.37

14.85

−2.99

2.44

8.52

2.23

4.67

1994

3.36

67.53 2.15

−4.47

5.56

7.58

15.53

−1.81

2.44

12.57

2.24

4.68

1995

3.67

59.24 0.58

−4.51

6.40

8.91

16.18

−1.94

2.35

7.95

2.01

4.36

1996

3.14

53.47 0.63

−6.99

9.20

13.09

18.97

−3.44

2.35

6.73

2.60

4.95

1997

2.74(p)

51.52(p) −0.61(p)

−7.94(p)

10.21(p)

18.28(p)

22.81(p)

−4.02(p)

2.35

4.39

3.17

5.52(p)

1998

2.26(p)

51.81(p) −0.63(p)

−6.65(p)

11.39(p)

15.11(p)

19.45(p)

−3.89(p)

2.35

3.13

−1.74

0.61(p)

1999

47

518.7 766.3 −247.6 36.4

1987

144.7

117.8

3,642.5 4,289.0

587.5 674.0 −86.5 13.0

1986

(contd.)

103.4

4,069.5

553.2 590.5 −37.3 30.0

1988

114.7

3,491.6

745.7 610.9 134.8 35.0

1989

100.0

3,778.9

845.2 702.7 142.5 65.9

1990

87.6

3,628.0

776.6 993.7 −217.1 93.7

1991

73.3

3,784.5

637.6 1,130.4 −492.8 120.1

1992

71.5

3,782.8

709.7 1,176.9 −467.2 121.6

1993

79.2

4,215.5

997.6 1,196.3 −198.7 128.0

1994

78.7

4,523.1

1,041.5 1,385.4 −343.9 372.3

1995

78.0

4,366.4

1132 1,536.3 −404.3 472

1996

84.8(p)

4,233.8

1,166.5 1,850.8 −684.3 728

1997

Sources: Banco Central de Bolivia, Instituto Nacional de Estadísticas. 1 Public foreign debt 2 Disbursements of concessional credit (p)Preliminary

E. GDP in 7,609.8 8,934.4 10,805.5 12,693.9 15,443.1 19,132.1 22,014.0 24,459.0 27,636.3 32,235.1 37,536.6 41,859.6 current Bolivianos GDP in current 4,005.0 4,337.0 4,598.0 4,718.0 4,867.6 5,336.7 5,636.5 5,725.9 5,974.8 6,707.0 7,385.3 7,918.9 dollars

D. Terms of trade index (1990=100)

Total foreign debt1

C. External sector indicators (US$m) Exports Imports Trade balance Foreign direct investment

Table 3.1.

74.0(p)

4,327.1(p)

1,051.1(p) 1,755.1(p) −704.0(p) 951.0(p)

1999

8,522.4(p)

8,351.3(p)

47.001.0(p) 48,604.6(p)

75.9(p)

4,390.4(p)

1,104.0(p) 1,983.0(p) −879.0(p) 869.8(p)

1998

48

Economic Vulnerability in Bolivia

49

The debt crisis of the 1980s revealed the weakness of a model dependent on foreign financing. The dramatic bout of hyperinflation suffered between 1982 and 1985 was prompted by the accumulation of large fiscal deficits previously financed by foreign loans. Bolivia’s exposure to foreign debt led to an external crisis that, given the convergence of a number of disruptive factors, brought on hyperinflation. First, large trade surpluses were required to service the debt. The only way to achieve these was through currency depreciation. Rapid depreciation fed inflation, causing the value of real wages to fall and therefore stimulating unrest among salaried workers. Secondly, the financing of the fiscal deficit from foreign loans became impossible, forcing the central bank to use domestic credit to this end, leading to excessive monetary expansion. Since the government found itself unable to roll-over the foreign debt and there was no market for government paper, central bank borrowing became the only method of financing the fiscal deficit. This mode of deficit financing interacted with the public demand for money, resulting in explosive rates of inflation. Inflation, in turn, exacerbated the fiscal shortfall by means of the so-called Olivera-Tanzi effect. Thirdly, attempts to control inflation through price and exchangerate caps proved not only futile, but exacerbated the problem. Black markets quickly appeared: the black market rate for foreign exchange exceeded the official exchange rate by as much as 1,300 per cent. The hyperinflation crisis brought about more abruptly than in most countries not just the end of commercial bank lending but the bankruptcy of the state capitalist model itself. The 1985 stabilization programme sought to put the government’s fiscal accounts in order. Indeed, the fiscal element of the package was particularly draconian, since on the revenue side the domestic price of fuel was hiked by a factor of seven. YPFB found itself obliged to place each day the entirety of its sales in a special account in the central bank. Such deposits were carefully controlled by the government and acted as a brake on the money supply. Taxes on fuels remain one of the key sources of treasury income. Changes on the spending side were also drastic. Some 10 per cent of the public workforce was dismissed, with little consideration for either age or re-employment possibilities. The effect in the state mining corporation, Comibol, was particularly draconian. Public-sector wages and investment were frozen, initially for a sixmonth period. Price stabilization in 1985 also revealed the importance of bilateral and multilateral aid to Bolivia. In fact such sources of finance had played an important role in previous stabilization packages, such as the

50

Towards Democratic Viability

Washington backed rescue in 1957.5 The availability of commercial finance had obscured Bolivia’s dependence on official aid, but when bank credit evaporated in the early 1980s such sources of finance assumed a renewed importance. The IMF accepted the 1985 stabilization plan, although it disagreed with some aspects of exchange-rate policy and Bolivia’s decision officially to suspend commercial debt-service payments. The Washington-based international financial institutions played a key role in providing both technical and financial support to the government of Víctor Paz Estenssoro (1985–9). Bolivia reached agreement with the IMF on a stand-by loan in 1986. A structural adjustment financing loan followed the stand-by agreement in 1987. Since 1989, Bolivia has benefited from, as well as enduring the conditionality of, two Enhanced Structural Adjustment Facilities (ESAFs), designed by the IMF to cater for the needs of the world’s poorest countries. In view of the technical approval of the IMF, other international agencies as well as governments have lent substantial amounts to Bolivia, often on very concessional terms. In addition, Bolivia has renegotiated its bilateral debt on favourable terms with the Paris Club. The support of the international financial institutions and the governments of industrialized countries for the emergency social fund (ESF), set up in 1987 to help mitigate some of the negative effects of the adjustment on low-income members of the population, needs to be underscored. Bolivia remains highly dependent on foreign aid, its entitlement to concessional aid enhanced by being one of the few countries in Latin America with a sufficiently low GDP per capita to qualify. If Bolivia is shown to have crossed the GDP threshold, it could suffer as a result. In the meantime, Bolivia, on account of its low income and its track record of good macroeconomic management has been one of the few Latin American countries to qualify for a measure of debt relief under the Highly Indebted Poor Country (HIPC) scheme, administered by the World Bank and other international financial institutions.6 Once inflation receded in the wake of the stabilization package, the government moved swiftly to implement a new tax law. This was passed in June 1986 and involved the introduction of eight new taxes. Of these, by far the most important was a value added sales tax which began at a uniform rate of 10 per cent, and was increased subsequently to 13 per cent. Considerable effort was also expended on improving tax administration and enforcement. One of the main lasting effects of the tax reform was to reduce fiscal vulnerability to deterioration in the terms of trade. On the expenditure side, the effects of the tax reform legislation were reinforced by the so-called SAFCO law, passed in July

Economic Vulnerability in Bolivia

51

1990, which imposed tighter supervision and control over the use of public resources (see chapter 11 below). An important consequence of the political hiatus created by hyperinflation was the forging of a crossparty consensus on the need for greater rectitude in the use of public finances. The banking system also recovered swiftly from the distress caused to balance sheets by macroeconomic instability in the early 1980s. After 1985, deposits recovered – mostly denominated in dollars – on the back of high interest rates. High loan rates, however, brought some casualties, caused by an increase in bad debts. This led to measures to improve the quality of bank regulation. Reserve requirements were raised, minimum capital–asset ratios introduced, supervisory functions hived off from the central bank and – somewhat later – state development banks were closed. From 1991 onwards, Bolivia also began to receive foreign short-term capital inflows, mainly through the domestic banking system. The credit boom which ensued greatly complicated financial management and opened up a new source of vulnerability. As a result, some banks lent recklessly, often to closely related parties. When the growth in deposits declined, mostly for external reasons, the banks’ situation became precarious. In 1994 and 1995, 6 banks of a total of 17 faced difficulties; in two cases these were so severe that they had to be liquidated. The government was subsequently obliged to establish a special fund to help some banks recapitalize. Although in 1996 and 1997 the banking sector recovered somewhat, in early 1997 a medium-sized bank had to be rescued (involving a large cash injection) and at the end of 1997 a smaller bank had to be liquidated. Bolivia was therefore not immune from the financial instabilities that plagued a number of countries of Latin America in the period that followed after the Mexican peso crisis of December 1994. The government and depositors paid the price for financial volatility by assuming the losses of failed institutions. Like other countries in Latin America, Bolivia faces the problem of private claims on private financial institutions being converted into private claims on state institutions, with the taxpayer – ultimately – paying the price. Although better regulated and supervised, the banking sector is still vulnerable to this sort of pressure. The domestic saving rate is low, and Bolivia remains too dependent on foreign savings to finance its investment needs. Grants and highly subsidized loans from international financial institutions and donor governments reached over 6 per cent of GDP in 1997. Since 1995, longterm foreign capital inflows, in the form of foreign direct investment,

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have been forthcoming; the accumulated total between 1995 and 1997 was 1.42 billion dollars, equivalent to about 20 per cent of 1996 GDP. Such long-term foreign financing is, on the whole, beneficial. However, the reliance on foreign capital for investment adds vulnerability and may not be so healthy in the long run. Has the financing of development now been placed upon a more secure footing? At this point, the answer cannot be definitive; it could even be negative if the current state of low domestic saving persists. Increasing the domestic saving rate hinges on there being a solid fiscal position; despite sustained effort this has yet to be achieved. While concessional sources of finance may dry up, private foreign direct investment will probably continue to enter in substantial amounts for some years to come, at least until the country reaches the limits of its ability to absorb more. Foreign capital inflows also depend on confidence in the public sector, whilst short-term foreign flows are crucially dependent on the resilience of the domestic banking sector to external shocks.

3. From public- to private-sector dominance Cuba apart, Bolivia in the 1960s and 1970s was possibly the Latin American country with the most state participation in the economy. The development model adopted in the wake of the 1952 revolution was highly statist in orientation, largely because the private sector was so weak. Following the revolution, when the ‘tin barons’ found their properties nationalized, rural landowners were expropriated under the terms of the agrarian reform legislation and the private-sector counted for very little. The development of the agricultural potential of Santa Cruz, coupled with the recovery of private-sector mining, led in the 1960s and 1970s to the growth of a private sector with influential lobbying organizations. At the same time, the consolidation and expansion of state activity also generated a parallel development of private industries whose existence depended, primarily, on providing the state sector with goods and services. A substantial number of private interests were thus dependent on the state, as purveyors of services or as recipients of highly subsidized state funds that many never repaid. As we have also seen, the state sector became vulnerable, particularly to volatility in the supply of external finance of different types. As elsewhere in Latin America, the debt crisis forced governments to adopt a markedly different approach to development, involving a closer relationship with the private sector, both Bolivian and foreign. However, it was not the case that the private sector as a whole was a direct beneficiary of the reduced

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role of the state; a large number of private firms suffered directly as the ambit of state intervention was reduced. Large numbers of contractors, accustomed to lucrative public-sector investment project contracts, found the new situation uncomfortable. Many of these relationships were based more on clientelistic than purely commercial lines. Trade liberalization also harmed some private interests, although protection was never as high in Bolivia as in some of its neighbours. Even domestic firms in the financial sector, like insurance companies, suffered in adapting themselves to the loss of very profitable deals because of the shrinking of the state. As a whole, the private sector underwent some painful adjustments in adapting itself to the neo-liberal paradigm. Although the ‘first wave’ of the reform process in the years after 1985 brought with it the deregulation of markets and a shrinking in state activities, it was not until the 1990s that the privatization programme got underway, a facet of the ‘second wave’ of liberalizing reform. The first wave focused primarily on restoring macroeconomic activity, correcting relative prices and bringing them into line with those of the market, trade liberalization and market deregulation. The liberalization of goods and factor markets, of course, had a direct bearing on the role of private intermediaries within the economy; deregulation was fairly far-reaching, although its effects were limited in the markets for land and labour. The second wave related more specifically to refining the relationship between the state and the private sector and between central government and local government. The reforms also sought to bring about institutional changes to enhance savings and investment and to encourage international competitiveness. Perhaps the most important of these reforms was privatization, or rather the ‘capitalization’ of former state companies. Although Congress passed a privatization law in 1991 during the Paz Zamora government (1989–93), no more than 25 minor companies were sold off before the end of its term in August 1993. The capitalization scheme, 7 introduced by the Sánchez de Lozada government for the larger state companies, was designed to be politically more palatable than straightforward privatization. The latter was difficult to carry out because the political mandate generated by the success of macroeconomic stabilization in 1985 had weakened by 1993. The government was acutely aware that it needed to make considerable effort to convince the population of the benefits to be derived from privatization. The basic idea of capitalization was to convert these companies into joint stock companies and to increase their capital by selling new shares (equivalent to the existing share capital) to private investors or ‘strategic

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partners’. The new investors automatically would assume management functions. Once capitalized, the original share capital would be distributed amongst all adult Bolivians. This capital was to be administrated by pension funds, with the benefits accruing in annuities to the elderly in the form of annual pension payments known as Solidarity Bonds (Bonosol). The firms sold in this way included YPFB, the electricity company (ENDE); the telecommunications concern (Entel), the national flag carrier (LAB) and the railways (ENFE). The strategic partners were selected through competitive bidding. In all cases they were sold to foreign investors. The capitalization of YPFB, by far the largest of the firms thus disposed of, was intimately linked with the project to build a new 3,150-kilometre gas pipeline from Santa Cruz to São Paulo in Brazil. This had long been a strategic goal to reduce Bolivia’s dependency on a single customer (Argentina) and to increase its volume of gas sales. The pipeline is designed with a load capacity of 30 million cubic metres a day. Low private investment rates suggest timidity on the part of the Bolivian private sector in taking advantage of the new economic environment created by the reforms. In fact, private investment only rose with the influx of foreign direct investment after 1995. The Bolivian domestic sector, composed mainly of small and medium-sized enterprises, has had major difficulties in adapting itself to the new rules. Domestic firms yearned for the protection afforded by the state-capitalism model, with low tariffs on their imported inputs, subsidized credit and lucrative contracts with the public sector. Pension reform was an adjunct to the privatization programme. The reforms to the pension system introduced by the Sánchez de Lozada administration abolished the state pension scheme and replaced it with a system of individual capitalization. The new pensions law, modelled in part on the Chilean experience, established a system of pension fund administrators (AFPs). These AFPs, selected on the basis of competitive tender, were to administer private pensions as well as the Bonosol scheme. The privatization of pensions was attacked for abandoning the collective approach enshrined in the constitution in favour of a more individual-based system. Workers also maintained that the government was high-handed in determining the fate of their contributory savings without any proper consultation. Most serious of all, the pension reform involved higher than expected fiscal costs for the government: rather than saving the state from responsibility for a bankrupt and unviable state pension system, in the short run it exacerbated the problem of the public-sector deficit. The Bonosol system, seen by some as a minimum

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pension scheme, was also criticized on the grounds that it would finance consumption (by old people) and not investment in either human capital or infrastructure.8

4. Administrative reform Improvements in public administration have been by no means constant over recent decades. While some state agencies have undoubtedly invested in modernization, other services have deteriorated, especially since 1985. The Central Bank and the Contraloría General de la República, both founded in 1928, share a good reputation as exponents of modern public administration. The Treasury and the Internal Revenue Service can also be included in the list of ‘modern’ institutions, as well as the Unit for Economic Policy Analysis (UDAPE). UDAPE is a think-tank which provides technical advice to the planning ministry and latterly the finance ministry. The planning ministry, a key institution in policy formulation since the 1960s, saw its power and influence greatly diminished in the 1990s. Among the most notorious examples of the deterioration in public services has been in public education (at all levels, including universities). In spite of various attempts at educational reform, the educational level of school leavers and college graduates is probably lower than it was in the 1970s. 9 Policy-making at the macroeconomic level has probably suffered less from party political influences than at the sectoral level, mainly because commitments with the international financial institutions have reduced the scope for corruption and inefficiency. In the more specific cases of the Central Bank and the Contraloría, political independence has been key to their performance. To the extent that they benefited from statutes granting them substantial autonomy, they have managed to recruit qualified professionals and isolate themselves from political pressures. High levels of politicization have meant that many governmental agencies have not fared so well. Party politics have and continue to influence the design of social policy. Patronage, clientelism and even venality influence decision-making in some respects. Such problems afflicted governance in the period up until the mid-1980s; they still do to some extent. Nowhere is this more evident than in public investment projects. Cost overruns and investment in undertakings known to be unprofitable are a telling sign of this. An egregious instance was the building of a large smelter at Karachipampa in the 1970s for which there were no available ores. Similarly, at much the same time, a soya

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oil plant was built in Santa Cruz for which there were was inadequate supply of soybeans. Until the early 1990s, local administration through departments and municipalities showed little improvement. During the 1970s, the most important local institutions were regional development corporations, in charge of public works in each department. Their investment programmes were notably ill-designed. Many corporations fell prey to vested local interests, frequently associated with local pressure groups (comités cívicos). Bolivia possesses a substantial number of well-educated technocrats and public servants, more so than many Latin American countries at a similar level of development. That political discourse tends to be peppered with technocratic jargon and with even populist parties claiming they have teams of qualified technicians is illustrative of the power gained by the technocracy. Yet, political leaders, especially at the local level, resent this power. Nowhere is the opposition between the political establishment and the technocratic elite more apparent than in Congress. Committees in both houses of Congress, citing their oversight role (poder fiscalizador) to summon government technocrats to account in hearings (informes orales). Since party politics and the vested interests of specific constituencies influence the work of congressional committees, these hearings frequently become forums for political vendettas, as well as for deals to increase the number of political appointees in government. Since 1985, official discourse has emphasized the need for minimal government. The largest state-owned enterprises have been privatized/ capitalized and the traditional methods of supervision by sectoral ministers has passed to the new regulators. Yet this minimalist approach to government and the appointment of technocrats as regulators posits a set of new contradictions, which are difficult to resolve. Although, on paper, regulators can only enforce laws concerning their sectors, they enjoy a high degree of discretion, powers distrusted by governments and congressmen. Yet, tying their hands with ever more detailed laws and decrees may have efficiency costs, creating red tape that impedes swift decision-making. The accountability of the regulators is also an unresolved problem. To reduce vulnerability and enhance decision-making and implementation, a high-quality civil service is required. Efforts in this direction over several decades have been modest. Meanwhile, the influence exercised by vested interests over some segments of officialdom has greatly impinged on the quality of public services. Politicization, fostered in

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turn by the uneven distribution of wealth and income and continued overmanning in the public sector, is all too often the main cause of poor government performance.

5. Poverty and social exclusion Bolivia remains one of the poorest countries in Latin America and, according to most indicators, the country of South America with the lowest rate of GDP per head of the population. In spite of being a substantial recipient of foreign aid over a prolonged period of time, the country remains very poor, as is shown in more detail in Chapter 5. Although the official data on income levels are not of high quality, evidence provided by the human development ministry suggests that in 1976, 85 per cent of the population lived in poverty, whilst in 1992, 72 per cent did so (Ministry for Human Development 1993). Although the incidence of poverty may since have declined, it remains very high. Pereyra has estimates which are somewhat lower (Pereyra 1997). He reckons that in 1990, 53.3 per cent of the population lived in poverty, and that the corresponding figures for 1995 was 47.8 per cent. Whichever set of figures we choose to believe, poverty remains widespread. Extreme poverty is more a rural phenomenon, concentrated primarily in the Quechua-speaking departments of Chuquisaca, Potosí and Cochabamba. Yet it is also widespread – if not the norm – in such urban areas as El Alto where levels of unemployment (especially among young people) are worryingly high. Employment in these areas is characterized by very low wages, high job instability and low rates of productivity. Opinion polls in all large cities show, invariably, that lack of adequate employment is the main problem on people’s minds. As the range of variation in the above figures suggests, it is impossible to measure the problems of poverty and inequality with any certainty; statistics are at best unreliable guides. However, it seems reasonable to suppose that in periods of relatively high growth and macroeconomic stability, expanded output has had some beneficial effects on the poor. Certainly, the obverse of this is true: periods of extreme macroeconomic instability, such as the years between 1982 and 1985, exacerbated social problems, probably hitting hardest those on low wages and subsistence incomes. The political acceptance of the drastic 1985 stabilization package suggests that low-income earners greatly welcomed price stability. Nevertheless, the human cost of the package was high amongst workers in the public sector and pensioners; it was for this reason that the Paz Estenssoro government after 1985 proposed, with the support of the

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World Bank and other donors, the Emergency Social Fund programme to provide some relief to those most at risk. What has been done to alleviate poverty in Bolivia? In some respects, a great deal has been achieved. The rate of infant mortality – a classic indicator of deprivation – has fallen consistently over the last 30 years. Education has expanded greatly over this period, although its quality is poor and the drop-out rate alarmingly high. Also, since 1952, all adults have enjoyed the right to vote, irrespective of sex or levels of literacy, conferring on them a basic right of citizenship. However, as we have seen, extreme poverty remains widespread and – in spite of being able to vote – a large proportion of the population is effectively excluded from the benefits of economic growth. Indeed, the relatively sluggish growth rates registered in the years that followed the 1985 stabilization package were a major disappointment to policy-makers. Per capita growth rates between 1987 and 1996 ranged between only 0.3 per cent and 2.8 per cent. If GDP per capita were to grow at 2 per cent per annum, Bolivia would only reach the current average per capita income for Latin America as a whole in 2057. Rather than launching new targeted poverty elimination programmes, the Sánchez de Lozada administration focused its attention on a scheme, known as ‘popular participation’, designed to decentralize decision-making to the municipal level and to redirect social and other spending through these revamped municipalities. Crucially, this involved a redirection of spending on health and education towards rural areas, since central funds to municipalities are distributed on the basis of population. Previously, central government spending was absorbed very largely by those urban areas with greatest political influence over the allocation of resources. It is still premature to assess the full impact of this programme, but it seems likely that the decentralization involved worked to the benefit of many who had never previously received state assistance, whilst the system of strengthened community control helped reduce waste and corruption in the distribution of scarce resources. A fuller description of the Popular Participation state reform scheme is to be found in Chapter 4, along with a preliminary assessment of its strengths and weaknesses. The extent to which such reforms will form the base of a long-term strategy to deal with poverty still remains to be seen. In itself, the contribution of Popular Participation to the relief of poverty and to any increase in rural living standards was probably relatively modest.

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6. Conclusions Bolivia’s economic history during the twentieth century has been characterized by frequent domestic turmoil and a high exposure to exogenous shocks. Two periods of hyperinflation in a single generation – the second more pronounced than the first – underscore such vulnerability. The country’s productive structure and its insertion into the world economy exposed it to changes in its terms of trade, whilst the weakness of the fiscal system tended to be the main factor transmitting this weakness to the rest of the economy. Bolivia has been – and still is – highly dependent on imported savings in financing its development. Moreover, its growth record has not been such as to provide the means to rescue the majority of its population from poverty. Until there is sustainable and rapid growth, based on a more diversified structure of production, Bolivia will remain more vulnerable than many other countries. Still, the glass is not empty; far from it. The reforms of the 1950s did much to develop the economy and to make it less vulnerable. These reforms left many issues unaddressed and created new problems that had not existed previously. However costly these reforms were in practice, in hindsight we can appreciate how necessary they were; the returns were never likely to be immediate. The hyperinflation and subsequent liberalizing reforms of the mid-1980s introduced a new era, recognizing that the old state model had largely exhausted itself. These changes, plus the ‘second wave’ reforms of the mid-1990s, served to stabilize the country and create the conditions for a more vigorous participation by the private sector – whether Bolivian or foreign. Bolivia remains a country with a large untapped potential, requiring foreign investment to develop it. The achievement of a higher growth trajectory is a necessary but insufficient condition to improve the welfare of the mass of Bolivians. Unless other policies are devised and successfully pursued, the problem of poverty will overshadow developments in other areas.

Notes 1 Some excise taxes were collected by local government. 2 This and what follows is based on Sachs and Morales (1988) and Morales (1996). 3 Opposition came primarily from manufacturers and from the Cámara Agropecuario del Oriente, a pressure group representing cruceño agricultural interests.

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4 A good deal of investment went into expanding the productive capacity of the hydrocarbons sector, especially natural gas. The construction of the gas pipeline between Santa Cruz and São Paulo reduced Bolivian dependence on the Argentine market. 5 Some of the lessons learned in 1957 were applied in 1985 to overcome hyperinflation. 6 Bilateral official debts were renegotiated in six Paris Club sessions, in the last of which Bolivia qualified for ‘Naples terms’ and the stock of its debt reduced by 67 per cent. The HIPC programme involved a reduction in multilateral debts. 7 For a detailed account of the capitalization programme and the concomitant pension reform, see Larrazábel and de la Barra (1997). 8 The Bonosol scheme as such was scrapped by the Banzer government in 1998, and replaced by an amended pensions scheme. 9 In seeking to improve the performance of state institutions, the Banzer government devoted considerable time and attention to reforming the customs, long a particularly corrupt corner of the bureaucracy.

References L. Larrazábel and V. H. de la Barra, Capitalización y pensiones: análisis y reflexiones sobre los modelos de la reforma (La Paz: Editorial Stampa, 1997). R. A. Mayorga, ‘Gobernabilidad, la nueva problemática de la democracia’, in M. Miranda, ed., Bolivia en la hora de su modernización (Mexico City: UNAM, 1993). Ministry for Human Development, Mapa de pobreza (La Paz, 1993). J. A. Morales, ‘Bolivia and the Slowdown of the Reform Process’, in L. Frischtak and I. Atiyas, eds, Governance, Leadership and Communications: Building Constituencies for Economic Reform (Washington DC: The World Bank, 1996). R. Pereyra, Unpublished report based on family surveys (La Paz: UDAPE, 1997). J. Sachs and J. A. Morales, Bolivia 1952–86: Country Studies 6 (San Francisco: International Center for Economic Growth, 1988).

Part II Poverty and Exclusion

4 Exclusion, Participation and Democratic State-building George Gray-Molina

1. Introduction Political and economic exclusion continue to pose severe obstacles to the development of a viable democracy in Bolivia. Seven out of ten Bolivian citizens live in poverty and four out of ten in conditions of indigence. Poverty is often coupled by exclusion from the means and capabilities needed to overcome persistent income and basic-needs deficiencies. Access to social services (education, health and sanitation), economic assets (physical, capital and technological) and political power (representation and decision-making influence) are restricted, and often conditional on clientelistic or other particularistic channels of political and economic intermediation. 1 Recent efforts to reform the Bolivian state have aimed at broadening access to political and economic power by institutionalizing more open, transparent and accountable channels of democratic governance. As in many Latin American countries, however, the gap between the país legal and the país real in Bolivia is large, and analysis is required of both the intent and the impact of reform efforts. In the Bolivian case, this sort of assessment is made more difficult by the diverse territorial and cultural contexts in which reforms have been implemented, suggesting the need for a differentiated treatment of outcomes. This chapter focuses on the impact of a particular state reform, ‘Popular Participation’, which sought to democratize access to political and economic power through ambitious and potentially far-reaching institutional innovation.2 Its impact will be assessed on the basis of two criteria. First, to what extent have the stated objectives of increased citizen participation and the democratization of political and economic power been 63

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attained? And, second, how have these outcomes contributed to democratic viability? On the first point, I will argue that a fair assessment of the achievements of Popular Participation and administrative decentralization must take into account the extremely diverse territorial and cultural reality in which the reforms were carried out. In the context of a fragmented state and diverse society, Popular Participation can be more properly regarded as being a ‘state-building’ rather than a ‘state-shrinking’ reform. Hence, its achievements and shortcomings need to be assessed on a case-by-case basis. At the national level, however, the reform has clearly resulted in increased indigenous and peasant political representation in local politics, greater citizen participation in public decision-making and a significant urban-to-rural redistribution of fiscal resources. Nevertheless, it still falls short in securing greater access of the poor to social services, economic-factor markets and productive infrastructure. On the second point, I will argue that to the extent that Popular Participation has succeeded in increasing political representation and promoting citizen participation in public decision-making, it can be seen as contributing to the institutionalization of local democratic practice and reducing the discretionary power exercised through clientelistic and other particularistic channels of intermediation. This may be regarded as an important step toward democratic consolidation in the sense discussed by Juan Linz and Alfred Stepan (1996) and commented upon by Guillermo O’Donnell (1996: 34–51). However, the reform will have contributed to democratic viability only to the extent that the policy outcomes associated with it address the vicious cycle that links persistent poverty to the exclusion from political and economic power. Under this yardstick, the Popular Participation reform can be regarded as a mixed success: as an ‘empty box’ it may have initiated a unique transformation in local politics, but it has yet to provide the policy content needed to overcome the causes of poverty and lay the foundations for more equitable economic growth. Democratic theory has often predicated the analysis of democratic development on the presumption of a high degree of homogeneity, both territorial (across space) and functional (across ethnic and class groups), of the state and of the social order it supports (O’Donnell 1993: 1355–69). Under such an assumption, the ‘state’ – as guarantor of the rule of law, effective policy-making and nation-state unity (i.e. its legal, bureaucratic and ideological attributes) – is understood to function with equal effectiveness in urban and rural areas, as well as for the poor and non-poor, indigenous and non-indigenous alike. Among Latin American

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democracies, this assumption is rarely borne out by experience (Nickson 1995; Fox 1994: 152–84). In many countries, particularly those characterized by cultural and territorial diversity, the state can be visualized as enforcing its legal and bureaucratic presence in ‘pockets’, frequently privileging urban over rural and the well-off over the poor. The ideological attribute of the state as guarantor of nation-state unity is even more problematic than the previous two in a multi-ethnic and divided nation within a single state. Access to political and economic power in this sort of scenario is frequently achieved or supplemented through participation in informal channels and institutions. While not necessarily exploitative or opportunistic, informal clientelistic or particularistic channels of intermediation are more likely to escape the public scrutiny and accountability demanded of more formal democratic institutions. The co-existence of both formal and informal forms of political and economic intermediation calls attention to the need for a differentiated analysis of democratic development. A state-centred analysis of reform is likely to overstate the achievements or shortcomings of formal channels of participation, while a society-centred view is likely to emphasize the opposite view. Popular Participation, surveyed from below, can be seen as an attempt to assert the territorial presence of the Bolivian state through new means. It is not the first time that Bolivia has engaged in state-building, and indeed it could be argued that the problems of consolidating a modern nation-state are as prevalent today as they were 50 years ago during the 1952 revolution. This chapter maintains a relatively narrow focus on present reform efforts with all of the shortcomings that this entails. It focuses rather, across space, on the diversity of outcomes resulting from the heterogeneous implementation of the reform. I develop these arguments in five sections. The first provides an overview of the aims of Popular Participation. In the second and third sections I discuss its achievements and shortcomings, as perceived after only four years of implementation. In the fourth, I attempt to illustrate the achievements and shortcomings identified earlier by discussing the implementation of the reform in three municipalities: one in the highlands, one in the valleys and one in the lowlands. Finally, I assess the impact of the reform in terms if its contribution to democratic viability in Bolivia, and suggest some key challenges facing civil and political society in promoting greater political and economic participation in the future.

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2. Aims Bolivia is characterized by a great degree of cultural and territorial diversity, supporting a highly heterogeneous pattern of political and economic development. A country of nearly 8 million inhabitants, Bolivia is today predominantly urban, indigenous and poor. While official figures estimate a national income per capita of US$1,000, the variance is large, and includes cities with averages of over US$3,000 and villages with less than US$100.3 Administratively, the country is divided into municipalities, provinces and departments, and further between the Andean highlands, the inter-Andean valleys and eastern lowlands. The Popular Participation programme, launched in April 1994, aimed to promote greater access to political and economic power by means of a strategy of state decentralization linked to institutionalized forms of citizen participation (Gray-Molina 1997). These aims can be analysed more closely in terms of territorial, political and fiscal objectives. Territorially, the reform involved the division of the country into 311 municipalities, 187 of them new and covering nearly two-thirds of the country’s total area. Of the pre-existing municipalities, only 61 ever received central government revenue-sharing transfers. Municipalization has also involved incorporating rural areas into previously urban jurisdictions, which had hitherto functioned as administrative ‘islands’. The reform thus aimed to incorporate the whole national territory into clearly defined administrative borders. Politically, the reform was more ambitious. Municipalities were to be governed by elected councillors, overseen in turn by public oversight committees composed of representatives of local grass-roots organizations. These consisted of peasant and indigenous communities and neighbourhood councils. The oversight committees were intended to provide a bridge between formal and informal channels of political participation at the local level. They were mandated to participate in priority-setting and supervision of the use made of transferred revenues. Public investment planning, implementation and evaluation were to be carried out by means of a common ‘participatory planning’ methodology aimed to maximize citizen voice in the public decision-making process. Fiscally, the reform aimed to provide newly-installed municipalities with the necessary revenues for effective policy-making. Through Popular Participation, municipalities received revenue-sharing transfers based on population size, and were granted municipal revenue-raising powers over property taxes, fees and user charges. For the 250 new municipalities, this meant receiving revenue-sharing transfers for the first time. On the

Exclusion, Participation and State-building 67

expenditure side, municipalities were endowed with new responsibilities for the maintenance, equipment and investment involved in urban as well as social and productive-oriented infrastructure. The reform was complemented by an administrative decentralization reform delegating discretional and non-discretional public investment powers to the prefectural level, replacing the centralized (and highly politicized) executive power for a three-tiered (central, prefectural and municipal) system of governance in the administrative and fiscal spheres. The chain of command that links the central, prefectural and municipal tiers is complex and reflects the contradictory nature of a decentralization-cum-state-building reform. At the central government level, the key actors are line ministries, special development funds and the office of the presidency, which appoints prefects and maintains a close relationship with departmental administrations. At the prefectural level, the key actors are the prefect, his staff and a departmental council elected by municipal councillors as a check on prefectural decisionmaking. At the local level, mayors, municipal councillors, oversight committees, political parties, non-governmental organizations (NGOs), and grass-roots organizations all play a critical day-to-day role.

3. Achievements Six years into the reform, much attention has been given to the evaluation of the key political and fiscal changes initiated. While the overall performance of the reform is deemed positive, there are highly contested issues in the evaluation of its relative success. I address some of these below and attempt to assess the effectiveness of each change in increasing access to political and economic power at the local level. 3.1. Political changes As many analysts have noted, the 1995 municipal election was the first public validation of the Popular Participation reform (Calla and Calla 1996; Rojas and Zuazo 1996). Political parties and groupings which had been sceptical (even antagonistic) to the reform a year earlier, put forward candidates and gained representation to an unprecedented degree. Nearly 2 out of every 5 local governments elected candidates from the opposition parties. One of the more surprising political advances was by peasant coca producers under the Izquierda Unida (IU) banner, who won landslide victories in 11 of the 12 coca-producing municipalities of the Chapare and Carrasco regions. Similarly, Quechua and Aymara peasant unions in Oruro and Potosí gained seats through

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the Eje Pachacuti party. Perhaps more significantly, 1 out of 4 municipalities elected peasant or indigenous mayors, an important development in modern Bolivian politics (Albó 1997: 7–26; Ayo 1997: 27–40). Peasant and indigenous councillors won seats in 210 municipal governments, or two-thirds of the total. Nevertheless, peasant and indigenous candidates still face obstacles in having to register through traditional political parties. Most analysts agree that Popular Participation has not had significant effects in democratizing the parties themselves, which still rely on patron–client networks to dispense political favours. Moreover, the 1995 elections cannot be construed as a victory for female political representation: the proportion of women councillors fell from 27 to 8 per cent, despite an increase in the number of women candidates. The political representation of disadvantaged groups will remain a challenge. In 1999, the political balance of power shifted somewhat. The emergence of ‘anti-systemic’ and ‘neo-populist’ political alternatives in the capital cities of departments tipped the political balance to new forces such as the Movimiento Sin Miedo (MSM) in La Paz and the Nueva Fuerza Republicana (NFR) in Cochabamba. In rural areas, surprisingly, traditional parties such as the MNR, MIR and ADN regained influence. Links between local and national politics also played a novel role, as municipal candidates positioned themselves for the 2002 presidential elections. 4 The Popular Participation law sought to promote citizen participation through collective rather than individual action. Over the past 4 years nearly 14,000 grass-roots organizations have registered as ‘territorial’ organizations in the 311 municipalities. Although an achievement in itself, the effects of this remain a source of controversy. Some analysts see the recognition of ‘territorial’ organizations (neighbourhood councils, peasant and indigenous communities) as a deliberate attempt to demobilize the traditionally vocal urban and rural unions (Booth et al. 1997; Ticona et al. 1995). Others have argued that this recognition stems from a defence of non-union indigenous organizations which have traditionally participated as ayllus (Aymara and Quechua), capitanías (Guarani) or other ethnically-based organizations (Vadillo 1997: 317–32; Molina Rivero 1997). The extent to which these organizations have actually participated is also open to question. While rural municipalities have witnessed a revival of civic participation in budgetary planning, public-works schemes and oversight, the capital cities have been visibly impaired in promoting effective forms of local participation. Popular Participation has clearly struck a chord in promoting collective forms of citizen participation

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in a country characterized by the strength of local organization. However, patterns of mobilization are very mixed. In some regions, the election of peasant and indigenous political representation has substituted for effective grass-roots participation, while in others collective action has never taken root. In places, grass-roots participation has encouraged growth of rent-seeking behaviour with regard to local public investment, as I discuss below. One of the unique aspects of Popular Participation is the institutionalization of public oversight mechanisms. Oversight committees, made up of representatives of grass-roots organizations, are responsible for channelling local demands for public investment, supervising the implementation of public works and providing feedback mechanisms to improve the performance of public services. These committees thus constitute a non-partisan check on local government with veto power over annual budget approvals and the discretion to denounce suspected wrongdoing to the finance ministry, the Senate and the office of the Comptroller General. Between 1994 and 1998, 8 municipalities had their accounts frozen, and 78 were investigated for presumed wrongdoing (Guzman Boutier 1998). While oversight committees have not been wholly effective, they are a visible countervailing power to entrenched political networks and have made local officials more accountable. The most effective oversight committees tend to be found in intermediate-sized municipalities in the valleys and tropics, which are ‘under-represented’ by peasant or indigenous councillors (Gray-Molina and Molina Ballon 1997). Oversight committees appear to perform a vital signalling (rather than controlling) role. Although premature, such new forms of accountability should help consolidate viable public institutions. 3.2. Fiscal changes Prior to Popular Participation, 91 per cent of the country’s revenue-sharing resources were distributed among the three most populous departmental capitals. In 1999, these received 68 per cent of revenue-sharing, a reflection of their share of the total population; the remaining municipalities received 32 per cent. The revenue shift prompted by the reform is twofold: first, fiscal resources transferred to municipal governments have doubled from 10 to 20 per cent of tax revenues; and second, the flow of resources has shifted from urban to rural municipalities, through a fixed capitation formula. In this way, each municipality receives the same per capita resources as any other municipality, thus providing a measure of horizontal fiscal equity. (See Table 4.1.)

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Table 4.1

Revenue-sharing before and after the reform (US$ thousands) 1993

1994

1995

1996

1997*

48,056 (92.1%)

44,672 (52.2%)

53,360 (39.0%)

62,747 (39.0%)

71,299 (38.8%)

Rest of country

4,103 (7.9%)

40,948 (47.8%)

83,390 (61.0%)

98,314 (61%)

112,339 (61.2%)

Total

52,158 (100%)

85,620 (100%)

136,750 (100%)

161,061 (100%)

183,638 (100%)

Capital cities

*Programmed. Source: Bolivia:Participación popular en cifras: resultados y proyecciones para analizar un proceso de cambio, vol. II. La Paz: Ministerio de Desarrollo Humano, Secretaría Nacional de Participación Popular, 1997.

In addition to revenue-sharing, municipalities also benefit from local property taxes which now account for almost half all municipal fiscal resources. The disproportionate growth of property taxes in larger municipalities implies a gradual reconcentration effect over time, which promises to widen the gap between rich and poor municipalities. Some sort of vertical fiscal redress may have to be achieved through a national ‘pro-poor’ expenditure policy in the future. On the expenditure side, between 1994 and 1997, the structure of national public investment shifted radically from a central-to-local/ departmental expenditure ratio of 75 per cent to 25 per cent before the reform to a 25 per cent to 75 per cent ratio 3 years later. Together with this change in structure, there has been a shift in composition: while in 1994 most local investments were directed toward urban development, in 1995 and 1996 there was a gradual move towards social investments in education, basic sanitation and health. The impact of this shift has been significant. In three years, aggregate social investment more than tripled from US$ 75 million in 1994 to US$ 178 million in 1996 (GrayMolina and Molina Ballon 1997: 69–88). The smaller and more rural municipalities have invested most in the social sectors, while the capital cities have continued to invest much more in urban development. (See Table 4.2.) Ironically, the fiscal impact of decentralization may have been felt most acutely at the level of central government. Line ministries, which had previously battled over the use of discretionary public investment funds, found themselves with only a meagre budget allocation to fight over. This led to changes in the way public polices

Exclusion, Participation and State-building 71 Table 4.2

Municipal public investment, 1994–6 (US$) 1994

1995

1996

Social* Production** Infrastructure*** Multi-sector

57,959,736 1,600,060 10,107,135 4,570,310

209,170,556 7,663,944 19,847,625 7,926,426

206,375,400 21,337,704 34,282,261 5,200,956

Total

74,237,241

244,608,551

267,196,321

*Education, health, basic sanitation, urbanism, sports and culture. **Agriculture, irrigation, industry and tourism. ***Energy, roads and communications. Source: See Table 4.1.

were designed and implemented. The top-down policy directives, long the hallmark of presidentialist government, gave way to a less orderly but more democratic policy process. Municipal governments and prefectures now formulate their own investment programmes, and negotiate separately for intergovernmental grants administered by the central government. Intermunicipal associations (mancomunidades), another novelty, have also prompted coordination between municipalities on matters like transport, natural resource management and water management. However, public investment now suffers from clientelism and rentseeking at the prefectural and municipal levels. The Comptroller General is faced with numerous new demands arising from the new fiscal and administrative system. The strength of particularistic and clientelistic politics continues to overshadow the positive incentives emerging from the new system of decentralized policy-making. Strengthening public accountability remains a paramount challenge.

4. Shortcomings The high expectations generated by Popular Participation were followed by a wave of doubts about the effective scope of the changes. Though designed as a decentralization reform, it was canvassed as a political and redistributive reform, equivalent to the 1953 agrarian reform (Molina and Arias 1996). While clearly not a panacea for poverty alleviation, the reform was viewed as an important step towards reducing urban/rural disparities and increasing local access to fiscal and political power. Three key shortcomings have been identified:

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4.1. Access to social services While social investment doubled between 1994 and 1997, more resources have not necessarily meant greater access to education, health and basic sanitation. Firstly, the incentive structure set up by the three-tiered system of decentralization has tended to obscure responsibilities for the provision of key social services. Under the current ‘input-led’ arrangement, municipalities may build schools or health posts for which teachers or medical personnel (appointed at the prefectural level) are not available. Such problems are not just ones of coordination, but result rather from a system in which levels of government no longer have specific responsibilities. In this regard, the redistributive effect of Popular Participation may have been at the expense of fiscal and administrative aspects which could have boosted effectiveness in service provision. Secondly, the decentralized provision of services has lacked effective feedback mechanisms to promote public accountability. Human development policy ought to be designed in ways which promote local-based ‘voice’ mechanisms (parent-led school boards, health boards, etc.), rather than assume that generic oversight committees will preside over every aspect of service delivery. Although the education and health reforms of the Sánchez de Lozada administration involved initiatives of this kind, their implementation was hampered by command-oriented policy directives (see Chapter 7). Few school or health boards were deemed ‘functional’, according to an evaluation of education and health services (Giussani and Ruiz 1997). The lack of effective feedback mechanisms will prejudice the poorest who are unlikely to use the public service system to start with. Thirdly, and perhaps most relevant for social and market access, Popular Participation can be described as something of an ‘empty box’, not a substantive policy instrument for social and economic reform. The decision to allocate fiscal resources – the contents of the box – will vary from municipality to municipality and from administration to administration over time. Experience elsewhere in Latin America would suggest that many, if not most, exercises in decentralization have led to regressive social investment patterns, owing to the ‘state-shrinking’ approach of central governments (Burki, Perry and Dillinger 1999). 4.2. Access to economic markets The most serious misgivings about the Popular Participation reform have concerned access to economic-factor markets (land, credit and technology) and productive infrastructure (roads, irrigation, communications), particularly in rural areas where it was hoped it would lead to

Exclusion, Participation and State-building 73

a productive transformation (Medina 1997; Tuchschneider 1996: 103–26; Gobierno de Bolivia 1996). Productive-oriented investments in technology, irrigation and rural transportation have been minimal at the local level since 1994, prompting calls for aggressive local initiatives. The reasons for under-achieving in the sphere of productive investment are many. First, since the allocation of municipal investments depends on local preferences and planning priorities, there is no reason to expect any concerted effort in a single sector. This is particularly true in poor, rural municipalities where there is a trade-off between productive and social demands, a problem made worse by an intergovernmental grant system that favours social over productive investments. Second, the demand for credit and technology faces serious collective action problems: better-off farmers are more likely to pursue private rather than public sources of such goods and services, increasing the gap between the ‘haves’ and the ‘have-nots’ in rural municipalities. While such dilemmas can be addressed through public/private institutional arrangements, there has been no clear policy response. Third, some productive investments depend on intermunicipal cooperation. Access to factor markets, such as land and credit, is clearly beyond the scope of Popular Participation. The reform of land administration policies has been the object of comprehensive reform, affecting land tenure rights. However, the greatest challenge of land administration reform is to secure a balance between efficiency and equity by addressing problems like tenure insecurity, the unequal distribution of land and reconciling the collective rights of indigenous peoples with the public/private tenure regime prevalent overall. The impact of this is particularly important to smallholders and medium-sized farmers whose livelihoods depend on agricultural and livestock rearing. 4.3. Targeted poverty alleviation A concern that is not directly addressed by Popular Participation, but which has been cited as a shortcoming by donor organizations, is targeted poverty alleviation. In a sense, decentralization substitutes for the targeted approach advocated by donors with a universal but demand-driven strategy. This more broad-based approach aims at developing a solid, less ‘assistentialist’ framework for development, rather than addressing just poverty alleviation. Top-down decision-making with regard to public investment allocation has slowly shifted toward a more bottom-up conception of policy-making. The decisions concerning ‘where’ and ‘to whom’ social and productive investments are directed are increasingly made at the local level by

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elected officials. However, on the negative side, the new system lacks a policy handle over how to tackle the needs of the poorest of the poor. In their performance-driven zeal, mayors may easily overlook the needs of the voiceless. The central government has also ignored the potential negative consequences of dismantling the safety-net system pioneered by the social emergency funds in the mid-1980s.

5. Case studies Over the past four years, some municipalities have been more successful than others at setting up the basic institutions for local governance, designing policies, executing public works and promoting citizen participation. Many have relied on political affinities in the prefecture or central government to jump-start local institutions from the top. Others have capitalized on the existing organizational strengths of grass-roots communities to achieve similar ends from below. In what follows I examine three case studies, each in different parts of the country, to discuss outcomes with reference to representation, participation, revenue flows and policy-making. 5.1. Sacaca, Potosí At 3,500 metres above sea level, the municipality of Sacaca is located in the uppermost corner of northern Potosí, a region dependent on highland agriculture, herding and tin-mining. Sacaca is one of the poorest municipalities in Bolivia, with a population of nearly 15,000, 96 per cent of whom live in poverty and 71 per cent of whom live in conditions of indigence. Eight Quechua ayllus, which form part of the Federation of Ayllus of Northern Potosí (FANP), co-exist with 54 peasant unions belonging to the National Confederation of Peasant Unions of Bolivia (CSUTCB). While ayllus typically continue to hold authority over territorial disputes, festivities and inter-ayllu relations, unions dominate everyday local economic and political affairs. As in most of the north of Potosí, the Popular Participation Reform made few inroads in Sacaca. Abstention was high in the 1995 municipal elections, when five councillors were elected from three political parties (MNR, Movimiento Bolivia Libre (MBL), and UCS), four of them of non-campesino and non-indigenous origins. The elections were thus an instance of ‘politics-as-usual’ for the local power holders. The only indigenous peasant councillor elected to office ran through the MBL, a party which opened its doors to peasant union leaders in rural areas. 5

Exclusion, Participation and State-building 75

The oversight committee, which by law is made up from peasant and indigenous grass-roots delegates, is currently run by three rural school teachers. Although politically powerful and active, the ayllu and union leaders of Sacaca shun local politics, concentrating their efforts on the regional grass-roots assemblies at the regional level. The existence of a strong tradition of self-government and the growing importance of alternative channels of political and economic intermediation through NGOs and donor projects, mean that this is unlikely to change in the near future. In Sacaca, there is little interest in engaging in the new ‘rules of the game’ established by the Popular Participation programme. The municipal budgetary process has been conducted almost exclusively by the municipal council, with resources being spent primarily on education and urban renewal. Prior to the reform, Sacaca received no fiscal resources, but today it manages close to US$600,000 a year.6 Local government relies overwhelmingly on central government transfers and donations from abroad, raising no fiscal resources locally. Policy-making is conducted on a top-down basis, since the divide between mestizo councillors and Quechua grass-roots leaders hinders participatory planning. Sacaca and areas like it represent a challenge to the aims of Popular Participation. The common ‘rules of the game’ advanced by the reform are not perceived as being truly ‘common’ in the region. The ayllu leadership holds a stronger interest in gaining political autonomy than in voicing demands through the formal political system. The union leadership, in contrast, voices regional themes of state neglect and radical politics that do not yet encompass political participation in a mainstream-dominated party system. After a long period of state neglect, and despite the relative strength and vitality of local grass-roots organizations, the rural/urban divide is only accentuated by the presence of alternative sources of political and economic power (NGOs and international donors) that largely by-pass local government institutions. The legitimacy crisis of the Popular Participation reform observed in Sacaca is indicative of the shortcomings of a the reform in regions characterized by sharp ethnic divisions. As discussed in the case of Ascención de Guarayos, below, political participation is not likely to increase at the local level until reformers and/or grass-roots leaders negotiate truly ‘common rules’ of political engagement, which may or may not include claims for greater political and territorial autonomy in the future. 5.2. Capinota, Cochabamba The municipality of Capinota has a population of nearly 16,000. It is at around 2,200 metres above sea level in the central and western valleys

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of Cochabamba, and poverty is concentrated in rural areas. As other places in the central valleys, Capinota was deeply influenced by the effects of the 1953 agrarian reform, which redistributed land from large and medium-sized haciendas to peasant smallholders. Unlike Sacaca, Popular Participation has led to the mobilization of citizen groups and political parties and has provided a vital catalyst for political competition. The participation rate in the elections of 1995 was significantly higher among rural voters, and two peasant leaders were elected to the municipal council for the first time. Again, unlike Sacaca, political parties competed keenly for the rural vote. A compromise was successfully reached among the political parties over who should be mayor: a peasant union leader from the Izquierda Unida.7 Sixteen urban neighbourhood councils and 25 peasant unions registered as grass-roots organizations, and took an active part in planning and the budgetary process. The oversight committee, made up of one urban and three rural representatives, has been one of the most active anywhere in Cochabamba. Grass-roots organizations have ‘scaled-up’ their activities through union centrales and sub-centrales and play a part in the affairs of neighbouring municipalities. They have successfully lobbied the Capinota council and neighbouring local authorities on irrigation planning in the central and southern valleys. Since the beginning of Popular Participation, the municipal budget had tripled by 1996 to 1.8 million dollars, of which 66 per cent came from central government matching grants, 15 per cent from central government revenue-sharing and 10 per cent from local sources. 8 The priority in terms of spending has been water and basic sanitation works. Public investment implementation rates have been high, in part due to the number of projects executed directly by local government on its own or in conjunction with local communities. Policy-making has been facilitated by the contact between municipal councillors and grass-roots peasant leaders in elaborating a five-year development plan. Although frictions persist, there is considerable ‘give-and-take’ between parties and grass-roots organizations, suggesting broad acceptance of the new ‘rules of the game’. Capinota is regarded as a success story, owing to the increase in peasant representation, grass-roots participation and effective policy implementation. However, it is not a homogeneous municipality, and there are continual tensions between urban and rural organizations as well as between the factions competing for local power. Political competition may account for the openness to local demands, but is insufficient as an explanation for the successful implementation of policy and the completion of public works projects. A tradition of municipal government

Exclusion, Participation and State-building 77

that preceded Popular Participation and of active union activity help account for this. Whilst by no means free of particularistic and clientelistic interests, both within government and in local party networks, this may have helped policy-making at the local level. 5.3. Ascención de Guarayos, Santa Cruz The lowlands have special problems for Popular Participation, both because of the size of many of the municipalities and the competing territorial claims of dozens of indigenous communities and nonindigenous farmers, loggers and cattle owners. Ascención de Guarayos, a former Jesuit settlement in northern Santa Cruz, has a population of over 11,000. The municipality is mostly urban (75 per cent), but divides along ethnic lines between Guarayo and mestizo settlers. As in most of the Chiquitanía missions, the presence of large-scale cattle ranchers and commercial farmers has limited the activities of peasant unions, providing a context for patron–client relationships. Participation in the 1995 elections was relatively high, with 60 per cent of registered voters casting their ballot. Five urban-based councillors were elected, representing 4 political parties.9 The Guarayo communities are represented by 8 grass-roots organizations, while the non-indigenous population is represented by a single neighbourhood council. Since the implementation of the reform, Guarayo leaders have not run for office nor participated directly in the activities of the municipal oversight committee. The Guarayo central opted, rather, to lobby central government for the establishment of an Indigenous Municipal District, in order to participate in the reform but retain a measure of political autonomy. Over 100 such districts have been recognized throughout the lowlands since 1996. Recognition of an Indigenous Municipal District allows for the election of a district-level mayor by customary practices and for special negotiating rights in the budgetary process. By means of Popular Participation, Ascención de Guarayos saw its budget triple in two years to reach 340,000 dollars in 1996. Revenues come overwhelmingly from revenue-sharing transfers (80 per cent), whilst locally raised revenues amount to only 5 per cent.10 The eventual establishment in 1996 of an Indigenous Municipal District in Ascensión de Guarayos represented a ‘negotiated’ solution between the indigenous and non-indigenous groups. The budgetary procedure in Ascención thus involved ‘inter-ethnic’ bargaining rather than ‘intra-party’ negotiations. Ascención de Guarayos represents a special case in the story of Popular Participation, since it shows the difficulties of building ‘common rules’ in a context of ethnic diversity. The consociational solution reached by

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indigenous and non-indigenous settlers allowed for policy-making privileges that favoured the Guarayo communities but fell short of full political and administrative autonomy. The creation of an Indigenous Municipal District, which has linked the Guarayo into new political and territorial commitments, would not have been possible prior to the Popular Participation reform. As in Capinota, the ‘scaling-up’ of grass-roots collective action has allowed for multi-municipal agreements. However, it remains critically dependent on the organizational capabilities of local communities.

6. Conclusions The Bolivian Popular Participation reform attempts to reduce the degree of political and economic exclusion faced by traditionally poor and disenfranchised populations by laying the foundations for the development of local democratic institutions. How effective has the reform been in achieving its stated objectives of increased citizen participation and the democratization of political and economic power? The analysis presented in this paper suggests that the underlying social, cultural and territorial diversity in which the reform took shape provides a key determinant in explaining the heterogeneity in outcomes. At the national level, Popular Participation has made substantial progress in boosting political representation on the part of disenfranchised sectors of the population, enhancing public accountability through grass-roots participation in local affairs, increasing the fiscal decision-making power of local governments, and beginning to change the way public policy is designed and implemented. These results suggest an important transformation in the nature of state–society relations. The extent to which Popular Participation provides a sustainable framework for local political development and more effective policymaking has to be evaluated case by case. The experience of Sacaca suggests important limitations to political and economic participation, both in the process and substance of local democratic development. Ascención de Guarayos, on the other hand, indicates a modus vivendi solution for a region characterized by sharp ethnic diversity, but it also highlights the weaknesses of the consociational approach advanced by Popular Participation. The co-existence of formal and informal channels of political and economic intermediation poses opportunities and challenges to the development of local democratic institutions. To the extent that clientelistic and particularistic behaviour grants power to some and restricts it to others, it may be seen to threaten the consolidation of fair and

Exclusion, Participation and State-building 79

accountable democratic practice. However, inasmuch as it facilitates policy-making and political and social mobility, it may be seen to offer more opportunities of access to political and economic power. Ultimately, closing the gap between the país legal and the país real will require the removal of the barriers that block the way to the formal empowerment of the poor and disenfranchised. How has Popular Participation contributed to the development of a more viable democracy in Bolivia? Two arguments can be made. First, Popular Participation contributes to the consolidation of democratic practices and institutions where and when it succeeds in increasing the degree of political representation and promoting greater citizen participation through grass-roots collective action, since in so doing it reduces the scope for non-democratic, arbitrary or clientelistic decisionmaking. Second, while contributing to the consolidation of democratic institutions, the reform falls short of guaranteeing democratic viability since it fails to provide directed policy solutions to pressing questions of social and economic development. Even at its best, Popular Participation is more of an ‘empty box’ than a substantive policy to reduce poverty and exclusion. The dangers it faces are many. From within, building democratic institutions requires not only managerial and administrative capabilities but also a functioning political system at the local level. Political parties, grass-roots leaders and other key players are, to an extent, all novices. The 1999 municipal elections were an important catalyst for local political mobilization. However, open electoral competition, representative leadership and effective and accountable government institutions will not be created quickly. From without, the temptations to reverse the decentralization experiment are also powerful. Central government administrations will be tempted by the public investment resources managed at the local level. The attempt to use the prefectures as an instrument of political and fiscal re-concentration is indicative of this. What can be done to address these dangers and promote greater access to economic and political power in the future? First, continued strengthening of public accountability is needed. Local governments should rely both on incentive as well as command-based accountability mechanisms to promote citizen/customer ‘voice and exit’ in response to public-service delivery. Only the weakest attempts have been made in this direction so far. The poor performance of oversight committees has been seen as indicative of failure in this respect, largely due to poorlydefined ex ante and ex post supervision mandates that have hampered their ability to accomplish either task. The evaluation of oversight

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performance should, however, push reformers further towards (not away from) citizen participation and public oversight. Second, policy-makers need to encourage greater experimentation in the design and implementation of local policies. Rather than push topdown solutions, prefectures and central government officials should promote and document innovation. This is particularly important for public/private or multi-municipal initiatives in agriculture, industry, commerce and other sectors; some municipalities have pointed the way towards effective partnerships that promote local economic growth and create productive employment. The geographic and territorial diversity that make the application of common rules difficult, can be used as a spring-board for the development of original policy responses. Third, the partial success of the 1995 and 1999 municipal elections in achieving greater peasant and indigenous representation in local politics should encourage the liberalization of local partisan politics. The barriers posed by clientelistic local politics limit the functioning of political representation. Peasant and indigenous community leaders are less likely to run for office under established party banners as if they were independent candidates. Until political parties democratize their own internal electoral procedures and run transparent political campaigns, party conscription constitutes a powerful entry-barrier for the poor and disenfranchised. Finally, the future of the reform will require continued support for participatory forms of democratic governance. Popular Participation has initiated a significant transformation in Bolivian politics, but it relies crucially on the ability of the grass-roots to sustain participation and collective action. The Latin American experience in popular mobilization suggests that such capabilities are limited, particularly beyond the phase of transition from authoritarian rule. To remain viable, the Bolivian experiment in participatory democracy must show the capacity to mobilize ongoing support, while offering tangible solutions to some of the most pressing problems of human and economic development.

Notes 1

‘Particularism’ is defined here as the usage of public power to advance private ends. ‘Clientelism’, in turn, is defined as a specific form of particularism that bases asymmetric relations of political power on subordination for material reward. Guillermo O’Donnell (1996) has observed that the persistence of (informal) particularistic and clientelistic power relations is intrinsic to many new Latin American democracies, and argues that, despite attempts at comprehensive reform, this may help explain why many new democracies remain (formally) unconsolidated.

Exclusion, Participation and State-building 81 2

While the Bolivian state-building reforms are actually two (the Popular Participation and Administrative Decentralization reforms), I will focus specifically on the first and highlight the most important aspects of the second as they relate to citizen participation, accountability and state-building. I use the term ‘citizen participation’ in an instrumental sense, to denote political actions (other than voting) intended to influence public decisionmaking. 3 These figures are based on estimates made by the United Nations Development Programme (UNDP) in its 1998 Human Development Report (UNDP 1997). 4 Whilst the most voted parties in 1995 were the MNR (21.3 per cent), UCS (17.4 per cent), Condepa (15.4 per cent) and MBL (13.0 per cent), the results in 1999 were MNR (20.4 per cent), MIR (15.9 per cent), ADN (14.6 per cent), UCS (11.8 per cent) and NFR (8.3 per cent) (Corte Nacional Electoral 2000) 5 In 1999, peasant and indigenous candidates ran and won under the auspices of the MSM with 31 per cent of the vote. A joint MSM–MNR alliance subsequently delivered a governing majority. 6 All fiscal data are based on public investment figures released by UDAPSO (1997). 7 In 1999, Capinota voters dispersed the vote by electing councillors from five different parties. Two campesino representatives were elected to the council. 8 All fiscal data based on public investment figures released by UDAPSO (1997). 9 In 1999, the MNR swept the board in the local elections with urban and rural candidates. The MIR and UCS won one council seat each. 10 All fiscal data based on public investment figures released by UDAPSO (1997).

References X. Albó, ‘Alcaldes y concejales campesinos/indígenas: la lógica tras las cifras’, in Indígenas en el poder local. (La Paz: Ministerio de Desarrollo Humano, Secretaría Nacional de Participación Popular, 1997). D. Ayo, ‘La elección del tres de diciembre de 1995: análisis de las 464 autoridades indígenas y campesinas elegidas’, in Indígenas en el poder local (La Paz: Ministerio de Desarrollo Humano, Secretaría Nacional de Participación Popular, 1997). D. Booth, S. Clisby and C. Widmark, ‘Popular Participation: Democratising the State in Rural Bolivia’. Report to SIDA, commissioned through the Development Studies Unit, Dept of Social Anthropology, Stockholm University (Stockholm, 1997). S. Burki, G. Perry and W. Dillinger, Beyond the Center: Decentralizing the State (Santiago: Economic Commission for Latin America and the Caribbean (ECLAC), 1997). R. Calla and H. Calla, Partidos políticos y municipios: las elecciones de 1995 (La Paz: Instituto Lationamericano de Investigaciones Sociales (ILDIS), 1996). Corte Nacional Electoral (CNE), Resultados finales de las elecciones municipales de 1999 (La Paz: CNE, 2000). J. Fox, ‘The Difficult Transition from Clientelism to Citizenship: Lessons from Mexico’, World Politics, 46, Jan. 1994.

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B. Giussani and F. Ruiz, Proceso de decentralización y financiamiento de los servicios de educación y salud en Bolivia (Santiago: CEPAL, 1997). Gobierno de Bolivia, ‘Estratégia para la transformación productiva del agro’. Presented to the Consultative Group, Paris, March 1996. G. Gray-Molina, ed., Participación popular: Construyendo políticas públicas locales en Bolivia (La Paz: Unidad de Análisis de Políticas Sociales (UDAPSO), 1997). G. Gray-Molina and G. Molina Ballon, ‘Programación de la inversión pública municipal: ¿a dónde fueron los recursos?’, in G. Gray-Molina, ed., Participación popular: construyendo políticas públicas locales en Bolivia (La Paz: Unidad de Análisis de Políticas Sociales (UDAPSO), 1997). O. Guzman Boutier, ‘Denuncias del comité de vigilancia o cuán efectivo es el control social.’ Mimeo (La Paz: Vice-ministerio de Participación Popular, Ministerio de Desarrollo Sostenible, 1998). J. Linz and A. Stepan, ‘Toward Consolidated Democracies’, Journal of Democracy, 7, April 1996. J. Medina, Poderes locales: implementando la Bolivia del próximo milenio (protocolos de gestión de un subsecretario) (La Paz: Fondo Editorial FIA/Semilla/CEBIAE, 1997). S. Molina and I. Arias, De la nación clandestina a la participación popular (La Paz: Centro de Documentación e Información, 1996). R. Molina Rivero, ‘Una reflexión crítica en torno a la Ley de Participación Popular y sus repercusiones sobre las poblaciones indígenas’. Mimeo, 1997. A. Nickson, Local Government in Latin America (London: Lynne Rienner Publishers, 1995). G. O’Donnell, ‘On the State, Democratization and Some Conceptual Problems: A Latin American View with Glances at Some Post-communist Countries’, World Development, 21, no. 8, 1993. G. O’Donnell, ‘Illusions about Consolidation’, Journal of Democracy, 7, no. 2, April 1996. G. Rojas and M. Zuazo, Los problemas de representatividad del sistema democrático boliviano: bajo el signo de la reforma del Estado (La Paz: Instituto Latinoamericano de Investigaciones Sociales (ILDIS), 1996). E. Ticona, G. Rojas and X. Albó, Votos y whipalas: campesinos y pueblos originarios en democracia. (La Paz: Fundación Milenio and Centro de Investigación y Promoción del Campesinado (Cuadernos de Investigación (CIPCA) 43) 1995). D. Tuchschneider, ‘Una visión desde la planificación participativa municipal,’ in La Participación popular: avances y obstáculos (La Paz: Grupo DRU y Unidad de Investigación y Análisis, Secretaría Nacional de Participación Popular, 1996). UDAPSO, ‘Carpeta de indicadores de la Participación Popular’ (La Paz: Unidad de Análisis de Políticas Sociales, Ministerio de Desarrollo Humano, 1997). UNDP, Desarrollo humano en Bolivia (La Paz: UNDP, 1998). A. Vadillo, ‘Constitución política del estado y pueblos indígenas’, in El pulso de la democracia: participación ciudadana y descentralización en Bolivia (La Paz/Caracas: Ministerio de Desarrollo Humano, Secretaría Nacional de Participación Popular/ Nueva Sociedad, 1997).

5 Rural Poverty and Development Jorge Muñoz

1. Introduction Since 1985, Bolivia has been successful in stabilizing its economy, liberalizing its domestic markets, making its currency fully convertible and integrating its economy to international markets. Moreover, since 1993 the country has implemented a series of ‘second-generation’ reforms in areas such as fiscal decentralization, education, land administration, privatization of state-owned enterprises and pension reform. These have earned Bolivia international recognition and praise. In spite of these achievements, however, the economy is barely growing at a rate of 4 per cent a year and the majority of the population remains extremely poor. For Bolivia’s reforms to be sustainable and its democracy made viable, the country needs to grow faster and the benefits of growth need to be more widely distributed. Stabilization and structural adjustment laid the foundations for more sustainable growth. However, they are not enough. A long-term economic development strategy is needed to address problems of rural and urban poverty (especially in the western highlands and valleys), the social and political exclusion of the majority of Bolivia’s indigenous populations and the degradation of its natural resources. An important step in addressing some of these issues was taken in 1994 with the initiation of the Popular Participation reform (see Chapter 4). The presentation of the Strategy for the Productive Transformation of Agriculture to the consultative group of international donors in 1996 also represented an important advance in strategic thinking on some of these issues. However, more conceptual and institutional analysis is needed to make a rural development strategy viable. To date, only a few of the recommendations have been implemented. 83

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This chapter is organized around three main arguments. First, it argues that poverty alleviation is a sine qua non for the long-term social, political and economic sustainability and that this requires significant investment in rural development and agriculture. It will be very difficult to alleviate rural (and urban) poverty simply by redistributing the benefits (by means of ‘trickle-down’ or Popular Participation) from growth elsewhere in the economy. Although history shows that other countries have achieved remarkable agricultural development and transformation without democracy (especially in Asia), for democracy to be underpinned an agricultural development strategy is needed to raise rural living standards and reduce social exclusion. Or to put it more generally, if the majority of the population remains very poor, it will have little stake in preserving democracy. Second, rural poverty alleviation needs to be addressed as a national development imperative, not merely as a sector- or region-specific challenge. The magnitude of the challenge to alleviate rural poverty demands a national strategy of public investment aimed at increasing significantly agricultural productivity, in the context of sustainable management of natural resources and as part of an ongoing decentralized and participatory process of public investment. Substantial increases in agricultural productivity require large investments in rural education and agricultural technologies based on sound applied research and in accordance with relative factor scarcities. Third, the implementation of such an ambitious long-term rural development strategy demands a broad national consensus and a very participatory approach to public investment and accountability. In the last few years, progress has been made on the participatory approach, but much work still needs to be done towards reaching a national consensus on the imperative of rural development. Bolivia has a history of partial, interrupted and failed attempts at developing its rural economy. The public investment programme proposed in early 1996 had some of the necessary technical ingredients for becoming a viable long-term development strategy, but it was still too general, required more analytical work and lacked the political and institutional leadership to carry it out.

2. Rural poverty, urban poverty and economic development 2.1. The magnitude of the problem Bolivia is a very poor country. It is the poorest country in South America and the third poorest in the western hemisphere after Haiti and Honduras.

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The World Bank estimated a per capita income of only US$800 for 1995, comparable to countries such as Lesotho in Africa or Indonesia in Asia (World Bank 1997a). The Human Development Report, using a purchasing power parity approach for 1994, estimated an income of US$2,598 (UNDP 1997). There are no reliable data on income distribution in Bolivia, but there is no question that there are enormous differences in standards of living between the highest and lowest income strata, between urban and rural areas, and particularly between the non-indigenous and indigenous populations. Regional studies indicate that per capita consumption levels in rural Bolivia are less than one US dollar a day (Muñoz 1994, World Bank 1996). If we define rural areas to include towns of less than 10,000 inhabitants, Bolivia is still roughly 58 per cent rural. According to the poverty map, using 1992 census data, 51 per cent of urban households and 94 per cent of rural households had ‘unsatisfied basic needs’ (see Table 5.1). That is to say, half of all urban households (or close to 1.5 million people) and almost all rural families (roughly 4 million people) lack adequate access to drinking water, sewerage, education and health services. Similarly, functional illiteracy rates in rural areas are very high: 58 per cent of men and 70 per cent of women cannot read or write in Spanish. Health indicators for rural areas are also considerably worse than for urban areas. Furthermore, the evolution of urban poverty in Bolivia, as in many other developing countries which have failed to develop agriculture successfully, is directly associated with the severity and dynamics of rural poverty. Although Bolivia has not suffered the common Latin American syndrome of one primary city absorbing the majority of rural–urban migrants, there is a growing problem of urban slums in El Alto (La Paz), Cochabamba and Santa Cruz. Rural–urban migration in Bolivia has been primarily the result of ‘pull’ factors associated with the urban bias of past development strategies. Similarly, rural–rural migration since the 1950s has been the result of public investments in settlement programmes and road-building in the humid lowlands. Migration has rarely been the result of ‘push’ factors associated with pressure on the land. This chapter argues that for economic growth to be sustained in the long run, rural poverty must be reduced significantly through direct investment in agricultural productivity, human capital and rural infrastructure. The reduction of urban poverty is also dependent on a successful rural development strategy, since only a dynamic rural economy that generates sufficient farm and off-farm income and employment will be able to reduce the flow of poor rural migrants to urban centres.

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Table 5.1

Bolivia: social indicators and living conditions

Households with Unsatisfied Basic Needs, UBN (1992): Urban Rural

69.8 per cent 51.1 per cent 94.0 per cent

Households with drinking water at home: Urban Rural

74.8 per cent 17.2 per cent

Households with sewerage: Urban Rural

36.2 per cent 0.9 per cent

Households with electricity or adequate fuel for cooking: Urban Rural

89.0 per cent 6.5 per cent

Functional illiteracy (1991–4): Urban Men Women Rural Men Women

20.0 per cent 27.0 per cent 58.0 per cent 70.0 per cent

Infant mortality rate (1984–94): Altiplano 142 per thousand live births Valleys 158 per thousand live births Lowlands 84 per thousand live births Life Expectancy at Birth: 59 years Source:

Poverty Map, UDAPSO, INE, UPP, UDAPE and ENDSA 1994.

2.2. Alternative scenarios for poverty alleviation We have described the enormous challenge that rural poverty alleviation represents for Bolivia and explained why it needs to be addressed directly. But are there other possible strategies to alleviate poverty that Bolivia could follow? In other words, should public investment funds be utilized in other areas instead of rural development? In this section, we discuss the prospects for poverty alleviation under three hypothetical optimistic scenarios: (i) rapid, urban-based growth; (ii) an agricultural export-led growth strategy with heavy public support; and (iii) a natural resource, rent-based growth, were Bolivia to discover suddenly a rich and large source of foreign exchange earnings, such as oil fields or new mines. (i) Rapid Urban Growth. A development strategy based on a rapidly growing urban manufacturing or service sector is often justified partially on the argument that agriculture is strategically inferior to manufacturing

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as a source of growth and employment generation. Theoretically, this argument has roots in the classic two-sector models developed by Lewis (1954), Hirschman (1958), Ranis and Fei (1961) and others. Empirically, the argument has often been supported by the historical observation that in industrialized countries, the share of agriculture as a proportion of GDP had irreversibly declined in the process of development. A central tenet of this argument is that manufacturing is superior to agriculture and that a country would do well to transfer resources in the form of labour migration and capital transfers from agriculture (where the marginal productivity of labour is assumed to be close to zero) to the rest of the economy. Through forward (processing) and backward (input supply) linkages, manufacturing has greater potential for stimulating domestic industries and generating employment. However, the experience of the import-substitution industrialization efforts in much of Latin America showed that in most cases these linkages did not materialize, the manufacturing industries remained protected for long periods gradually becoming uncompetitive (thus taxing consumers), and the country exchanged one form of dependence (manufactured goods) for another (intermediate and capital inputs). In the case of Bolivia, what urban industries are likely to emerge in the next decade or so in the context of increased market globalization (through Mercosur for example)? Most likely, the country would find that it has a comparative advantage in some labour-intensive simple manufacturing industries, such as textiles and apparel. But for these industries to grow, they will need gradually to absorb more labour from rural areas. However, for these industries to remain competitive, labour costs would have to be kept low since the country does not possess a technological advantage over its potentital regional competitors. One key determinant of labour costs is the real price of food. If productivity in agriculture (especially in non-tradable commodities) does not increase, the real price of food will be determined mostly by food imports, which means that Bolivian labour will gradually become (in nominal wage terms) expensive and uncompetitive unless some sort of wage repression is used. Since other countries have higher education levels, Bolivia’s competitive edge will be gradually eroded. However, even if Bolivian labour costs remain competitive, how would urban growth trickle down to poor rural areas? Perhaps the most important transfer mechanism for rural areas that currently exists is Popular Participation (that is, block transfers to municipalities). This is an effective non-market mechanism for income redistribution. Yet, it would be very risky to expect that the benefits of urban growth would

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be shared with rural areas just through a fiscal transfer mechanism. In the long run, market-based mechanisms, such as off-farm rural labour absorption and increased demand for agricultural products, are essential if rural poverty is to be alleviated in any substantive way. (ii) Export-led agricultural growth. A second hypothetical scenario involves an expanded and dynamic export-oriented agricultural subsector. There is no question that this scenario would be very positive for the country as a whole, but it would have only a limited impact on rural poverty alleviation, since production of the main commodities exported is fairly capital intensive. In the case of soya, high profitability results from preferential access to export markets in Andean countries (Colombia, Peru), a circumstance that may not last. Furthermore, as commodity prices tend to be more volatile than the prices of manufactures, the profitability (and hence dynamism) of this sector is vulnerable to external shocks (such as weather or international market changes) and to internal adjustments to these shocks (especially currency appreciation). Also, since the rents of this growth tend to be captured largely by the producers themselves (as opposed to consumers), there is little justification for public investments in promoting this growth (aside from public goods such as roads, etc.). Most of this growth should be driven by private investment. There is little need for further public involvement in stimulating it. (iii) Natural resource rent-based growth. The two last scenarios are to some extent already occurring in Bolivia, and indeed they are having a limited impact in overall (and especially rural) poverty alleviation. Yet what if Bolivia were to discover some new rich source of natural resource rents? How could a sudden and sizeable flow of income be used to alleviate poverty? There are many countries that have had the fortune (or quite often the misfortune) to discover large sources of rent. The main problems associated with rent income are (1) how to distribute the rents (through public means) and (2) how to keep the rest of the country from suffering from ‘Dutch disease’. With regard to the first, Popular Participation could be used to distribute rents since it channels resources to rural areas, but it runs the risk of becoming an entitlement mechanism that would be difficult to sustain once the rents run out (as they usually do). Rural areas, accustomed to receiving net transfers, would have little incentive to expand their own local revenue-raising capacity or to develop competitive local industries. With regard to the second problem, the key challenge is sound management of the exchange rate, so that appreciation does not undermine the competitiveness of other tradable sectors (see Chapter 3).

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3. The challenge of rural poverty alleviation 3.1. Past development efforts Precarious living conditions in rural Bolivia are the result of a combination of many factors, including geographic and demographic constraints; a long history of dependence on export enclaves; and low levels of public investment in agriculture, rural infrastructure and human capital. Throughout its colonial and republican history, Bolivia’s economic development has been fashioned by its geographical isolation. Its trade opportunities have been limited by the Andes to the west and the Amazonian jungle and Chaco plains to the east and south. It also has a very low population density (barely seven inhabitants per square kilometre), and costly transport infrastructure ties have raised the costs of trade. Suitable places for highland agriculture tend to be far from one another. These factors, combined with a complicated topography, have constrained the domestic market for all types of commodities and raised the delivery costs of basic services, such as education and health. What is now Bolivia became inserted into the world economy and the international division of labour when silver was discovered in Potosí in the sixteenth century. Since then, the country has depended heavily on ‘enclave’ natural resource export sectors – first silver, then tin (in the early twentieth century), oil and gas in the 1980s, and most recently coca and soybeans. With the exception of coca, which is labour intensive, all Bolivia’s sources of foreign exchange have had weak backward linkages to the rest of the economy. Since historically there were large natural resource rents to exploit, there was little incentive to develop rural areas. Also, since a significant portion of the foodstuffs needed to feed the population in mining centres was imported by rail (especially grains), using the wagons used for the export of ores, there was a limited potential for expanding the domestic market for agricultural produce. Consequently, there was no endogenous pressure to generate new technologies for the intensification of agriculture. Until the Second World War, there was no proper rural development strategy, and public investment in rural areas was minimal. Development was guided by the interests of the mining industry and its urban/professional political alliances. In 1941,with the United States interested in securing Bolivian minerals and other primary commodities essential for the war effort, the US embassy commissioned Merwin Bohan to design a development strategy for the country (Wennergren and Whitaker 1975, Dandler 1984, Godoy et al. 1993). The ‘Bohan Plan’ argued that Bolivia needed to break its dependence on mineral exports by diversifying its

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economy. This meant prospecting for hydrocarbons, developing agriculture in order to substitute food imports and generate some exports, and opening up the eastern lowlands (Bohan 1942). To this end and assisted by the United States, Bolivia created an Agricultural Bank (BAB) in 1942 and a national development corporation (CDF) in 1944. The 1952 revolution marked the beginning of a new era in Bolivia’s social, political and economic history. The post-1952 rural development strategy – based on Bohan and backed up by other international missions (including the UN Keenleyside Mission of 1951 (Dandler 1984, Godoy et al. 1993)) – was based on four key pillars: i) massive land redistribution in the country’s highlands (Altiplano and semi-arid valleys) in favour of peasant farmers; ii) settlement programs in the Andean piedmont and Santa Cruz lowlands to alleviate demographic pressure in the highlands and open up the agricultural frontier; iii) public investments in roads (notably the Cochabamba–Santa Cruz highway) and agro-industrial infrastructure (sugar refining, milk processing, cotton mills, edible oil refining, etc.); and iv) state support for agricultural services, especially rural credit and research, the latter through the creation of the US-financed InterAmerican Agricultural Service (IAS). This rural development strategy lasted until the early 1980s when the country entered the worst social, political and economic crisis in its republican history. The strategy achieved some important objectives. By the 1980s, almost all occupied rural land in the highlands (20 to 25 million hectares) had been distributed to peasant communities and individual farmers. Some 80,000–100,000 families had migrated from the Altiplano and valleys to the humid colonization regions involving the allocation of 3–5 million hectares. Also, the country became self-sufficient in rice, sugar and oilseed whilst generating sizable exports of soybeans, cattle and other agricultural commodities. Areas under cultivation in the Chapare and in eastern and northern Santa Cruz have grown rapidly and continue to attract new migrants. Slowly infrastructure was developed (roads, schools, agro-industries); research and extension services were made available by IBTA-Chapare, CIAT in Santa Cruz and numerous nongovernmental organizations (NGOs). Rural incomes in these regions have increased. Several hundred thousand people have benefited from these achievements over the course of four decades. Additionally, the emergence of coca as a very profitable crop (due to the illegal nature of

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its derivates and associated international drug trade) has played a major role in stimulating growth in the Chapare region. In Santa Cruz agricultural growth has been boosted by a combination of several factors: attractive international prices for soya; the extension of the agricultural frontier into the vast alluvial plains east of Rio Grande; heavy public investments in roads, research and extension, as well as land use planning; and significant private investments (including foreign capital) in land clearing, marketing, processing and export promotion. Exports of soya and its derivatives account for close to one-third of the country’s legal (excluding coca/cocaine) sources of foreign exchange. Despite these positive developments, policy had little impact in alleviating poverty in the highlands, where the majority of the rural population still lives. Living standards and agricultural production conditions for the majority of the 2.5 million inhabitants of the Altiplano and Andean valleys remain precarious. In western Bolivia, farmers by and large continue to use the same technologies that their ancestors used. Crop yields for staples – such as potatoes and maize – have remained stagnant for decades. Real per capita agricultural incomes have continued to fall. Agriculture in these regions is gradually becoming less and less profitable, as plots shrink in size, the natural resource base deteriorates and access to the most basic public services remains limited. Farmers have increasingly come to rely on off-farm employment to supplement their incomes. 3.2. Reasons for lack of success There are several reasons why the strategy over the last four decades has had only a marginal effect in alleviating rural poverty. Five in particular stand out. First, the agrarian reform, which started in 1953, was more successful in stabilizing the country socially and politically than in providing a mechanism for economic growth. The reform redistributed land in favour of peasant farmers and prevented the earlier onset of rural–urban migration. Initially, rural incomes rose as farmers were able to capture the land rents that previously went to urban landlords. Some agricultural intensification also took place in the more densely populated areas, such as the Cochabamba valleys. However, these gains gradually diminished since further population growth led not to technological innovation but to land subdivision and a deterioration of the natural resource base. Since Andean agriculture was geared almost entirely for domestic consumption, agricultural intensification generally caused prices to fall.

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Second, agricultural development was seen typically as a means to substitute food imports. This explains the priority given in the 1970s to expanding cultivation of sugar cane and rice, establishing sugar mills and milk processing plants, and generating exports (cotton in the 1970s, soya in the 1990s). In both cases, the emphasis was on tradable commodities, because the perception was – and still is – that the main contribution that agriculture can make to the country’s development is to alleviate the balance of payments. Little attention has been given to the critical role that agriculture can play in the ‘structural transformation’ of the economy or in poverty alleviation, both rural and urban. The technological transformation of agriculture, particularly in nontradable crops, is essential for increasing real incomes, expanding domestic demand, releasing resources from agriculture, expanding nonfarm employment and stimulating growth throughout the economy. Third, the strategy had a clear regional bias. Most public investment went to the lowland regions of Santa Cruz and Chapare. Whilst this attracted migrants and helped alleviate demographic pressures in the highlands, it did little (except through remittances) to improve the living conditions there. Fourth, as the emphasis was on opening up frontier regions and introducing new crops, little attention was paid to rural education, either among migrant settlers in the lowlands or among those who remained in the highlands. This made the process of labour adjustment out of agriculture more difficult. Fifth, the great majority of projects, settlement programmes, investments in infrastructure and agro-industries and institutional strengthening was (and continues to be) heavily dependent on foreign assistance. Government commitment to these projects and programmes was erratic. In particular, there was little long-term government commitment to capacity and institution-building. This remains a key problem which contributes to the country’s economic, social and political vulnerability. Consequently, even when there is rapid growth in some agricultural subsector (such as soya), the impact on poverty is minimal; this sort of growth is mostly natural resource- and capital-intensive, creating little rural employment and benefiting primarily an urban-based farming elite. 3.3. Alleviating poverty Aside from moral arguments about the need to alleviate rural poverty, there are several compelling reasons for doing so on the grounds of

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strengthening democracy and facilitating economic development. Here, we only discuss those related to the economic effects of a reduction in rural poverty, since the issue of increased democratic participation is taken up in Chapter 4. In a landlocked country of 7.1 million inhabitants, a population density of only 7 inhabitants per square kilometre, a per capita income of only US$800 and with over two-thirds of the population living on no more than one dollar a day, the potential for developing even some of the most basic domestic industries is clearly limited. The Bolivian domestic market is so small that only a reduced number of the most essential non-tradable product and service industries can emerge spontaneously and survive competitively over time. The country’s comparative advantage primarily lies in the exploitation of rich natural resources, cultivation of some primary commodities, and low-tech manufacturing of products like beer and alpaca clothing. Foreign-exchange earnings from these exports can then be used to import the majority of consumer products, virtually all consumer durables and luxury items, and all intermediate and capital inputs. The tragedy of being a poor, landlocked and sparsely populated country is that even the development of non-tradable, labour-intensive industries is constrained by weak domestic demand. Poor people simply do not generate sufficient income to demand even cheap products and services, so the potential providers of these goods and services have difficulty in finding a market for their products. Rural inhabitants in Bolivia are poor because total factor productivity in agriculture – their primary or ‘default’ occupation – is so low. Of the three main factors of production (land, capital and labour), the overwhelming majority of peasant farmers in the highlands have easy access to only one: their labour. Productivity in agriculture is low because the natural resource base – in particular soil and water (for simplicity’s sake referred here to as ‘land’) – is either very limited or of poor quality. Thus, even when significant amounts of labour and capital are applied to poor-quality land resources, the amount of output produced per unit of land (yield) is low. And more importantly, the more labour is used to compensate for low-quality land, the lower per capita output levels will be. Similarly, even if a farmer has unrestricted access to financial capital, purchasing more capital inputs within the same production function does not necessarily increase farm incomes if alternative technological packages are not available to increase the productivity of land and labour.

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3.4. Three ways to raise farm incomes In principle, increases in farm income could be achieved in three different ways: (i) by applying more inputs to the production process, (ii) by increasing the overall efficiency of factor use and (iii) by increasing the productivity of factors. Confusion about the logic and policy implications behind each of these three mechanisms has often resulted in misguided policies and costly mistakes. The first mechanism assumes that there are economies of scale in agriculture and that by applying the same practices on a larger scale, one can increase the returns to factors. An implication of this is that larger farms are more efficient than smaller ones and that per capita incomes can be increased by consolidating small plots. However, for the majority of crops and farming systems in Bolivia today, there is little empirical evidence to support the argument that farm incomes can be increased by scale economies. The second mechanism assumes that peasant farmers are doing something wrong and that if an outside technical expert were to show them a better way of allocating the factors of production, their incomes could be increased through ‘efficiency gains’ from better extension services. Unfortunately, there is little evidence that current farming practices in the country are inefficient or severely distorted. They generate low incomes because of a lack of improved technological packages and limited market access, not because factor allocation is inefficient. The third mechanism is based on substantive changes in the overall technological package that farmers use. It is this third mechanism that needs to be the focus of public policy, because it is the one that has the greatest potential for externalities and income growth. The main challenge then is to invest public resources in developing technological innovations for the highlands of Bolivia which farmers would find economically attractive and easy to adopt. In sum, peasant farmers in highland Bolivia are poor less because they are inefficient or their farms are too small to take advantage of existing economies of scale, but rather because they lack alternative technological packages. The tragedy of being a poor Andean farmer is that land (both soil and water) is scarce and of low quality, capital is both scarce and not very helpful in raising agricultural productivity (because alternative technological packages are not readily available), and family labour is plentiful but of low productivity. 3.5. Prioritizing public investment in rural development In their efforts to modernize agriculture, governments have traditionally placed more emphasis in alleviating capital constraints than improving

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land resources or investing in human capital. Theodore W. Schultz, the 1973 economics Nobel laureate, noted more than 35 years ago that the relative importance of the three factors of production in transforming traditional agriculture is actually in the opposite order. He argued that differences in incomes and living standards among traditional farmers could be explained first by labour quality differentials (specifically related to education levels), then by land quality, and only lastly by access to capital (Schultz 1964). This may be a gross generalization, but it highlights one important aspect of the failed agricultural strategies in Bolivia, namely, that technological innovation can only be effective in raising rural incomes when farmers have the ability, the economic incentives and the means to adopt new packages. A successful development strategy must address all these issues in a systematic way: they must develop technologies that are consistent with the sustainable management of natural resources, that take into account the actual social and economic environment (especially with regards to relative prices and marketing constraints) in which farmers operate, that are complemented with significant investments in rural human capital, and that can be disseminated to a large number of beneficiaries in a highly participatory manner. This has important implications for the link between rural poverty, natural resource degradation and technological innovation. As we will see in the next chapter, the main reason for the gradual degradation of natural resources in the Andean highlands and valleys – as in many other developing countries – is poverty, not population growth. In other words, a high labour to land ratio does not necessarily lead to unsustainable use of natural resources. Increases in demographic density are only harmful to the agricultural natural resource base when the technological package developed and used for low-density situations is used under high-density scenarios. The culprit then is lack of technological innovation (a public-sector failure) and not population growth per se (a natural ingredient in the course of economic development). There are plenty of examples world-wide where very high population density has led neither to rural poverty nor degradation of natural resources, but rather to technological innovations to make more intensive and sustainable use of these resources. Since technological innovation in agriculture (especially land saving), as opposed to other sectors, depends heavily on basic and applied research, field validation and widespread diffusion among the beneficiaries, these public goods and the economies of scale they generate imply significant government intervention. Significant and sustained investments are required for research on and validation of new technological packages,

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particularly for non-tradable crops that represent a significant component of the basic consumption basket for the majority of the population. That significant public investment in research and extension is needed to raise agricultural productivity is not a new argument. Bolivia made important investments in this area in the late 1950s and early 1960s when the United States funded the IAS. However, the progress made then had only a limited impact on rural poverty due to erratic government fiscal outlays, limited participation by farmers in extension and overly centralized and isolated research efforts. Between 1990 and 1995, public investment in rural areas represented only 38.5 per cent of total public investment, which itself amounted to only 3 per cent of GDP or just US$13.30 per capita. Most was invested in the relatively better-off regions of Chapare and Santa Cruz. With the Popular Participation reform, public investment in rural areas jumped to 47.1 per cent in 1996 and is expected to reach 80 per cent by 2000 (Ministerio de Hacienda 1996).

4. Strategy for the Productive Transformation of Agriculture (ETPA) In March 1996, at The World Bank’s Consultative Group meeting, the Bolivian government presented the Strategy for the Productive Transformation of Agriculture (ETPA) as an official public investment programme for the following five years. The proposed strategy had four main ‘pillars’: i) a technological leap in agriculture, through short-term validation and diffusion of existing technologies and through long-term research, extension and training programmes; ii) sustainable management of natural resources, including rehabilitation of watersheds and irrigation infrastructure and modernization of the national land administration system; iii) increased investments in human development (education and health) in rural areas, with particular emphasis on women’s education; and iv) investments in market-expansion infrastructure, especially roads. The ETPA strategy aimed at improving agricultural technology, since this not only benefits rural households but has wider effects throughout society. When new technologies are applied to essential non-tradable crops that constitute an important component of the basic food basket of the majority of the population (so-called ‘wage goods’), the effect on

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real incomes is very significant. Improved farming technologies result in higher productivity and yields. The increased supply of non-tradable products would translate into lower consumer prices for the entire population, rural and urban. The net effect of lower food prices is an increase in real incomes for all consumers, but with particular benefit to the poorest segments of the population as they spend a larger share of their budget on food. Therefore, the benefits of public investments that increase the productivity of non-tradable agricultural wage goods tend to be widely distributed across the entire population, but with the poor benefiting proportionately more. Increases in real incomes resulting from lower food prices give rise to a second round of important economic benefits. More disposable income on the part of the poor leads to increased demand for non-food products and services, which can significantly increase domestic demand for basic industries. The important lesson behind this logic is that what initially appears to be only a rural investment programme eventually ends up benefiting the entire economy, especially the poorest. Over time, as new technologies are adopted more widely by farmers, there will be strong pressures for some agricultural labour to seek off-farm employment. In order to facilitate this, it is essential that investments in technological innovation are accompanied by significant investment in rural education. Improved education will allow farmers to adopt new technologies more easily and to develop new marketable skills if they seek employment outside agriculture. A third important effect of a productivity increase in non-tradable food staples is an improvement in the country’s international competitiveness. On the one hand, lower food prices reduce inflationary pressures. On the other, lower food prices represent increases in real incomes, thus reducing the pressure for increases in nominal wages. Non-rising nominal wages, accompanied by increases in real income, would allow the country to remain internationally competitive (in terms of labour costs) without sacrificing living standards. When new technologies are applied to tradable agricultural commodities, the main benefit to the economy is increased foreign exchange earnings (either from increased exports or reduced imports), thus strengthening the country’s current account.

5. Conclusions Initially, the ETPA strategy was enthusiastically endorsed by most international donors, since it involved a welcome change in Bolivia’s policy

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priorities in favour of rural poverty alleviation. However, this support gradually turned to scepticism for a variety of reasons. First, the Sánchez de Lozada administration did not seize the opportunity to consolidate support for the strategy, within government, amongst international donors or civil organizations. Many public and private institutions remained uninformed about it, indifferent to it or opposed it. The government even failed to rally support among sectors most likely to benefit, such as farmers and their organizations, municipal governments and decentralized rural service agencies. Second, although in principle USAID and the World Bank – the most important donors for the first and second ‘pillars’ – agreed with the broad objectives, in practice they had strong reservations about the means proposed by the government to achieve them. The case of the World Bank was particularly notable, considering that the Bank is a strong supporter of land tenure reform. Indeed, ETPA followed closely the Bank’s own recommendations for rural poverty alleviation in developing countries. A recently-published sector strategy for the Bank, ‘Rural Development: From Vision to Action’, states that ‘increasing farm productivity requires the development and application of new and improved technology from research and extension, private-sector investment, and better management of natural resources on which production and productivity depends . . . In the past . . . many programs focused on technical issues and specific crops, without sufficient concern for policy, private-sector incentives, sustainable resource management, commodity diversification, or decentralization and participation of farmers and other rural dwellers in decision-making. . . . Many of these programs bypassed rural women. Sustainable intensification of production systems therefore requires new approaches’ (World Bank 1997b: 71). Despite its initial support for ETPA, the Bank did not build its official Country Assistance Strategy (CAS) for Bolivia around these principles. Third, the government failed to appoint a strong leader to assume responsibility for implementation. Bolivia’s democracy is heavily dependent on presidential leadership. One feature that explains the success in implementing the most important reforms after 1993 is that they were all undertaken at the behest of strong leaders with full presidential support. Other reforms (like education) which lacked leadership suffered. ETPA did not catch the full attention of President Gonzalo Sánchez de Lozada until very late in his administration. Fourth, in addition to strong leadership, a strategy of this magnitude needed the support of a wide coalition of stakeholders. The World Bank document cited above points to the importance of there being a national

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consensus for the formulation of a rural development strategy (World Bank 1997b: 41). The task of building a strong constituency to support and defend a long-term rural development strategy is something that Bolivia’s political leadership was unable to accomplish either in the 1950s and 1960s, when USAID strongly supported rural development in general and agricultural research in particular, or in the 1990s when it could have rallied stronger support from international donors.

References M. Bohan, Plan Bohan. Informe de la Misión Económica de los Estados Unidos a Bolivia (1942), trans. G. V. Bilbao la Vieja (La Paz: Editorial Carmach, 1988). J. Dandler, ‘El desarrollo de la agricultura, políticas estatales y el proceso de acumulación en Bolivia’, Estudios Rurales Latinoamericanos, 7, no. 2, 1984. R. Godoy, M. de Franco and R. G. Echeverría, ‘A Brief History of Agricultural Research in Bolivia: Potatoes, Maize, Soybeans and Wheat Compared’, Harvard Institute for International Development (HIID) Development Discussion Paper Series, no. 460, Harvard University, Cambridge, Mass. (July 1993). A. O. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958). Instituto Latinoamericano de Investigaciones Sociales (ILDIS) and Instituto Interamericano de Cooperación para la Agricultura (IICA), La Agricultura Sostenible y el Medio Rural en Bolivia (La Paz: ILDIS/IICA, 1966). A. W. Lewis, ‘Economic Development with Unlimited Supplies of Labour’, Manchester School, 28, 1954. Ministerio de Hacienda, ‘Estratégia para la Transformación Productiva del Agro’, presentación del Gobierno de Bolivia al Grupo Consultivo, Paris (March 1996). J. A. Muñoz, ‘Rural Credit Markets and Informal Contracts in the Cochabamba Valleys, Bolivia’. Ph.D. dissertation, Food Research Institute, Stanford University, Stanford, Calif., June 1994. G. Ranis and J. C. H. Fei, ‘A Theory of Economic Development’, American Economic Review, 51, 1961. T. W. Schultz, Transforming Traditional Agriculture (Chicago: University of Chicago Press, 1964). United Nations Development Programme (UNDP), Human Development Report (1997) (New York: UN). E. B. Wennergren and M. D. Whitaker, The Status of Bolivian Agriculture (New York: Praeger, 1975). World Bank, Bolivia: Poverty, Equity, and Income, Selected Policies for Expanding Earning Opportunities for the Poor. Report no. 15272-BO (Washington DC: The World Bank, Feb. 1996). World Bank, World Development Report (Baltimore and London: Oxford University Press, 1997a). World Bank, Rural Development: From Vision to Action (Washington DC: The World Bank, Oct. 1997b).

6 Technology and Rural Productivity Diego Sánchez de Lozada and Carlos Valenzuela

1. Introduction As we have seen in preceding chapters, extreme poverty in Bolivia is concentrated in the rural sector. According to the Ministry of Human Development, poverty affected 94.2 per cent of rural households and this proportion only improved marginally (by four percentage points) between the censuses of 1976 and 1992 (Ministerio de Desarrollo Humano 1995). Improvements in rural income have been limited mainly to the department of Santa Cruz (where large-scale farming enjoys access to land, technology and finance) and the coca-producing area of the Chapare in Cochabamba. At the same time, economic growth in recent years has mostly benefited urban centres, notably the cities of La Paz, Santa Cruz and Cochabamba. In urban areas, the percentage of households living in poverty fell from 65.8 to 49.5 per cent between the two census dates. Nevertheless, there are still strong concentrations of poverty within urban areas. Poverty belts of cities are the destination for migrants from the rural sector. Migration is largely a function of the inability of the rural economy to sustain population where agricultural productivity is very low. Since the early 1980s there has been a process of socio-economic polarization in society as a whole, with the rural population largely by-passed by the benefits achieved. It is unclear why Bolivia’s relative ‘success’ since 1982 – the transition to democracy, economic stabilization, modest overall rate of growth and the implementation of ‘second generation’ reforms – has not done more to reduce the scale of rural poverty. What is clear is that rural poverty represents a threat to the consolidation of Bolivian democracy and the country’s longer-term peaceful development. Economic and political exclusion tend to give rise to populist, extremist and racist political movements. Further, the erosion in the credibility of democratic institutions 100

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may promote popular backing for more authoritarian forms of government. In spite of the achievements at the level of Popular Participation (Chapter 4) and the enactment of other laws to increase accountability and to vest in local communities oversight functions, the perception remains widespread that income improvement and favourable judicial decisions are achieved mainly through corruption and clientelism. How long can this polarization and potential for social unrest be kept in check if most of the rural population remains excluded from the process of socio-economic development? Although it is certainly true that the second-generation reforms of the mid-1990s will need time to take full effect, it is our contention that further policies are required to combat rural poverty and exclusion, and that any approach to fighting rural poverty must involve a substantial leap in rural productivity (Chapter 5). To this end, a broadly-based strategy is required, grounded on agricultural development, along the lines suggested in the 1996 Stategy for the Transformation of Agricultural Productivity (Ministerio de Hacienda 1996), and taking into account the arguments of Sadoulet and de Janvry (1995) and Tomich et al. (1995). This chapter attempts to provide further elements to complement the sort of structural reforms already broached. It seeks to contribute to the development of an agriculture-led growth strategy by stressing the fundamental requirements to raise agricultural productivity, and therefore to alleviate poverty and increase Bolivia’s international competitiveness. The sustained incorporation by farmers of improved technologies in a context of ecologically sound watershed management is the main objective outlined here. At the same time, greater public participation by the rural population is seen as a key corollary of this process of raising productivity, breaking down barriers of exclusion and tackling poverty. In this context, raising the standards and the relevance of rural technical education plays a role of fundamental importance. The chapter is organized along the following lines. The first section discusses the vicious circle of poverty, low productivity and land degradation. The lack of a continuous flow of updated and appropriate technology is considered a major cause of the degradation of watersheds in Bolivia, the decline in agricultural productivity and the worsening of rural poverty. Then, we consider the creation of a framework for an integrated approach towards raising productivity. The generation of appropriate agricultural technologies and watershed management are discussed. Although the question of education is taken up in Chapter 7 more fully, we seek to underline its importance in raising productivity and managing watersheds. We follow this up with a short section on institutional

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aspects, highlighting various possibilities at different levels of government. Finally, we consider some of the major obstacles that may impede strategies to achieve a substantial increase in productivity.

2. The vicious circle of poverty, land degradation and low productivity The poverty indicators that receive most attention in the Ministry of Human Development statistics relate to education, health and housing conditions. It is therefore not surprising that these attract most attention, and that much public investment and international cooperation spending has gone into building schools, hospitals, new homes and providing potable water systems. However, other causes need to be addressed, in particular under-employment and low productivity. Of course, spending on education and healthcare can improve levels of productivity, and the reforms carried out in education and infant/ maternity insurance are meant to contribute to that end. However, higher productivity is a sine qua non for improvements in purchasing power for the bulk of the population, and provides a condition for the establishment of a taxation system to fund improvements in education and health. To the extent that public investment successfully raises rural productivity, it helps meet basic needs and reduces levels of exclusion. Short-term programmes of poverty assistance and emergency relief do little but temporarily disguise the magnitude of socio-economic problems. Most attempts to raise levels of agricultural productivity have had disappointing results. Since the Bohan Plan of the 1940s, efforts have tended to be intermittent at best: short bursts of substantial funding followed by lengthy periods with little attention. Achievements in the years before the 1990s included the establishment of experimental stations by the Inter-American Agricultural Service (IAS) and the introduction of new plant varieties and crop propagation programmes through the activities of the Bolivian Institute for Agricultural Technology (IBTA). Small groups of researchers and extension workers were also trained abroad, normally to master’s level. However, the lack of continuity meant that the knowledge base created tended to be fragmented, dispersed and often non-retrievable. Moreover, the delivery of technology was marked by a distinctly ‘top-down’ approach with emphasis more on the propagation of new technologies than on understanding the problems facing rural producers. All in all, the impact of public investment in increasing rural productivity was relatively slight.

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To address the problem of poverty, we need to understand better its causes and extent. As in many developing countries, rural poverty brings about the degradation of natural resources and lowers levels of agricultural productivity. The use of natural resources intensifies in order to meet people’s rising food and fuel requirements, and as a consequence of global competition. This immediate need for greater production causes the abandoning of traditional practices which had conserved natural resources. Nevertheless, the ‘carrying capacity’ of natural resources can be increased by the adoption of new technologies, which raise production whilst avoiding resource degradation. This has been the experience of many countries with much higher population densities than Bolivia. In the absence of such appropriate technology flows, people resort to resource-depleting activities with negative effects on watersheds. The loss of productive capacity further exacerbates the initial conditions of rural poverty, creating a vicious circle. The effect is accentuated where population growth simply leads to ever more depleting agricultural and other practices. Although the effects of progressive natural resource degradation on watersheds have not been adequately studied in Bolivia, some general approximations can be made. Land degradation refers to the reduction in the current or potential capacity of the soil to generate goods and services, and can take various forms (FAO 1976). Extractive activities cause soil quality to decline and agricultural productivity to fall. Lal and Couper (1990) distinguish three types of land degradation: (i) physical (erosion), (ii) chemical (salinization, alkalinization and acidification), and (iii) biological (decline in organic matter). In practice, within watersheds these types tend to be interrelated. The reduction in vegetation, which acts as soil cover, is one of the main causes of degradation in Bolivian watersheds. Deforestation in the steep-sided headwater regions of valleys originating on the Cordillera Oriental and stretching down through the Subandino region (Figure 6.1) cause intense erosion, soil fertility loss, higher run-off, landslides, heavy sedimentation in the rivers and increased likelihood of flooding. Sediment unloading downstream gives rise to changes in the course of rivers and flooding in flat valley floors, parts of the piedmont and the lowlands (Llanura Chaco Beniana), with consequent destruction and agricultural losses. Deforestation also leads to lower water intake into the soil and water storage. The reduced aquifer recharge enhances water stress and productivity loss downstream. In the dry season, wind erosion is a major cause of degradation of bare soils. In the Altiplano and those watersheds with semi-arid valleys, where rainfall is concentrated in three or four months of the year, the reduction

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1: Western Cordillera 2: Altiplano 3: Eastern Cordillera 4: Subandino 5: Chaco/Beni Plains 6: Brazilian Shield 7: Lake

Figure 6.1

Physiographic provinces in Bolivia

in soil cover is exacerbating problems of low biological productivity, reflected by reduced plant biomass, lower crop yields and eventually a process of desertification. A consequence of alterations in the landscape through the interaction of physical, chemical and biological processes and often human activity (Mabbutt 1986; Grunblatt et al. 1992), desertification is usually an irreversible process unless there is a sudden and radical change in the water cycle within a watershed. A dramatic reduction in the productivity of the soil is evident in the valleys of Cochabamba, Chuquisaca and Tarija, of the Rio Grande and Pilcomayo river basins (Figure 6.2). Agriculture in these valleys tends to be intensive, and excessive subdivision of plots is common. Problems of overgrazing, soil erosion and salinization abound, whilst alkalinization and sodification are also widespread in semi-arid soils. Inadequate irrigation practices also cause salinization, and the number of hectares

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1

11

9

10

2

8

17 16 4

6 5

7

15 19

12

14

18

3

1: Abuná-Madera 2: Beni 3: Bermejo 4: Chapare-Ichilo 5: Coipasa 6: Desaguadero 7: Grande 8: Itenez 9: Madre de Dios

Figure 6.2

13

10: Mamoré 11: Orthón-Acre 12: Paraguay 13: Parapetí 14: Pilcomayo 15: Poopó 16: Titicaca 17: Titicaca Iake 18: Uyuni 19: Uyuni salt flat

Main river basins in Bolivia

suffering from salinity or which have become badlands is alarming. Such processes are either irreversible or too costly to reverse. According to findings by the National Programme to Combat Desertification and Drought, just over 40 per cent of the total land surface of the country is undergoing desertification and 30–40 per cent of all irrigated land is

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suffering problems of salinization (Ministerio de Desarrollo Sostenible y Medio Ambiente 1996). This situation has been made worse by periodic droughts since the late 1980s. The resultant fall in agricultural productivity is forcing people to farm during the rainy season and to migrate during the dry season to the coca-producing areas of the Chapare. In warm and humid regions of the country, deforestation leads to a sharp drop in the organic matter present in the soil. In such areas soil fertility is closely related to the recycling of organic matter from the dense vegetation cover. However, the effects of the removal of upstream soil cover vary according to the nature of the watershed system. In some cases, such as in parts of the Mamoré River basin, the removal of upstream cover is not necessarily negative, as flooding leads to increased fertility in the downstream savannah lands through the deposition of nutrient-rich topsoil. In large areas of the humid valleys at the headwaters of the Mamoré River (Chapare) and in much of the Amazon forests in the Abuna– Orthón–Madre de Dios watershed system, land use should be restricted to production of timber in ways that do not destroy soil cover. Once trees are felled and vegetation burnt, the biological cycle is broken and the rich organic layer disappears. Soils in these areas are generally poor (high in 1 : 1 clays) and unsuitable for fertilization, especially when the organic matter content drops sharply. Land cleared for crop production, usually following deforestation to access high-value timber, is of use for about two years for low-yield agriculture, which further decreases its productive potential. By contrast, however, parts of the humid valleys and piedmont of the Beni River basin are more suitable for agriculture if adequate precautions are taken. Coffee and cocoa, as well as other perennial crops, have been fairly successful in this region. In the eastern lowlands of the Rio Grande watershed, land degradation is also occurring in regions with productive soils, mainly because of intensive land use without adequate conservation measures. These low-to-medium fertility soils may quickly lose their productive capacity through erosion and compaction if current agricultural practices are not improved. Although land is always subject to erosion by water and wind – a natural mechanism of topographic shaping – human activity can easily accentuate this process. Current agricultural practices and intensive livestock rearing have contributed to a problem of erosion, which has reached alarming proportions in Bolivia. According to the Agrarian Superintendency (Superintendencia Agraria 1997), at least a quarter of the total land surface of the country is suffering from serious soil erosion. Table 6.1 illustrates the scale of the problem.

53,588 118,218 37,623

Oruro Potosi Tarija

30,787 84,021 16,199

46,583

–

– 47,179 24,365

26,410

Area affected by strong erosion (km2)

Source: Ministerio de Desarrollo Sostenible y Medio Ambiente.

370,000

Santa Cruz

63,827

213,985 51,524 55,631

Beni Chuquisaca Cochabamba

Pando

133,985

La Paz

Area (km2)

Current erosion situation in Bolivia

Department

Table 6.1

Overgrazing, salinization, erosion Overgrazing, salinization, erosion Erosion, deforestation, overgrazing

Erosion, deforestation, inappropriate land use Deforestation, inappropriate use of plains Erosion, overgrazing Demographic pressure, inadequate agricultural practices, deforestation, salinization Deforestation, inappropriate use of the land Deforestation, wind erosion, land tenure, overgrazing, soil compaction

Main problem

Intensive agriculture, ranching, forestry, permanent crops Extensive ranching Extensive agriculture Intensive agriculture, extensive ranching, forestry

Forestry

Extensive agriculture, permanent crops, forestry Extensive ranching, forestry Intensive agriculture Intensive agriculture, permanent crops, forestry

Potential land use

107

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Contamination is also becoming a serious problem in some areas. Bolivia has traditionally been seen as a vast land resource in which the impact of human activity was slight. However in the Pilcomayo watershed, mining operations release contaminants into this river system. The waters of Lake Poopó are likewise contaminated by mineral extraction. Waste water from the city of La Paz pollutes rivers downstream, affecting irrigated agriculture. Industry in the city of Santa Cruz is blamed for killing fish and other river life in the Piraí. However, little by way of quantitative information is available on the extent of this problem or its causes. Responses tend to be reactions to periodic emergencies and only then does contamination become a major issue. Inadequate land management practices, excessive subdivision of land ownership units, deforestation, erosion, salinization, overgrazing are all leading to lower levels of agricultural productivity in practically all the main eco-systems in the country. Even the fairly prosperous northern part of the Altiplano basin, in the region of Lake Titicaca, where population is fairly dense and there is a long history of agricultural usage that predates Inca times, there are signs of degradation. The fall in the productive capacity of the land has contributed to the migration of people to urban areas, giving rise to the rapid growth of ‘new cities’ like El Alto. This is a generalized phenomenon in Bolivia, where overall population growth (1976–92) was 2.1 per cent, rural population growth 0.09 per cent and urban growth 4.2 per cent (Ministerio de Desarrollo Humano 1995). Lack of access to improved technologies has therefore been an important factor that has promoted rural migration, whilst productivity levels (as measured by the crop-yield data available) have continued to fall. Bolivia’s agricultural productivity is among the lowest in Latin America. The case of the potato, a native crop and a key consumption item, is particularly striking. Average yields barely reach 6 tons per hectare, compared with 20–40 tons in developed countries. Maize and rice yields are well below 2 tons per hectare, half the average yield of other Latin American countries like Argentina and Colombia. In the case of soya beans, the average yield (2 tons per hectare) is closer to that of countries like Argentina (2.3 tons), but much of Bolivia’s production comes from fertile virgin soils on an ever-expanding agricultural frontier where yields will be hard to sustain. One of Bolivia’s problems is that, because of the failure to develop appropriate agricultural technologies, food needs have been increasingly met by expansion of the agricultural frontier into the subtropical piedmont and the tropical lowlands. For many years the country has been consuming and exporting its fertility,

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in much the same way as it has lived off ‘non-renewable’ natural resources like minerals and hydrocarbons.

3. Rural technology The most important characteristic of agricultural technology should be that it respond to the needs of producers. The ways in which technology is generated and disseminated should be demand-driven. Research must begin by focusing on the difficulties facing producers and then priorities should be set in function of market opportunities. Technical solutions need to be grounded on production systems, and these should be compatible with specific sets of resource endowments and socioeconomic conditions. Production systems have to contemplate ecologically responsible management of land systems within watersheds. Delivery of adequate technologies depends on the existence of strong producer organizations, as well as the availability of trained professionals, a sound understanding of watersheds and the natural resources they encompass and good technical education at the local level. Producer organizations have to convey their problems, influence the way in which public investment decisions are made and demand effective results. Professionals involved in technology generation and transfer only have credibility if they can offer solutions to the concrete problems facing farmers. The environmental consequences of the adoption of technology can be foreseen in so far as the processes at work within watersheds are properly understood. One of the challenges facing rural education (see Chapter 7) is to create an educational system that responds to the needs to raise rural productivity. These requirements can be met if the political will exists to invest in rural technology and watershed management through competitive and transparent allocation of funds. The Popular Participation Law sought to increase the influence of local producers in the allocation of resources. By transferring funds and giving a greater control over decision-making as to their use, the administrative reorganization of the country into 311 municipalities provided a stronger institutional framework. Mayors enjoy more legitimacy in their communities by virtue of the fact that they are now elected and not appointed by central government and can be held accountable for what they do. Municipalities are in a much better position to coordinate decision-making, resolve local conflicts and implement development projects than central government. Decentralized authorities are also quick to organize local people when they perceive opportunities for development.

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Such was the case, for instance, in response to the Strategy for the Transformation of Agricultural Productivity which had, amongst its core aims, the attainment of a technological ‘leap’ in rural areas and natural resource conservation within the context of watershed management. In the southern cone of Cochabamba, 13 municipalities came together in 1997 as a mancomunidad to coordinate their efforts on a regional scale. They are seeking to develop a watershed management strategy for the headwaters of the Rio Grande, with a view to raising levels of agricultural productivity, promoting water supply projects and both protecting and reviving the natural resource base of the region. However, such efforts require the collaboration of central government and the prefectures at the departmental level, since frequently river basins cross departmental boundaries. Such collaboration must include access to a continuous flow of updated technology. Although many elements of technology already exist and do not need to be reinvented, appropriate technologies which correspond to the specific needs of communities and local ecological conditions need to be developed and tested locally by agricultural producers. Ongoing research is therefore required, to understand the interaction between processes within watersheds, for the generation of knowledge needed to develop and adapt technologies, methods of management, production systems and conservation policies. Only through such research is it possible to provide local populations with reasonable assurances as to the likely effects of technological applications. Experience shows that farmers are reluctant to adopt new methods and procedures unless they are reasonably sure what the outcomes will be. After all, it is they who have to bear the cost of failure. Research is required at various stages. The first stage involves the analysis of farmers’ production and marketing problems and the likely consequences of introducing alternative production systems. In order to evaluate technical constraints and potentials, it is important to have a good understanding of the natural resources present within watersheds and the ways in which these operate from a hydrological point of view. Once this stage is complete, researchers can move on to the process of selecting and adapting technologies. Experiences in different watersheds with similar ecologies provide a guide. Then selected technologies must be rigorously tested as an element in generating production systems that are compatible with the environment and the markets targeted. Specific research may be required to develop technologies not in existence elsewhere and to make existing technologies compatible with watershed management techniques.

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Usually, the verification of technologies under controlled conditions will take place in experimental stations. The successful adoption of new technologies requires the active participation of farmers, especially in testing the validity of applications and in their dissemination. Unlike verification (which is more the province of scientists), validation involves the testing of technologies by farmers in their fields. Dissemination can only take place once farmers are satisfied with the results. Scientists meanwhile have to monitor the reaction of the farmers and understand the reasons why they do not meet with approval. Participatory validation and extension would require the establishment of farmer technology units, which could also form the basis for the provision of rural technical education, as well as assisting farmers with access to inputs and markets. As in the past, international technical assistance would play a role in helping to implement a rural technology and watershed management strategy. However, Bolivia’s own research capabilities also need to be strengthened so as to reduce dependence on foreign aid. With only around 3 per cent of those involved in research holding a doctorate, Bolivia lacks a critical mass of qualified scientists required to develop agricultural technology, and compares unfavourably with its neighbours in this respect. Steps therefore need to be taken to increase the number of highly qualified professionals available, not just in the field but to train others. In part, this could be achieved by stemming the outflow of Bolivian professionals who seek employment abroad rather than at home. This means creating new incentives to engage such people locally. The infrastructure needed for technology generation and transfer also needs to be improved. Whilst laboratories and testing facilities are generally poorly equipped, the lack of adequate access to information is perhaps the weakest link in the chain. Information on natural resources, socio-economic conditions and uses made of technology needs to be organized as a part of interconnected national information systems. Only if properly organized and easily accessible can information be verified, updated and consistently used. Policy-makers, farmers, as well as scientists and other professionals, need access to the growing body of knowledge available for planning and decision-making.

4. Watershed management Bolivia faces a fairly extreme problem of natural resource degradation, as well as the task of both reclaiming regions of watersheds that are loosing their productive capacity and protecting other land from damage.

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There is growing public awareness of the need to protect natural resources for future generations whilst, at the same time, maintaining an acceptable standard of living. However, a methodological basis for decision-making and resource management is required to harmonize the demands of ecological and economic development. The watershed (river basin) approach provides a useful framework for this (Meijerink 1988; and Pavoni et al. 1997). The management and reclamation of watersheds will effectively help prevent resource degradation if integrated into the incorporation of new technologies to raise agricultural productivity. Usually, there is no direct conflict between the need to improve the productive capacity of watersheds and the rational use of renewable natural resources: water, soil, livestock, forests, pastures, wildlife, etc. Conservation simply seeks to avoid an extractive approach towards renewable resources through rational management techniques. Where the trade-off between economic rationality and natural resource preservation becomes more acute is with non-renewable natural resources: coal, petroleum and other minerals. An extractive approach to non-renewable resources is justifiable subject to consideration of environmental impacts and the extent of resource depletion. Scale and spatial predictability issues related to natural processes in watersheds are still poorly understood (Baveye and Boast 1998). Nevertheless, from an operational point of view, watersheds provide useful units in the management and conservation of natural resources because they lend themselves readily to the application of a systems approach. A watershed is the area, including the subsoil, drained by a river or stream, with the boundaries defined by watershed divides. Inputs and outputs for the system can be established – even though subsurface water flows are difficult to account for accurately. Processes and their interactions within watershed boundaries can be evaluated. A watershed also divides naturally into subsystems with clear topographical boundaries, since minor watersheds make up larger ones. A systems approach helps to relate changes in the system to disturbances elsewhere within it or in its surroundings. Watershed management therefore makes it easier to link cause and effect and provide a more effective response. It helps define what needs to be done within a river system to increase the recharge of aquifers and reduce probabilities of flooding. Watershed management helps the selection of prime areas for production, as well as the targeting of areas where reforestation and protection will have most effect. The benefits to farmers, however, need to be set against the costs to other groups elsewhere within a region.

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Such practices as deforestation, for instance, have effects elsewhere in the system. Where timber extraction is warranted, the development of forest production systems, which help regenerate woodland to increase or maintain its commercial value, requires the selection of species and technologies appropriate to the place concerned. An understanding of the whole hydrological system is critical for the subtle difference to be appreciated between one place and another. As recognized by the mancomunidad of municipalities of the southern cone of Cochabamba, specific knowledge on the watersheds encompassed and their natural resources is crucial for improving agricultural production. The recovery of natural resource productive capacity in this area and raising agricultural productivity beyond subsistence levels requires changes in agricultural practices. The selection of crops that maximize economic returns in sustainable production systems depends largely on an understanding of the natural resources involved and the interactions affecting them within the watershed system. Of course, watershed management as a system approach is no novelty. River basin management projects emerged as the economic implications of natural resource degradation became evident and the need arose for better knowledge and greater coordination. Initially, watershed management was mainly associated with more efficient water use for hydroelectricity, irrigation, domestic and industrial purposes and for transport. Soon, the wider implications and applications of watershed management surfaced. The Tennessee Valley Authority, the Regional Water Authorities in the United Kingdom and the River Rhine Commission are just few examples of the linkage of water and land use with agricultural productivity, and such phenomena as deforestation, erosion, flooding and landslides. Substantial investment in multi-disciplinary research was required in the implementation of such river basin management projects. In Bolivia, the management of natural resources within watersheds has been recognized in various pieces of legislation since the beginning of the 1990s. The 1992 Law for the Protection of the Environment considered integrated watershed management as the basic framework for environmental planning. Sustainable natural resource use is also the subject of the 1996 Forestry Law, which seeks to control practices that damage the natural resource base, promote the protection and reclamation of watersheds, establish protected areas and prevent land degradation, whilst striking a balance between social, economic and environmental interests. By creating a special directorate for river basins, the Ministry of Sustainable Development and the Environment also acknowledged the need for watershed management.

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These efforts were preceded by a number of watershed management projects. For ten years, a study was conducted on the hydrological cycle and the resource base of the Altiplano, prior to the establishment in 1997 of the Binational Lake Titicaca Authority (ALT) between Peru and Bolivia. The ALT seeks to promote land and water uses in ways that do not upset the ecology of Lake Titicaca and other water resources in the basin. It focuses on regulating water uptake from the lake’s tributaries and its outlet. The ALT is also developing an information system to aid municipalities in the region in the planning of projects. In 1991, the Integrated Watershed Management Programme (PROMIC) was set up to promote alternative agricultural practices and reforestation. It carries out extension activities in small watersheds in order to reduce the risk of floods and landslides in the Cochabamba valley. The PROMIC has completed an integrated pilot project for the management of the headwaters of the Taquiña watershed. Other programmes involving watershed management include SEARPI in Santa Cruz and the National Basin Management Plan. SEARPI began as a flood prevention scheme on the Piraí River but became more involved in land rehabilitation and agricultural development. The National Basin Management Plan, backed by the central government and the Food and Agriculture Organization (FAO) is evaluating the division of the country into watershed systems. As attention shifts towards this approach, pilot projects need to be established in certain critical watersheds. In view of the crucial role played by the headwaters within a watershed, it would make sense to give these priority. However, there are other areas within watersheds which, by virtue of their population density and/or economic impact, also merit priority attention. More than one pilot project could be carried out per watershed. With the implementation of a greater number of pilot projects and as existing ones grow, watershed management should, in time, cover much of the country.

5. Rural education Education reform is dealt with more fully in Chapter 7. Suffice it to say here that education plays a critical role in raising rural productivity in the processes of development and adoption of appropriate technology. Rural education should also lay the foundations for raising awareness of the need for sustainable natural resource use. Natural sciences, with an applied or agricultural science focus, should be introduced into the curriculum for (at least) the last three years of primary schooling. In the four years of secondary education, the

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curriculum should place equal weight on agricultural education and a technical formation that prepares the population for non-farm rural or urban employment. The latter may have to take precedence as perspectives for rural employment decrease. The need for adult technical education in rural Bolivia cannot be overstated. It was a crucial component in the successful validation and dissemination of agricultural technology in Europe and North America. Furthermore, Bolivian education still has to contend with the widely different cultures that make up our society. The quest for improved living conditions in an increasingly competitive global economy must override such discrepancies.

6. Institutional development Different levels of government will have to develop the capability to implement rural technology policies along the lines described above. During initial attempts to execute the Strategy for the Transformation of Agricultural Productivity a number of suggestions were made with regard to institutional development. These require further debate. Some of the recommendations can be summarized as follows: a. Municipalities. Municipalities should play a central role, either individually or as associations like the mancomunidad in Cochabamba mentioned above. They would be responsible for promoting the local organization of farmer technology units to evaluate the demand for agricultural technology, test scientifically verified technology and disseminate the results. Technical education should also be the responsibility of municipalities, both for schoolchildren and adults, reflecting the need for close local oversight of the educational system generally. Coordination between central government and municipalities is of key importance to the success of the educational reform. Finally, municipalities would also execute watershed reclamation and management projects. b. Departments. Departments should join to carry out projects involving shared river basins. Prefectures would undertake the establishment of basin boards through which to invest jointly in applied research to identify suitable technologies and in basic research to understand processes. These boards would be responsible for networks of stations and substations within river basin systems. River basin boards would also have planning functions for programmes of watershed management and reclamation. c. Central government. The main function of central government would be to develop, update and implement rural technology and watershed management policies. Funding could be channelled on a

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competitive basis through a national watershed and rural technology fund, which would also have responsibility for scientific training and dissemination of information. The longer-term need to raise levels of agricultural productivity would require that the central government provide financial support both for the river basin boards at the departmental level and the municipalities at the local level. Some sort of structure would probably have to be devised to provide matching funds. A foundation might also be established to provide ongoing monitoring and evaluation of the agricultural sector independently from government, and to complement efforts to promote research and the training of scientists.

7. Challenges and obstacles In implementing strategies to improve agricultural productivity, reduce the problem of land degradation and promote watershed management, there are, of course, numerous difficulties to overcome (Barrow 1998: 171–86). Policy-makers have to face up to the issues involved if they are serious about combating rural poverty. The most obvious obstacle is financial. According to T. Schultz (1990), the benefits of agricultural research – especially in developing countries where the private sector traditionally does not invest in research – are largely public goods and therefore should be funded from the public purse, albeit with some contribution from private sources. Even though investment in agricultural research typically has fairly high returns, it is an area in which there is under-investment (Sadoulet and de Janvry 1995). However, scientific work needs to be adequately funded. There is much more funding for this purpose in industrialized countries (2.55 per cent of the value of agricultural production) than in low-income countries (0.67 per cent) (Stevens and Jabara 1998), where agricultural research probably would have greater impact on socio-economic development. Political and bureaucratic constraints in Bolivia carry part of the blame for the low investment in agricultural research and the slow progress in raising agricultural productivity. Many of those employed in agricultural research institutes hold appointments by virtue of the political contacts that they enjoy. Thus, changes of government tend to result in wholesale changes in the staffing of such institutions. Furthermore, the notion that quick results can be obtained with little effort is, sadly, too often an assumption that guides the activities of those who hold office for relatively brief periods of time. Their understanding of the real problems involved is, all too often, superficial. Within the state and international bureaucracies – major players in the Bolivian power

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structure – there is often a disregard for the longer-term attainment of objectives and resistance to change for fear that power may have to be relinquished. This is as much the case in the sphere of agricultural research and extension as in other areas. Bureaucracy is inimical to real reform, especially when it seeks to create greater accountability among public servants. The tendency therefore exists for bureaucracy to perpetuate itself and to strengthen controls from above rather than to decentralize power and responsibility towards those who are supposed to be the beneficiaries of policy. Channels have to be created to make public participation more effective. At the same time, a balance has to be struck between responsibility for outcomes and the participation of beneficiaries. With ‘participation’ now very much in fashion after years of centralized control, there is a danger of too much of the responsibility being imposed on the shoulders of farmers. A school of thought has arisen which argues that the farmers possess a vast knowledge, accumulated over generations, whereas the application of science (particularly the ‘green revolution’) has nothing positive to offer. Also, it is quite possible that if too much responsibility is placed on the farmer, the impetus for change will fade and that traditional ways of doing things by trial and error will prevail. Radical positions in favour of participation can end up disguising weaknesses in the approaches taken and failure to provide adequate funding and technical support, whilst in the end the farmers are blamed for the poor results achieved. A clearer separation of functions might help. On the other hand, small farmers have been unable to form a strong constituency in demand for technology. In part, this is probably a consequence of the relative weakness of participatory mechanisms and lack of accountability, also contributory factors to the low credibility of the research and extension system. Moreover, the policies followed by successive governments to privilege the development of large-scale agriculture in Santa Cruz has meant that the needs of small farmers for technology have been overlooked. The perception that the country enjoys a large endowment of land and other natural resources in the east encouraged an extractive ‘mentality’ whereby seemingly it is easier to incorporate new land for agricultural production than to apply appropriate technology to existing plots. Without a radical change in this sort of thinking, problems of degradation and falling yields will persist. Moreover, for small farmers access to land has always been a priority over technification; at the subsistence level, land affords security to those who occupy it. Factors that affect the demand for technology need to be better understood.

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Perhaps the greatest challenge for Bolivia is to develop the political will to combat rural poverty and to provide the necessary funding to achieve it. The experience of the last few years suggests that the role of government is to design policy, allocate funding to pay for it and regulate the use made of those funds. It has become clear that government as such does not need to manage projects. It can create the conditions for others – regional or local organizations, universities and the private sector – to take the lead in determining needs, formulating projects and putting them into practice. Government can and should play a proactive role in institutional strengthening. An attempt to create solid foundations for a more prosperous society has been made with the transition to democracy in the early 1980s and the reforms since then. However, the effects on the rural population have so far been slight, and the problem of exclusion from the benefits of economic growth remains.

References C. J. Barrow, ‘River Basin Development, Planning and Management: a Critical Review’, World Development, 26 (1), 1998. P. Baveye and C. W. Boast, ‘Physical Scales and Spatial Predictability of Transport Processes in the Environment’, in D. L. Corwin, K. Loague and T. R. Ellsworth, eds, Application of GIS, Remote Sensing, Geostatistics and Solute Transport Modeling to the Assessment of Non-Point Source Pollution in the Vadose Zone (Washington DC: American Geophysical Union, 1998). Food and Agriculture Organization (FAO), Metodología preliminar para la evaluación de suelos (Rome: FAO, 1976). J. Grunblatt, W. Ottichilo and R. Sinange, ‘A GIS Approach to Desertification Assessment and Mapping’, Journal of Arid Environment, 23 (1), 1992. R. Lal and D. C. Couper, ‘A Ten-year Watershed Management Study on Agronomic Productivity of Different Cropping Systems in Sub-humid Regions of Western Nigeria’, in E. Baum, P. Wolff and M. Zobisch, eds, Topics in Applied Resource Management in the Tropics: a Series on Soil and Water Conservation and Land Use Systems (Witzenhausen: German Institute for Tropical and Subtropical Agriculture (DIETSL), 1990). Law No. 1700, 12 July 1996. Ley Forestal. Law No.1333, 27 April 1992. Ley de Medio Ambiente. J. A. Mabbutt, ‘Desertification in Australia’, in Arid Development and the Combat against Desertification: an Integrated Approach (Moscow: UNEP–UNEPCOM, 1986). A. Meijerink, ‘Data Acquisition and Data Capture through Terrain Mapping Units: the Integrated Land and Watershed Management System’, International Institute for Aerospace and Earth Sciences (ITC) publication no. 7, Enschede, 1988. Ministerio de Desarrollo Humano, Mapa de pobreza. Una guía para la acción social, 2nd edn (La Paz: Ministerio de Desarrollo Humano, 1995). Ministerio de Desarrollo Sostenible y Medio Ambiente, Programa Nacional de Lucha Contra la Desertificación y la Sequía (La Paz: PRONALDES, 1996).

Technology and Rural Productivity 119 Ministerio de Hacienda, ‘Estratégia para la Transformación Productiva del Agro’. Presentation by Bolivia to the Paris Consultative Group, Paris, 14–15 March 1996. B. Pavoni, A. Voinov and N. Zharova, ‘Basin (Watershed) Approach as a Methodological Basis for Regional Decision Making and Management in the ex-USSR’. Annual report of the Hydro-ecological Institute, Moscow, 1997. E. Sadoulet, and A. de Janvry, Quantitative Development Policy Analysis (Baltimore: Johns Hopkins University Press, 1995). T. W. Schultz, ‘The Economics of Agricultural Research’, in C. K. Eicher and J. M. Staatz, eds, Agricultural Developments in the Third World (Baltimore: Johns Hopkins University Press, 1990). R. D. Stevens and C. L. Jabara, Agricultural Development Principles (Baltimore: Johns Hopkins University Press, 1988). Superintendencia Agraria, Hacia el uso sostenible de la tierra: Problemática agraria en Bolivia (La Paz: Superintendencia Agraria, 1997). T. P. Tomich, P. Kilby and B. F. Johnston, Transforming Agrarian Economies: Opportunities Seized, Opportunities Missed (Ithaca: Cornell University Press, 1995).

7 Human Development in a Multi-ethnic Society Fernando Ruiz-Mier

1. Introduction From the mid-1980s onwards it became increasingly clear that, as well as maintaining macroeconomic stability and growth, government needed to address the critical problems of poverty and social exclusion. Traditional forms of social policy delivery had failed to provide the means by which the majority of the population could improve its condition. From 1993 onwards, a new approach was developed, based on the concept of human development. This approach, involving social participation, depended greatly on newly-established municipalities for its implementation. Although the results are still incipient, in many ways they are encouraging. Human development is understood to mean the development of individual capacities through greater equality in access to opportunity, both through education and other forms of social provision. As such, it is intimately linked to the idea of democratic viability. Democratic viability presupposes effective democratic participation in decision-making with a view to increasing the legitimacy of government in the eyes of the people. Participation demands that people have a voice in government or, in other words, they have the ability to become citizens. In the first instance, this means that their basic needs can be satisfied and that they are able to make informed choices about different options and likely consequences. 1 Furthermore, democratic participation becomes more likely when people have a stake in society and can improve their circumstances by means of participation. A democratic regime is therefore more likely to be viable if it yields results for the majority of the people, at least in terms of meeting basic needs. By the same token, in a society where inequality not only persists but becomes 120

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more acute, social polarization is liable to place democracy in jeopardy; only where citizens have equitable opportunities do they become stakeholders.

2. Social conditions in Bolivia2 A number of relevant indicators suggest that there has been some improvement in social conditions in Bolivia since the mid-1980s. However, such improvements are not only precarious, but a great deal yet needs to be done to raise social conditions to anywhere near acceptable levels. As discussed in Chapter 5, poverty remains widespread, with some 7 out of 10 Bolivians classifiable as ‘poor’, and the ratio in rural areas considerably higher. Poverty tends to be most acute among those with the least education who do not speak Spanish, live in remote rural locations and depend on subsistence agriculture. Educationally, drop out rates in schools are high, and as much as 1 in 5 of those over the age of 15 is illiterate. Healthwise, a high proportion of the population (44 per cent) lacks access to basic public health services, life expectancy (60 years) is low, and infant mortality rates are the highest of anywhere in Latin America. More than half of the population lack access to piped drinking water and 40 per cent to sewerage systems. With respect to education, healthcare and basic sanitation, the contrasts between urban and rural areas are marked, reflecting a long-standing legacy of discrimination in the design and implementation of social policy. Nevertheless, this raises a number of difficult challenges, of which two in particular merit mention. First, the ethnic, cultural and linguistic diversity of the population means that standardized approaches to social provision are often inappropriate. Rather, what is needed is a flexible approach that respects cultural diversity, even if this is more difficult to devise and manage. Secondly, since much of the rural population lives in sparsely populated areas, adequate coverage is disproportionately costly to the numbers involved. The isolation of many rural schools and health centres is such that it is difficult to attract adequately trained staff.

3. The human development paradigm 3 The human development paradigm places individuals at the centre of development policy, recognizing them as the key social agents. For this reason, it gives particular emphasis to the need for active citizen participation and responsibility in decision-making. It thus takes issue with

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the traditionally paternalistic and centralized modalities of social policy common in Bolivia and countries like it. According to the new paradigm, the role of the state is to ensure that individuals enjoy the opportunity to develop their capabilities and to provide channels for active participation. Social policy is viewed as an investment in people rather than as an exercise in assistentialism. However, it presupposes the creation of a decentralized system of service provision, with mechanisms and incentives for participation. The human development paradigm is also based on an integrated approach to social policy, with different types of provision closely coordinated. Thus, rather than develop different types of policy and programmes in isolation, an effort is made to adopt a holistic approach to effectiveness and impact. Education is viewed as playing a central role, since not only does it spread opportunities more widely but provides the basis for active citizenship (Ruiz-Mier 1996). In Bolivia, the most serious problem was less a lack of resources than methods to increase the effectiveness of available social investment. New answers were required to old questions about how to provide services, widen access to them, finance them and improve their quality. Over the years, the centralized state had been found wanting in these areas. Yet, the option of privatizing provision and trying to optimize its efficacy by leaving it to the laws of the market was not an appropriate alternative.4 Unlike the productive sphere where the consumer may exercise his or her choice by buying products from rivals and competitors, no such ‘exit’ option exists as a spur to improving performance. Yet, a ‘voice’ option does exist, whereby users of services can make their views known to those who provide services (Hirschman 1970). The challenge, therefore, is to create a situation in which the ‘voice’ option can work by giving users more influence over decision-making. The methods used to achieve this in Bolivia involved three key pieces of legislation: the Law of Popular Participation, the Law of Administrative Decentralization and the Educational Reform Law. These laws, along with their detailed regulations, established the mechanisms to enhance participation and coordination within a context of decentralized service provision. As we saw in Chapter 4, the Law of Popular Participation led to the creation of a network of new municipalities throughout the country, each with elected mayors. As such, it brought about a fairly radical change in the way in which resources are distributed at the local level.5 At the departmental level, it gave prefects responsibilities for the administration, supervision and control over human resources in education and health.

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Whilst these reforms sought to place responsibility for social services nearer to those who use them, they also involved changes within central government, where a new Ministry of Human Development was established.6 At the centre, there was an attempt to harness new thinking to management and the development of policy. Through initiatives like matching grants, central government sought to create incentives without necessarily imposing decisions on local government. The role of central government was to create the institutional arrangements required to reach such objectives. These involved realism (especially with regard to the role of the state), relevance (by decentralizing the locus of decision-making), flexibility (by facilitating different options at the local level) and greater accountability. In order to achieve these, a separation was required between policy design and implementation. While centralized ministries would therefore have overall responsibilities for administering programmes and channelling resources to them, separate National Programmes – designed and financed by central government in order to ensure investment in social provision – were introduced to help formulate priorities and co-finance the municipalities. In the rest of this chapter, we seek to evaluate the aims and achievements of policy in education and healthcare. Generally, it is fair to say that the results were positive, even though their impact may have been limited and uneven. A new dynamic effectively emerged at the local level, with local-based groups taking a more active role in identifying needs and prioritizing the use of resources. Traditional state paternalism thus gave way to greater local initiative. Nevertheless, resistance to change was also strong in certain areas, not least amongst those whose powers were threatened by the new order and who doubted the ability of ordinary people to play a more influential role. Similarly, in many places, people were slow to take up the new opportunities on offer, in part due to lack of information about the rights and responsibilities involved. New structures also involved new actors in the provision of services, changes that gave rise to problems of coordination and accountability (Ruiz-Mier and Giussani 1997).

4. Educational reform Bolivia is a multicultural, plurilingual country, in which just over half the population live in urban areas. The indigenous population is concentrated in the highlands and the inter-Andean valleys. In Potosí, Cochabamba, Chuquisaca, La Paz and Oruro departments, the indigenous population represents 85 per cent, 77 per cent, 70 per cent, 68 per cent

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and 67 per cent of the population respectively. By contrast, in the departments of Santa Cruz, Beni, Pando and Tarija in the eastern half, the proportion is below 20 per cent. Whilst Aymara is the predominant indigenous language in La Paz, Quechua is the main native language in Chuquisaca, Cochabamba, Potosi and Oruro. Other indigenous groups include the Guaranis, the Chiquitanos, the Guarayos, the Yurakares and others, who mainly live in the eastern lowlands. Such cultural and linguistic diversity poses major problems for the educational system. The main structures of the educational system in place at the beginning of the 1990s had been established in the wake of the 1952 revolution with the 1955 Educational Code. The main object of the educational reforms of the 1950s had been to extend the scope of educational coverage, especially to indigenous peoples. Education was regarded as the main vehicle for strengthening a sense of national identity, and to this end the system introduced had a deliberately homogenizing effect. However, even within this overall framework, more pragmatic and realistic educational models were introduced, catering for specific local needs. Often such models were associated with the Catholic Church and with nongovernmental organizations (NGOs), which recognized the importance of cultural, ethnic, linguistic and regional differentiation. Many of these projects were quite successful, but their success – as often as not – was due as much to the fact that teachers were highly motivated and well-trained as to their catering for multiculturalism. If such experiences are to be reproduced, the improvement of teaching abilities is of critical importance. The issue of multicultural education is both a philosophical and a political one. There is some evidence to suggest that cultural flexibility leads to better results, but it would be wrong to suggest that the shortcomings of the Bolivian educational system can be solely attributed to its standardization. The causes of poor educational provision are multiple and complex. Various studies have sought to identify these problems. There is a good deal of consensus about the main factors involved. The inadequate coverage of the educational system is largely a ‘supply’ problem, derived from a lack of budgetary resources, poor administration and the absence of an adequate referral structure.7 On the demand side, the opportunity costs of education in relation to perceived returns have limited the attractions of education, especially in rural areas. The problem of quality is related to inappropriate curricula, the failure to take cultural diversity properly into account, the poor training of teachers, the lack of good-quality educational materials and texts, the inadequacy of much educational infrastructure and equipment, and last (but not least)

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the inability of parents to voice their views and opinions with respect to their children’s education. By the early 1990s, it had become clear that the educational system was failing in important respects, not least in generating the educated and discriminating citizens needed for a viable democracy. When the 1993 reforms were announced, conditions for change were already ripe. Within Bolivia, the need for reform to improve standards was widely accepted. Internationally, there was a growing consensus in policy-making circles concerning the key role to be played by education in social policy. This was a debate that had been taken up by the various multilateral development agencies, precisely the organizations best placed to finance a programme of reform. However, there were also obstacles to change. Reform threatened to upset the status quo and a number of entrenched interests. Opposition to the reform proposals was – predictably – virulent in the teachers’ unions and in some parts of the official bureaucracy. Such opposition became quite overt as the legislation came to be implemented. It was also not limited to the potential losers; even members of the ruling coalition parties, realizing that the scheme was conflictual and would only yield results in the long term, opposed the idea or gave only luke-warm support. The reform agenda only took shape when a special unit was established within the planning ministry to suggest what needed to be done. The so-called Technical Support Team for Educational Reform (Equipo Técnico de Apoyo a la Reforma Educativa or ETARE) began work in July 1991. That the ETARE was within the planning ministry, not the education ministry, reflected in part the latter’s lack of interest in spearheading reform. The teachers’ union retained considerable influence over appointments in the education ministry. Moreover, since the government lacked a detailed blueprint for reform, it was necessary in the first instance to prepare one as a basis for further discussion. ETARE had a difficult brief. First it was called upon to understand and prioritize the shortcomings of the existing educational system. It then had to strike a balance between many competing views as to how the system was to be changed: whether to place the emphasis, for instance, on curricular or more administrative aspects. Thirdly, different interests had to be managed and blended in the pursuit of some sort of consensus. Fourthly, social support had to be enlisted. ETARE was criticized for not seeking consensus. Rather, the problems lay more in the lack of adequate discussion prior to implementation. Probably ETARE deserved more criticism for failing to highlight the public-policy issues and tradeoffs in such a way as to encourage debate.

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The Educational Reform Law (Law 1565), based on ETARE’s proposals, was finally enacted in July 1994. It was subsequently complemented in February 1995 by five decrees which set out the detailed regulations.8 The law sought to tackle curricular problems as well as administrative ones. The law highlighted four basic principles: • comprehensiveness in coverage; • educational ‘quality’, or in other words relevance to social needs as well as cultural and linguistic criteria; • equity in terms of delivery to men/women, urban/rural areas and Spanish/native-speaking communities; and • efficiency in the use of resources and their allocation according to development priorities. As such, the law posits that education be universal, obligatory, free, participatory, intercultural, multilingual and equitable. Social participation and interculturalness constitute the two main axes of the law: the former is its institutional axis, whilst the latter provides its curricular axis. The stress placed on the intercultural and multilingual aspects of the law was supposed to provide a response to Bolivia’s socio-cultural heterogeneity. The stress on participation was recognition of the principle that an educational system should not be distanced from its ‘clients’ and that both parents and communities should play a key role in the workings of the system. The educational reform programme had a budget of around US$200 million for a 7-year period. 9 It involved a number of separate components, organized around two parallel programmes: the ‘transformation’ programme and the ‘improvement’ programme. The first of these was geared towards making good the pedagogical and curricular deficiencies in the system, and included the following components: developing a new curriculum; the development and production of new texts, teaching guides and other aids; and teacher training and pedagogical support. Curricular change is a slow process which can only be introduced gradually. That means that many children currently of school age cannot expect to benefit much. The second, the improvement programme, was directed at upgrading conditions in schools. It included programmes to improve equipment provision and institutional strengthening.

5. Implementation of the educational reform The ambitious and complex nature of the educational reform meant that implementation was bound to be difficult and success would depend

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both on strong leadership from the government and the skill of the management team. The ability to learn and adapt was also important: difficulties experienced in the first phase of the reform made it evident that some basic adjustments in the overall design had to be factored in. A number of problems became apparent early on, including weaknesses in the implementation team, snags in the original design, a lack of political support and changes in the overall context.10 The first supervision mission, in October 1995, highlighted many of these problems. The organizational structure had serious deficiencies which led to unnecessary delays in implementation. There was also a lack of strategic vision and planning. The mission concluded by saying that it was ‘unlikely that the proposed objectives will be accomplished in the proposed timeframe unless the planning of activities is significantly improved’. By this time, it was also clear that there were serious problems of coordination and power struggles had emerged amongst those involved. Too much time had been put into what to do, and not enough into how to do it. A lack of detailed strategic planning made sequencing difficult and impeded analysis of the preconditions for the success of each stage. As implementation got under way, it became evident that certain assumptions were not valid or had not been properly factored into the original design. For instance, assumptions about how other institutions would complement the reform project or the attitudes of people within the educational system were not borne out in practice. In other spheres too, key preconditions for implementation were overlooked and others over-emphasized. The reform programme recognized that there had to be room for greater participation by those involved in education, but in practice it was administered in a centralized, top-down and paternalistic manner. A ‘we-know-best’ attitude was prevalent amongst those involved. There was also a tendency to be overly prescriptive, leaving little room for those at the local level to take decisions. In other words, there was an imbalance between centralized design and the accommodation of this design to local conditions. A rather different attitude was required on the part of those implementing the reform, towards teachers, local administrators and community participation. Ample evidence came to light about the importance of improving educational infrastructure. It was assumed, however, that the Social Investment Fund (SIF) would take care of infrastructure. Such deficiencies were thus not taken properly into account and little effort was made to coordinate the SIF’s activities with those of the educational reform programme. In fact, the SIF failed to assign sufficient resources

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to education, and it was only later in the implementation phase that an effort was made to raise extra resources for infrastructure. Although community participation was a key principle, the establishment of school boards ( juntas escolares) was, in itself, insufficient to make this happen. Greater support and extra incentives, not contemplated at the outset, were necessary to ensure that the juntas played the role they were supposed to. Similarly, the establishment of nucleos or networks of schools, on which progress was very limited in the first phase, proved more complex than had originally been thought. In preparing the ground for the reform, this aspect had only been dealt with superficially and much more work was required to adapt these ideas to specific circumstances. The original concept of the educational reform project had stressed problems of supply, which obviously had important implications for what could be achieved in terms of coverage and quality. It assumed that with better inputs (a more appropriate curriculum, better-trained teachers and more supplies), quality would improve. It failed, however, to recognize that educational quality needs to be viewed in a dynamic context. Quality can only be achieved in a sustained way if there is also an attempt to improve the capacity of users (students, parents and communities) to judge and demand quality. It only became clear during implementation that it was also necessary to help users to develop criteria about educational standards and the methods at their disposal to try and achieve it. The question of school autonomy was also not properly addressed at the outset. Although it is fairly clear that responsibility and accountability go hand in hand with the capacity to make decisions, schools in practice have little say in the assignment of teachers, the allocation of resources and in decisions over the curriculum. Consequently, they have little room in which to be innovative or proactive. In practice, the school system still stifles creativity and limits the ways in which schools can adapt to the specific nature of each community. Only when teachers are able to make decisions will their attitude begin to change. Indeed, only when schools can decide how to use the resources available to them will the original postulates of the Proyecto Educativo (a strategic plan for schools) become meaningful in any way. The issue of school autonomy has been addressed more in the recent past, and the conclusion reached that schools and nucleos should have more responsibility over the assignment and management of personnel. Also, the need for a more fluid relationship between schools and municipalities has been stressed, with schools given more control over the way in which education budgets

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are disbursed. Only when schools have greater powers of decision will they become accountable to the communities they serve. Another factor that hindered implementation was the lack of political support and government leadership. Political considerations often cut across policy, on occasions frustrating attempts to build a new institutional structure. For instance, vested interests at the departmental level interfered with the attempt to hire and train teachers solely on the basis of individual merit. Also, negotiations with the teachers’ unions weakened the wording of the Education Reform Law on matters relating to promotions. Yet among the public, the education reform programme – along with Popular Participation – was one of the reforms that enjoyed most enthusiastic support. However, this arose more from a feeling that the exisiting educational system needed changing than out of sympathy with the objectives of the reforms as such. It was because of a failure to transmit to people the objectives of the reforms that it failed to elicit more active support from parents and the community.

6. Adjustments to the original reform package Since the initial reform programme was undertaken, mistakes have been identified and lessons learnt. At the end of 1995, corrective measures were adopted to remedy strategic, organizational and operational shortcomings in the original scheme, and new criteria were adopted to clarify the roles of the various institutions involved. Amongst other things, implementation was brought under the National Secretariat of Education. Steps were also taken to enhance planning capacities, and a clearer strategic vision emerged. In October 1996, the second supervision mission noted that ‘the deficiencies that had produced the delays had been overcome and that an effective structure and management could be observed’. By the time of the third such mission, in November 1997, it was observed that the managerial and planning capacities, which had been lacking at the outset, had finally been established. After 1996, significant steps were taken to increase levels of participation and school autonomy at the local level, whilst reducing the ‘supply’ bias in the original scheme. A Programme for the Improvement of Educational Quality (PMCE) was also developed, which had four main objectives: (i) to include the main actors at the local level in the process of change; (ii) to engage schools themselves in policy discussions and thereby to increase their autonomy; (iii) to bring municipalities into the reform process; and (iv) to engender within the school a ‘culture of quality’. The PMCE is therefore considered to be a sort of ‘road’ towards

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greater participation. It consisted of three components. The first was a programme known as PASE, the School Support Action Programme (Programa de Acciones Solidarias para las Escuelas), which sought to increase the say of schools in selecting teaching materials. Not only was this a recognition of the fact that different schools needed different things, but also a step towards increasing their own power of decisionmaking. It also sought to increase the level of interaction between teachers, school boards, parents and municipal authorities. These agents effectively became engaged in discussing and prioritizing schools’ needs. The PASE also encouraged the formation of juntas escolares. A second component, known as PIE, the School Input and Incentive Programme (Programa de Insumos e Incentivos para Escuelas), was proposed in order to build on the experience of PASE. It sought to engender a ‘culture of quality’ into the school system on the basis that quality is a function of both supply and demand. It involved a mechanism for defining and permanently evaluating quality, which specified what users could expect and demand.11 It also aimed to provide a way of providing comparable information about conditions in schools and thus helping to make resource allocation more equitable and efficient. The third component proposed, known as PIME, the Teacher and School Initiative Programme (Programa de Iniciativas de Maestros y Escuelas), aimed to encourage teachers to identify learning problems within their schools and to establish ways to resolve them. It involved transfers of resources, with a view to further enhancing school autonomy over both administrative and pedagogical matters. By the end of 1997, PASE, the first component of the PMCE, had been implemented. PASE successfully helped generate a new dynamic at the school and local levels, with parents, teachers, and municipal authorities each participating in discussion about their schools’ needs. PASE also was instrumental in the establishment of juntas escolares, and inducing municipalities to invest in schools. As a result of the changes adopted, a number of the problems apparent at the initial stage were overcome. Yet difficulties remained. Two specific problems deserve mention. The first was how to engage teachers in the process of reform. Teachers did not play a central role, and often a centralizing, ‘top-down’ attitude prevailed. However, it is hard to imagine changes becoming permanent unless teachers are enlisted and recognized as key players. This depended on them being afforded a role in decisionmaking. Teacher training has been oriented more towards enabling teachers to use new methods and inputs than to developing their capacity to provide innovative solutions to problems and assuming greater responsibility. The second major challenge was how to engage society

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more. In particular, discussion about the aims and methods of the reform process needed to be broadened throughout society. Discussion during the design phase was concentrated among a small group of people. The notion that this was a matter for ‘experts’ restricted participation, excluding many whose views should have been canvassed and reducing any sense of ‘ownership’. Too much emphasis was placed on ‘selling’ the project rather than explaining it. As the process of reform moves ahead, those managing it should seek to consult opinions, not shut them out. Only through broader discussion of the pros and cons can better decisions be reached and a broader understanding of the changes involved.

7. Health as a component of human development The importance of health in the development of individual capacities, and hence human development, is well recognized. Poor health limits the potential of individuals in many ways. At an early age, health problems – particularly malnutrition – impair mental and physical development, often with lasting consequences. During the formative years, health problems limit children’s ability to learn. Moreover, throughout life, health problems limit productivity and restrict access to opportunity; they also reduce life expectancy. It has long been accepted that the state has a key role to play in fostering health. Two conditions are necessary if the state is to perform this role effectively. First, there has to be a clear understanding about where to direct effort and resources. Second, the appropriate delivery mechanisms have to be in place. In Bolivia, as in most less-developed countries, the profile of health problems is significantly different from that in developed countries and consequently calls for different priorities. The most pressing health problems are associated with malnutrition, vector transmitted diseases and deficient sanitation. The incidence of health problems is greatest in the rural areas and among infants. Life expectancy at time of birth is 60 years. Infant and child mortality rates are very high at 75 and 116 per 1,000 live births, although rates vary significantly between urban and the rural areas. Whilst mortality rates among children are 104 in urban areas, they are 162 in the rural ones. For children under 3, the three main causes of death are diarrhoea (20 per cent), respiratory infections (19 per cent) and complications from birth (18 per cent). Malnutrition is also a significant problem for this age group. Around 16 per cent of the population is undernourished as measured on a weight-to-age

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criterion, and 28 per cent on a height-to-age one (Ministerio de Desarrollo Humano 1995). Again, there are significant differences between urban and rural indicators, with the latter almost twice those of the former. The incidence of certain diseases such as chagas, malaria, cholera and tuberculosis is high. Of these, chagas is particularly prevalent, affecting an estimated 1.8 million people (slightly less than a quarter of the population). This health profile suggests that much needs to be done. That improvements in these and other indicators has been only modest over the years, reflects both the prevalence of poverty in Bolivia as well as the fact that healthcare initiatives have had low coverage. There can be little doubt that better allocation of resources would lead to greater improvements. Rather than attempting to provide all kinds of services, the state should focus on those that have most impact. Less emphasis should be given to the provision of medical services and more to preventive measures, such as improved sanitary conditions, vaccination, family planning and antenatal care. Healthcare provision has also suffered from a lack of effectiveness in the allocation of resources. Whilst from a technical perspective, what needs to be done to improve health conditions is relatively straightforward, a number of practical difficulties – mostly institutional – have blocked progress. First, delivery mechanisms have been highly centralized, inadequately staffed and poorly managed. Secondly, the institutional structure has tended to adopt a narrow view towards health policy. Water and sanitation, for instance, is considered as urban development and handled with little or no consideration as to their importance for health. Even within the health ministry, coordination is poor. A fragmented, project-based approach has encouraged a ‘territorial’ mentality, with those in charge preoccupied with obtaining resources and protecting their particular spheres of interest. As with education, factors such as the pattern of population distribution and cultural diversity pose special challenges. That slightly less than half of the population lives in rural areas, and many in usually small and remote villages, makes health service provision and programme implementation particularly difficult. At the same time, cultural heterogeneity calls for a high degree of understanding of traditional customs and considerable sensitivity in making policies and programmes acceptable to local people. In the case of health, as with education, it became clear that policies, priorities and delivery mechanisms needed to be redefined. Decentralization and Popular Participation constituted a first step that led to other changes in the sector. These, together with the adoption of the human development paradigm, made it easier to question what was being done to improve health conditions and to rethink policy.

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Although the changes that arose did not constitute a fully-fledged reform of the public health system, they represented a significant departure from traditional practice. In an attempt to adapt the health service provision to decentralization, a new structure for the health sector was introduced known as the New Sanitary Model (Nuevo Modelo Sanitario). This sought to strengthen the role of health authorities at the municipal level and to provide better coordination between municipal authorities, health sector authorities and representatives of the local population. This need for coordination had become critical since, as a consequence of decentralization, municipal authorities had been given responsibility for investing in health infrastructure and equipment with centralized control being maintained over appointments. The Nuevo Modelo Sanitario helped clarify the responsibilities of different authorities. It established the Local Health Directorate (Directorio Local de Salud or Dilos), composed of representatives of local people, the health sector and the municipal government, which was expected to play a critical role in coordinating and monitoring health policy at the municipal level. Building on the Nuevo Modelo Sanitario, a new scheme was instituted for the provision of basic health services to mothers and infants, the Mother and Child Security scheme (Seguro de Maternidad y Niñez). This new approach to the provision of healthcare services demonstrated considerable potential. Under the scheme, the central government defined a set of basic services to be provided by the public health system to pregnant women and to newborn children. These were services to be given free of charge, financed partly by the central government (which pays for health personnel) and by the municipalities, each of which assigns 3 per cent of its resources from Popular Participation to acquire medical supplies. Although there are no detailed impact studies as yet, preliminary evidence suggests a significant increase in the uptake of health services covered by the scheme. Whilst the need for some adjustments became evident soon after the scheme was instituted, these were essentially fine-tuning. The Seguro de Maternindad y Niñez provided a good example of the gains to be achieved from explicitly identifying and separating out services to be provided and channelling funds to that end. Better definition of priorities and decentralized delivery mechanisms may prove very effective. Both the Nuevo Modelo Sanitario and the Seguro de Maternidad y Niñez were efforts to take advantage of decentralization in order to provide health services more effectively. Yet, while decentralization provided an opportunity, it also limited the extent to which the definition

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of priorities and the mechanisms for service provision could be re-examined. The fact that decision-making at the local level was limited to investment in infrastructure and to some operational expenses has maintained a bias towards medical services. Moreover, the assignment of partial responsibilities to different levels of government has increased the need for good coordination between authorities at different levels and for clearer lines of accountability. The emphasis on changes at the local level may also have distracted official attention away from the pressing need for change at the central level. These changes in traditional ways of delivering healthcare have been accompanied by new approaches in other related fields. The same philosophy has been adopted for the rural water and sanitation programme (Prosabar). Prosabar finances investment in water and sanitation in rural areas under well-specified criteria. The programme provides another good example of an explicit definition of the state’s role (subject to technical criteria, the appropriate cost studies and the use of menus) and of the successful decentralization of certain decisions. It shows how adequate solutions, and the necessary level of commitment, can be found when allowing for choices to be made at the local level. Whilst there have been several encouraging experiences, new practices are still required to improve the effectiveness and efficiency of health policies in Bolivia. As mentioned above, the changes in the health sector were not comprehensive and further reforms are needed, particularly in central government. The horizons of health policy need to be broadened so as to incorporate – in a coordinated way – the needs of other related sectors. Indeed, the experience of the municipalities possibly offers a useful paradigm for coordinating programmes in a number of related spheres in such a way as to provide an effective and sustainable improvement in health conditions.

8. Conclusions Human development, understood as the development of individual capacities through greater equality of access to opportunities, is an essential prerequisite for poverty alleviation and effective democratic participation. Hence human development is a necessary condition for democratic viability. In order to promote human development, significant investment in education, health and other forms of social provision is necessary. Furthermore, conditions need to be established that enable that investment to be sustained and become more effective. Recent reforms in

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Bolivia – such as decentralization, Popular Participation and educational reform – have underlined the importance of human development and introduced changes in the way priorities are defined and services delivered. By bringing decision-making closer to the population, introducing delivery mechanisms that involve local participation, and providing mechanisms for people to express their views, these reforms have introduced significant changes that help to make access to them more equitable. These changes in policy had an effect. A new dynamic is in evidence at the local level, enabling municipalities and communities to identify the needs of their populations and to engage them in setting priorities in the use of resources. An unleashing of local initiatives, particularly in the rural area, has had the effect of eroding the paternalistic culture so prevalent in Bolivia. Although the reforms are still recent, the strengthening of participation shows that it is possible to improve service provision and achieve greater involvement and transparency in the allocation of resources. As such, the reforms are a powerful adjunct to Bolivian democracy. Nevertheless, tough challenges remain. Even though the central elements of the new paradigm are in place, there is evidence that the new scheme is not fully understood or even supported by everyone. A centralizing attitude persists, reflecting both the desire to continue exercising control and mistrust in the abilities of those called upon to play a more active role. At the same time, by assigning responsibilities to various players in providing social services, two key problems have emerged: the need to coordinate the activities of different actors to avoid inefficient and poor service provision; and the need to ensure accountability since the absence of a single provider makes it difficult for users to exercise their ‘voice’ option. It is still premature to judge the extent to which the new human development framework or the changes in education and health will lead to the desired results. Whilst the preliminary signs are encouraging, it will take years of sustained effort to improve conditions for the mass of the people and to reduce the extent of inequality. A combination of persistence and imagination will be needed if citizens are to be better equipped to meet the challenges they will face whilst participating more fully within democratic structures. Policy changes will be required that take into account the lessons learnt along the way. Perseverance and determination will be needed.

Notes 1

It has been argued that men cannot exercise the political freedom of citizenship without the freedom from economic dependence. (Kant maintained that

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suffrage ‘presupposes the independence or self-sufficiency of the individual citizen’. The satisfaction of basic needs, among them education, constitutes a weaker condition.) 2 The availability and quality of data on social conditions is limited, and little has been done to improve its collection. This chapter uses various sources (INE 1994, Secretaría Nacional de Educación 1993 and 1996, UDAPSO 1995), including the 1992 census (INE 1992) and periodic household surveys. 3 For purposes of this chapter the emphasis is placed on social policy and service provision. The concept of human development adopted is deliberately broad, taking into consideration such matters as access to justice. 4 This is because many of the necessary conditions for the good functioning of markets do not hold in the case of social services. The prevalence of externalities, asymmetries of information, monopolistic elements and other market imperfections significantly limit the effectiveness of markets. 5 Prior to the changes, few rural communities received any resources at all from central government. 6 The Ministry for Human Development brought together responsibilities for education, health, water and sanitation. 7 The share of central government spending on education had been about 0.7 per cent of GDP from 1986 to 1991, compared to a Latin American average of over 4.0 per cent. Resource allocation within the sector had been strongly skewed towards higher education. 8 These decrees defined such aspects as public participation in education, curricular structure, curricular administration, and the structure of technicalpedagogical services. 9 It was estimated that the transformation of the whole system would take 20 years. This was divided into three stages. The first was estimated to last 7 years and related to primary education. 10 The technical team, which had prepared the reform proposal and was in charge of implementing it, grew accustomed to the lack of technical criticism. Questioning concerning the strategy for implementing the programme, the motivation for certain institutional decisions, progress of the different components or the weaknesses in annual programming were seen not as constructive criticism but opposition. 11 This practice was to complement evaluations by the Quality Measurement System (Sistema de Medición de la Calidad, SIMECAL).

References Hirschman, A. (1970). Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, Harvard University Press. Instituto Nacional de Estadísticas (1992). Censo Nacional de Población y Vivienda, 1992, La Paz Bolivia. — — (1994). Encuesta Nacional de Demografía y Salud, 1994, La Paz, Bolivia. Ministerio de Desarrollo Humano (1995). El Progreso de Bolivia hacia las Metas de la Cumbre en Favor de la Infancia: Evaluación de Medio Término, La Paz, Bolivia. Secretaría Nacional de Educación (1993). Mapa Educativo Básico, Ministerio de Desarrollo Humano, La Paz, Bolivia.

Human Development in a Multi-ethnic Society 137 Ruiz-Mier F. (1996). Desarrollo Humano, Participación Popular y Sostenibilidad en Apre(he)ndiendo la Participación Popular, Secretaría Nacional de Participación Popular, Ministerio de Desarrollo Humano, La Paz, Bolivia. Ruiz-Mier, F. and Giussani, B. (1997). El Proceso de Descentralización y el Financiamiento de los Servicios de Educación y Salud en Bolivia, Serie Reformas de Política Pública no. 48, CEPAL, Naciones Unidas. Unidad de Análisis de Políticas Sociales, UDAPSO (1995). Acceso a los Servicios Sociales en Bolivia, mimeo, La Paz, Bolivia.

Part III Institutional Problems and Responses

8 Party Politics, Intermediation and Representation Pilar Domingo

1. Introduction Since the restoration of civilian government in 1982, Bolivia has experienced an unusually long period of relative political stability. Although not free from moments of crisis – for instance the hyperinflationary crisis of 1984–5 which cut short the mandate of Hernán Siles Zuazo – this has been a period in which constitutional institutions have become more firmly established and stability has resulted from a politics of consensus based on multiparty coalition governments. However, in addressing the question of viability, we seek to go further than a discussion of the consolidation of democracy; for democracy to become consolidated it first needs to be viable. As we have discussed in Chapter 1, viability depends on the extent to which institutions are rooted in society in a meaningful way. Ultimately, democratic viability refers to the capacity of democratic institutions to mediate social demands and pressures such that these may be represented at the level of the state; viability is determined by the interface and interaction between societal forces and the political system in a way that leads to enduring legitimation. Political parties play a key role in this process of mediation. In view of Bolivia’s often turbulent political history, it is no mean achievement that constitutional government has survived for 15 years and underpinned a period of political stability. The old zero-sum conflicts of the past appear to have given way to a new politics, based more on negotiation and compromise. In this respect, political parties have tended to supplant some of the old actors – the military and the trade union movement – as the main power-brokers within a framework of 141

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democratic institutions. However, a number of questions remain. What kind of democratic arrangement are we witnessing? Is it adequately representative? Is it adequately inclusive, given the huge socio-economic inequalities and the cultural heterogeneity that characterize Bolivian society? How have the formal institutions of liberal democracy inserted themselves into Bolivian politics and how well do they adapt to social realities? There are certainly signs that the minimal democratic rules have been observed by the political class and that constitutional forms have been respected. Observance of a regular electoral calendar and the alternation of parties in office have become routine features of political competition, especially since 1985. The uncertainties of the transition have been overcome, and power-sharing has been accepted as a necessary principle by the main political forces. Post-election coalitions have even taken on an air of normality in ways that would have been difficult to imagine 20 years before. However, Bolivian democracy is still a fragile endeavour. The institutional links between state and society are fundamentally weak and, as elsewhere in Latin America, representation and intermediation is made more difficult by public disenchantment with the institutions of formal democracy and political parties in particular (Mainwaring and Scully 1995: 1–37). Modern-day politics still reflect many traditional features: both clientelism and state patronage permeate government and representative institutions at every level, as does corruption.1 Political parties readily engage in these practices, at the expense of their representative functions and their relations with society. The persistence of high levels of inequality and the uneven distribution of resources increase the obstacles to successful democratization. Unless Bolivia’s political leaders address the problems of poverty and exclusion, the longer-term democratic viability of the country will remain in doubt. If democratic viability is about a positive interaction between the social and political in a way that demands from below can be articulated and channelled through democratic institutions, much has yet to be done.

2. Political parties and their role The point at which Bolivia embarked on its transition to democratic rule and at which this transition gave way to ‘consolidation’ is and will continue to be a matter of dispute. The waters were muddied by a sequence of short-lived governments, both civilian and military, that followed on from the fall of General Hugo Banzer in 1978 and led

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finally to the restoration of constitutional rule in 1982 under Siles Zuazo at the head of the Unión Democrática y Popular (UDP) coalition government. Amid the hyperinflationary economic crisis of 1984–5, Siles Zuazo resigned and the date of the next election was brought forward, leading to the election of Víctor Paz Estenssoro in 1985. Paz was the first elected president to serve out a full constitutional presidential term in power since 1964. At the outset of the transition, party politics in Bolivia were characterized by a number of features. Firstly, the record of the main political forces in the country, chief amongst them the Movimiento Nacionalista Revolucionario (MNR), and more recently Banzer’s Acción Democrática Nacionalista (ADN), indicated a weak commitment to democratic politics. Factions in both parties had shown few qualms about supporting military solutions to constitutional stalemates. Secondly, parties were highly polarized and susceptible to ideological splits, traits made more pronounced by the personalist, top-down way in which they were structured. Indeed, the rules of the electoral system itself encouraged factionalism, especially after the 1980 electoral law introduced a high level of proportional representation. Thirdly, political parties were operating in a context of rapidly changing social expectations and demands as the electorate came to prefer moderate, non-ideological political options. In 1978 political activity was still subject to explosive bursts of popular mobilization. The fall of Banzer showed that the military was no longer in control of the political process. Party activity flourished on a wave of anti-military protest and street politics was resorted to with enthusiasm. ‘Bottom-up’ pressure for democratization was orchestrated by civilian opposition leaders and groups from the diversity of political parties and the ever-radical union movement, each pressing for its own notion of democracy. In the interplay of political rivalries over the following two years, diverse social demands and expectations emerged around the promise of democracy, whilst the right and the military remained unwilling to accept electoral outcomes. In this context, political demands ranged from bringing the military to account over human rights violations to more general appeals for social justice and political democracy. Until 1985 mobilization and street politics were still perceived as a legitimate political tool, and parties of the left sought to benefit from articulating widespread social discontent.2 By 1985, the exhausting effects of political instability, combined with the traumatic experience of hyperinflation, undermined both the popularity of left-wing parties and the appeal of the radical mobilization tactics of the Central Obrera Boliviana (COB). Economic stability and

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order became the predominant social concern, a point reflected in the 1985 election results, which gave a majority to the ADN and to the more conservative wing of the MNR under Paz Estenssoro. Thereafter, despite its continued fragmentation, the party system was strengthened as parties emerged as the decisive vehicles for political organization. This was the product of a learning process by which the surviving political actors adapted, essentially by default, to formal democratic rules. Other non-electoral actors, notably the COB and the military, were dislodged from the centre of the political scene. What follows is an attempt to classify parties into three main types. a. The pre-transition parties The three main pre-transition parties had different starting points, but some common roots. The MNR, a major political force since the 1940s and to date still a dominating force in party politics, was born out of the revolutionary nationalism that transformed Bolivia in the 1950s, and its subsequent fragmentation gave rise to many influential splinter groups. The Movimiento de Izquierda Revolucionaria (MIR), which first appeared in the 1970s, initially sought a socialist reconstruction of the revolutionary nationalist tradition espoused by the MNR. The ADN appeared at the end of the 1970s as a vehicle for Banzer’s attempts to achieve electoral representation. With the exception of the Falange Socialista Boliviana (FSB), it was the first attempt of the Bolivian right since 1952 to reorganize itself as an electoral option. Yet through his links to General René Barrientos, the military leader who toppled Paz in 1964 and who ruled as military dictator prior to his election in 1966, even Banzer can trace his political origins back to the MNR. Despite their different trajectories, there is much common ground between them: all three have come to adopt fairly similar positions on a range of political and economic issues; all have achieved a degree of organizational capacity and a resilience to political and economic turbulence; and in each case their leadership is drawn from what can be loosely termed the ‘clase política tradicional’. The MNR has traditionally enjoyed a broader nation-wide social base, whilst the MIR has a more narrowly provincial middle-class appeal, and the ADN is more representative of urban business interests with a strong regional appeal among the flourishing Santa Cruz bourgeoisie. Since 1985, all three parties have reached the presidency: the MNR under Paz Estenssoro (1985–9) and Gonzalo Sánchez de Lozada (1993–7); the ADN under Banzer (1997– ) and the MIR under Jaime Paz Zamora (1989–93).

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• The MNR has combined the benefits of its original nationalist revolutionary discourse with a flexibility in adapting to changing conditions, both within Bolivia and internationally. Through the skilful leadership of Paz Estenssoro in the 1980s, the MNR transformed its discourse from one of state interventionism to one of neo-liberal capitalism, from an authoritarian approach to politics to a more consistent adherence to constitutional rule. Latterly, the party has entered into alliances with other political forces where this has helped it legitimize itself. Nevertheless, it has lost much of its earlier organized presence in society and its ability to mobilize political opinion on specific issues. • The ADN has successfully given a political voice to right-wing interest groups, which previously lacked an electoral vehicle and which therefore tended to support authoritarian options. As the left was discredited and statism receded, the ADN achieved – as a consequence of democratization – sufficient institutional cohesion to compete with relative success in elections, receiving the largest single vote in 2 out of 4 general elections since 1985 (in 1985 and 1997). 3 It remains to be seen the extent to which this process of party institutionalization will be sufficient to survive a leadership hand-over when Banzer finally retires from active politics. • With the transition to democracy, the MIR claimed to represent a more social democratic option. By 1989, it had distanced itself from its role in the UDP government of 1982–5. Its left-wing image faded after the alliance with ADN brought Jaime Paz Zamora to the presidency in 1989. The MIR–ADN alliance after 1989 did not lead to any sharp change in policy. However, its electoral standing was damaged by the party’s reputation for corruption. b. Post-transition ‘neo-populism’ The late 1980s saw the emergence of new types of populist parties in the shape of Conciencia de Patria (Condepa) and Unión Civica Solidaridad (UCS), founded in 1988 and 1989 respectively.4 Condepa is regionally based with a strong electoral appeal among the aymara and urban population of La Paz. UCS is less geographically defined, but has experienced considerable electoral success in Santa Cruz and Oruro. Both parties made strong inroads among the lower and more marginalized sectors of society. They therefore initially represented a break with the clase política tradicional, both in terms of their militants and leaders who tend not to belong to groups which have traditionally benefited from state patronage. They were a novel expression of the mestizo urban class

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and the informal sector. By broadening the political options available to the electorate, it would seem that they helped mitigate some of the deficiencies of the party system. In particular, it is notable that while on the one hand both Condepa and UCS have had an impact on the more traditional political parties through the promotion of more ‘populist’ forms of electoral strategies, they in turn also adapted well to the rules of the political negotiation within the logic of coalition politics that has underwritten recent political stability. Moreover, the looseness of their political platforms, combined with the appeal of state patronage, has made them willing partners in coalition building. Both parties resembled the traditional parties in the centrality of a personalized leadership figure: ‘Compadre’ Carlos Palenque in the case of Condepa and Max Fernández in that of UCS, both of whose deaths prior to the 1997 elections did not appear to dim their popularity. However, the removal of Palenque and Fernández from the political scene, combined with in-fighting and factionalism especially within Condepa, and the wearing effect of holding public office has weakened the electoral standing of both parties, as is evident from the 1999 municipal election results.5 Since the ‘representative’ factor of these parties resides not in the strength of their political programmes, but as ‘alternatives’ within the seemingly broader social appeal of mestizo politics, it is possible that their decline could increase the fragility of democratic institutions, since they provide a channel for those otherwise disenchanted with traditional politics. The constituencies to which they successfully appealed remain highly volatile, and may turn to other political options. In local elections this has expressed itself in the victory of other recent new populist parties such as Nueva Fuerza Republicana (NFR) in Cochabamba and the Movimiento Sin Miedo (MSM) in La Paz under Juan del Granado following his departure from the Movimiento Bolivia Libre (MBL). With regard to the MSM, the boundary between neo-populism and left-wing movimientismo is unclear. This is also true the Partido Socialista (PS) in Potosí which scored an overwhelming victory in the 1999 elections, mainly because of the personal popularity of its mayoral candidate. c. The traditional left The traditional left has been the loser in the process of political and economic transformation since 1985. Tied closely to the fortunes of the COB, traditional left-wing parties were blamed for exacerbating the economic insecurity of the 1982–5 period. Structural adjustment, especially the decline of the state mining industry, dealt a further blow to the political salience of the left. Even so, radical expressions of disconformity

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with neo-liberal economic policies have not disappeared and successive governments have had to resort to repressive methods to contain outbursts of social mobilization. To some extent, the left has been transformed through the defensive reactions of coca-producing peasants, the emergence of indigenist-based political movements, and also more recently by grass-roots, urban-based movements. The discourse of the left is still more one of denunciation than innovation (Dunkerley 1998), yet the opening up of new channels for political participation at the municipal level could in principle provide an avenue for representation for the left and some stake in the new order for the otherwise excluded. In the 1993 and 1995 municipal elections, the vote for the left rose from 5 per cent to over 11 per cent respectively. Whilst it is still unclear the extent to which Popular Participation will widen political options at the local level, it seems to be the case that the left is poorly placed to compete with the traditional parties, both in terms of resources and nation-wide organization. The 1999 municipal elections revealed that municipal politics do allow for the emergence and electoral success of alternative left-oriented options at a local level, as the victories of MSM in La Paz and PS in Potosí show. But in overall percentage terms, the major political parties have in fact increased their electoral strength in comparison to the 1995 municipal elections.6 At a national level, the left has benefited somewhat from the 1996 electoral law, which helped the Izquierda Unida secure four ‘uninominal’ seats in Congress.

The period since 1985 has, then, been one in which the zero-sum confrontations of the past gave rise to a new sort of politics based more on consensus-building and cemented by an ideological convergence around liberal democratic rules and market economics. However, the persistence of poverty, the slow rate of economic recovery achieved since 1985, and the unequal distribution of the benefits from economic liberalization have progressively eroded the credibility of political parties, which have failed to respond adequately to real social needs. Opinion polls consistently place parties in a highly unfavourable light, along with other institutions of democratic government (Rojas and Zuazo 1996: 17–18). The rise of populist parties like UCS and Condepa was also indicative of this disaffection with the traditional parties. As the memory of hyperinflation fades in the public mind, the consensus it engendered appears to be dissipating and a technocratic style of government tends to have less resonance among the majority of the population.

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Public disaffection with party politics is not simply a function of dissatisfaction with policy outcomes, but with the clientelistic logic which is thought to lie behind the stated motives of political parties. As Gamarra and Malloy have put it: parties are first and foremost vehicles to capture and circulate state patronage. Only secondarily, if at all, have parties served to define ideologies, project programs and articulate the interests of civil society as part of the governmental process. (Gamarra and Malloy 1995: 421) Whilst alternation in power may help defuse a crisis in representation, the rotation of parties and the nature of coalition politics means that even small parties can expect to accede to state patronage at some stage. The struggle for jobs (repartición de pegas) is characteristic of each election year. The vices of the system tend therefore to be perpetuated under the discourse of consensual politics. A distinction perhaps needs to be drawn between patronage, which is at the heart of the history of state formation in the most established democracies, and corruption. Patronage oils the political machinery of democratic politics. However, the absence of the constructs of a modern state, such as a professional civil service based on merit and adequate control mechanisms of accountability and transparency in public office, makes clientelism a prominent and damaging feature of the political process in Bolivia (see also Chapter 11 on public accountability). Democratic legitimacy is undermined where patronage and clientelism dwarf other motors of political activity. Moreover, a lack of public accountability tarnishes the political process by providing opportunities for corruption and graft. The frequent instances of corruption and impunity in public office sharpen in the public mind the image of party politicians as interested more in personal gain than in representing the interests of their constituency. As discussed in Chapters 10 and 11 on legal reform and accountability, recent legislation on judicial reform and the strengthening of internal audit control mechanisms is designed to address the problems of impunity, but accountability and transparency still do not prevail in the public image of party politics and public office. Political parties in Bolivia fail to connect with society in a meaningful way. As democratic politics have become ‘routine’ and political outcomes more predictable, parties have lost the capacity and interest to engage in mass mobilization. The contrast with the politics of the 1978–85 period is therefore striking. Although election campaigns remain lively affairs, political outcomes are now more the consequence of coalition

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deals, and this undermines public interest and enthusiasm about elections. Broadly, acceptance of the overall economic model has also reduced the scope of and the possibilities for political participation. The popular base of the major political parties (especially the MNR) has narrowed, at the same time that policy-making has become a more technocratic exercise and social disenchantment with policy outcomes has become more pronounced, with government decisions far removed from the majority of the population. Whilst stable democracies may involve institutionalization and a move away from radical street politics, they also require parties to be socially rooted and capable of channelling public demands.

3. Electoral reforms and their effects Since 1985, elections have become the main way of defining political outcomes. Although elections took place during the 1950s and 1960s and gave legitimacy to a sequence of MNR governments, political conflict was mainly negotiated outside the electoral sphere. Key actors had little faith in democratic procedures. Elections tended to involve unscrupulous manipulation and those who oversaw them did not act with impartiality. With the transition to democracy, which ushered in a new role for elections, electoral rules had to be adapted to make them acceptable both to the competing political forces involved and to the electorate as a whole. It is not surprising, therefore, that electoral reform became a major subject of debate and negotiation. 7 Three key issues had to be addressed. The first was the need to construct a legitimate system of electoral control to minimize the possibilities for fraud and manipulation. The second was the need to guarantee the effective access to the vote for a dispersed and still largely rural population. The third was the need to reform the system by which congressional seats were allocated in such a way as to be acceptable to the parties and to legitimize representative government. Much has been done to improve the electoral system since the beginning of the democratic transition. The 1991 Electoral Law reformulated the National Electoral Court (CNE), establishing a credible regime for the management and administration of elections.8 Under the new system, electoral authorities were appointed on the basis of a two-thirds majority approval in Congress. On the whole, the CNE is a widely respected institution which has so far upheld an image of political neutrality and integrity. Subsequent reforms sought to minimize the chances of manipulation in voting procedures. The 1996 Electoral Law is a remarkable

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compendium of measures aimed at regulating the behaviour of political parties and the electoral process. Also, the CNE has been given considerable financial support, which has helped it devise and implement measures to ensure outreach, fairness and efficient processing of electoral results. Much has been achieved in terms of extending the presence of electoral mechanisms into the rural and more remote areas of the country. Electoral reforms have also redefined the rules governing political competition and access to power. Until 1996, seats in Congress were allocated basically on a principle of proportional representation (PR) with varying degrees of proportionality. A law introduced in 1980 allowed for greater proportionality, thus favouring smaller parties. The effects of this were partially reversed in 1986 when legal changes reduced the degree of proportionality. By its unclear wording, the 1986 law established an ambiguous system of seat allocation which was narrowly interpreted by the electoral authorities in 1989 to discriminate against small parties. Whereas ten parties achieved a presence in Congress in 1985, in 1989 this was reduced to five.9 Electoral reforms in 1991 and 1993 introduced the St Lague formula which once again increased proportionality in the system, as reflected in the 1993 results when 8 parties achieved congressional representation.10 The original adoption of PR was a factor in encouraging the proliferation and fragmentation of the party system in the early 1980s. However, as the political system stabilized, the closed party list system which had always been in place increasingly encouraged greater party cohesion and discipline. The subordination of party members in Congress to party leadership, and therefore, to executive decisions thereby helped promote government stability. However, if party verticalism has facilitated coalition politics, it has also undermined the legislative and oversight functions of Congress. The 1996 Electoral Law promised to alter executive–legislative relations by introducing a mixed system of representation, modelled on the German system. Congress is now elected on both a PR (plurinominal) system as well as a ‘first-past-the-post’ (uninominal) system. Just under half of the members of the lower house are elected on the basis of PR, whilst the other half are elected for single-member constituencies. The purpose of this arrangement is to enhance representation and make congressmen more accountable to those who elect them (Dunkerley 1998). The 1996 reform may therefore enhance the representative functions of Congress, facilitate the election of representatives from broader sections of society and provide greater opportunities for smaller parties to achieve congressional representation. While the initial results do not

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seem to confirm this, the longer-term impact of the reform still remains to be seen. The contribution of the Banzer government to electoral and party politics came in the form of the Political Party law passed in June of 1999. This represents a detailed and prescriptive attempt to regulate party politics, establishing rules on internal party democracy and accountability, and includes an affirmative action clause for female participation. The law is an ambitious document, but it remains to be seen what effect the new law will have on the workings of the party system.

4. Coalition politics As we have noted, government since 1985 has been underpinned by party pacts and coalitions in Congress. The pact agreed in 1985 between the MNR and ADN ensured support for the implementation of the far-reaching economic liberalization plan, establishing a precedent for coalition government. It was a consequence both of the specific institutional rules of Bolivia’s ‘hybrid’ presidential system11 and the lessons learnt from the preceding UDP administration when the executive lacked a majority in Congress and governability fell victim to executive– legislative conflicts. Although there had been a tradition of pact-making in times of crisis, the 1985 pact broke new ground in setting a precedent for a style of majority coalition politics designed to avoid inter-institutional conflict between one power and another. It helped break with the tradition of resorting to extra-constitutional mechanisms to deal with crises of governability. The unique system of ballotage in Bolivia is conducive to coalition politics. According to a tradition that dates back to the nineteenth century, when no one presidential candidate achieves a plurality of votes in an election, the Congress (elected at the same time) is constitutionally responsible for choosing the next president. Therefore, in a multi-party system, where no party has an overall congressional majority, the appointment of a president resembles a form of parliamentary election. The experience of the transition years showed that majority congressional support was necessary prior to electing a president in order to avoid the politically costly stalemates that characterized elections in the late 1970s. Furthermore, in order to achieve governability, a majority coalition needed to be enduring in order to secure stable and cooperative relations between executive and Congress. Three consecutive elections (1989, 1994 and 1997), each of which followed this pattern, helped turn such practices into a normal part of Bolivian political life. 12

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The post-electoral pact of 1989, when Banzer supported the MIR (which came third) as an act of revenge for the MNR’s refusal to reciprocate its own support in 1985, seemed to many at the time to be an example of unsavoury opportunism, especially on the part of Paz Zamora, who became president on the back of a deal with the MIR’s old enemy. Yet, arguably, this alliance showed how well-adapted the parties had become to the new rules of democratic competition in a situation where ideological positions had been sacrificed on the altar of neo-liberal policy. In practice, the Acuerdo Patriótico, the name given to the coalition, turned out to be more structured than its MNR-ADN forebear. In 1993, Sánchez de Lozada, the MNR presidential candidate, whose election ticket also involved the Movimiento Revolucionario Túpac Katari de Liberación (MRTKL), a small indigenista grouping, formed a post-electoral coalition with the Movimiento Bolivia Libre (MBL) and UCS. Four years later, the so-called megacoalición – ADN, the MIR, Condepa and UCS – elected Banzer as president, although Banzer himself received only 22 per cent of the vote. At the outset, the megacoalición occupied over twothirds of the seats in Congress. In August 1998 Condepa had exited the coalition, although this retained a majority in Congress until early 2000. What is noteworthy is that coalitions have lasted well beyond the election of a president, generally for the full duration of a presidential term.13 Access to state patronage has acted as sufficient inducement for parties to remain within a coalition without holding the presidency themselves. Parties have also been prepared to enter into coalitions where their presence was not indispensable for the survival of that coalition. This was particularly the case of Banzer’s megacoalición. The experience of the transition years, the decline of non-elective political actors, the transformation of zero-sum politics into an ideological convergence around neo-liberal economics, and the particular constitutional configuration of the Bolivian political system are all factors which helped engender an unprecedented political modus vivendi through a coalition politics which allows for rotation in power and a degree of pluralism. The question which now arises is whether this formula can encourage the intermediation and representation necessary for democratic viability in the longer run.

5. Consensus politics, political mediation and democracy Undoubtedly, coalition formation has underwritten government stability in Bolivia, but it has not been achieved without cost. Moreover, the yardsticks by which coalition politics have been judged are predominantly

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to do with stability and governability, not whether democratic institutions are representative or socially embedded. Given the turbulence of Bolivia’s political history, government stability within a constitutional framework is commendable but (on its own) insufficient to ensure longer-run democratic viability and regime legitimation. While institutional factors help explain the stabilization of coalition politics, ultimately this has been achieved from a fine balance being struck between three underlying factors: the prevalence of clientelist politics; an increasingly technocratic and ‘closed-door’ approach to policymaking; and an ideological convergence around neo-liberal economics with limited tolerance towards any deviation from the policy agenda. First, a key ingredient to the success of coalition politics has been access to state patronage, which has been a more potent factor than discrepancies over ideology or policy. Indeed, policy issues have become a relatively minor consideration in the negotiations between parties prior to the election of a president. Although voters may expect parties to behave in such a way, this further weakens their representative attributes; they are guided not by the interests of their constituents but by the lure of government office and the influence that this entails. The search for jobs is thus the glue that holds institutional stability together. Although clientelistic behaviour is a characteristic shared with established democracies, in the latter the democratic element of representation and resource distribution is sufficiently well incorporated into the system to allow for regime legitimation to take place. This is still not the case in Bolivia, and it is precisely here that a key challenge to democratic viability arises. Huge inequalities in the distribution of wealth and the inability to generate sufficient resources to aid redistribution threaten to undercut the capacity to advance legitimation over the longer term. Furthermore, coalition politics is essentially a ‘top-down’ affair. The terms of alliances are negotiated at the highest levels of leadership; the parties’ ranks in Congress comply and their supporters accept it as a fait accompli. Although there have been rebellions in Congress among coalition party members, discipline tends to prevail. In itself, this is not so different from coalition politics in multi-party parliamentary systems with executive-led governments and passive parliaments (Bogdanor 1983). The difference lies in the extent to which graft and clientelism permeate parliament and parties in Bolivia, undermining the representative, legislative and oversight functions of Congress. Policy-making by government is a ‘top-down’ business, in which decisions tend to be taken by ministers and their advisory teams of technocrats. Although

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the role of Congress is not negligible in decision-making, congressional debate is by no means instrumental in the legislative process. Rather, Congress tends to play a denunciatory role – often theatrical, but seldom forcing the executive to reconsider decisions already taken. Second, technocratic government heightens this sense of ‘top-down’ policy-making. This was a characteristic of the Sánchez de Lozada government, during which reforms were typically hatched behind closed doors with little consultation. The underlying assumption appears to have been that it was more efficient to keep ‘venal’ politicians at arm’s length. However, the consequence was that policy decisions and reforms did not benefit from public debate. Since they did not respond to social demands, the probability increased that they would not prove enduring. The Popular Participation scheme may prove an exception to the rule. A key characteristic of coalition politics is thus that government and policy decisions tend to be executive-led. Congress does not play a major legislative or debating function. Occasionally specific constituencies or sectoral interests are taken into account in the formulation of policy, but usually as a result of their ability to mobilize – as has been the case with the peasant sector.14 Where broader consultation takes place, party structures and Congress tend to be side-stepped. This weakness of Congress in the governmental process is a major problem for the long-term viability of representative institutions, reflecting as it does the deficiencies of parties as agents of political mediation. Finally, a third characteristic of coalition politics is the broad ideological convergence which has prevailed since 1985. The support for the 1985 economic measures to halt hyperinflation reflected not just a political accord on the need to take action, but a broader social consensus forged by the way in which the trauma of economic instability had affected all sectors of the population. Radical options became discredited, and the further decline in the influence of the COB and the miners’ federation (FSTMB) was an inevitable corollary of liberalization and state restructuring. As this ideological convergence deepened, coalition politics became increasingly depoliticized. As parties entered government coalitions, their ideological identity tended to fade because of the acceptance of the economic model and the attractions of state patronage. However, increasingly, it would seem, stability and governability have been achieved at the expense of political mediation and representation. Ultimately, the political system is deficient in the ways it channels social demands and articulates them at the level of the state. It is here that the prospects for viable democratic development falter. Stable

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coalition politics have produced a somewhat complacent political class, with political institutions weakly rooted in society and unresponsive to changing social demands and public concerns.15 The seemingly pluralist character of consensual politics disguises the nature and extent of public disaffection. Although social protest has been sporadic, government policy has been contested in various spheres. Successive democratic governments have not hesitated to resort to emergency measures and repression in response. Ultimately, deviance from the political agenda imposed by top-down decision-making is not tolerated. Although dissent may express itself through the party system both at the local and national levels, it is still far from clear whether the channels of mediation will be sufficiently robust to articulate demands from below. The de-ideologization of political conflict in Bolivia also appears to arise from consistent electoral preferences for centrist positions and political moderation since 1985, although these have not necessarily translated into stable party constituencies. Initially, these reflected societal exhaustion with the experience of hyperinflation. Over time the ‘deradicalization’ of the voting population has come to reflect not only the limited alternatives on offer but, more importantly, changes in a society that is no longer drawn towards the ideological (and polarized) discourses of the past. Such centrist preferences arise from a rejection of the past, but not necessarily a positive identification with the current options. The nature of demands from below is something that is constantly changing, reflecting transformations in society itself as new political identities emerge, displacing traditional forms of political conflict. The nature of these identities, in turn, reflects the structural changes that have come about over the last 20 years, and the ‘winners’ and ‘losers’ from that process. The radicalism of the FSTMB has been displaced towards the cocalero movement, which represents a far from negligible threat to the state. New rural identities, including the cocaleros, vary from indigenous concerns through to more general campesino preoccupations about such matters as rural development policy and land distribution. The MNR no longer holds its traditional sway over the rural population, outside a few defined constituencies, partly because the initial benefits of the agrarian reform have long ago disappeared. Rural politics remain highly complex and differentiated, given regional, ethnic and developmental variations. Peasant politics is still weakly articulated, although the Confederación Sindical Unica de Trabajadores de Bolivia (CSUTCB) has gained strength and organizational capacity both with regard to the COB (in which traditionally peasant participation was very limited) and

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the state. Peasant movements have demonstrated a capacity to mobilize rural discontent and frustration with the lack of representation of their demands within formal democratic institutions. At the same time, there has been significant factionalism and division within the peasant movements persists, and the forceful coca erradication programme implemented under Banzer has weakened the cocalero movement somewhat. The introduction of uninominal seats did increase the presence of campesino representatives in Congress, and the Popular Participation Law may also have opened up new channels of political participation. However, given that the rural population constitutes around half of the population, it remains grossly under-represented at the level of the state. A centrifugal dynamic in Bolivian politics is also potentially disruptive, given strong regional identities. This is not a new problem and reflects changes in the productive structure of the country, especially in view of the economic development that has characterized Santa Cruz since the 1960s and the decline of traditional mining interests in the highlands in the 1980s. The UCS, Condepa and NFR have shown that parties can emerge which articulate regional demands. At the same time local comités civicos have voiced regional interests. On occasions, cross-party regional coalitions have emerged in Congress in defence of departmental interests and investment projects which favour them. However, most parties have not picked up on regionalist issues in their discourse and political conflict is still voiced primarily in national terms.

Conclusions The merits of coalition politics should not pass unacknowledged, particularly when we consider Bolivia’s starting point and measure the country’s experiences against those of some of its neighbours. A multiparty structure has been created which enjoys a degree of institutional stability and which has survived the vicissitudes of various rounds of electoral competition. Also, the political system admits new parties and other groupings that express disillusionment with traditional party politics. The political system is not entirely exclusive and provides some channels for political conflict to be articulated within a constitutional framework. However, democratic institutions fail adequately to reflect the ‘pluralism’ of Bolivian society and the tensions within it. Although political parties may seek to respond to this pluralism, particularly at elections, party constituencies remain shifting and fragile, underlining the inchoate nature of party politics. While coalition politics may help

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governability, it is at the expense of the representation function of party politics. There is little sense of a positive interface between party structures and social identities, and whilst the majority of the population receives relatively little from the process of economic reform, failure to incorporate it politically represents a threat to democratic advance. Ultimately, the longer-term viability of representative politics is bound up with the capacity of the system to filter substantive benefits to the poverty-stricken majority. Intermediation and representative government can only have meaning if structural problems of social exclusion and inequality are addressed. Indeed the extent of inequality and exclusion in Bolivia may be such that the task of political mediation may be wellnigh impossible, thus raising the question whether in a long-term sense democracy, as such, is viable.

Notes 1

2

3

4 5 6

7

Transparency International rated Bolivia 49th out of the 50 countries mentioned in its 1997 ‘corruption perception index’, with a score of 2.05 out of 10; in 1998 it scored 2.8; and in 1999 2.5. Such surveys show, at least, that awareness of the problem of corruption is widespread among the elite groups consulted. When the UDP government assumed office in 1982 on the electoral results of 1980, there had been reluctance on the right to hold new elections which would at this stage have further boosted the electoral successes of the left (Dunkerley 1984: 342). For many on the left, for whom the political repression duing Banzer’s military government is still an issue, his democratic credentials are still questionable. Banzer has never been brought to account for the political crimes committed during his military government. He therefore stands in contrast to General Luís García Meza, who was given a lengthy prison sentence for having usurped power in 1980 after the bloody coup which gave cocaine interests unparalleled political influence. For a fuller discussion of neo-populism in Bolivia, see Mayorga (1991 and 1993), Saravia and Sandoval (1991) and Toranzo and Arrieta Abdalla (1989). UCS maintained its position in Santa Cruz under the banner of Johnny Fernández, son of the founder. But Condepa lost its traditional hold on El Alto. Where alternative options to the traditional political parties have scored high electoral results, it is often due to the presence of a popular candidate whose personal credibility at the local level outweighs the electoral machinery of the larger parties. The victory of these new movements is, again, also the reflection of grass-roots disaffection with a political class which is viewed as corrupt. The most remarkable example of vibrant grass-roots political mobilization is the case of Potosí where the PS candidate achieved an overwhelming 64 per cent of the vote. Changes to the electoral system were introduced in 1980, 1986, 1991, 1993 and 1996.

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8 The 1991 electoral law was the consequence of a major institutional crisis during the Paz Zamora government, involving an attempt to impeach members of the Supreme Court. The agreement reached between the ruling coalition and opposition parties involved a deal on the electoral law which had been a major issue since the 1989 election. 9 A different application of the 1986 law would have enabled two additional parties to achieve congressional representation. 10 The St Lague formula is a variant of the D’Hondt electoral system of seat apportionment which produces greater proportionality in the allocation of multi-member electoral constituencies. It is designed to favour smaller parties, and to diminsh the over-representation of larger political formations. 11 Gamarra (1991) coins the term ‘hybrid presidentialism’ to characterize the system that contains a strong parliamentary component in the way the executive is elected. 12 Further changes to the constitution in 1996 specified that the Congress can only chose from the two front-running candidates from the popular vote; and that a presidential term is for five years rather than four. Debate over constitutional reform has fuelled academic debate over the relative merits of presidentialism as against parliamentarism. However, in practice, the 1996 reforms did not fundamentally change the balance between the executive and the legislature. 13 The exception to the rule here was the rift between the MNR and ADN in 1989, only months before the general election. 14 It is significant that for the formulation of the INRA law, which redefined the structure of landholding and the institutions of the agrarian reform programme, consultation and debate of the law was initially extended by the executive to peasant and indigenous organizations and the private sector. Congress was only involved minimally as a forum for discussion, and in fact only took 20 minutes to consider and vote on the final version of this controversial law in October 1996. 15 None the less, it is worth stressing that the rules of political competition have not remained static since 1985. Popular participation and the 1996 electoral reform, in particular, sought to open up new channels for the expression of local grievances.

References V. Bogdanor, ed., Coalition Government in Western Europe (London: Heinemann Educational Books, 1983). J. Dunkerley, Rebellion in the Veins (London: Verso, 1984). J. Dunkerley, The 1997 Bolivian Election in Historical Perspective, Institute of Latin American Studies, Occasional Paper (London: ILAS, 1998). E. Gamarra, ‘Hybrid Presidentialism and Democratisation: the Case of Bolivia’, Unpublished manuscript, 1991. E. Gamarra and J. Malloy, ‘The Patrimonial Dynamics of Party Politics in Bolivia’, in S. Mainwaring and T. R. Scully, eds, Building Democratic Institutions: Party Systems in Latin America (Stanford: Stanford University Press, 1995).

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S. Mainwaring and T. R. Scully, ‘Party Systems in Latin America’, in Mainwaring and Scully, eds, Building Democratic Institutions: Party Systems in Latin America (Stanford: Stanford University Press, 1995). R. Mayorga, Max Fernández: La Política del Silencio (La Paz: ILDIS, 1991). R. Mayorga, Discurso y Política en Bolivia (La Paz: ILDIS, 1993). G. Rojas and M. Zuazo, Los problemas de representatividad del sistema democratico boliviano: participación ciudadana y decentralización (La Paz: ILDIS, 1996). J. Saravia. and G. Sandoval, Jach’a Uru: La Esperanza de un Pueblo (La Paz: ILDIS, 1991). C. Toranzo Roca and M. Arrieta Abdalla, Nueva Derecha y Desproletarización en Bolivia (La Paz: ILDIS, 1989).

9 The Private Sector and Democratization Horst Grebe López

1. Introduction In seeking to identify the role of the private sector in making Bolivian democracy more ‘viable’ we are entering a polemical field which excites debate amongst politicians and academics alike. It is only possible to reach preliminary and tentative conclusions, not least given the uncertainties that continue to exist both within Bolivia and internationally. The tentative nature of this sort of reflection is underscored by the fact that it is a theme which has yet to be properly researched and for which a bibliography as such scarcely exists. Although studies on Bolivia of one kind or another have increased notably in recent years and the number of independent academic research centres has multiplied, the private sector has not been a major focus of academic interest. Indeed, it is worth pointing out at the outset (and it is something we return to later on) that there is no consensus over what we even mean by ‘the private sector’. Our point of departure, perhaps inevitably, is the restoration of democratic government in 1982, and a major focus of our attention is the structural reforms which took place in the years afterwards, specifically under the government of President Gonzalo Sánchez de Lozada (1993–7). We seek to analyse the performance of the private sector because, in the period since 1982, it has come to perform a much more important role as the main motor of the country’s economic growth. We thus seek to examine the potential of the private sector to carry out those changes to the productive structure of the country which are essential if democracy is to prosper. The increased role of the private sector is derived, basically, from the policies of privatization and capitalization undertaken between 160

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1989 and 1997, when a new framework was established that altered the traditional relationship between the state and the private sector. However, before examining the consequences of these policies and asking whether the private sector will live up to the role now assigned to it, it is important to begin with some consideration of the context within which these changes took place.

2. The background to privatization As discussed elsewhere in this volume (see Chapter 3), the overall pattern of Bolivia’s development since colonial times has not been conducive to the development of a competitive structure of production. Bolivia was integrated into the world economy mainly through the output of minerals required by industrialized countries. Indeed, the perception persists of a mining economy coexisting with a backward peasant-based economy, even though this is a caricature that no longer reflects reality; urbanization has been fast and furious and mining no longer acts as the main motor of growth. In the 1930s and 1940s, the struggle between the state and the major mining companies over the use of the rents from tin culminated in the 1952 revolution which, with the nationalization of the largest mines (gran minería), marked a new phase in state-led development. The pattern of development which ensued was intimately related to the control of the state over the production, processing and export of tin, which together formed the backbone of the economy and moulded the relationship between the state and the working class. This paradigm was further reinforced when the nationalization of Bolivian Gulf Oil in 1969 gave the state a monopoly over the exploitation of hydrocarbons as well. By controlling both mining and hydrocarbons, the state became the main source of the country’s foreign exchange, as well as the bulk of its fiscal income and its most productive area of employment. The overriding direction of state policy during these years was clear: to pursue a policy of import substitution through the development of the eastern part of the country – especially such cash-crop agriculture as rice, sugar and cotton. From that time on, the private sector developed two different faces: in the west of the country it tended to play a rather parasitic role, chiefly supplying state contracts of one kind or another; in the oriente a more dynamic business outlook less linked to the state prevailed. I have argued elsewhere that the development model based on the state-owned mining sector already showed clear signs of exhaustion towards the end of the 1960s, and it was only because of its ability to tap exceptional external opportunities

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(cheap credit and buoyant world tin prices) that the authoritarian Banzer government (1971–8) managed to prolong it (Grebe López 1983). The transition from authoritarianism to democracy was initiated in Bolivia in October 1982, when the military government of the day found itself obliged to hand over office to Hernán Siles Zuazo, the victor of the aborted 1980 presidential elections. The turn of the tide, however, also owed much to the social mobilization that took place in the years after 1978, to the onset of the debt crisis and to a change in the attitude of the private sector, notably the private-sector business confederation, the Confederación de Empresarios Privados de Bolivia, which astutely recognized the exhaustion of the previous military regime. The Siles Zuazo government (1982–5) brought with it the re-emergence of the social sectors which had driven the 1952 revolution (revolutionary syndicalism and left-wing populism) which sought in vain to overcome the economic crisis of those years by resorting to time-honoured methods of state intervention. The struggle that ensued between foreign creditors, the dominant elite and wage workers fuelled hyperinflation. The failure of the Siles administration led to the opening of a new chapter, with Siles forced to bring forward the date for presidential elections one year to 19851 and the subsequent election of Víctor Paz Estenssoro.

3. Liberalization and privatization Hyperinflation created a new demand for stability and order. The Paz Estenssoro administration took maximum advantage of this new ethos to demolish the very statist edifice which he, as one of the main architects of the 1952 revolution and twice president thereafter, had done so much to construct. Amongst his first dispositions in government was to enact Decree Law 21060 which sought to place the ties between the state, economy and civil society on new foundations.2 Although the ostensible purpose of DL 21060 was to halt hyperinflation and to stabilize domestic prices, the policies that emerged put relations between the public and private sectors on an entirely new footing. Stabilization itself came about through the creation of a single exchange rate, severe fiscal and monetary adjustments and measures that helped ease the burden of debt. With inflation under control, the new government undertook more structural changes, scrapping a number of state subsidies, liberalizing trade and capital controls, and redefining the rules of the game in the labour market. Subsequently, it took steps to improve tax yields by means of a thorough shake-up of the tax system.

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Despite stabilization and new laws to favour investment, total investment in the years that followed was disappointingly low, although the proportion of foreign direct investment (FDI) rose somewhat. Annual average fixed capital formation was US$551 million in the years between 1986 and 1989, declining to US$474 million in the 1990–3 period. Foreign investment rose from just under 30 million dollars in the first period to 102 million in the second (Pacheco Torrico 1998). The Paz Zamora administration, which took over from Paz Estenssoro in 1989, did not adjust the new development paradigm in any substantial way, although it refrained from embarking on major new policies with respect to state reform. By the beginning of the 1990s, it was clear that it was necessary to complement traditional stabilization policies with new policies geared towards dynamizing the economy and paying greater attention to social problems and the lack of productive employment. It took a particular mix of personal initiative and political circumstances to create policies which adapted the recommendations of multilateral institutions to Bolivia’s specific circumstances and then to implement them. Herein lay the merit of the MNR’s ‘Plan de Todos’ policy blueprint on which it was elected in 1993.3 It sought to adapt structural adjustment policies to the need to tackle deep-rooted economic and social problems: sluggish growth, low wages, unemployment, poor educational levels, state corruption and the problems afflicting rural areas. Moreover, it sought to encourage greater participation and thus enhance grass-roots democracy, whilst modernizing the state and its operations in such a way as to tackle policy issues – political, economic and social – in a more coordinated fashion than in the past. To this end a new social ministry – the ministry of human development – was set up with a similar status to that of ministries in the economic sphere. Whilst on the one hand social spending was oriented towards the achievement of greater equity, on the other the capitalization programme was based on the idea of creating a new market-based model of productive accumulation with private-sector operators willing to take risks within competitive markets. 4 The capitalization of the main public companies involved ‘strategic partners’ contributing new capital (initially equal to the capital value of the firms) and bringing in much-needed new technologies. The transformation of state management into private management averted the outright sale of formerly public-sector assets. However, public-sector assets were effectively ‘nationalized’ in the sense that they were turned into pension funds, held in the name of every citizen but administered by private-sector fund managers. This, it was believed, would stimulate domestic saving by creating widely held instruments

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Table 9.1

The results of the capitalization of public companies (US$)

Capitalized firm

Strategic partner

ENDE – Corani ENDE – Guaracachi ENDE – Valle Hermoso ENTEL LAB ENFE – Western network ENFE – Eastern network Empresa Petrolera Chaco Empresa Petrolera Andina

Dominion Energy Energy Initiatives Constellation Energy

Transportadora Boliviana de Hidrocarburos TOTAL

ETI Euro Telecom VASP Cruz Blanca Cruz Blanca AMOCO Bolivia Petroleum Co. YPF S.A. – Pérez Companc – Pluspetrol Bolivia ENRON Transportadora (Bolivia) S.A. – Shell Overseas Holdings Ltd.

Book value (US$)

Capitalization (50% shares)

33,030,000 35,280,000 30,750,000

58,796,300 7,131,000 33,921,100

130,000,000 24,000,000 29,000,000

610,000,000 47,475,000 13,251,000

24,000,000

25,823,099

382,800,000

306,660,010 264,777,021

263,500,000

688,860,000

1,631,334,530

Source: Subsecretaría de Inversión Pública y Financiamiento Externo, La Paz, Bolivia.

which would generate sources of capital for investment. One of the most original characteristics of the capitalization scheme was the way its meshed with social policy through the pension reform. Capitalization also avoided the situation whereby the assets of former state-owned companies were sold to help finance current public spending; rather, the profits remained to finance social spending (old age pensions and funeral expenses) through a scheme known as Bonosol.5 Although the capitalization scheme did not quite work out along the lines originally anticipated, on balance, the results proved fairly positive (see Table 9.1). Bolivia also developed a more conventional privatization programme during these years, especially during the Paz Zamora administration. As elsewhere, such sales involved the disposal of state assets, and the cash raised was used to finance current public spending. According to the UN Economic Commission for Latin America and the Caribbean (ECLAC), a total of 780 units – mostly small companies – were privatized in this way, either by auction or through public bids. Between 1995 and 1997, some 40 companies were sold off to private investors (both foreign and

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domestic) for a total of US$97.5 million. Foreign sales included the dairy foods producers PIL-La Paz and PIL-Cochabamba (sold to Peru’s Leche Gloria for US$8 million) and the electricity firm Luz y Fuerza Eléctrica de Cochabamba (sold to EMEL of Chile) for US$50.3 million. Since capitalization consisted of handing over administrative and managerial control to private companies, some sort of regulatory structure had to be devised. Law 1600 of October 1994 established a sectoral regulatory system. An attempt was made to set up a system that was professionally run, transparent and free of influence from the politicized bureaucracy. This system was put in charge of regulating the various sectors included in the capitalization programme, namely: telecommunications; electricity generating and distribution; hydrocarbons; air and railway transport; water and other sectors. The regulators were given the task of ensuring that these industries were run in such a way as to contribute to the country’s development (ensuring that those who lacked such services eventually received them), whilst protecting the legitimate interests of both investors and consumers. In order to provide for continuity as well as autonomy, the General Superintendent (responsible for the whole regulatory system) was to be appointed for a 7-year period by the president from a list of nominees approved by at least two-thirds of the Senate. The superintendents for each separate area were also to be appointed by the president for a period of 5 years from a list similarly approved of by two-thirds of the Senate. The law stipulates that firms operating in these specific sectors should operate on a free-market system unless otherwise indicated in the regulations. According to the 1996 Pensions Law (Law 1732), the system of financial regulation had the duty to regulate, control and supervise the activities of those involved in long-term pension funds, as well as banking, insurance, reinsurance, the stock market and other financial services. These various structural reforms had the effect of building both a new institutional framework and changing the relationship between the state and the private sector in important ways. The institutional framework, however, was still far from fully consolidated. Already, in the period since the Sánchez de Lozada administration, significant changes have been brought about, despite opposition on some points from the multilateral banks and the governments of investing countries. It is still possible that the ethos of confidence established between the authorities and private investors (whether Bolivian or not) will be broken. Although the laws themselves may have been adequate, the delay in applying them and making them effective has raised difficulties. Furthermore, the regulatory institutions created remain precarious, lacking

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the infrastructure and trained personnel required for them to carry out their functions properly. Indeed, the Banzer administration introduced changes to the regulatory system (as well as abolishing Bonosol) which undermined the original purpose of the project and exposed the new system to greater political interference. Such changes in the rules of the game may have damaged business confidence. 6 There remains a constant danger that those involved may be ‘captured’ or won over by the very people they are supposed to regulate. In particular, the system of financial regulation has demonstrated major weaknesses. 7 Moreover, considerable skill is required on the part of the regulators to adequately monitor the activities of the foreign companies that invested through the capitalization scheme. There is little by way of local experience of this sort of free-market activity; the last major foreign company to operate on Bolivian soil was Gulf Oil, nationalized in 1969. Meanwhile, the capitalization programme also brought about some important changes within the private sector itself. The presence of large, competitive foreign companies was a novelty for domestic firms and traditional business organizations. For these, the new regulatory system is also an innovation requiring a change in attitude and practice.

4. The private sector and structural rigidities In spite of the effort invested in reforming and modernizing economic institutions, many traditional and deep-rooted obstacles remain, limiting the positive effects of the reforms in helping the country insert itself into the wider, global economy. One of the key problems is the extreme nature of inequality. As we have seen elsewhere, the Popular Participation programme and the series of administrative reforms that accompanied it sought to redistribute the benefits of state spending (see Chapter 4). These measures clearly had an important effect in reformulating relations between the state and society, especially in the rural sphere. However, with a population of 8 million and a highly skewed distribution of a low per capita income of around US$800, the domestic market remains small and is unlikely to change very noticeably – at least within a single generation. The top third of the population in terms of disposable income has a per capita income roughly similar to the average per capita income of countries like El Salvador, Colombia or Paraguay, and provides a market worth approximately US$4.48 billion a year – insufficient to sustain a development model that prioritizes the domestic market. Nevertheless,

The Private Sector and Democratization Table 9.2

167

Economic inequality

Population strata Proportion of income (%) Average GDP per capita (US$) Lowest third Middle third Upper third

8.3 17.1 74.6

198 411 1791

Source: Based on World Bank calculations.

it should not be forgotten that Bolivia has, amongst its immediate neighbours, three of the most important economies of South America: Argentina, Brazil and Chile. Any development strategy that is adopted must take this into account. This is why the question of regional or subregional cooperation and integration is of such critical importance to Bolivia. However, it is noteworthy that there is little by way of a shared vision on this amongst the country’s political elite, bureaucratic class, leading businessmen and civil society more broadly. What has tended to happen is that relatively small groupings of private businessmen, responding to their own immediate and often conjunctural interests, have sought to exercise pressure on governments to protect their interests, thereby reducing the coherence of official policy with regard to integration. In order to overcome this, a longer-term view is needed, sufficiently robust to withstand and deflect particularistic pressures; this is more a responsibility of the state than the private sector, since only the state has the administrative and legal weapons to influence the actions of economic agents. Privatization and capitalization have had the effect of further increasing structural heterogeneity in Bolivia by introducing an actor previously absent from the scene: large multinational corporations. These now operate in strategic sectors of the economy and are subject only to supervision and control by new and relatively inexperienced regulators. There are large numbers of small-scale private businesses at one end of the scale, and relatively few large companies at the other. The relatively low level of development in the Bolivian economy is revealed by the fact that the average number of employees per firm is under 5, as the Table 9.3 makes plain. This extreme heterogeneity reflects enormous differences between firms in terms of productivity and profitability, and creates a situation in which there is a very marked segmentation which prevents market signals being transmitted from one sector to another. This, effectively, rules out direct and transparent competition. This differentiation is

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Towards Democratic Viability Table 9.3

The structure of employment

Employees

Total Workforce

Percentage

1–4 5–19 More than 20 Unclassified

2,333,890 731,612 424,140 80,099

65 21 12 2

Total

3,569,741

100

Source:

Instituto Nacional de Estadísticas (INE), Anuario Estadístico, 1997.

made even more clear by the fact that access to credit depends almost entirely on the size of a firm and the nexus that exists between certain businessmen and bankers. In terms of employment, the state sector represents 8 per cent of those in employment, the business sector 15 per cent, the ‘semi-business’ sector 10 per cent, and family employment 65 per cent. The extent of heterogeneity is also revealed by the predominance of commercial activity at one end of the spectrum and that of manufacturing and services at the other. It is noteworthy that there were only 116 firms in the country with 100 workers or more, further underlining the low level of economic sophistication of the productive apparatus. 8 The structure of business therefore can be summarized as follows: • Five companies which have bought into former key state-run industries by means of the capitalization programme.9 These control strategic areas of the economy and the main services on which other companies and the population as a whole depend. • Some 50 relatively large economic/financial groups with both national and foreign investment capital, concentrated in mining, commercial agriculture and banking. • A network of relatively small manufacturing firms, with very few approximating either in size or technical capacity to their equivalents in neighbouring countries. • Some 500,000 small-scale firms (microempresas) operating chiefly in agriculture, commerce and artesan types of production. These are characterized by very low levels of productivity and an inability to convert themselves into more dynamic types of enterprise. This structure limits the efficacy of public policy. It also limits the capacity of business organizations (gremios) to assume an ideology

The Private Sector and Democratization Table 9.4

169

Economic units by sector and employment (1992)

No. of employees

Commerce

Manufacturing

Services

1–4 5–9 10–14 15–49 50–99 100 and more

72,019 3,571 522 495 45 22

10,783 1,674 388 736 111 81

7,638 471 91 120 12 13

90,440 5,716 1,001 1,351 168 116

Total

76,674

13,773

8,354

98,792

Source:

Total

Author’s estimates based on official data.

which reflects all agents. Indeed, the lack of identity between business organizations and the way the productive sector is organized means that it is difficult for the private sector as a whole to make common cause on policy matters. The way in which these business organizations traditionally worked shows that larger-scale foreign investors were reluctant to engage with these gremios.10 Similarly, neither the small nor medium-sized employer – still less those in the informal sector – sought representation through such business organizations. 11 It is clear then that there are conceptual difficulties involved in defining what we mean by ‘the private sector’. Given its size and economic importance, as well as its potential contribution to helping to consolidate democracy in Bolivia, I would suggest a classification with three broad categories: 1. The capitalized firms, the financial groups and the larger firms. These enjoy sufficient political muscle to influence policy-making and reformulate the role of institutions if they feel these to be seriously damaging to their interests. 2. Small and medium-sized businesses, generally ill-equipped to change the rules of the game as such. Broadly speaking, one would suppose that most of these would have some objective identity with democratization. They are essentially intermediate sectors which, to some extent, provide a link between the business world and the broad mass of the population. This sector is sparse in Bolivia. In other countries, it would be a sector which would supply the domestic market with goods and services and which would, potentially, be a major beneficiary of integration. 3. A large universe of very small economic units which operate at the margins of the law and which manage to survive because of their ‘informality’.

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This sector includes the small-scale rural producer (minifundista) and the self-employed (cuenta propia).12 These are groups which, in recent times, have sought some political expression through populist parties like Conciencia de Patria (Condepa), whose democratic credentials are still fairly ambiguous. (See Chapter 8.) So far as capital accumulation is concerned, as well as exports and technification, only the first two of these categories have any relevance. 13 For this reason, a strategic objective of economic policy should be to construct the linkages that connect the more dynamic sectors to the rest of the economy through the development of small and medium-sized enterprises. A ‘two-speed’ economy could have negative implications for the process of democratization which depends on the deconcentration of wealth and power, as well as the creation of more democratic political parties.

5. The persistence of other structural rigidities Although agrarian reform was a key objective of the 1952 revolution, the country’s development was retarded by the dichotomies and inequalities in the rural sector. As a recent study has argued, the main obstacles to growth have been the persistence of archaic social relations in the rural sphere, especially in the highlands (Baldivia 1998). Although capitalization may have effectively privatized some of the largest state companies, the dominant production matrix has not changed fundamentally. The primacy of mining in the first instance, rivalled more recently by agribusiness and hydrocarbons, has thwarted the capacity of manufacturing to transform the nature of the productive apparatus and spawn the development of an urban industrial working class. The manufacturing sector is modest, both in terms of numbers of factories and the fairly rudimentary technologies that these employ. As we have mentioned above, this is partly to do with the way in which import substitution in Bolivia involved a reduction in agricultural imports. This was the economic programme espoused by the first MNR government after 1952, following the recommendations of the Bohan Plan.14 Bolivia’s backwardness in developing industries has expressed itself, in turn, in the tendency for rural–urban migration to lead to large sectors of the urban population being engaged in the tertiary and informal sectors, where levels of productivity are not much higher than in agriculture.

The Private Sector and Democratization Table 9.5

The economic gulf: Bolivia and its neighbours Real GDP per capita (US$)

Bolivia Argentina Brazil Chile Paraguay Peru

171

The difference (Bolivia = 1)

1960

1994

Average annual growth rate

1960

1994

610 2,701 823 1,162 525 964

780 3,947 1,993 2,378 1,012 988

0.7 1.1 2.6 2.1 1.9 0.1

1 4.4 1.3 1.9 0.9 1.6

1 5.1 2.6 3.0 1.3 1.3

Source: UNDP Human Development Report.

6. The private sector and democratic viability Under the new scheme of things, the private sector has assumed a key role in creating the economic conditions required to support democracy, with the state sector playing a much smaller role, it is the private sector that is mainly responsible for raising the coefficient of investment required to accelerate growth, increase the supply of foreign exchange through exports, and boost productive (and reasonably well-paid) employment. So far as growth is concerned, the private sector must mobilize the various factors of production. However, as we have already seen, the economy has long lacked dynamism, and this has widened the breach between Bolivia’s growth performance and that of its neighbours. (See Table 9.5.) In order to reduce the size of the differential between Bolivia and its neighbours, an annual per capita growth rate of 5 per cent or more would be needed for a period of several decades. It is by no means clear where this new dynamism is going to come from, particularly in view of continuing international volatility and the slowdown in world growth. 15 To achieve such growth rates would require a rate of capital accumulation substantially higher than historical rates. It would imply the private sector providing at least two-thirds of total gross fixed capital formation. Traditionally, the private sector has only contributed around one-third of gross fixed capital formation. Only in the last few years, as a consequence of capitalization, has private investment overtaken public investment. However, it is not just a question here of two independent variables. In the past, with the possible exception of the mining sector,

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it has been public investment that has driven private investment by creating the necessary investment opportunities. Even in 1997, when private investment was substantially higher than public investment,16 the former only reached 17.4 per cent of GDP (compared with an average for Latin America of 20 per cent) (Fundación Milenio 1998). As already stated above, the domestic market is unlikely to provide the demand required to generate sustained accumulation. Therefore, it will be necessary to develop new exports, raising the value of these by at least 10 per cent a year. This sort of challenge is unlikely to be met spontaneously from the country’s existing export lines, which consist largely of raw materials for which prices are subject to volatility in world demand. In recent years, Bolivia has entered into various integration commitments such as the Free Trade Agreement of the Americas (FTAA), Mercosur and the Andean Community, but little has been done to help Bolivian businessmen take advantage of the opportunities on offer. Indeed, in some respects they have suffered rather than benefited from integration, owing to enhanced competition from abroad in the domestic market. Much still needs to be done to enable the Bolivian private sector to take full advantage of these opportunities by, for instance, upgrading the knowledge base and capacities of the business gremios and such institutions as the chambers of commerce. A new business culture is needed. As far as employment is concerned, new stimuli and incentives are needed to ensure that the mass of the population benefit fully from economic growth. Most low-income Bolivians aspire less towards becoming small businessmen than achieving a job at a reasonable wage. What is needed is the generation of employment by modern capitalist enterprise. Unless the problem of employment is broached, it is difficult to see democracy firmly taking root; the phenomenon of informality tends to generate populist responses of one kind or another. An annual increase in productive employment of 3 per cent would seem the minimum requirement – at least to absorb the young as they enter into the job market. The only way in which such targets will be met is if there is a new collaborative framework between the private and public sectors, and this will not come about simply as a result of the divergent demands of different industrial sectors. It will require active state involvement to establish the policies and incentives required to help the private sector overcome its present limitations. For this to happen, three basic requirements need to be met: 1. The current system of incentives needs to be changed. The existing system of incentives tends to encourage consumption and imports

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rather than investment and exports ( Jordan Pozo 1998). Successful macroeconomic management may be a necessary condition to create economic stability, but it needs to be accompanied by policies to stimulate growth, as well as policies at the meso and micro levels. More micro management, however, should not involve a reprise of the the traditional sectoral policies which responded mainly to pressure from organized vested interests. At the same time, new incentives are required to encourage informal firms to move towards the formal sector. Meanwhile, public policy has to be linked with the regulatory functions of the superintendencias. The design of policy at the meso and micro levels depends on the capacity of public sector institutions to undertake them, which in itself implies greater stability and continuity within such institutions. Policy will need to be attuned to the realities of the Bolivian economy, one of which is the lack of attractive business opportunities. If we assume, conservatively, that autonomous private-sector investment will be in the region of 5 per cent of GDP, the value of such investments over a 5-year period would be in the region of US$1.5 billion. It is unlikely that the total portfolio of private-sector projects would exceed one-third of this amount. One of the key obstacles to raising investment in the free market is a lack of projects. A project bank would need to be created, geared primarily to tapping the Mercosur market. The stimulus to investment would need to be coordinated at the three levels of government: national, departmental and municipal. Municipal governments, which potentially have an important role to play in promoting industry at the local level, can be encouraged to compete for investments. The volatility of world market conditions underlines the need of firms to be able to adapt to changing market conditions. New organizational methods may help them in this respect. Financing problems also affect private firms, especially smaller ones. There is a need for more efficient financial intermediation to channel savings into investment Deposits tend to be short-term, whilst the extent of dollarization in the economy restricts the effectiveness of monetary policy. The way in which the financial system really operates has never been the subject of rigorous study, but it would appear that the banking system restricts itself to the recycling of financial resources in what is a very small part of the economy. It is poorly atuned to supplying the medium and longer-term funds required for productive investment. Although the pensions reform aimed to increase the supply of domestic risk capital for investment, achieving this was always likely to depend on a change in the culture of the financial sector. In seeking to improve the availability of long-term finance, there is a case for the

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re-establishment of development banks. However, this should not mean resurrecting the old state development banks, with their poor record in assigning financial resources and their reputation for corruption and bad management. 2. A reform is needed in business practice. Following a period of significant change in the role of the state in the economy, further changes are required that run parallel to the strengthening of new institutions. This involves changes in the ways in which firms conduct themselves and how they represent their interests in society as a whole. As we have already seen, the structure of the private sector is complex, but poorly adapted to generating a process of sustained and rapid growth. Whilst previously it was the public sector which articulated relations between different sectors of the economy, the private sector is less well suited to playing this role. In particular this is because, unlike other more modern economies, Bolivia lacks a strong intermediate sector of smaller companies. This is an issue which has yet to receive much by way of theoretical interpretation, but there is a widespread view that the microempresa has the capacity to fulfil this role. This, I would argue, is erroneous, since the microempresa exists largely in a context of informality. While it may play a key role in providing employment, the microempresa is a low-productivity unit that is virtually absent from the export market. The microempresa might assume a more important role if it became more integrated (through subcontracting, for example) with larger-scale units of production. Bolivia still lacks what is sometimes termed a ‘national bourgeoisie’, and the process of capitalization has done little to change this. The extent to which the private sector will abandon its traditional characteristics and assume a new role will depend on the incentives to which it is subject. Business conduct depends on a series of factors, of which perhaps the most important are the quality of political leadership, the stability of the rules of the game, the degree to which institutions are consolidated, the way in which the judicial system works and the existence of mechanisms to penetrate new markets. What is required is that private businesses take decisions on the basis of market considerations and not pacts and agreements with the state. It also has to be remembered that firms in neighbouring countries often enjoy far better opportunities to capitalize themselves than Bolivian firms. A number of problems thus need to be addressed: • The lack of functioning capital markets: Bolivian firms tend to operate in a semi-closed way, with share capital divided up between friends and relatives. Alternatively they depend on a special nexus with a

The Private Sector and Democratization

•

•

•

•

175

private bank. There is no real stock-market in Bolivia capable of generating longer-term investment capital for private firms. A lack of technology: Bolivian firms tend to be more backward in their use of technology than firms in other Latin American countries. A huge effort is required on the part of private companies to resolve this deficiency, requiring large-scale financial inputs. The rigidity of existing forms of business organization: Businesses need to have the flexibility to respond to new opportunities. This does not simply mean the flexibility to hire and fire at will, but the capacity of firms to adapt to the new forms of specialization demanded by the market. Few Bolivian businessmen have yet fully realized the importance of this. A lack of support from gremios: These are poorly equipped to provide services to their members, a factor which makes it more difficult to change the conservative outlook of many businessmen.17 The need for assistance to take advantage of integration: Bolivia still lacks a clear policy on how best to profit from membership of various regional integration schemes. If the country is to play a role in articulating the membership of these groupings, policies need to be developed to this end.18 The creation of ‘export corridors’ represents a long-term goal, but prior accords need to be reached with neighbouring countries. Some progress in this respect has been made with Chile and Brazil. However, the state has yet to cede much space to the private sector in discussions over integration agreements. This is one of the areas in which business organizations could play a dynamic role.

3. A new relationship between public and private sectors. It is my contention that the private sector, on its own, is unable to formulate a national development strategy. Nor is the public sector able to do so. What is needed is a combined strategy which allows for learning and the accumulation of experience on both sides. Procedures are required for this joint purpose. The new institutionality in the public sector has yet to produce an entity to promote this endeavour, still less to reorganize methods of production and promote manufactured exports. There has never been an institution, other than the finance ministry, whose task it has been to develop relations with the private sector.

7. Conclusions In competing with other Latin American countries in capital and export markets, Bolivia suffers from a number of disadvantages which

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are difficult to surmount. It remains a country highly dependent on the export of relatively few commodities, which increases its exposure to volatility in international markets. In shifting the axis of its economy from the public sector to the private sector, the latter faces a formidable challenge in spearheading a process of development which can raise the living standards of the mass of the population and therefore underpin democracy. The main problems which face the new model include a large degree of productive and technological heterogeneity; the lack of strong linkages between sectors and industries; increased industrial concentration; and a fairly undynamic commodity-based export sector, alongside a much more dynamic import sector which exerts strong competition in the use of foreign exchange. The shortage of foreign exchange cannot be resolved in the longer term through disbursements of concessional finance, whilst the completion of the gas pipeline to Brazil may have only limited effects on exports. Flows of foreign investment, which have been unusually dynamic in recent years, are also conditional on buoyant prospects for commodity prices and may be affected by uncertainties over the regulatory regime. In the light of the above discussion, we can reach some tentative conclusions. The liberalizing reforms undertaken in the early 1990s, especially capitalization, have yet to generate a new private-sector ‘culture’ which reflects a genuine integration into the global economy. Indeed, the traditional private sector has not been greatly affected by capitalization. However, privatization and capitalization have generated a new power structure within the private sector, which necessitates effective state regulation. Further institutional developments are required to strengthen this regulatory system. The regulatory system is still weak and susceptible to influence in its decisions by those it seeks to regulate. The private sector is unlikely to transform itself into a dynamic motor of national development without an active policy of state incentives which help reduce the enormous differences in the starting points for international and local firms. Better linkages are required both with the outside world as well as with small-scale industry within the country. Currently, the banking system is ill-prepared to assume the costs of the modernization and technification that the private sector needs, although the acquisition of local banks by international banks may help here if these are prepared to lend to smaller firms. It is arguable that the liberalizing economic reforms which took place after 1985 were, to some degree, based on an optimistic notion of the nature of the private sector in Bolivia and its capacity to spearhead growth. Moreover, the second-generation reforms of the Sánchez de Lozada administration were insufficient in

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177

themselves fundamentally to shift the axis of accumulation within the economy.

Notes 1

2 3 4 5 6 7

8 9 10 11 12

13

14 15

16 17 18

This was a consequence of a negotiated settlement between the main political parties and social actors, prompted by the Catholic church. See Muller y Machicado Asociados (1986). At the time the Central Obrera Boliviana (COB) was considered to be the very heart of civil society. For an evaluation of the main proposals put forward, see Chávez (1998). For a detailed account, see Pierce (1997). Bonosol was subsequently scrapped by the Banzer administration. An opinion poll conducted in early 1990 suggested a lack of confidence on the part of ordinary citizens in both privatization and regulation. Various reports by the Fundación Milenio have focused on this problem. The state has had to incur high costs to rescue ailing banks and their depositors. These figures change substantially if firms in the mining and oil/gas sectors are included. The sale of Empresa Nacional de Fundiciones (ENAF) would increase this total to six. Both the ‘tin barons’ and later the minería mediana operated independently of the gremios. The Federación Boliviana de la Pequeña Industria (Febopi) is independent of the Cámara Nacional de Industrias. In Bolivia, the phrase cuenta propia is used to describe those who have developed a capacity to run small-scale businesses with a very limited capacity for expansion. It is also possibly worthwile reflecting as well on the role of the voluntary sector. NGOs have become conduits for significant amounts of foreign aid in recent years. The Bohan Plan of 1942 formed the basis for the policies pursued by the MNR after 1952 (Guevara Arce 1955). The Asian crisis of 1997–8 prompted considerable academic debate over the possibilities for maintaining high growth rates on the basis of the incorporation of new factors and inputs (Baldivia Urdininea 1998). This was largely a consequence of the investment of capitalized firms in the construction of the gas pipeline from Santa Cruz to Brazil. See Fundación Milenio, Diálogos (1997). Negotiations with the Andean Community over the future of soya exports is illustrative of this need.

References J. Baldivia Urdininea, ‘La capatilización’, in J. C. Chávez, coord., Las reformas estructurales en Bolivia (La Paz: Fundación Milenio, 1998).

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J. Baldivia Urdininea, ‘Condicionantes estructurales para el crecimiento económico en Bolivia’, in J. Baldivia Urdininea et al., Relexiones sobre el crecimiento económico (La Paz: Fundación Milenio, 1998). Juan Carlos Chávez, ed., Las reformas estructurales en Bolivia (La Paz: Fundación Milenio, 1998). W. Guevara Arce, Plan de política económica de la revolución nacional (La Paz: Ministerio de Relaciones Exteriores y Culto, 1995). Fundación Milenio, Informe de Milenio sobre la economia en 1997 (La Paz: Fundación Milenio, March 1998). Fundación Milenio, Diálogos (La Paz: Fundación Milenio, 1997). H. Grebe López, ‘El excedente sin acumulación: la génesis de la crisis económica actual’, in R. Zavaleta Mercado, ed., Bolivia, hoy (Mexico City: Siglo XXI editores, 1983). R. Jordan Pozo, ‘El falso dilema de la estabilidad o el crecimiento: la política económica y el crecimiento en los paises en desarrollo (reflexiones sobre el caso boliviano 1986–97)’, in J. Baldivia Urdininea et al., Reflexiones sobre el crecimiento económico (La Paz: Fundación Milenio, 1998). Muller y Machicado Asociados, ‘El diálogo para la democracia’ (La Paz: Muller y Machicado Asociados, 1986). M. N. Pacheco Torrico, ‘Apuntes sobre las transformaciones de la economia boliviana, 1986–97’, in J. Baldivia Urdininea et al., Reflexiones sobre el crecimiento económico (La Paz: Fundación Milenio, 1998). M. Pierce, ed., Capitalización: el modelo boliviano de reforma social y económica (La Paz: Woodrow Wilson Center and North–South Center, 1997).

10 Legal Security in Bolivia Eduardo Rodríguez Veltzé

1. Democracy and legal security As elsewhere in Latin America, major changes have taken place in Bolivia since the 1980s with respect to economic liberalization and the creation of new market structures. At the same time, steps have been taken to reformulate and to decentralize some functions of the state with regard to social policy. By contrast, judicial reform has lagged behind reforms in these other areas and the changes that have been made are inadequate. There remains widespread dissatisfaction with the ways in which the justice system operates, giving rise to a situation of ‘legal insecurity’ that affects both ordinary citizens and those engaged in business activity. 1 A democratic political system facilitates change. It allows problems to be identified and resolved. One of the major challenges facing Bolivian democracy is to create a climate of legal security, which provides citizens with adequate legal protection, allows them to exercise their legitimate rights and enables them to lead lives free from fear and arbitrary behaviour. Thus legal security forms a critical part of the functioning of a democratic polity which upholds the rule of law. It places limits on the actions that the state can take against the individual, providing the individual with access to judicial remedies. The justice system therefore lies at the heart of a democratic state: it not only provides citizens with a channel to defend themselves against other citizens and the actions of the state, but underpins their rights to be equal before the law. The rule of law enables citizens to claim the rights they enjoy, as set down by the laws, the constitution and international obligations. It is fundamental for governance as it guarantees the exercise of civil rights and enables government to be accountable. 179

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Towards Democratic Viability

Since Bolivia returned to civilian government and constitutional rule in 1982, there have been genuine advances in respect for civil rights and the provision of guarantees, providing Bolivian citizens with greater security in the way they lead their lives. This has undoubtedly helped create a more stable relationship between citizens and the state. Nevertheless, more than 15 years later, the whole issue of security under the rule of law throws up many challenging questions. In the words of former vice-president Víctor Hugo Cárdenas, ‘No one can deny that in Bolivia the return to democracy has strengthened the ability of the people to exercise their political rights and enjoy constitutional guarantees. Also, it cannot be denied that such improvement is still only partial and there remain examples of abuses against human rights and situations which limit the full exercise of the rule of law [estado de derecho]’ (Cárdenas 1997: 2). Such deficiencies in the exercise of the rule of law reduce the security which citizens enjoy. They also limit the extent to which individuals can benefit from what the state has to offer, or as the UNDP puts it, encourages ‘a process which increases the opportunities for the individual to exercise and increase his or her human capacities and put them to the best possible use’ (Laserna 1996). Furthermore, they engender a climate of fear and uncertainty in social behaviour. Human development requires a climate of political and institutional stability in which opportunities exist for effective participation in decision-making. It also depends on rules and institutions which protect both individual and collective rights so that these can be exercised without intimidation, as well as on conditions of financial and even environmental stability. Such considerations therefore play an important part in helping to define the sort of policies that need to be developed both to minimize people’s insecurity and to encourage their participation (Laserna 1996: 4). Studies on popular perceptions about human security in Bolivia, based on surveys of public opinion, point to the sort of threats and uncertainties people are faced with and the conditions they believe endanger the democratic process. They provide telling insights. When asked to compare respect for human rights with the previous period, more than half (56 per cent) said that the situation was more or less the same as before, whilst less than 10 per cent answered that the human rights situation had improved. This suggests that the benefits of democratization are often not recognized as such. Poll evidence also suggests that most people do not consider that their ability to exercise their rights has improved in any significant way.

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When asked whom they considered culpable for this sense of democratic instability, the answers were as follows: politicians (76 per cent of men, 70 per cent of women), the armed forces (40 per cent and 50 per cent respectively), the police (36 per cent and 28 per cent), drug traffickers (66 per cent and 62 per cent), the ministry of the interior (42 per cent and 33 per cent) and the anti-drug police (42 per cent and 33 per cent). Some three-quarters of those whose opinions were canvassed thus identified politicians as a threat to democracy. To a lesser degree, the military, the police and the anti-drug police – all of which are supposedly involved in maintaining public order – were seen as a threat. Political parties and law enforcement agencies are clear targets for public disapproval, especially in view of their authoritarian and repressive role in the relatively recent past. When asked about which laws they thought should be obeyed, 58 per cent said that all laws should be obeyed, 23 per cent that only those laws which they considered useful should be obeyed, whilst a smaller minority said that obeying the law should be up to the individual. That more than one-third had a selective attitude towards the law is notable. The study concludes that human security depends greatly on the nature of social relations and the way in which risks and responsibilities are distributed in society. At the same time, it stresses that it is also highly dependent on the capacities of the legislative system and transparency (or lack of it) in the way it works. So, while some fundamental steps have been taken towards the consolidation of democracy in Bolivia and progress has been made in honouring international agreements on human rights to which the country is a signatory, there remain many deficiencies and distortions in the way democracy operates in practice, and decisions are taken which are at odds with the principles of human rights and civilian guarantees. That the institutions of public order are seen as a threat to democracy is a reflection of their inability or unwillingness to adapt to the new democratic order. In the case of the armed forces and the police, old arbitrary and authoritarian practices persist in spite of the declared support of these institutions for democratization. As long as there is no institutionalized system of accountability for the military and the police, an essential prerequisite for the consolidation of democracy will be missing (Mayorga 1997: 7). Similarly, the accountability of politicians is another problem which needs to be addressed. The way in which politicians are seen as a threat to democratization reflects the tarnished reputation of parliamentary institutions and the way in which these enable politicians to act with

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impunity. In a number of instances, parliamentary privileges have been invoked to protect politicians from legal actions and to give themselves immunity from prosecution. This, of course, raises the broader question of the extent to which politicians are accountable to those who vote for them, a matter taken up in greater detail in Chapter 8 of this volume. With regard to the economy, the state remains in many ways a centralized and discretionary authority which provides only a limited degree of legal protection for investors. For these, the legal framework is still often unclear, incomplete and subject to arbitrary changes to which there is little or no redress. Any market economy depends on the observance and protection of property rights in law, along with the legal security required for overall stability. Without this economic activity is hampered. Business also requires the honouring of contracts, both between individual citizens and between citizens and the state, as well as the need for mechanisms to resolve disputes. The absence of an effective legal system, along with the perception that public officials are both arbitrary and venal, is a major impediment to investment, whether domestic or foreign. It encourages corrupt behaviour and the perpetuation of a nexus between those who enjoy special political and economic privileges. A functioning judiciary is therefore a prerequisite for both legal stability and economic development. In Bolivia, as elsewhere in Latin America, the economic system is nominally based on the free exercise of individual property rights. However, legislation is meaningless without an efficient judicial system to interpret it and to give force to the law. At the same time, beyond respect for contracts and property rights, a liberal democracy requires the strengthening of the bonds between society and the state and the provision of judicial remedies in a prompt, fair and efficient manner; these are necessary corollaries for the legitimacy of the exiting order. Yet, as throughout Latin America, laws in Bolivia are not subject to predictable interpretation and the administration of justice is usually inefficient. Apart from anything else, such inefficiencies simply add to the costs of doing business (Buscaglia 1997: 77). A strengthening of the justice system would thus bring with it greater impartiality and efficiency, inspiring public confidence. A simplification of dispute resolution mechanisms would also provide ordinary people with better access to legal redress.

2. The legal order in Bolivia This lack of legal security in Bolivia is not just the consequence of recent social and economic changes, but of a long tradition of weak

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constitutional and political structures that hampered the development of judicial institutions and practices. At the same time, the reforms introduced since the return to civilian government have not always recognized the shortcomings of this legacy and on occasions have simply served further to exacerbate old problems. In many cases, reforms have been enacted without the support of a cohesive and supportive legal framework. In this section of the chapter, we turn to developments in specific areas of the legal system and try to evaluate some of the changes introduced in recent years and their limitations. 2.1. Administrative law Shortcomings in the body of administrative law in Bolivia reflect a tradition of disparate and sometimes contradictory legal models dating back to the birth of the republic itself, a situation rendered still more complicated by 14 subsequent constitutional reforms. Efforts made to reform administrative law as part of an attempt to restructure the state apparatus have so far been timid and largely ineffectual. Those who are charged with the administration of the state must act in accordance with legal norms if they are to act impartially and the rule of law is to mean anything. The ways in which different countries have decided to order their legal affairs has varied widely. In the case of Bolivia, two different traditions have influenced the development of legal institutions and behaviour. The judicial norms set down in the constitution are basically derived from the Anglo-Saxon tradition, and most of the attempts to reform the constitution have been influenced by this model. However, the French tradition, with its dual jurisdiction, has also had an influence. As an amendment to the 1831 constitution, a council of state was established. This underwent several changes in its lifetime, until 1880 when, in an amendment to the constitution, the responsibility of resolving administrative disputes was finally transferred to the Supreme Court where it still remains. Nevertheless this tradition of administrative law persists in some respects, since the judicial system has never been comprehensively overhauled so as to harmonize its various attributes. In particular, the system suffers the major shortcoming that the scope for judicial review of administrative decisions is very limited. An important sphere in which this tradition of administrative law persists is the system of agrarian law, as established by the agrarian reform legislation of 1953. This is primarily administrative in character and deals with conflicts over property arising from the agrarian reform. The granting of land titles and the resolution of conflicts over land tenure

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are the specific attributes of agrarian tribunals, which are political appointments. The decisions of these tribunals, which are not subject to appeal2 and carry the full weight of the law, have often been vitiated by arbitrary decision-making, political influence and corrupt practices. 3 Accordingly, on many occasions, their decisions had to be suspended for periods of several years. The sort of problems to which this gave rise were made more intractable by lengthy periods of de facto government in which principles of legality were subordinated to the interests of an authoritarian state. The system of agrarian tribunals and the scope these provide for political manipulation is one of the more egregious examples of the inadequacy of the legal system with regard to property rights. In 1996, a new law was passed, called the National Institute of Agrarian Reform Law (INRA), which went some way to changing the rules affecting the distribution of land tenure and brought it within the scope of a new regulatory agency, the Regulatory System for Natural Resources (Sirenare). The new law also established a new National Agrarian Tribunal and agrarian courts. However, the new legislation retained the separate identity of this special jurisdiction, largely because the constitution makes it very difficult to change the agrarian legal system. Such anomalies help explain the lack of uniformity and cohesiveness within the legal system, an issue which has not received the attention it deserves. Until these are ironed out, distortions will continue to arise and the legal security that citizens should enjoy will suffer as a result. Administrative regulations remain scattered in a disorganized way throughout the judicial system, giving rise to inconsistent and often arbitrary judgements. Citizens thus lack a regulatory system that is clear, efficacious and relevant to everyday needs. They also lack the ability to challenge through judicial review those administrative decisions which they believe to impinge on their rights and legitimate interests. There is no overall code of administrative procedure, and whilst administrative law only acknowledges jurisdictions in specific instances, it is often unclear who is eligible to access these. Where judicial review is a possibility, it requires a judgement from the Supreme Court in Sucre; for the vast majority of the people this effectively renders it impossible to challenge administrative decisions. However, advances have been made in recent years in establishing regulatory agencies as the accent of state intervention shifts from ownership towards regulation of markets. Three regulatory agencies were established with responsibility for regulating the activities of larger privatized monopolies (Sirese), financial institutions (Sirefi) and those

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activities which impinge on the use of natural resources (Sirenare). As well as setting out procedures for regulating these sectors, these agencies also provide for judicial review of administrative decisions within their respective spheres of activity. However, in practice, the new system of regulation has also given rise to some serious anomalies,4 some of which arise from a lack of experience and/or precedents. At the same time, the appointment of superintendents has itself given rise to charges of political manipulation. Further reforms to the system will have to take these problems into account, as well as making it easier for consumers and users of privately provided goods and services to access the regulatory system by decentralizing the services of the regulators. Further reform in administrative law is therefore required for legal security to be enhanced, since this is the area in which the citizen and the public administration are most frequently at loggerheads. Administrative law should guarantee the limits on the power and authority wielded by the state and provide methods of redress to the citizen, both through administrative and judicial channels. In the case of the latter, constitutional precepts regarding judicial review need to be established, whilst better access for the citizen to such mechanisms must be afforded. 2.2. Civil and commercial law These branches of the law were subject to a fairly far-reaching reform during the military government of General Hugo Banzer in the early 1970s. However, whilst procedures were rationalized and codified at the time, the law has failed to keep up with developments since then, especially since 1985. Indeed, the Banzer codes, passed by supreme decree, have yet to be formally ratified by an elected Congress. In 1996, some procedural changes were introduced by a law designed to streamline civil procedure and free it from a number of quasi-technical procedures. Civil litigation in Bolivia is inevitably lengthy and costly. Litigants usually find it difficult to borrow the sums required to cover legal costs. They are prevented from using property other than real estate as collateral, by virtue of the fact that banks and other financial institutions do not accept goods as collateral. As a World Bank report makes clear, the removal of such restrictions would not only improve access to the judicial system but would also open up credit markets as a whole (World Bank 1994).5 Also, private parties are prevented from coming to mutually agreeable arrangements to cut short long, drawn-out judicial procedures. Aside from the need for improvements in the legal system, some special reference should be made with respect to enhancing public registries of ownership in such spheres as real estate, motor vehicles and commercial

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activity. The lack of reliable registries impedes the filing of property rights and claims made upon them (such as mortgages or other charges). Where these do exist, they lack modern computerized information retrieval systems, adding to the cost and uncertainties of transactions related to property ownership. In the sphere of commercial law, a large number of individual regulations passed in recent years have greatly affected the 1975 commercial code. This needs to be brought up to date in view of the major changes in the activities and structure of the state and the development of new markets. There is also a need to update legislation in such areas as the registration of copyright and trademarks, protection of intellectual property and prevention of commercial piracy. In general terms, commercial law does not meet with today’s business needs. Many of the elements which would form part of the commercial code have been enacted by means of presidential decrees and isolated administrative regulations, often inconsistent with one another. For example, in 1998, a new law of insurance was promulgated, under which only limited companies (sociedades anónimas) could dedicate themselves to insurance activities. This norm clashes with other regulations and leaves significant gaps with respect to mutual and cooperative enterprises which are also involved in insurance and therefore legally unable to pursue such activities. 2.3. Criminal law The penal system dates back to the early days of the republic, when President Andrés Santa Cruz enacted a number of laws that covered the area of criminal law. Subject to many modifications and additions, this survived until 1973. Under the Banzer regime, a law commission was established to prepare a penal code more in keeping with the times. Subject to a number of revisions made in 1997, this is the code which is still in force today. The code on criminal procedure was also brought up to date in 1973, although since 1996 there has been considerable discussion about further wide-ranging reforms. Amongst other things, these included the introduction of trial by jury and greater use of oral evidence in court. Since 1995, there have been some changes in aspects of criminal procedure, like ending such outdated practices as the use of debtors’ prisons, making it easier to detain citizens on civil offences and reducing the strain on the prison system by granting bail on oath. With financial assistance from abroad, a programme of publicly-funded defence lawyers was instituted, helping Bolivia to comply with international agreements

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on human rights to which the country is a signatory. Also, steps were taken to create different procedures to deal with drug-trafficking offences. However, the 1988 law on controlled substances did not have much impact on coca leaf production, the manufacture of cocaine, or its marketing. In some areas, it led to constant harassment by the drugs police of communities whose livelihood is dependent on the production of coca leaves.6 The anti-narcotics legislation has also led to the violation of basic legal principles such as the arrest of individuals on the basis of suspicion alone, calling into question a number of police procedures. A report on the Bolivian penal system (ILANUD 1993) has concluded that it suffers from the more general problems that afflict the justice system as a whole: lengthy procedures and long delays, selectivity, inaccessibility and pervasive corruption: • Lengthy delays in the administration of criminal justice are an endemic problem. In some cases it can take up to five years for a case to be heard. Problems of procedure and the saturation of the judicial system are among the main reasons for this. • The selective way in which the justice system tends to work is also a key problem, calling into doubt the equality of all citizens under the law. It is quite clear that judicial outcomes depend as much on the resources (political and economic) at the disposition of those accused as the severity of the crimes committed. The justice system tends to work to the advantage of the rich and powerful and to the disadvantage of the poor. • Inaccessibility results from the lack of straightforward procedures to help people avoid the process of litigation and to improve the judicial services at the disposal of those who lack resources. • Corruption is deeply rooted in the justice system. Instances of corruption take numerous forms, but generally involve bribing officials, bringing political influence to bear on judicial decisions and granting favours to achieve specific judicial outcomes. 7 The consolidation of democratic institutions in Bolivia has improved the likelihood that some of these problems will be addressed. There have been some signs of progress, including the passage of laws referred to above, the drafting of a new code of criminal procedure and greater discussion of the international human rights conventions to which Bolivia is signatory. According to Aniyar de Castro (1988: 404), improvements in criminal law and the deepening of democracy are mutually reinforcing processes: an inefficient criminal system is a

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violation of the rights of the citizen, whilst an effective criminal law is part and parcel of respect for individual rights and liberties and a necessary condition for the individual to enjoy life and to participate freely and fully in the community to which he belongs. As in other areas of the law, policy on criminal law has not followed an orderly or coherent path, and there is no single document to which those involved can go for guidance. Sadly, many of the more recent reforms also lack coherence. For example, both Law 1008 of 1988 and the revised extradition treaty between the United States and Bolivia were drafted and approved by Congress in a great hurry: once enacted, their legal shortcomings became very obvious. 8 Another example was the ‘fast-track’ treatment given to the drafting of the 1997 reforms to the penal code which resulted in these being rushed through into law in a few days. Such instances often reflect the urgency to respond to external pressures and ignore the need for calm, measured thought and reflection. This underlines the need for carefully considered changes in the criminal code, rather than what Aniyar de Castro calls the ‘apparent system’, by which she means the use of laws as window-dressing to reassure citizens and the outside world that all is well. Such laws, she contends, are simply not worth the paper they are printed on.

3. Legal security and judicial autonomy Legal security implies that people have the means to oversee and to challenge the lawfulness of government actions. The autonomy of the judiciary, as well as its efficacy, accessibility and transparency, are critical components in safeguarding the sovereignty of the law. It is not possible to have a democracy unless there is a judicial authority with the capacity to uphold the supremacy of the legal system and the ability to make it function in an objective and autonomous fashion. In Bolivia, as in many countries of Latin America, the development of the judiciary followed a fairly chaotic historical pattern. Judicial structures were erected as copies (not always very good ones) of those in existence in Europe and the United States at the time, and were shaped in such a way as to protect the interests of specific groups in society. This led to a sequence of short-term arrangements which undermined the consolidation of strong legal institutions. According to C. Felix Trigo (1955), a Bolivian writer on constitutional matters, ‘in our country, where we have rigid constitutions, this inflexibility has not guaranteed the stability or permanence of the laws. Whilst we cannot refer to judicial

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stagnation, we can certainly allude to frequent violent changes. This state of affairs is made manifest throughout our history by a sequence of mutinies, uprisings, coups d’état, rebellions and revolutions. Each time a new group seized power, they believed it their duty, certainly their right, to dash off a new constitution. It was of little consequence that the new document was little different from the old or that it involved no improvement on its predecessors.’ Despite the number of changes to the constitution over the years, the amendments made were often a dead letter due to the moribund nature of the power entrusted with interpreting them. For instance, in 1967 a law was passed to reform the workings of the civil service. The law stipulated that all officials were at the disposition of the collective state and not at the behest of one or more of the political parties. Nevertheless, with every change of government since then – whether at the local level or nationally – there has been an influx of new officials and the removal of those previously in post. The law still awaits final ratification. Laws passed in 1994 which ordered the establishment of a constitutional tribunal, a council of magistrates and an ombudsman (defensor del pueblo) were only finally enacted in 1998. Notwithstanding repeated attempts to change the constitution, there still appears to be a lack of genuine will on the part of elected politicians to establish a strong, independent judiciary which can work with parliament and put much-needed reforms into practice. Political parties seem unwilling to accept such a challenge, preferring to devote themselves to their own shorter-term and more particularistic agendas. Leaders of military regimes, as well as politicians of all colours in democratic governments, have contributed to the poor esteem in which the judiciary is held. Indeed, political parties have sought to carve up the judicial authorities between them by nominating their own appointees as judges and members of the Supreme Court. The return to democracy appears to have increased the desire of political parties to control the judiciary, rather than respect its autonomy. There have been serious scandals in which political manipulation of the judiciary has come to light. One of the first of these took place in 1990, when the Acuerdo Patriótico government – a coalition of Acción Democrática Nacionalista (ADN) and the Movimiento de Izquierda Revolucionaria (MIR) – decided to dismiss 8 of the 12 members of the Supreme Court, including its president, for alleged corruption. The activities of these court members was said to be having a destabilizing effect on the country’s financial standing. Critics saw this as a scheme to reinforce government control over the Court. It was described by

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members of the Supreme Court as a ‘virtual coup d’état’. A year later, in 1991, the political parties represented in Congress signed a document to ‘affirm the dignity and independence of the judicial power’. Shortly afterwards, the Senate reinstated those members of the Supreme Court who had been dismissed. The political agreement struck involved the introduction of new rules whereby a two-thirds majority in Congress became necessary to appoint the members of the Supreme Court and other top appointments. This also paved the way to the creation of the constitutional tribunal, the magistrates’ council and the ombudsman. In 1993, conflict re-emerged when the government decided to prosecute the Court’s president and his most senior official for alleged bribery and corruption. Both were sentenced and dismissed in 1994, following a trial that gave rise to serious questions (not just in legal circles) being raised about the Senate’s fairness and objectivity.9 Once again, it was suggested that the aim of this move was to restore government control over the judiciary. Since 1994, vacancies on the Supreme Court have remained unfilled for lengthy periods and the court has had repeated difficulties in selecting a president, reflecting political battles within the court itself. A number of attempts to resolve this problem have failed. In September 1998, the president of the Senate initiated proceedings to impeach three Supreme Court judges for alleged bribery and corruption. This was a response to a judgement in a labour dispute between the privatized flag-carrier, Lloyd Aéreo Boliviano (LAB), and its workers. Once again, this reawoke fears of political recriminations undermining the autonomy of the judiciary. Moreover, the removal of the three judges would have provided the opportunity to increase the government’s effective control over the Supreme Court. In support of international attempts to promote judicial reforms, Chemonis, a firm of consultants, were hired in 1996 to conduct a study, which concluded that the public image of the workings of the judiciary was one of legalized plunder, delay and corruption. The report took to task judicial reforms for their failure to connect administrative and judicial shortcomings, to take fully into account the views of the three powers of the state or those of the Supreme Court. It criticized the ways in which laws are drafted without the benefit of wide consultation and highlighted the inadequacy of the legal training provided by Bolivian universities. One of the possible answers to the defects of the justice system could be to provide more effective arbitration between litigants. An important step in this direction was the 1996 Arbitration Law, but it is still premature to judge the extent to which this initiative has led to substantive improvements. Nevertheless, the consolidation of democratic

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rule in Bolivia has led Congress to produce a number of laws, especially since the early 1990s: in 1992, it passed the Public Ministry Law and the Judicial Organization Law; in 1993, a law declaring the need for a constitutional reform; and in 1994, laws amending penal procedure. Other laws followed in the 1995–7 period: further modifications to the penal code, a law on civil procedure and the Arbitration Law. At the end of 1997, the legislative proposals regarding the magistrates’ council and the ombudsman were finally enacted and legislation on the constitutional tribunal was also passed by Congress in 1998. In 1993, following decades in which it was simply a branch of the interior ministry, the public prosecutors’ office (Fiscalía General de la República) acquired the autonomy allotted to it under the constitution. A general law (ley orgánica) defined the Fiscalía as an autonomous constitutional entity. Nevertheless, despite this status, the workings of the Fiscalía continued to be affected by its own weak structure, its inadequate budget and continued political interference with regard to appointments. Furthermore, the efficacy of state prosecutors hinges on the capabilities and honesty of the police-force. In order to develop its capacities, specialist units within the Fiscalía are required to deal with common crime, financial and administrative crime, judicial corruption, civil and human rights abuse, as well as drugs, terrorism and other problematic matters. Prosecutors need to be allowed to follow cases through to their conclusion rather than, as now, be replaced at different stages of an investigation. Finally, much has yet to be done to enable the Fiscalía to effectively represent the state in cases brought against public agencies.

4. Conditions for improvement The development of democratic institutions in Bolivia since the beginning of the 1980s has provided a framework in which to tackle overdue judicial reforms. The process of structural adjustment and state reform has laid the basis for improvements in the efficacy of state institutions as a whole and the ability of ordinary people to benefit from this. The Banzer administration (1997– ) set out a programme designed to restore public confidence in the workings of state institutions, including those of the justice system. It also set out a reform programme on legal issues, to be conducted by a permanent National Codification Commission (Presidencia de la República 1997). At the time of writing, this commission was still not functioning. Since 1982, governments of different political colours have adopted erratic policies towards judicial reform. The judiciary itself has failed to

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take a leading role, and has even experienced difficulty in adapting itself to the reforms that have been made. Congress has tended to take its cue from the executive, which has used its majority legislative support to impose its will. Successive administrations have resorted to short-term expedients rather than pursue any longer-term vision with respect to enhancing legal security. In order, to achieve such an agenda, greater participation of civil society is a requirement, so that those with a specific interest – academics, lawyers, bar associations and other groups – can contribute towards policy-making and legislative solutions. In order to regain public confidence, the agenda for judicial reform needs to be depoliticized, just as judicial appointments and administration also need to be depoliticized. A National Codification Commission, enshrined in law and established on the basis of public consensus, could provide a channel for input from civil society, the private sector and politicians, as well as from the government. Political will from all shades of opinion is required in order to improve the justice system. In this chapter we have sought to identify long-running problems, proposed solutions and the implementation of some reforms. Without entering into detail, we set out below some broad suggestions on basic steps to improve the workings of the justice system: • The citizen and civil society must be at the core of any movement towards democratic governability, based on human security and justice. So that citizens regain respect for fundamental democratic institutions, these need to be given new life. They need to be both efficient and accountable. • The functional unity of the judicial system needs to be achieved so that it not only accords with constitutional norms, but also its component parts act in harmony. Unless such unity can be achieved, corruption will flourish and legal security will prove elusive. Institutional reforms must be based on carefully conceived policies that take into account the real conditions of the country. • Sustained effort needs to be directed towards addressing those factors that threaten legal security. There must be respect for constitutional continuity, as well as attempts to improve both the efficiency and accountability of the legal system. Alternatives to litigation need to be explored, whilst improved access to property registries would help provide a basis for the defence of such rights. The changing economic role of the state in society is surveyed in greater detail by Horst Grebe in Chapter 9. Here it is important to note

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that the twin processes of privatization and administrative devolution require as conditions for their success the building of a justice system in which it is possible for both citizens and private economic agents to identify and defend their rights. We have seen in this chapter that much still needs to be done to correct past deficiencies in the legal system, let alone extend its coverage so that it can be accessed on equal terms by those far from the centres of political power. These not only need to gain confidence that this is possible but that justice is done. Until this is the case, a basic ingredient of political democracy will remain missing.

Notes 1

2

3 4

5

6

7

8

A democratic regime presupposes not only the rule of law but also the existence of ‘legal security’. Legal security is basic to human development, providing a condition for welfare and prosperity. It is also a condition for the existence of trust between individuals, on which contracts necessarily depend. Legal security requires the existence of an autonomous and effective justice system. The rule of law can only take place where legal security exists. By this we mean a situation in which rights to life, property and work can be adequately defended. The rule of law can be applied under conditions of dictatorship, but not with adequate regard to legal security. It is a product of a regime in which individual liberties are upheld. Article 176 of the Constitution states that the ordinary justice system is not competent to review, modify and still less annul the decisions of the agrarian justice system, whose decisions are final. An executive decree of November 1993 ordered the reorganization of the agrarian justice system, suspending many of its activities. In January 1998, when the superintendent responsible for regulating the telecommunications system faced complaints from a service provider, he announced that he would appeal to the Supreme Court to revoke a contract granted (supposedly incorrectly) by his predecessor. This exacerbated a longrunning conflict and gave rise to charges that the legal security offered to foreign investors was being violated. It has been estimated that Bolivia could be losing between US$230 and $690 million a year (or 3–9 per cent of GDP) because of the deficiencies of its collateral laws. According to the Sistema Educativa Antidrogadicción y Movilización Social (Seamos), more than 90 per cent of those arrested in 1994 under Law 1008 were people of very limited means. Of these, 88 per cent made use of public defence lawyers. The ILANUD study also questioned judges about the form corruption takes. They replied: money (45 per cent of cases), political influence (32 per cent) and the granting of favours (7 per cent). Other sources broadly concur with these findings, although some put cash payments rather higher. Law 1008 (1988) on the regime governing coca leaves and other controlled substances provides for fast and summary proceedings for those accused and for stiff penalties. Due process guarantees, such as the presumption of

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Towards Democratic Viability innocence, are curtailed during the course of investigation. The law has been challenged on the grounds that it violates the Constitution. Major reforms to the legislation were pending at the beginning of 1999. The new extradition treaty with the United States replaced an earlier agreement, drafted nearly 100 years before. The negotiations were rushed through because of pending deadlines related to foreign assistance programmes. The treaty parts company with other bilateral and multilateral agreements since it introduces the obligation on Bolivia to hand over its nationals when required to do so. It incorporated new mechanisms and practices of an asymmetrical nature. The former Supreme Court president, Edgar Oblitas, announced on several occasions that his trial was invalid and that the Congress should declare it null. This did not happen. Oblitas and his lawyers published a chronicle of the trial in 1994.

References L. Aniyar de Castro, ‘Rasgando el velo de la política criminal en America Latina’, in C. Beccaria, ed., Modern Criminal Policy (Milan: UNICRI, 1988). E. Buscaglia, Economic Development and Judicial Reform in Latin America (Buenos Aires: Contribuciones Konrad Adenauer Stiftung, 1997). V. H. Cárdenas, ‘Seguridad ciudadana e instituciones del orden público’, cited in ‘Foro de Gobernabilidad y Desarollo Humano’ (La Paz: Pronagob/UNDP/ ILDIS), published in Presencia, April 1997. Instituto Latinoamericano de las Naciones Unidas para la Prevención y Tratamiento del Delincuente (ILANUD), ‘Estudio del funcionamiento del sistema penal en Bolivia’ (La Paz: Universidad Católica Boliviana, 1993). R. Laserna, La seguridad humana en Cochabamba (La Paz: Pronagob/PNUD/ILDIS, Sept. 1996). R. A. Mayorga, in ‘Seguridad ciudadana e instituciones del orden público’, cited in ‘Foro de Gobernabilidad y Desarollo Humano’, (La Paz: Pronagob/UNDP/ ILDIS), published in Presencia, April 1997. Presidencia de la República, ‘Plan operativo de acción “Para Vivir Mejor”’ , (La Paz, Nov. 1997). C. F. Trigo, Derecho constitucional en Bolivia (Buenos Aires: Editorial Cruz del Sur, 1955). World Bank, ‘How Legal Restrictions on Collateral Limit Access to Credit in Bolivia’, Report no. 13873-BO (Washington DC, the World Bank, 1994).

11 Accountability in the Transition to Democracy Antonio Sánchez de Lozada

1. Introduction In many emerging democracies, particularly those characterized by extensive and pervasive poverty, a large sector of the population tends to be excluded from the political process as well as from the benefits of economic growth (Chapters 4 and 5). Only a minority become stakeholders in the new democratic system. This fundamental danger for democratic viability is aggravated by a lack of broad representation on account of the narrowing base of political parties (Chapter 8), the absence of confidence in the legal system (Chapter 10) and dysfunctional government. To address these vulnerabilities and facilitate the informed consent of the governed, an accountable government in an open society is essential. The practice of public accountability requires that those elected by democratic means, or appointed through an authority emanating from an electoral mandate, respond to society both for government decisions and their consequences. Accordingly, politicians and public officials are held responsible for the way in which public resources are allocated, the efficacy with which they are managed, the timely release of relevant and reliable public information, and for qualified and independent evaluation as well as effective oversight of government operations. Social groups can also exercise oversight, formally or informally, by voice censure or exiting from civic or service organizations. Without accountability, no one in public life is obliged to assume responsibility for what he does. In the absence of transparency (diffusion of and access to information, including speedy response to inquiries) and oversight, it is 195

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unlikely that voters will have the instruments to define their needs or weigh up electoral alternatives. Accountability is generally poorly understood in emerging democracies. In Latin America, it clashes with strongly authoritarian traditions. Notions such as ‘principio de autoridad’ and ‘razón o majestad del estado’ are used to argue that ‘state security’, ‘public interest’ or ‘governance’ take precedence over the protection of human and political rights. ‘Public service’ is regarded as altruism. Even in long-standing democracies, accountability is subject to legal constraints. In the United Kingdom, for example, the Official Secrets Act empowers the government to restrict the free flow of information over large areas. In contrast, the survivors of apartheid are most conscious of the importance of accountability for democracy. Experience also suggests that – good intentions apart – corruption can only be effectively tackled if conditions exist for accountability and legal security. 1 This chapter is an attempt to formulate, primarily on the basis of the Bolivian experience since the 1970s, criteria for developing public accountability. I argue that the fundamental conditions include the establishment of transparency in and oversight of government, the political process, public service suppliers, the beneficiaries of special privileges and institutions in which power is concentrated; the building of legal security; and the creation of a public service ethos. For these, the efficacy of information, management, control and investigative systems is essential. I first seek to conceptualize public accountability and then review the legacy of authoritarianism in Bolivia and subsequent reforms. Particular consideration is given to the integrated financial management and control system (SAFCO). The chapter concludes with a summary of criteria for each condition required.

2. Responsibility, accountability and democracy 2 Because many different officials contribute in many ways to decisions and policies of government, it is difficult, even in principle, to identify who is morally responsible for political outcomes. (Thompson 1980: 905) The ‘problem of many hands’, described by Thompson, is at the core of current thinking on responsibility and accountability in government: who is responsible for what, when public decisions are made by so many? The conceptual debate on accountability can be clarified by introducing a more precise account of how public decisions are linked

Accountability in the Transition to Democracy Figure 11.1

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Matrix: four conceptions of passive accountability Collective responsibility

Individual responsibility

Collective actions

I Institutional accountability ‘Organization as person’

II Collective accountability ‘All for one’

Individual actions

III Hierarchical accountability ‘One for all’

IV Individual accountability ‘Each for himself’

to moral responsibility. Following Bovens (1998: 26–7), I shall consider two particularly useful notions, passive and active responsibility. The key question for passive responsibility – after an event has occurred – is who bears the responsibility for a given state of affairs. In contrast, the notion of active responsibility aims at preventing the occurrence of unwanted events and promoting desirable outcomes. This ‘responsibility as virtue’ is more directly linked to a public-service ethos. Accountability as passive responsibility can be disaggregated into four distinct conceptions, interrelating individual or collective action and responsibility (see Figure 11.1). At one extreme stands the idea of institutional accountability (I), where the organization acts as a person that assumes collective responsibility for what are, by definition, collective decisions. This ‘organization as person’ notion, introduced by corporate law, suggests a highly impersonal resolution of the ‘many hands’ problem that eliminates the need to know how decisions are made. Attention, rather, focuses on the outcomes of organizational decisions. Although this scenario is not directly applicable to the actions of public organizations, which rest on a combination of individual and collective actions and responsibilities, it provides a benchmark by which to assess the notion of accountability in the public arena. At the opposite end stands the notion of individual accountability (IV), whereby individual involvement is called to account. Accountability does not restrict itself to political leaders and government executives, but focuses on the individual responsibilities of each and every member of an organization. Junior public servants are not spared. The problem of ‘many hands’ is addressed by asking each to account for his actions. In practice, this form of accountability requires a clear and often difficult delineation of tasks, procedures and responsibilities. To assess ‘who did what’ requires a great deal of information and transparency, often lacking in the day-to-day routines of public management.

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Between these two extremes, stand two intermediate notions of accountability assessment. Hierarchical accountability (III) is perhaps the most widely used. It relies on a pyramidal view of authority and responsibility, where lower-level managers account to higher levels, all the way to the top, which, in turn, is held externally accountable for institutional actions as a whole. Individuals are still held responsible but within the limits of their actions. This model addresses the ‘many-hands’ problem. In contrast, the collective accountability conception (II) derives from an all-encompassing notion of individual responsibility for collective actions. The responsibility of each official for any outcome is seen as equal to that of every other. Accountability as active responsibility, or virtue, may be contrasted to the four earlier conceptions by its emphasis on shared values and a sense of public duty rather than punishment. Public officials, when considered to bear active responsibility, make morally compelling judgements to promote values that strengthen public accountability. As moral agents, officials may exercise voice to approve or disapprove of the public actions of their dependants and superiors, or exit by refusing to comply with questionable acts or resigning (Hirschman 1970). As shall be developed below, both active and passive conceptions of responsibility are useful for assessing the advancement of public accountability in an emerging democracy. The ex ante need for a societal ethos that values public service is as important as the legal and bureaucratic means of assessing ex post responsibility. As suggested by Guillermo O’Donnell (1998: 112), the importance of accountability in emerging democracies often stems, not from its shortcomings or uncertainties, but from its absence. The particularities of democratic development in Latin America, furthermore, suggest the critical importance of strengthening horizontal accountability, understood as the institutional framework of checks and balances that public bodies exercise over each other. Although the establishment of political and civil rights procedures has greatly contributed to the practice of vertical accountability through electoral checks, most Latin American democracies have avoided the ‘intrusive’ and ‘levelling’ effects of horizontal controls. The application of public accountability, so conceived, restrains the abuse of power and its undue concentration. It can also be effective in reducing opportunities for unacceptable behaviour, improving the possibilities to expose it, and for marshalling evidence to censure corruption. Accountability is incompatible with de facto regimes, based on verticality, caste loyalty and secrecy, which all result in impunity.

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3. The legacy of dysfunctional government and the process of reform Most new democracies have had to contend with the legacy of counterproductive policies, improvised government intervention, managerial incompetence and absence of reliable information. In Latin America, many emerging democracies inherited from their predecessors an unresponsive public administration unable to control an intensifying fiscal, economic and socio-political crisis and characterized by the almost total absence of transparency, reporting and any commitment to public service. The five freely-elected administrations that have governed Bolivia since it initiated its transition to democracy in 1982 have all faced the same problems: • absence of relevant and opportune information systems and procedures for policy formulation; • lack of effective management systems to implement, monitor and adjust policy in a timely fashion; and • counter-productive or ineffective internal and external controls. Without an adequate information base for scheduling operations and their inputs, budgeting became a largely arbitrary process. The Contraloría General de la Republica (Contraloría) was supposed to prepare the consolidated financial statements of the public sector and then audit its own work, functions incompatible with one another. The scarcity and deficiencies of institutional reporting and financial registries converted this task into a tedious and frustrating search for documents, producing worthless tomes of paper. Auditing was reduced to reviewing compliance, with norms arbitrarily selected from a mass of contradictory regulations decreed by a succession of de facto regimes. With the false illusion of controlling government spending, staff from the Contraloría undertook prior authorization of all payment orders and contracts. Because they lacked the multiplicity and level of skills required to carry out such tasks, the situation generated bureaucratic delays, irrational actions and corruption. Most seriously, however, this external pre-control veto freed the executives of public entities from responsibility both for their conduct and its consequences, engendering government without accountability. With the suspension in late 1980 of Central Bank foreign currency sales, the loss of control over inflation became evident. Inflation originated in the substantial indebtedness incurred in the 1970s, a decade of

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favourable export prices and easily available external credit due to abundant petro-dollars. The governments of the period increased not just public investment but also generated growing fiscal operating deficits. With widening gaps between official prices and the black market and worsening food shortages, pent up frustration from almost two decades of authoritarian rule intensified. By late 1981, the ruling administration recognized that it could not handle the growing social and political confrontation and thus the risk of applying fiscal discipline, finally deferring in 1982 to the Congress elected in 1980. It was a case of democracy by default. The ‘popular front’ government which initiated democracy tried to reconcile stabilization and democracy, and introduced a high degree of transparency. It gave precedence to the right of protest, even though it had inherited untenable socio-economic conditions. The governing coalition held only a minority in Congress and was subject to extortion, externally from the populist radicals and internally from its component parties. Although this government effectively bridged the transition to democracy, the acceleration of hyperinflation obliged elections to be called one year early. Notwithstanding the crisis, an overhaul of Bolivia’s public administration was begun in 1983, assisted by specialists from the US General Accounting Office (GAO), the World Bank (IBRD), the Inter-American Development Bank (IDB), and the UN Development Programme (UNDP). In March 1984, it was agreed to initiate the improvement of public-sector management and accountability with the introduction of more effective supply and contracting procedures and government accounting and auditing systems which responded to generally accepted principles. Pre-payment authorizations were phased out. Strong resistance from the Contraloría employees’ union, backed by the deputy comptroller, led to a takeover of the offices, amid demands for the resignation of the comptroller. In early 1985, senior staff at the Central Bank (with the support of the bank union) countermanded the resolution of the bank’s president and executive board, and resisted an external audit by the Contraloría. 3 The level of anxiety generated by the social and economic emergency made it easier for the subsequently elected government to embark in August 1985, without any outside involvement and within a democratic framework, on some thoroughgoing changes in fiscal practices (see Chapter 3). Until international cooperation increased significantly in 1987, stabilization was financed essentially by a dramatic increase in domestic petroleum prices from a few cents per litre to international

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levels, which primarily benefited the National Treasury. The ending of counter-productive controls and tax reforms removed major sources of corruption. However, some banks, brought in to process tax payments, were frequently tardy in crediting collections to National Treasury accounts. Inspection companies were retained to verify the declared value of imports, and exports and other agencies were brought in to manage the contracting of goods and services. With simplified and reduced tariffs, customs revenues were already growing, and so it is difficult to assess the success of verification. Nevertheless, project delays and overruns remained high, thereby tending to confirm the suspicion that mechanical procedures are of limited effectiveness, especially in the whole area of competitive contracting of consulting services. None of the agencies made available their standard costing or grading operations, only their results, thereby limiting their transparency. With fiscal adjustments, the Contraloría was able in 1986–7 to lay off over 700 of some 1,200 employees, mainly those involved in pre-control procedures. At the same time, a new project was formulated with the World Bank and USAID. Known as the Financial Management Strengthening Operation (FMSO), it embraced not just the SAFCO project, but also the reorganization of the Central Bank and the strengthening of the tax administration. The FMSO got under way towards the end of 1987 and was completed in early l990. The need to implement the Law for Government Management and Control (Law 1178, 1990), known popularly as the SAFCO Law, led to FMSO II. Though FMSO II was initiated in 1991, by the end of 1992 the project had disbursed only a minor proportion of its funding. The SAFCO Law and the Public Prosecution Law (Law 1469) of 1993 were only seen as anti-corruption measures. The latter resulted in the reorganization of the Attorney General’s office, making it autonomous from the executive branch. However, it did not address the need for more effective and specialized investigative capabilities. The World Bank also promoted and financed the Economic Management Strengthening Operation (EMSO), with a view to developing a professional civil service, create supply procedures, and foster decentralization, amongst other objectives (the first two a duplication of SAFCO project components). The second-generation reforms also had important potential implications for accountability. In place of full party lists for assigning proportional representation, the l994 constitutional reform (Law 1585) created individual representation from electoral districts for half of the deputies from each department, with the aim of establishing greater direct vertical accountability. The Popular Participation Law (Law 1551, 1994) and the

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legislation on administrative decentralization (Law 1654, 1995) created mechanisms for participation and oversight at the local and regional levels (Comités de Vigilancia and Consejos Departamentales). Capitalization (Law 1544, 1994), which doubled the equity capital of major public enterprises and privatized their administration, also helped to reduce patronage and corruption associated with public management. But despite the clear benefits of these second-generation reforms, transparency and oversight for public accountability were not necessarily promoted under the new institutional arrangements. In some cases, new legislation directly undermined aspects of the SAFCO law. The regulatory system to oversee public and financial services (Law 1600, 1994) was a case in point.

4. The integrated financial management and control system The purpose of the SAFCO project was to improve public-sector management and achieve greater accountability by facilitating transparency and oversight. It was foreseen that more effective control of corruption would be a derived benefit. As originally financed, the project consisted of: i)

the design of systems for public resource allocation and management, information and control, the preparation of basic standards for these systems and their testing by means of pilot projects in entities representative of the diversity within the public sector; ii) the formulation of principles for the evaluation of public servants’ responsibilities; iii) the transformation of the Contraloría into the maximum publicsector external auditor; iv) the drafting of an enabling law for the SAFCO system; v) the interim monitoring of cash flows in major government entities, pending the development of accounting and information systems; vi) the development of training programmes for professional staff and middle management; and vii) management of the SAFCO project. Transparency and oversight for accountability are not possible in conditions of disorder, that is without effective management systems. Public resource allocation involves medium-term scheduling of tasks and non-financial inputs to implement policies, programmes and projects (‘Operations Programming’), in function of which organization and support services may be defined (‘Administrative Organization’).

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These two systems are the basis for medium-term financial projections, the annual budget, its execution and systematic adjustment (‘Budget’). The allocation techniques also facilitate improved administration of public resources: ‘Personnel’ development and management, ‘Supply’ and contracting of goods and services, ‘Treasury and Debt’ – management of financial commitments and flows. A critical tool for accountability is ‘Integrated Accounting’, wherein operational, administrative and financial data are incorporated with results analytically into an overall management information system. This system becomes the bridge between resource management and public policy. Automatic checks and comparisons incorporated into procedures, quality controls, monitoring of operations, and internal auditing constitute ‘Internal Control’, which permits executives to assess fulfilment of delegated responsibilities and thus take opportune action. Finally, ‘External Control’ is based on qualified external evaluation of the effectiveness and transparency of the systems for resource allocation and management, information, and internal control. This facilitates verification of compliance with policy, particularly investment and operating programmes, administrative norms and legal dispositions, as well as of reliability and consistency of operating, administrative and financial reporting. The auditing of compliance and reporting are prerequisites for performance auditing, also known as operational, results, comprehensive or valuefor-money auditing. To avoid conflict of interest, which disqualifies even the best external audit, it must always be ex post and independent. Since upgrading post-secondary education in financial management takes considerable time, a training programme, targeted to develop specific tools for the implementation of the SAFCO systems, became a key component of the project. Disagreements over the importance of training emerged during FMSO I and, in particular, FMSO II. The training budget was cut by 40 per cent on the recommendation of a generalist adviser to World Bank senior management who had not visited Bolivia for the project. The nature of the SAFCO law To codify all the attributes of public-sector management and control – even in moderate detail – would have implied passing a law running to hundreds of articles. Therefore a framework law (54 articles) was drafted to set out fundamental principles and terms of reference for the subsequent elaboration of basic standards for each system. Based on these, each institution or group of similar entities were to prepare detailed regulations which responded to its unique needs while respecting the

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system’s basic standards, thus obviating the need to cater for myriad exceptions to the law and basic standards. Furthermore, regulations specific to each institution allowed periodic adjustments, arising from the experience of their application and changing or unforeseen circumstances. This technique accommodated to a degree the rigidity of the Latin American administrative principle, which prohibits actions not specifically authorized by law or its regulations. Such regulatory straitjackets and the illusion of infallibility assumed from their strict application are at odds with effective management decision-making, which generally involves trade-offs, approximations and judgement rather than absolute right/wrong choices. The Law sets out four overriding objectives. First, to increase the efficiency with which public resources are managed with a view to improving the implementation of public policy. Second, to improve the timeliness and quality of information on the performance of public-sector institutions. Third, to make all public servants – irrespective of rank – more fully accountable for management of public resources. Finally, the Law sought to improve capacities to identify the misuse of public resources. The systems specified are applicable to all entities of the public sector. A fundamental contribution to transparency was article 5, which requires full disclosure of financial information and the management systems used by private entities that receive funds or other privileges from public agencies, or supply public services not subject to competition. Chapter II of the Law sets out principles for developing the 9 management, information and control systems. In chapter IV, each system is assigned to a Director Agency. Its mandate is: (i) issuing basic standards for the system; (ii) establishing deadlines for each entity to develop the detailed regulations and manuals to govern their particular remit; (iii) evaluating the effectiveness and internal consistency of the regulations issued by an entity, and their compatibility with basic standards and the SAFCO Law; and (iv) monitoring the information generated by each system. Implementation of the management systems contemplated by the Law (operations programming, administrative organization, budget, personnel, supply, treasury and public debt, and integrated accounting) is entrusted to the Ministry of Finance, while the control systems are the responsibility of the Contraloría. Accountability and the Contraloría Chapter V of the Law deals with principles of accountability, which combine institutional, hierarchical and individual responsibilities. Each public servant became responsible for the outcomes in performing his/

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her assigned duties and attributions. The Law posits that all activities are licit until proven otherwise. The relevant standard establishes that an act is licit if it meets the requirements of lawfulness, ethical behaviour and transparency. For its part, transparency involves: (i) the immediate communication of pertinent, reliable, intelligible and verifiable information to all involved in an operation; (ii) the preservation of and easy access to such information; (iii) the public dissemination of information; and (iv) upon reasonable request, the processing of unreported data and its diffusion. In addition to defining administrative, civil and penal responsibilities, as well as the due process for each, the Law provides for ‘executive responsibility’. The chief executives and board members of state entities are explicitly required to: • report fully on the allocation of resources, their management and the results obtained; • file contracts in publicly accessible registries and provide audited financial statements; • promote the capabilities and impartiality of the internal audit units; and • obtain results, ‘reasonable’ under the circumstances prevailing at the time of decision and action. Furthermore, when a public entity has paid damages, it has the right to recover them from the executives proven responsible. By this provision, the state is made responsible for liability claims. Professional and technical staff or outside advisers, whatever their institutional dependence or source of remuneration, are legally responsible for their reports, recommendations and actions, whilst lawyers representing public entities are liable for procedural negligence. However, civil, executive and administrative responsibility cannot be invoked when it is shown that at the time a decision or action was taken, it was in the best interest of the entity concerned and within the limits of reasonable risk. In this law, the functions of the Contraloría are quite specific. It is the Director Agency for all control systems and supreme government auditor, with particular responsibility for evaluating the effectiveness of standards and institution-specific regulations for management, information and control systems, as well as the operational results of public institutions. It also emits qualified opinions on the personal responsibility of public employees, as well as being a training resource for management, systems analysis, auditing and administrative law.

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To fulfil these responsibilities, the Contraloría has the authority: (i) to access all records and documentation, including working papers of internal audits, external audits, consulting services and projects contracted by public or special-privilege private entities; (ii) to commission audits or other evaluations of state entities or special-privilege private entities: (iii) to freeze bank accounts of, or disbursements to, public entities whose officers do not fulfil executive obligations; (iv) to recommend publicly the suspension or dismissal of chief executives of government entities for non-compliance with access requirements or when executive responsibility is invoked; and (v) to take judicial action against public entity officers for failure to comply with accessibility, disclosure and the obligation to take legal action, as well as against those who should have been brought to judicial account by those officers. However, the Contraloría must now proceed by due process and its decisions can be challenged in court. Direct congressional approval of its budget reinforces the autonomy of the Contaloría.

5. Implementation lessons Problems encountered in the SAFCO project are summarized under three headings, as follows. Project management and evaluation Differences between those involved in the project delayed its implementation. The key issues were the nature of the various components of the SAFCO system and their technical requirements; the scope and magnitude of training; and an insistence on mechanical criteria for evaluating results. In practice, local project management was annulled by the time FMSO II was instituted as a result of micro-management by World Bank generalists in Washington, while responsibility for deficiencies was exclusively local. Multilateral finance is often conditioned on hiring foreign ‘experts’. These are difficult to recruit, expensive to employ, unpredictable in their effective competence and they frequently have difficulty in relating their experience to local realities. Ideally, consultants’ assignments should be as concrete as possible and undertaken in conjunction with local professionals. However, the remuneration permitted for the recruitment of competent local professionals, or their repatriation from abroad, can be insultingly low in comparison with that of international consultants of variable effective competence. The dismissal of some ‘experts’ for unacceptable performance strained relations with the multilateral organizations.

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Confrontation would have been minimized if qualified institutions, free of prior involvement, had been contracted to evaluate project implementation and the performance of key individuals. Limited evaluations were undertaken by World Bank-selected consultants, most of whom had already participated in the project and therefore tended to have a conflict of interest. Inadequate understanding of basic concepts A serious obstacle to implementation was inadequate transmission of basic concepts such as accountability, transparency, public-service ethos, management decisions, executive responsibility, etc. The failure of numerous special events and courses to communicate adequately the essence of the reforms was the responsibility of the comptroller. For instance, when YPFB, the state petroleum corporation, was required to investigate a possible case of corruption through its internal audit office, the report was clearly evasive and thus repeatedly rejected by the Contraloría. In the end, the Comptroller had to invoke ‘executive responsibility’, along with the recommendation that the president of YPFB be removed. This official considered himself unjustly accused of complicity in corruption as he did not understand his obligation to take disciplinary action against those professionals of the internal audit unit who had not complied fully with their duties. Basic standards for the Law were delayed and old ways of doing things often reasserted themselves. The standards issued by the ministries of finance and planning frequently failed to comply with the principles established by the Law. They were formulated rather as procedural regulations applicable to all entities, obviating the responsibility of chief executives to prepare regulations and manuals appropriate to the needs of their respective institutions. Some multilateral agencies, in counterposition to the Law, supported a single regulation instead of institutionspecific regulations. Closely related to the foregoing were misconceptions about the design of some of the systems. A generally applicable supply regulation, as opposed to standard, was a somewhat more sophisticated version of the mechanical tendering system whereby, traditionally, what mattered most was strict compliance irrespective of results. Civil service proposals generally sought ‘job security’ with dismissal only possible in instances of extreme immorality, thereby perpetuating mediocre public management. By contrast, ‘employment security’ implies competitive recruitment from basic training, continuing education and evaluation of performance to determine

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remuneration, and competitive promotion. With time limits for continuance in any particular position or grade, the civil service responds to the principle of ‘improve, perform, reward or out’. In this manner, the public administration would continually be upgraded, a critical need in developing countries. Exposure of corruption increased with democracy and, hopefully, as a consequence of the SAFCO law. Yet this tended to be confused with evidence of increased corruption itself, which on occasions obscured the role that should have been played by the Contraloría.4 Inadequate complementary legislation Transparency in policy formulation and regulatory operations requires proposals to be publicised, along with divergent positions and responses, summaries of public hearings and decisions made. Unfettered public access to the relevant documents and information is indispensable. Norms regarding administrative procedure which set out standards for attending the public may contribute to transparency, human rights and improved public service. The lack of provision for such procedures was a serious omission in Law 1178. Legislation is also required to underpin accountability and public confidence in government by increasing the ability of the authorities to investigate corruption. In many countries, the prosecuting function depends essentially on the investigative capacities and the integrity of the police, even in cases involving high degrees of specialization. Such reliance on ever-widening police skills opens the way to abuse and even corruption. A drafter of control standards proposed that the 1993 Public Prosecution Law should be complemented with a provision for a deputy attorney-general. His/her role would be to allocate the services of specialized investigative units to prosecuting attorneys and to monitor such units’ performance. Such units could include: • A common crime unit to verify police evidence, carry out further investigations and support the prosecuting attorney in the preparation of evidence. • A financial and administrative crime unit to follow up leads uncovered by the Contraloría, the Central Bank, the tax collection authorities and regulatory agencies, and to support prosecution of possible fraud, tax evasion, graft, money laundering and similar crime. It could also investigate allegations of corruption in the above institutions.

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• A civil and human rights unit to investigate complaints, responding to institutional requests or acting on its own initiative, and to assist in the preparation of evidence in cases of physical and sexual abuse, family violence, women’s and ethnic rights, discrimination, the denial of free speech and other political rights. It could also act on allegations of police and judicial corruption, as well as other forms of abuse of authority. • A specialist unit to support verification and prosecution of possible drug-trafficking, terrorism and other types of criminal association. Although the autonomy of the attorney-general’s office from the executive power should counter the negative effects of political appointments, the Law never clarified by whom and by what means oversight of this service was to be exercised. The Law could also be adjusted to expedite prosecution by assigning each case to a ‘responsible prosecutor’ who would then manage all phases of a prosecution. This officer would have to have the support of associate attorneys and specialist investigators, and be oriented and monitored by a supervising attorney or senior attorneys in the cases of appeals. Bolivia remains one of the few countries in which the maximum auditor of the executive branch, the Comptroller General, still comes under the president of the republic. Generally, ‘supreme audit institutions’ provide independent and qualified auditing services so that Congress can fulfil its oversight responsibilities. These ‘qualified opinions’ also serve as an independent source of intelligence for government executives to verify fulfilment of the responsibilities they delegate. The audit reports, with comments from those involved annexed, should be made available to their supervisors so that appropriate action can be initiated prior to delivery to the oversight body and public release. The possibility of independence is lost when the audit is performed by an entity dependent – directly or indirectly – on the audited institution. This does not negate the value of internal audit, which should monitor for executives the specific activities of their departments It would require a constitutional amendment to transfer to Congress oversight of the Contraloría, preferably renamed Auditoría General del Estado. The Auditor General should be an experienced analyst of public-policy implementation, if possible with complementary skills in management information and systems analysis. To promote impartiality, congressional oversight should be exercised through a permanent and pluralist joint public accounts committee.

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6. Conditions for accountability From this overview of Bolivia’s pioneering pursuit of accountability, I seek to extract criteria for developing the four conditions required to achieve horizontal accountability, both individual and collective. The first two are transparency and oversight (for passive accountability) which depend on adequate management systems. The third is legal security (passive accountability), which comes into play when illegality is suspected. This is considered separately in Chapter 10. These are strengthened by the fourth, a commitment to public service (active accountability). All these conditions contribute to the efficacy of the electoral process which, in a democracy, is the essence of vertical accountability. Transparency The basic requirement for transparency is the timely public diffusion of readily understandable and reliable information, covering the most important aspects and results of policy, government and regulatory operations, resource allocation, management practices and control actions. All instances of government must respond, both publicly and diligently, to requests for information both from oversight bodies and all representative social groups. Also essential is ease of access to sources on which the publicity was based and all information on other activities that were not originally publicised. To achieve transparency in policy formulation and the regulatory function, full information prior and subsequent to decisions being taken needs to be made public, complemented by an open consultative process. This could include the dissemination of summaries of commentaries to proposals, vetted by the authors, together with official responses; hearings in which at least those who have presented written observations can question in public the replies of public servants; as well as ease of access to all information and documents. Care must be taken to avoid conflict of interest arising from incompatible functions, such as operational duties and control responsibilities being assigned to a person or unit within the entity, because these tend to obscure transparency. Third, privatization eliminates a major source of government corruption, although it can still lead to the public interest being defrauded. It should produce substantially improved access to, as well as enhance the efficiency of, public services and financial intermediation (reflected in reduced unit costs), which is essential for accelerating competitive investment. Sustainable and socially optimal use of natural resources is

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also a vital public issue, since these belong to all members of society and their use is a major environmental factor. Private corporations with a concentration of economic power, beyond that of government and any civic organization, also fall within the public interest. Therefore clear standards are needed for full, opportune public disclosure and verification of these private entities’ strategies, their management systems, operations and results. Fourth, for a truly open society, political parties, non-governmental organizations and other intermediaries between civil society and government should publish at least three times a year sworn and verifiable reports. These should deal with their policy positions, representation and other activities; sources and application of their funds; their organization and the selection of their leaders. The political system is the ultimate protector of the public interest and should, therefore, be expected to meet the highest standards of public scrutiny in ways that both strengthen and legitimate this critical role. Oversight To enhance the oversight function of representative bodies and to engender confidence in the reliability and opportuneness of the information, qualified and independent verification and evaluation is needed. First is the audit for effectiveness and transparency of (1) policy formulation, implementation and monitoring procedures and the regulatory process; (2) systems for the allocation and management of public resources; (3) analytically integrated management information systems, along with publicity and access; and (4) internal control systems. Then auditing for compliance, as well as reliability and consistency of reporting, becomes simpler and merits greater confidence. These three kinds of audits are ultimately not only a ‘stick’ to induce compliance, but a method to facilitate better management at each level of government. They also provide a test of transparency. Performance auditing is the tool of public accountability most directly beneficial for the electoral process. With such assessments, results as well as justification of policy decisions become more accessible to the general public as well as providing useful tools for policy-makers. In addition to procedures respecting the rights of those involved, the establishment of oversight evaluation standards to apply consistent political responses to both deficient as well as positive performance, demands consensus and continual review of a complex of social and political values. This almost philosophical task would need to be translated into legal and operating definitions and institutional form.

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Audits are not detailed verifications. The audit sample is based on evaluating management systems to identify possible areas of vulnerability. By stressing the review of these debilities, the probability increases the likelihood that deficiencies will be detected, including possibly illegal actions. Investigation of suspected deviations from standards now depends wholly on the inborn talent of prosecuting attorneys. To fill the void between the auditor and the prosecutor and expedite the exercise of justice requires qualified and specialist investigative units, independent of the police and both regulatory and auditing agencies. Much of the arduous work of preparing a judicial case can only be done by specialists trained in wading through voluminous documentation, data bases and audit reports, to assemble the relevant evidence. The municipality is the level of government with which the majority of the population identifies most closely. Theoretically, participation by local groups in the oversight of resource allocation for those social services and public investments that most directly affect people and the way in which that allocation is carried out is the most direct system of accountability. Since oversight is carried out by the beneficiaries, there is a greater tendency for it to result either in social censure or recognition. It is likely that regional governments will be more accountable if oversight is exercised by representatives of the basic social unit, the municipality. Oversight and judicial processing should be undertaken in an open and responsible manner, including publication of conclusions, resulting actions, their justification and the responses of those affected. Any restrictions on transparency and oversight, if absolutely necessary, must be specific and previously established in law. The law should designate the independent authority to whom confidential activity and information should be opportunely reported, who will exercise oversight, and how. Public service ethos A public service ethos lies at the heart of democratic accountability. The shrewd use of institutional design and the effective application of public management systems can achieve open and responsible government, but these are sustained by a conception of active responsibility for the generation of benefits to society. Given existing conditions and levels of training, responsible public employees tend to seek the least conflictual route to formal compliance, with little concern for substantive results. This is variously aggravated by a sense of power or defensiveness in dealing with the public. On the other hand, in Bolivia, as elsewhere,

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the public seldom appreciates the need to conciliate individual and common interests or the limitations of government in an emerging democracy. To convert government to a public-service orientation will require a civil service which rewards those who generate benefits – particularly for the most excluded sectors – and establishes disincentives for mere compliance or abuse of power, as an integral part of a competitive focus of ‘improve, perform, reward or out’. Some countries have developed norms for administrative procedure, and in some cases laws to ensure an opportune and adequate (even a courteous) response on the part of public employees involved in administrative services. Sometimes protection for the government employee is also included. Codes of ethics in recent years have become common to reduce the abuse of power and corruption – especially at the executive, middle-management and professional levels. Civil service codes emphasize employee duties, behavioural norms, employment conditions and rights, generally including ‘job security’ as opposed to ‘employment security’. All such standards can be systematized and made more coherent by being integrated into a single public-service code or statute. This might begin with what is generally expected of a public servant and why, including social values as they relate to the country’s reality and its government. These principles serve as a point of departure for formulating standards of responsibility, ethics and relations with the public. The standards should also clarify the rationale for administrative procedures and rules, personnel development and management systems, as well as the incentives for effective public service. Lack of concern on the part of government authorities and employees for the consequences of their actions will no doubt continue to pose a major challenge to democratic development in the future. The survival of Bolivia’s emerging democracy owes much to the church and the press. Church involvement in ongoing civic education on democracy, accountability and public service at all levels of the educational system and within civic institutions (especially political parties) could contribute to the creation of a public-service ethos. Incisive, opportune and competent reporting by the media on government policy and activity, the integrity of those involved and examples of outstanding public service is also valuable in promoting this social value.

7. Conclusion In this chapter I have argued, in essence, that accountability via transparency, oversight and legal security, with a commitment to public service

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and ethical behaviour, is the fundamental safeguard of democracy and therefore a critical determinant of its viability.

Notes 1 The author was Comptroller General during Bolivia’s transition to democracy (1982 to 1992), adviser to the governments of five countries, and participant in numerous events on management, accountability and corruption in the Americas, Europe, the Middle East and South Africa. 2 This section was prepared in collaboration with George Gray-Molina. 3 In spite of an unanimous Supreme Court decision ratifying that the Central Bank is subject to independent external audit, the access of the initial audit commission was obstructed. Its members were trapped in the Bank’s elevator and then cornered for several hours in an office suite. Subsequently, the Bank’s managers were arrested and the union’s demand to participate in the audit was refused. With USAID and UN assistance, but without IMF support, the audit was rapidly completed and exposed numerous arbitrary operations with abundant false reporting. This audit set the fundamental precedent of no exceptions for external control and opened access to the armed forces and others. 4 In 1992, after more than 8 years of international investigation and litigation, the Contraloría recovered US$81 million of fully negotiable interest-bearing promissory notes, issued by the Bolivian Airforce in 1981 for the purchase of 52 supersonic fighters (‘Widowmakers’) and unconditionally guaranteed on each note by the Central Bank.

References M. Bovens, The Quest for Responsibility: Accountability and Citizenship in Complex Organizations (Cambridge: Cambridge University Press, 1998). Congreso Nacional Ley No. 1178. Ley de Administración y Control Gubernamental. 20 July 1990, Gaceta Oficial de Bolivia (No. 1652). Congreso Nacional Ley No. 1469. Ley del Ministerio Público. 19 Feb. 1993, Gaceta Oficial de Bolivia (No. 1778). Congreso Nacional Ley No. 1544. Ley de Capitalización. 21 March 1994, Gaceta Oficial de Bolivia (No. 1544). Congreso Nacional Ley No. 1551. Ley de Participación Popular. 20 April 1994, Gaceta Oficial de Bolivia (No. 1821). Congreso Nacional Ley No. 1585. Ley de Reforma a la Constitución Política del Estado. 12 Aug. 1994, Gaceta Oficial de Bolivia (No. 1828). Congreso Nacional Ley No. 1600. Ley del Sistema de Regulación Sectorial (SIRESE), 28 Oct. 1994, Gaceta Oficial de Bolivia (No. 1853). Congreso Nacional Ley No. 1654. Ley de Decentralización Administrativa. 28 July 1995, Gaceta Oficial de Bolivia (No. 1894).

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A. O. Hirschman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States (Cambridge, Mass.: Harvard University Press, 1970). G. O’Donnell, ‘Horizontal Accountability in New Democracies’, Journal of Democracy, 9, no. 3 (1998), 112–26. M. Thompson, ‘Moral Responsibility of Public Officials: the Problem of Many Hands’, American Political Science Review, 74 (1980), 905–16.

Conclusions John Crabtree and Laurence Whitehead

Like other countries in Latin America, Bolivia has undergone a dual transformation since the early 1980s: the establishment of a democratic system of government after nearly two decades of military and authoritarian regimes; and the mutation of a highly statist economy into a much more liberal one. These achievements have brought with them a period of relative political and economic stability which stands in stark contrast to the country’s turbulent past. This ‘dual transition’ was facilitated by favourable external and domestic circumstances. However, it also owes much to the policies pursued by successive governments since 1982. In the late 1980s, Bolivia carried out a number of adjustment policies that helped reorient the economy, taking advantage of the changed political circumstances brought about by the successful conquest of hyperinflation. Then in the mid-1990s, a series of far-reaching and innovative ‘second-generation’ reforms were carried out, geared towards consolidating the new economic model and tackling some of the country’s more deep-rooted structural problems. The beginning of a new decade provides a good vantage point from which to assess what has been achieved and what needs to be done to make Bolivia a viable democracy. One conclusion is that, by reasonable comparative tests, Bolivia’s achievements in constructing a democracy are considerable. A period of 18 years of unbroken constitutional rule, in which elections have taken place regularly, fairly (at least since 1990) and with the results being respected, clearly stands in contrast with the preceding period in which short-lived constitutional governments were interspersed with lengthy periods of military dictatorship. By historical standards, such relative regime stability rivals the best in the country’s republican history. The transfer from military to constitutional rule was unconditional, with no 216

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special protection or impunity offered. The military became a subordinate actor; indeed Bolivia was one of the few countries to convict and sentence a previous military dictator and his collaborators. Bolivian democratization compares quite favourably with the record of some of the country’s neighbours and Andean partners during the 1990s. Even though governments resorted to states of emergency with fair frequency, there was no formal break in constitutional legality. No Bolivian president has tried to extend his mandate by removing the constitutional bar against immediate re-election. Although specific political parties represent interests imperfectly, the party system as a whole has retained a degree of vitality. No political party since 1982 has succeeded itself in government. Much remains to be done to complete democratization, but a significant amount has been accomplished. The domestic context for a certain low-key type of democratization was broadly favourable. The legacy of gross human rights violation, combined with the involvement of the Bolivian military in drug-trafficking, made any return to military rule a particularly unattractive option. The origins of accelerating inflation during the military governments of the 1970s underlined the economic irresponsibility of these administrations. From 1979 onwards, the most conspicuous military figure, Hugo Banzer, sought to build an electoral base by founding his own party and participating in elections, even though his commitment to the full rigours of democracy was not always evident. The experience of hyperinflation provided the opportunity for established political parties, especially the MNR, to reconstitute themselves along new programmatic lines and thereby to gain a fresh lease of life. It also greatly weakened the union movement, whose uncompromising syndicalism had in the past provided the justification for military repression. At the same time, the external context was also favourable. Quite early on, Washington showed itself supportive to Bolivian democracy, stung by the experience of the ‘narco-generals’ and the 1980 coup, with even the Reagan administration prepared to back a government coalition which in 1982 included the pro-Moscow Communist Party (PCB). The main concern of the United States subsequently was to enlist Bolivia’s cooperation in the ‘war against drugs’, and democratic regimes constituted more reliable allies in this endeavour. The process of democratization in the rest of Latin America over this period also added important support to Bolivia, whilst incipient integration processes carried with them important democratic components. Perhaps this was most explicit in the formation of Mercosur, to which Bolivia became an associate member in June 1996.

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This volume has aimed to provide an analytical approach with which to assess this achievement and to gauge its limitations and vulnerability. How solid is this democracy and how irreversible? The concept of ‘viability’ provides a tool for assessing democratic performance along a number of different axes, each with their own particular forms of measurement. Chapter 1 pointed to the various ways in which viability can be visualized and tested, stressing the way in which these involve in-depth consideration of specific historical conditions. The first of these concerned the ability of the state to maintain effective jurisdiction over the extent of its territory: to prevent inroads by neighbouring states and to exercise effective internal political control. Bolivia is a country which has suffered considerably at the hands of its neighbours over the last 150 years and has experienced guerrilla warfare and the seizure of state power by the drug mafia in the relatively recent past. However, as in other countries of Latin America, the ‘density’ of state power is still very variable, with large areas where state institutions are still quite precarious. The second criterion of viability concerns legitimacy. Elected in a pluralist way under universal suffrage, governments since 1982 have commanded greater legitimacy than their forebears, but legitimacy is an elusive factor and its strength should not be taken for granted. It depends on a regime’s ability to tame anti-system forces, incorporate (or marginalize) ‘outsiders’ and articulate perceived national interests in the face of external pressure. A third element is the extent to which democratic institutionality – parties, elections, the workings of Congress, local government, the judiciary – knits together in such a way that a regime articulates and harmonizes public desires and preferences. In the past, institutions have often worked against each other, out of sequence and in disregard for an overarching framework of constraints and dependencies. Although this situation has clearly improved, the extent to which such improvements are firmly grounded remains open to question. The fourth axis along which democratic viability has to be evaluated involves discussion of the linkages between the state and civil society. With a legacy of popular organization, Bolivia’s civil society is quite supportive, yet strong oligarchic, clientelistic and parochial features endure that reduce the extent to which representative democracy can take root. The private sector remains a weak element, particularly given the central role assigned to it under the neo-liberal model. A fifth dimension relates to the concept of effective citizenship and the extent to which members of a polity have equal rights before the law. In a country with such enormous inequalities as Bolivia, effective democracy remains at best an aspiration rather than an accomplishment. Finally, the sixth axis along which democratization

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can be judged relates to the question of performance. Even in wellestablished democracies, the ability of a regime to generate a modicum of prosperity is a factor linked to its longer-term survival. This is particularly the case of weak systems in which poverty and indigence is widespread. In such societies, poor performance will undermine support for democratic institutions, whereas strong performance should have the reverse effect. From this analytical approach it is possible to derive a certain number of practical requirements that would have to be met in order for us to consider that a viable democracy had been established in Bolivia. On the economic front, in order to survive it would be necessary to achieve some minimum prospects of cumulative growth so that the twin problems of poverty and exclusion could be tackled. In institutional terms, for democracy to be viable, adequate channels for representation and participation must exist, with political parties successfully undertaking a role of political intermediation. In terms of civil society, a convincing climate of legal security and accountability needs to be created, extending well beyond the narrow confines of the urban middle class. And, with regard to public policy, the state would need to establish itself as more responsive to national interests – indeed even capable (where necessary) of resisting powerful external pressures.

1. Tackling poverty and exclusion A central argument of this book is that the existence and persistence of acute poverty and social exclusion represent a constraint on and a threat to democracy. This is not just because the poor are more likely to rebel against democracy than the wealthy, but because the poor are not stakeholders with a vested interest in its maintenance. If democracy fails to bring material well-being, it will provide little incentive for loyalty to the system. Moreover, it is also the case that stakeholding should involve empowerment and active participation. As Amartya Sen has argued in the case of India and other countries, it is no accident that the incidence of poverty is relatively less marked in places where the poor have instruments to better their situation: where literacy is relatively high, where there is a tradition of social organization and where women take an active role in the lives of their communities. This means that the answers to poverty are not to be found solely in the sort of technical solutions which have infused thinking about poverty relief in Bolivia and elsewhere. Rather, they involve policies to encourage genuine popular participation, to raise the standards of education, to create a political and legal system

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in which it is possible for the poor to achieve redress, and to gain a voice in the political process. These are policies which require an active role on the part of the state; they are not developments likely to occur simply as a result of free-market forces. The challenge is one of creating real citizenship and strengthening of civil society. It is not just a question of boosting growth (although that is important) or even taking steps to ensure that ‘trickle-down’ trickles further; it is a question of changing the nature of power relations within society. The experience of Bolivia in this regard since the beginning of the 1980s gives some grounds for optimism but also raises some anxieties. It is clearly the case that during these years there has been no massive redistribution of either income or power, and that the degree of inequality in society has not changed in any fundamental way. Along with Haiti, Honduras and Nicaragua, Bolivia remains among the poorest countries of Latin America, with acute poverty concentrated in a rural sector which still represents a relatively large proportion of the total population. Ethnic cleavages also remain pronounced. We have seen how successive attempts to reduce levels of poverty have failed to have much lasting impact, whilst the country’s economic performance (measured by GDP growth) has been disappointing since stabilization in 1985. Nevertheless, there are grounds for qualified optimism as well. Bolivia is one of the few countries which, in the design of its second-generation reforms, sought to get to grips with some of these problems. New policies were developed to deal with rural poverty, although their implementation was delayed owing, in part, to a lack of political will to carry them through. Rather more successful in terms of implementation were reforms to the educational system, which involved a reorientation of priorities towards rural and more vocationally oriented education, geared in part to catering for the ethnic and linguistic needs of a pluricultural society. However, these reforms also revealed some of the deep-rooted obstacles to further change. The Bonosol pension scheme sought to create new rights by using the proceeds of capitalization to establish universal retirement pensions. Although partly scrapped by the Banzer administration, the scheme established a significant precedent by introducing rights beyond the market. Perhaps most important were the achievements of the Popular Participation programme. Not only did this establish a mechanism to enable people to participate more fully in decisions affecting their communities (thereby helping to empower them), it also involved a radical reorientation in the distribution of budget resources towards rural communities where poverty in Bolivia is still most acute, whilst at the same time meshing with other human development reforms.

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The achievements of recent years are more substantial in terms of policy design than in terms of policy implementation; the scale of the problem is such that any change is bound to be attainable only in the long run. It is therefore difficult for those involved properly to evaluate the pay-off from the reforms. These reforms also suffered from failures of communication, misinterpretation and a lack of adequate evaluation and feedback. Some tentative conclusions, however, can be drawn from the foregoing chapters. The first is that the problem of rural poverty can only be resolved through the creation of a new model of rural accumulation. The Andean peasant farmer will not resolve the economic constraints to which he is subject unless he can access appropriate technological packages, adequate credit flows and both legal and institutional support. Enabling this to happen would require a major reorientation in the priority given to agriculture within the overall pattern of state spending. It would also require institutional innovation in order to produce and disseminate appropriate technologies, whilst giving greater importance to rural education. If agricultural productivity can be enhanced in this way, it might have beneficial effects in other respects, such as reducing the cost of food to the urban consumer. However, one of the problems that remains is that greater productivity would involve displacement of many from the land and the need to create non-farm, rural-based economic activities. A second conclusion is that raising agricultural productivity must be achieved in such a way as to avoid further aggravating the problem of resource depletion. The ecological dimension to the human development paradigm cannot be ignored. Indeed, the available evidence suggests that unless something radical is done to change the way in which agriculture is carried out, the vicious circle of poverty – land degradation – poverty (whether in the eastern lowlands or in the Altiplano) will become increasingly intense. Watershed management was advocated as a way to do this. The key, however, is a decentralized approach, in which municipalities – either individually or in conjunction with others – take a proactive role in testing and disseminating rural production techniques. Once again, this dovetails with the need to shift the emphasis in rural education, especially of women. A third conclusion is that the human development paradigm, involving education, health and other aspects of welfare, has to be placed at the very heart of the model. If human development involves the fostering of active citizenship, one of the roles that the state must assume is to ensure that individuals and communities have the capacity to develop their potential through vigorous and ongoing participation. This leads us to our fourth conclusion, that the state must play a central role in

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tackling poverty, since it is something that will not respond to the normal operation of market forces. Indeed, ‘affirmative action’ is required if the problems facing the poor, especially in the rural sector, are to be tackled. From this, then, it should be abundantly clear, that tackling poverty involves both economic and political strategies and that a purely technocratic focus will at best provide only temporary, unsustainable gains. The key, therefore, lies not just in improved ‘performance’ – although this is indispensable – but in promoting active citizenship so that individuals and communities of individuals have a ‘voice’ and can assume a more active role in the conduct of their own affairs. This is, of course, consistent with a shift away from the paternalistic state, towards one in which social demands make themselves felt at all levels of government. Some progress has been made in stimulating the thinking required for such a reorientation to take place but – as the Bonosol experience showed – there is still in-built political resistance towards turning such ideas into reality and a lack of structured social support to overcome such obstacles. Without persistent pressure from below there is reason to doubt whether changes in public policy will come about. However, it also needs to be borne in mind that real decentralization may greatly complicate the tasks of government.

2. Building channels for political intermediation A balance between political participation and representation is characteristic of any functioning democracy, and irrespective of the degree of poverty in society, the strength or weakness of such a system depends on the ways in which intermediation works. In the aggregation and representation of political demands, political parties are expected to play a key role, providing the link between civil society and the state. They also help legitimize the actions of the state, both through their role in the legislative process and in government. Naturally, since parties are key components in the ways in which formal democratic systems operate, their performance will be an important factor in whether or not systems of representation actually work. Political parties and other representative institutions also play an important role in developing civil society and citizenship, key concepts in our discussion of democratic viability. In many countries, it has been popular mobilization by parties which helped generate these in the first place; in the Bolivian context, the MNR played a significant role in the 1940s and 1950s in developing popular organization and engendering a concept of citizenship. Parties and their performance are also conditioned by economic performance:

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where performance is positive, it helps to legitimize parties; where it is negative it can effectively destroy those parties perceived to be responsible. This study has drawn attention to the shortcomings of Bolivian political parties in the ‘democratic era’ since 1982, arguing that in the quest for centrist consensus, the key political actors have lost much of their distinctive personality and have become divorced from the rank and file of their supporters. Even the so-called ‘populist’ leaderships have proved prone to interparty wrangling at the centre, thereby weakening their linkages to the grass-roots. Still, such shortcomings should not be overstated. Bolivia’s political parties have shown greater persistence and internal cohesion than some parties in neighbouring countries, providing a bridge between the people and the state. The emergence of new parties is also a positive sign, suggesting that the party system has a capacity for renewal, not least since new parties often have a stronger rapport with their supporters than older, more institutionalized ones. Furthermore, the ability to change the political ground-rules in response to demands to improve the quality of Bolivian democracy also merit recognition. Whether they will achieve their desired objectives may be debatable, yet there have been important changes to the constitution, including the adoption of new modes of congressional representation which aim to make parliament more responsive to the electorate. Such changes suggest a capacity for innovation and adaptation. At the local level, too, the importance of the popular participation reforms should not be overlooked since, as well as creating new administrative structures, they extended the arena of democratic electoral politics into rural areas at the margins of the political system. As such, in a sense, they extended the boundaries of the state and its competence, increasing its ‘density’ in outlying areas. Popular participation, we have argued, should be considered as an exercise in ‘state-building’. Disillusion with the performance of political parties is one of the recurrent themes to be found in commentaries on the state of democracy in the post-Cold War world. Bolivia’s parties are arguably in better shape than those of some other Latin American countries, notably Peru and Venezuela. But in such countries democracy has been under severe strain and the implosion of the party system is a reflection of the overall state of political disarticulation. Therefore, when assessing the viability of democracy in Bolivia, it is essential to subject the political parties to critical scrutiny. Do they display incipient tendencies towards the kind of failure observable in some other countries? What scope is there for reinvigorating them, and so restoring representativeness to the

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party system? In their favour we should note the relative longevity of some major parties and the fairly stable balance of forces between them. However, opinion surveys confirm the very low esteem in which they are held by much of the population, and manifestations of public discontent often bypass them altogether. Party platforms and declarations of principle are viewed with disinterest, even derision. There is a widespread belief, backed by a considerable body of evidence, that parties lack internal democracy, that their leaders are unaccountable to the rank and file, and that most activists participate as a means to secure public employment or other personalist favours. The murky area of party finance is another source of suspicion and discredit, particularly given a history of penetration by corrupt activities. Some very narrow organized interests may ‘capture’ certain political parties, but more generally the great majority of social groups feel themselves alienated from and unrepresented by the political parties that contest power. Parties do not enjoy strong support in society and need to widen their popular base. A particularly critical area of failure from the standpoint of overall democratic viability is the inability of all the parties to breathe life into the legislature. Congress does not adequately perform the key functions of framing debate on public-policy choices, generating legislation or exercising responsible oversight over government. Recent attempts to reform the laws governing political parties do at least recognize the gravity of these failings, but it is far from evident that the remedies proposed will contribute much, unless ways are found to strengthen and reinvigorate Bolivia’s parties as channels of political participation. They could become a major point of failure for the democratic system as a whole. The introduction of uninominal constituencies in a hybrid system of congressional elections demonstrated a concern to redesign the electoral system in such a way as to encourage a greater degree of representation and to strengthen the rapport between congressmen and their constituencies. The full effects of this reform have yet to be properly evaluated, but they suggest that institutional arrangements can have a bearing on democratic performance, and that it is useful constantly to monitor their effects in contributing to the wider objective of heightened participation. In Bolivia, the National Electoral Court has provided a useful contribution in this respect. It may be the case that further steps should be taken to reduce the extent of proportional representation in the electoral system, or at least amend it in such ways as to enhance political accountability. However, the problem goes beyond narrow matters of institutional design. If now the main problem affecting the Bolivian political system

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is not so much chronic instability and ungovernability – as in the past – but the weakness of representational mechanisms, democratic viability may require new incentives for parties to improve the ways they aggregate and project interests in society at the level of the state. Government through coalition may need to give way to more competitive party politics with parties once again articulating divergent interests in society. Rather than side-lining politics, perhaps what Bolivia needs is ‘more’ politics – though traditional clientelistic forms should not be reinforced. More effective mobilization of social interests could indeed strengthen the political system. At the same time, much more still needs to be done in pursuit of greater decentralization. The Popular Participation reforms provided a mechanism for increased articulation between the municipal level of government and the departmental and national levels, yet further steps need to be taken to strengthen local accountablity, stimulate innovation in local policy-making, improve representation for indigenous interest groups, and encourage grass-roots organizations to pursue their agendas through these new structures. However, ultimately the success of such reforms will depend on the extent to which people choose to participate in these new structures. The three case studies mentioned in Chapter 4 suggest that significant barriers to participation remain, and that the extent to which people see the new structures as a valid way to pursue individual or collective interests is limited. In the meantime, outbursts of public anger tend to reaffirm the sort of mobilizational politics typical of earlier times.

3. Defining state responsibilities and creating public accountability The shift in emphasis from a state-led model of development to one where the private sector assumes a predominant role in the pattern of accumulation is a process which has raised the need to redefine state responsibilities in light of the requirement to make an emerging democracy more viable. Structural adjustment has seen the state withdraw from much of its former role in the productive sphere and managing markets of different kinds. Second-generation reforms have focused on the need for institutional innovations, with the state’s role shifting towards different sorts of activity. Deciding on the priority of state activity remains a contentious area. This book has argued that there are large areas of activity in which the market, alone, is unlikely to resolve problems. Those of poverty and exclusion, potential causes of democratic breakdown, are but cases in point. A more focused ‘enabling’ state,

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capable of mobilizing and directing market forces, will be needed to tackle these problems, whilst the state needs to help create an environment conducive to long-term growth. In most countries of Latin America, the shift of responsibilities towards the private sector has taken place pari passu with the establishment of democratic regimes. In some cases, opposition to change on the part of sectors prejudiced by structural adjustment has meant that governments have had to adopt decidedly authoritarian positions in order to achieve economic liberalization. In others, those opponents had already been weakened prior to the period of adjustment, thereby facilitating the process and making it politically less conflictual. Under the new model, second-generation reforms revolved around state reform, but did relatively little to enhance accountability. Such reforms are required to ensure that private ownership does not take place at the expense of the public interest and that the reduced state is made more accountable to those it ostensibly serves. It is out of a sense that capitalism should become more responsible that the so-called ‘post-Washington consensus’ came round to giving greater emphasis to institutional policies such a judicial reform and the regulation of privatized industries. In most countries of the region, state authorities – often bequeathed from military dictatorships – were unanswerable to their public and consequently prone to graft and corruption. Indeed, within the new democracies of the 1990s, the prevalence of state corruption became one of the most potent sources of public discontent, encouraging emergent politicians of varying ideologies to seek support by promising ‘clean’ government. The question of accountability, therefore, is an issue that has become one central to concerns about regime legitimacy. Those who answer opinion polls in almost all countries in Latin America place little faith in political parties because they believe that they are self-serving and corrupt. They have little confidence in institutions such as the judiciary and the Congress for the same reasons. Even the new regulators are looked at askance. Bolivia is, as we have seen, no exception to this rule. Where reforms can be introduced which visibly help to reduce levels of graft and corruption and ensure punishment for those who offend, it is likely that governments will gain legitimacy in the eyes of those who elect them. Honesty in politics can carry with it a large premium, legitimizing the economic reforms that proffer a bigger role to the private sector; however, the problem lies in translating such good intentions into deeds. Similarly, legal security involves reformulating the laws so that they adequately reflect contemporary social and political values and therefore provide stronger foundations for democracy. This also implies

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eliminating the aberrations introduced variously by authoritarian regimes or privileged groups. If legal security can be achieved, the rule of law is also guaranteed. Issues such as accountability and legal redress also have an important bearing on concepts of citizenship. The liberal state implies equality before the law, or in other words ‘citizenship’. As we have already discussed, the prevalence of poverty and social inequality makes equality before the law difficult to achieve in practice. Inequalities in access to power obstruct the creation of a ‘level playing field’ in which all citizens can make use of the justice system to protect their interests. Both corruption and clientelism can make a mockery of this. The shift from greater public to private ownership through privatization and other mechanisms also raises serious questions about transparency and oversight in the management of what were formerly state assets. A privatized industry is not necessarily more accountable than a public one, maybe less so. The regulation of privatized industries also raises the question of the wider accountability of private firms and full disclosure of their activities. Privatization also relates closely to the criterion of performance. Ultimately, economic liberalism is more likely to survive when it proves successful in generating economic dynamism in the longer run. If growth is strong and the benefits of growth are widely shared and percolate down to create new beneficiaries, then the new model will gain legitimacy and solidity. Where the legacy of liberalization and privatization is economic stagnation, the model is likely to encounter ever greater resistance. Similarly, where free markets manage to reduce perceptions of corruption, they will be welcomed. Yet this cannot be taken for granted, and there is a danger that the oversight ‘safeguards’ may themselves become tainted with corruption. The experience of Bolivia since 1982 reveals a number of attempts to grapple with some of these problems. Indeed, thinking on these matters has probably advanced further than in many other countries of Latin America. We have seen how the notion of accountability evolved within the Contraloría de la República after 1982, receiving an important boost with the SAFCO reforms of the early 1990s. We have also seen how the capitalization of key state companies involved a formula by which the public interest was placed centre-stage with the Bonosol pension scheme and the introduction of a network of regulatory agencies designed in such a way as to confer on them a good deal of executive autonomy. Similarly, within the justice system, a number of amendments were introduced to increase public access and improve judicial services. These were experiences from which other Latin American countries could profitably learn, and are particularly noteworthy in view of the relative

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lack of sophistication of the state entities concerned and the problem of ensuring compliance in a country where law enforcement faces major difficulties. However, our analysis of the strengths and limitations of the Bolivian private sector raises a number of question-marks about the viability of the economic model in the longer term and the capacity of private firms to respond to the heavy responsibility placed upon their shoulders. The large divide that separates a few well-capitalized and internationally competitive companies with a mass of small-scale units of production, oriented exclusively to the domestic market, makes the Bolivian private sector even more fragmented than its counterparts in other countries of the region. Although there are examples of economic agents being sufficiently dynamic to become major empresarios, they are relatively few. Whereas traditionally, multinational companies have been absent from the Bolivian scene, their presence since capitalization also calls into question the ability of Bolivian firms to compete for technology and markets. It has been difficult for Bolivian companies to take full advantage of the opportunities provided by regional integration, particularly Bolivia’s associate membership of Mercosur. For Bolivian firms to compete in such markets, a transformation in their capacities may be required. Meanwhile the domestic market remains too small to act as a powerful stimulus to industrial development, although an effective poverty eradication programme would stimulate demand for basic consumption items. Whether or not multinational firms will substantially improve the services previously provided by state monopolies has yet to be seen. While increased access to technology and finance should boost investment and productivity, this may come at a disproportionate increase in costs to the consumer. The fragility of the new regulatory system was already apparent by 1997–8, when it became clear that its autonomy to act independently was strictly limited. With respect to accountability and legal security, many obstacles still need to be removed in order to raise standards of performance in public life. Although progress has been made in identifying some of the problems and in taking initial steps towards resolving them, the notion that there is one set of standards for the rich and another for the poor remains deeply rooted. Those in the ‘informal’ sector are also citizens and are in quite as much need of legal security as the better off. Chapter 11 made suggestions as to how to increase transparency and oversight in public life, highlighting the need for ongoing evaluation of management decisions, timely and relevant public information and the creation of a public-service ethos in administration. Ultimately, movement towards

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these goals depends on the strength of the organized political commitment to achieve them, not just in government but in society more generally. However, it would be wrong to underestimate the difficulties likely to be encountered in establishing a new ‘culture’ both within the private and public sectors. Similarly, obstacles remain to promoting a climate of legal security in which individuals, communities and organizations feel that their interests are adequately served by the justice system. Further progress may yet be made in rendering this system more efficient (updating legal codes, improving arbitration procedures and improving judicial administration) and more accessible (through publicly funded defence systems, the use of property for collateral and the instituting of judicial review). Nevertheless such changes will only come about if there is sufficient political pressure to achieve them.

4. Reducing external vulnerability The fourth major area of concern is that of Bolivia’s relative weakness as a state within the international system. The legitimacy of government is partly a function of its capacity to act in the interests of its own citizens. In a world in which the economic, political and military power of individual states varies enormously, it is obviously the case that some states are able to operate in more autonomous and less dependent ways than others. The necessity to accommodate pressures from external sources can undermine the authority of governments of weaker states, when these are seen as responding more to pressures of outsiders than to the interests of their own citizens. The multilateralization of economic, political and military power on a global basis has compounded this problem, especially since the ending of the Cold War reduced the ability of weak countries to play one power bloc off against another. Bolivia has long been seen as a particularly vulnerable country, subject not just to the power projection of the United States and such multilateral organizations as the IMF and the World Bank, but also having to cope with the expansionary ambitions of some of its immediate neighbours, foreign-backed guerrillas and the depredations of international drug mafias. In the past, the country’s chronic political instability was due, in part, to the machinations of these external actors, each seeking to gain influence within it. It has also been an economy highly dependent on the volatility of one or two commodity prices and inflows of foreign aid. Yet at the same time Bolivian authorities managed to gain some room for manoeuvre by playing off the rival foreign ambitions to some effect: the United States against the Soviet Union, Brazil against Argentina.

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But with the ending of the Cold War and the process of economic integration within Latin America (notably Mercosur), their capacity to manoeuvre in this way has been reduced. Since 1982, Bolivia has come under strong and constant international pressure on two fronts in particular: drugs and structural adjustment. On occasions these two issues have been explicitly linked, with multilateral adjustment loans conditioned to progress in eliminating coca. Although Bolivian administrations like to present drug policies as their own, there is no hiding their dependence in this regard on the United States. The ability of Washington to project its interests into Bolivia’s domestic affairs on drugs has repeatedly undermined the authority of governments in La Paz, opening these to the charge of failing to act in the national interest. The ability of US ambassadors at critical junctures to manipulate decision-making at the highest levels of government has sometimes exposed the authorities to public ridicule. Similarly, Bolivia has found itself exposed to external pressure (once again mainly from Washington) in its economic policy choices. The economic crisis of the mid-1950s provided the opportunity for the US government and the Washington-based multilateral organizations to regain influence lost after the nationalist reaction of 1952. Thirty years later, by contrast, Bolivia managed to adopt a more autonomous stance in pushing through the successful stabilization package of 1985. The IMF only became a prime mover behind economic liberalization in 1987. And, as we have seen since then, the Bolivian authorities have played a major role in the design and implementation of policies, often distinguishing themselves for their capacity to manage external constraints. It would be a mistake, then, to portray Bolivia as a country unable to reduce its vulnerability to pressures from the outside world. As Juan Antonio Morales argues in Chapter 3, despite the stabilization crisis of 1956, Bolivia did much in the decades after 1952 to reduce its exposure to external influences by diversifying its economy; indeed it is only as a consequence of such measures that it became possible to talk of a ‘national’ economy. Similarly, significant changes have taken place since the 1950s in the institutional sphere that have greatly increased Bolivia’s ability to confront and resolve its problems. The secondgeneration reforms of the Sánchez de Lozada administration reflected a capacity to produce locally generated solutions to international policy recommendations and for the Bolivian authorities to stand their ground in defending the validity and importance of such adaptations. The capitalization scheme – which at the time fell short of internationally-approved models of privatization by involving the sale of only

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one-half of the equity in privatized companies – was a case in point. The clashes over implementation of the SAFCO law between the government of the day and the World Bank reveal a lack of understanding on the part of the latter about accountability and how best to introduce it. Eventually, the second-generation reforms of the Sánchez de Lozada government won Bolivia considerable recognition in other developing countries for their contribution to developing policy thinking. In departing from the strict letter of the Washington blueprint, the reforms also gained domestic legitimacy and acceptance. Bolivia is therefore not without resources in seeking to mitigate its vulnerability and to reduce its dependency on the United States in particular. Economic integration within South America provides Bolivia, whose neighbours include such key players as Argentina, Brazil and Chile, with important opportunities for diversifying its export base. Discoveries of large quantities of exportable natural gas helped reduce dependence on minerals like tin. Some commentators have also drawn attention to Bolivia’s advantages (rather than its disadvantages) as a landlocked country at the heart of the continent, providing a natural hub for transport and energy infrastructure. However, as Horst Grebe has argued in Chapter 9, Bolivia’s ability to benefit from the opportunities that arise from integration requires a more proactive response than has been the case in the past. Apart from sales of soya to Colombia and Peru, Bolivia’s experience as a member of the Andean Pact since 1969 has been a disappointment. Mercosur provides a greater challenge, albeit one which will require determination, skill and perseverance to exploit. Bolivia will continue to suffer certain disadvantages in terms of inserting itself into an increasingly globalized and interdependent world economy, whilst sales of natural gas to Brazil will have few backward linkages to help dynamize other sectors of the economy. As the poorest country in South America but one with a substantial track record both of economic reform and of democratic continuity, Bolivia stands to benefit from the Heavily Indebted Poor Country (HIPC) initiative. This broadly-based international endorsement of the country’s entitlement to economic assistance, along with the capacity of its political system to put such resources to good use, opened the way to a possible ‘virtuous circle’ whereby international economic benefits strengthened democratic viability and reduced external vulnerability. For this opportunity to be realized, Bolivia was required to complete a broad national dialogue, not just confined to the government or the ruling party but including the opposition and civil society. This, it was hoped, would generate a social consensus to support a further package of reforms and social policy

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initiatives geared specifically to poverty alleviation. The international community was thus offering Bolivia an unusual opportunity to make cumulative progress in breaking away from the more destructive aspects of its past history. A positive result would not only benefit the poor and contribute to economic development, it would also enhance the autonomy of the political system and add to the credibility of the political class. It would, therefore, reinforce Bolivia’s move towards democratic viability. However, it must also be said that, at the end of the 1990s, the outcome of this initiative still seemed quite finely balanced. Just as a ‘virtuous circle’ could be set in motion by good policy choices, so also a ‘vicious circle’ remained a distinct possibility. Failure to take advantage of the opportunities on offer could be followed by demoralization and renewed institutional conflict. While Bolivia’s political class could emerge strengthened if a ‘national dialogue’ mobilizes collective energies around a coherent project of national construction, it could also be discredited if this favourable opportunity is not well used. It would be worrying if such dialogues bypassed (and therefore implicitly delegitimized) Bolivia’s elected parties and legislators. If democratic processes are dishonoured then Bolivia’s leaders will become more vulnerable to division and potentially intrusive party meddling from without. This danger should be of particular concern to all those with an interest in rendering present institutions more viable, since although the old tensions between constitutionalism and mass mobilization may have been softened since the 1980s, they have not been fully resolved. Developments in other Andean republics show that once a civilian political class becomes divorced from popular sentiment it can lose all social leverage, and so face isolation and even rejection. Developments in Ecuador at this time demonstrated the type of dangers still lurking in the background. Though international conditions were more supportive than before for a strengthening of Bolivia’s democratic viability, they provided no guarantee of such an outcome. The possibility of unviability had yet to be conjured away.

5. ‘Viability’ as a yardstick for democratization By paying close attention to the specific characteristics and possibilities of Bolivia, this book has tried to produce an account of the country’s recent experiment with democratization that conveys a realistic sense of what is achievable. In contrast to the dominant current in the literature, which tends to posit an abstract and universal standard of ‘democratic consolidation’, we have chosen to focus on what kind of democratic

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regime is attainable and perhaps capable of being made permanent in view of the many (and possible intractable) constraints operating on this particular society. The shift in the focus from ‘consolidation’ to ‘viability’, we believe, helps us avoid the pitfalls of judging Bolivia’s experiment by an external yardstick that fails to take into account the country’s particular problems. The trouble with such judgements is that they lead to inappropriately severe conclusions; what has been achieved may be close to the limits of the possible even though it falls short of the universal ideal. By focusing on viability, attention can be paid to the ways in which the new regime adapts both to internal traditions and understandings of politics as well as external vulnerabilities. This requires analysis that is holistic (in which interdependencies are recognized), contextualized and avoids stark dichotomies. Adaptation to domestic and external conditions may be viewed as compromises or retreats from the universal ideal, but the language of ‘viability’ enables us to entertain the possibility that, on the contrary, it is possible to make the best of a difficult situation and therefore increase the chances of regime survival. Admittedly, this could open the way to ‘special pleading’, leading us to designate as ‘democracy’ something that in other settings would not merit the word. There are two main replies to this criticism. First, it may well be the case that in the specific conditions described in this volume the ‘quality’ of democracy in Bolivia may be less than in other countries in more favourable settings. Second, to concede this is not to betray the generally understood values of democracy but to apply them realistically. The claim that certain kinds of constraints in a particular context really do limit the short-term scope for (for example) the fulfilment of universal citizenship rights is a matter of judgement and evidence. It should not be an excuse for abandoning attainable programmes for improvement in this respect. Everything depends on the strength of the evidence presented concerning the constraints. The focus on ‘viability’ should direct our attention to the specific, empirically verifiable characteristics of a particular national context. Most discussions of ‘consolidation’, by contrast, tend to be idealized and inadequately grounded in factual reality. Using the various criteria we have assembled to appraise the available evidence, we can move closer to judging the viability of democracy in Bolivia. In general, the jury is still out on which of the neo-democracies will prove more viable in the long term. If a cyclical rather than linear theory is applied, as suggested at the outset, it could take two generations to know for sure. In Bolivia, and with less than one generation to

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judge by, much uncertainty remains. However, what this preliminary discussion suggests is that the chances of long-term viability will be enhanced to the extent that institutional innovation and policy reform take fully into account local needs, perceptions and characteristics. The constraints are real, but they are not absolute. In order for them to be tackled, they must first be acknowledged and placed at the centre of the analysis. That is what this volume has sought to do.

Index Acción Democrática (AD) 15 Acción Democrática Nacionalista (ADN) 28, 36, 68, 143, 144–5, 151, 152, 189 accountability 23, 56, 69, 72, 78–9, 84, 117, 123, 128, 134–5, 148, 150, 179, 181, 192, 195–214, 224, 226, 227, 228, 231 Acuerdo Patriótico 152, 189 administrative law 183–5 agrarian reform 25, 26, 27, 28, 35, 43, 52, 71, 76, 90, 91, 155, 170, 183–4 agrarian tribunals 183–4 agriculture 41, 44, 46, 84–99, 105, 106, 108, 161, 170, 221 agricultural credit 73, 90, 221 agricultural research 110–11, 116–17 agricultural technology 73, 84, 89, 91, 93–5, 96–7, 100, 109–11, 221 aid see foreign assistance Alianza Popular Revolucionaria Americana (APRA) 15 Allende, Salvador 31 Andean Pact (Andean Community) 44–5, 172, 231 Argentina 11, 44, 108, 167 Aristotle 1, 14, 16 armed forces 11, 12, 22, 24, 25, 26, 27–8, 32, 141, 143, 144, 181, 217 army see armed forces audits 199–207, 209, 211, 212 ayllus 68, 74–5 balance of payments 42, 92, 97 ballotage see elections banking 46, 51, 52, 165, 174–5, 176, 184, 185, 201, 210 Banzer, General Hugo 7, 18, 25, 27, 31, 44, 144, 145, 152, 156, 162, 166, 185, 186, 191, 217 Barrientos, General René 27, 31, 144

Bohan Plan 89–90, 102, 170 Bolivian Institute for Agricultural Technology (IBTA) 102 Bonosol 54–5, 164, 166, 220, 227 Brazil 11, 15, 31, 32, 44, 167, 175, 176 bureaucracy see public administration business structure see also private sector 166–70, 175, 228 capital accumulation (see also saving) 171–2, 174–5, 176–7 capitalization 41, 53–4, 160, 163–6, 167, 168, 170, 171, 174, 176, 202, 220, 227, 228, 230–1 Cárdenas, Víctor Hugo 180 Catholic Church 12, 124, 213 caudillos 21, 24 Central Bank 49, 55, 199, 200, 201, 208 Central Obrera Boliviana (COB) 25, 27, 35, 143–4, 146, 154, 155 Chaco War 25, 33, 43 Chapare 35, 46, 67, 90, 92, 100 Chile 15, 31, 32–3, 54, 167, 175 Chuquisaca 57 citizenship see also civil society 43, 58, 68–9, 120, 122, 125, 179–82, 185, 209, 218, 221–2, 227 civil law 185–6 civil service see public administration civil society 4, 5, 6, 7, 9, 12, 13–4, 58, 148, 162, 192–3, 211, 218, 219, 222, 231 clientelism 12, 46, 53, 55, 63, 65, 71, 78, 80, 101, 142, 153, 154, 202, 227 coalitions 11, 141–2, 145, 146, 148, 150, 151–7, 200, 225 coca 30, 45, 46, 89, 90–1, 100, 106, 147, 155–6, 187, 230 cocaleros 30, 35, 67, 147, 155–6 Cochabamba 57, 68, 75–7, 85, 91, 100 235

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Cold War 31–2 Colombia 17, 88 colonization 90 comités cívicos 56, 156 commercial law 186 communications see also infrastructure 33 Conciencia de Patria (Condepa) 10, 145–6, 147, 152, 156, 170 Confederation of Peasant Unions (CSUTCB) 74, 155 Confederation of Private Businessmen (CEPB) 162 Congress 11, 23, 56, 147, 149, 150–1, 152, 153–4, 156, 185, 188, 190–1, 192, 200, 206, 209, 224, 226 Constitution (1826) 23; (1831) 183; (1880) 25, 26; (1938) 25–6; (1967) 27 constitutional government 10, 11, 12, 15, 21–4, 25–30, 141, 143, 145, 151, 152–3, 180, 188–9, 192, 216–17, 232 constitutional reform 27, 183, 201, 223 Constitutional Tribunal 189, 190, 191 contamination 108 Contraloría General de la República (Comptroller General’s office) 55, 69, 71, 199–209, 227 Corporacion Minera de Bolivia (Comibol) 49 corruption 55, 69, 101, 145, 148, 174, 182, 184, 187, 191, 192, 198, 199, 201, 202, 203, 204, 207, 208, 213, 226, 227 cotton 92 Council of Magistrates 189, 190, 191 coups (see also military) (1964) 27, 31, 43; (1971) 25 criminal law 186–8 debt 46–8, 52, 162, 199 decentralization 9, 30, 58, 64–80, 109, 117, 122, 129–30, 132–5, 200, 201–2, 221, 222, 225 deforestation 103, 106, 113 ‘delegative democracy’ 11

Del Granado, Juan 146 ‘democracy by default’ 9, 22, 29, 200 democratic breakdown 14, 15 democratic consolidation 1–5, 6, 7, 8, 11, 12, 16, 17, 64, 100, 141, 181, 232–3 democratic legitimacy 6–8, 9–10, 38–9, 75, 120, 141, 148, 153, 182, 218, 226, 229 democratic persistence 5–6 democratic transition 2, 22, 28–30, 35, 142, 151, 199–200 democratic viability 1, 7–9, 10, 12–3, 14, 15–6, 64, 79, 84, 100, 120–1, 125, 134, 141–2, 152–3, 154–5, 160, 171, 172, 214, 218, 219, 223, 225, 231–4 democratization 1–18, 26, 28–31, 180, 187, 216–7, 222–3, 231 desertification see land degradation diseases 131–2 division of powers 5, 10, 23, 150, 151, 153–4, 189–90, 192 drug trafficking (see also coca) 28, 32, 45, 181, 187, 209, 217, 229, 230 economic diversification 43–46, 231 economic liberalization 29, 37, 41–2, 53, 147, 151, 152, 153, 176, 216, 225–6, 227, 230 economic performance 14–6, 38–9, 58–9, 147, 171–2, 218–20, 222–3 economic stabilization 15–16, 29, 42, 45, 49, 53, 57, 154, 162–3, 200, 230 economic vulnerability 41–5, 51–2, 59, 92, 230–2 Ecuador 15, 17, 33, 232 Eder, George Jackson 26 education 12, 14, 33, 55, 58, 70, 72, 84, 92, 96–7, 101, 111, 114–5, 120–31, 220, 221 Eje Pachacutí 68 El Alto 57, 85, 109 elections 5, 11, 15, 23, 25, 30, 141, 143, 148–51, 210 general (1966) 27, 144; (1978) 28; (1980) 200; (1985) 144, 145, 200;

Index (1989) 151; (1994) 151; (1997) 10, 18, 145, 151 municipal (1993) 147; (1995) 67–8, 74, 76, 77, 80, 147; (1999) 68, 79, 80, 146, 147 electoral fraud 149 electoral reform 147, 149–51, 224, emergency powers 11 Emergency Social Fund (ESF) 50, 58, 74 employment 36, 41, 45, 57, 85, 87–8, 91, 97, 102, 163, 167–9, 172, 213 equity see inequality erosion see land degradation ethnicity 13–14, 34–5, 74–5, 77–8, 121, 123–4, 155, 220 exchange rate 43, 45, 49, 50, 88, 162 exports 41–6, 88, 89–90, 91, 93, 97, 171–2, 176, 200, 201, 229, 231 extradition 188 Falange Socialista Boliviana (FSB) 34, 36, 144 Fernández, Max 146 Financial Management Strengthening Operation (FMSO) 201, 203, 206 fiscal policy (see also taxation) 54, 66–7, 69–71, 75, 76, 77, 87–8, 124, 162, 166, 199, 200 Fiscalía General de la República (Attorney-General’s office) 191, 209 food 87–8, 90, 96, 97 foreign assistance 45, 49–50, 52, 92, 111, 176, 200, 229, 231 foreign investment see investment Free Trade Agreements of the Americas 172 García Meza, General Luis 28 General Accounting Office (GAO) 200 gremios 12, 168, 169, 172, 175 growth see economic performance Guevara ‘Che’ 31, 33 Gulf Oil 35, 44, 161, 166

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health 70, 72, 85, 96–7, 102, 121, 122, 131–5 Highly Indebted Poor Country (HIPC) initiative 50, 231 human development paradigm 121–35, 180, 221–2 human rights 31, 143, 180, 182, 186–7, 191, 196, 209, 217 hybridity 12, 151 hyperinflation see inflation illiteracy see literacy imports 176, 201 import substitution (see also manufacturing) 87, 92, 161, 170 impunity 148, 182, 198 incomes 66, 85, 91, 94–5, 97, 100, 101–2 income distribution see inequality indigenous movements 12, 13, 23, 24, 34, 67–8, 74–5, 77–8, 147, 152 inequality 7, 14–15, 85, 100–1, 120, 135, 147, 153, 157, 163, 166, 170, 220 infant mortality 58, 86, 121, 131–2 inflation 16, 29, 35, 38, 43, 47, 51, 143, 147, 154, 162, 199, 200, 217 informal sector 12, 36, 146, 169–70, 172, 174, 228 infrastructure (see also transport, communications) 72–3, 89, 90–1, 96–7, 111, 231 institutionalization 10–13, 22, 78, 79, 141, 149, 174, 180, 188, 218, 230 insurance 186 intellectual property rights 186 Integrated Watershed Management Programme (PROMIC) 114 Inter-American Agricultural Service (IAS) 90, 96, 102 Inter-American Development Bank (IDB) 200 Integration (see also Andean Pact, Mercosur) 167, 169, 172, 175, 217, 228, 230, 231 International Monetary Fund (IMF) 43, 50, 229, 230

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investment 46, 51–2, 54, 72–3, 84, 85, 88, 95–6, 102, 163–5, 171–3, 176, 182, 203, 210 social investment 70–3, 76, 134, 228 Izquierda Unida 67, 76, 147 Japan 5 judiciary 23, 148, 174, 179–94, 226 judicial review 183, 184, 185 justice system (see also judiciary) 9, 179–94, 195, 208, 220, 227, 229 Karachipampa 55 Kataristas 10, 35 Keenleyside Mission

90

labour productivity 43, 93 Lake Titicaca 109, 114 land degradation 101, 103–9, 112, 113, 116, 117, 221 land productivity 93, 96–7, 100–18 land tenure 73, 85, 155, 183–4 La Paz 24, 100, 109, 145 legal security 179–82, 188, 192–3, 196, 210, 213, 226–7, 228, 229 Ley de Indias 22 literacy 13, 85, 86, 121, 219 Lloyd Aéreo Boliviana (LAB) 54, 190 local government see municipalities malnutrition 131–2 mancomunidades (see also municipalities) 71, 73, 80, 110, 113 manufacturing 44, 46, 86–7, 93, 97, 168, 170 ‘many hands’, problem of 196, 197, 198 media 9, 33, 213 megacoalición 152 Mercosur 32, 44–5, 172, 173, 217, 228, 230, 231 mestizos 14, 34, 75, 145, 146 Mexico 5 microempresas 167–8, 174 migration 33, 85, 90, 91, 92, 106, 111, 170 military see armed forces

military government 22, 25, 27–8, 31, 32, 184, 185, 198, 199–200 Mineworkers’ Federation (FSTMB) 25, 36, 154 mining 36, 42–4, 46, 52, 89, 108, 156, 161, 170 mobilization 21, 22, 24–30, 35, 76, 80, 143, 145, 148, 149, 154, 156, 162, 222, 224, 232 monetary policy 49, 162 Mother and Child Security, scheme for 133–4 Movimiento Bolivia Libre (MBL) 74, 146, 152 Movimiento de Izquierda Revolucionaria (MIR) 36, 68, 144, 145, 152, 189 Movimiento Nacionalista Revolucionario (MNR) 25, 26, 28, 34, 35, 36, 43, 68, 74, 143, 144–5, 149 151, 152, 155, 163, 170, 217, 222 Movimiento Revolucionario Túpac Katari de Liberación (MRTKL) 152 Movimiento Sin Miedo (MSM) 68, 146, 147 multiculturalism (see also ethnicity) 123–4, 126, 132, 220 municipalities (see also elections) 30, 56, 58, 66–7, 109, 114, 115, 120, 122–3, 128, 129, 130, 133–5, 147, 173, 212, 221, 225 National Basin Management Plan 114 National Codification Commission 191, 192 National Dialogue 231, 232 National Electoral Court (CNE) 149–50, 224 National Institute of Agrarian Reform (INRA) 184 nationalization (of mines, 1952) 26, 35, 43, 161; (of Gulf Oil) 44, 161 natural gas 44, 54, 89, 176, 231 natural resources 84, 88, 91, 93, 96–7, 101, 103, 111–12, 114, 185, 210, 221

Index neo-liberalism see economic liberalisation neo-populism (see also populism) 68, 146–6 New Sanitary Model 133–4 non-governmental organizations (NGOs) 6, 75, 124, 211 Nueva Fuerza Republicana (NFR) 68, 146, 156 oil 44, 89, 161 Ombudsman (Defensor del pueblo) 189, 190, 191 Organization of American States (OAS) 32 Oruro 67, 145 Ovando Candia, General Alfredo 44 oversight (see also regulation) 66, 67, 69, 72, 75, 76, 79–80, 150, 195–6, 199, 202, 209, 210, 211–12, 213, 227, 228 Pacto militar-campesino 27, 28, 34 Palenque, Carlos 146 Paraguay 25 Paris Club 50 Partido Comunista Boliviano (PCB) 217 Partido Socialista (PS) 146, 147 party system 9, 11, 28, 29, 36, 37 patronage see clientelism Paz Estenssoro, Víctor 26, 27, 28, 36, 50, 58, 143, 144, 145, 162, 163 Paz Zamora, Jaime 53, 144, 145, 164 peasants 24, 27, 28, 34, 36, 64, 68–9, 93–4, 147, 154, 155–6 pensions 54–5, 163–4, 165, 173, 220, 227 Peru 11, 17, 33, 88, 114, 223 Pinochet, General Augusto 32 ‘Plan de Todos’ 163 police 181, 191, 208 political participation (see also suffrage) 21, 25, 26, 67–9, 75–6, 78–9, 120–2, 147, 149, 156, 220, 221, 224 political parties 5, 6, 11, 27, 28, 67–8, 74–6, 77, 79, 80, 141–57, 181, 189, 195, 211, 217, 222–5, 232

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political intermediation (see also political parties) 64–5, 75, 78, 141–2, 152, 154, 157, 219, 222–5 Polybius 16, 18 Popular Assembly 25, 27, 35 Popular Participation programme 58, 63–80, 83, 87–8, 109, 122, 129, 132, 133, 147, 154, 156, 166, 201, 220, 223, 225 population 89, 91, 93, 95, 103, 109 populism (see also neo-populism) 17–18, 100, 162, 172, 223 Potosí 14, 57, 67, 74–5, 146 poverty 14, 41, 57–9, 63–4, 73–4, 79, 83–99, 100–1, 103, 118, 120, 121, 132, 134, 219–22, 232 prefectures 67, 72, 79, 110, 115 prisons see justice system private sector 52–4, 88, 160–77, 192–3, 218, 225–9 privatization (see also capitalization) 41, 53, 56, 160, 164–5, 167, 184, 202, 210, 227 Productive Transformation of Agriculture, Strategy for (ETPA) 83, 84, 96–9, 101, 110, 115 Programme for the Improvement of Educational Quality 129–30 property rights 182, 183, 184, 192 proportional representation 143, 150, 224 public administration 4, 5, 6, 7, 36, 55–6, 117, 125, 165, 189, 199–202, 207, 213 public policy 14–6, 38, 70–1, 78, 120–3, 125, 168, 172–3, 197, 203–4, 210 public service ethos 196, 197, 207, 210, 212–3, 228 Real Audiencia de Charcas 22–3 regionalism 33–4, 155–6 regulation 51, 56, 165–6, 167, 173, 176, 184–5, 204, 208, 210, 226, 227, 228 ‘rent seeking’ 37, 69, 71 representative democracy 10, 11, 12, 222

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revolution, Bolivian (of 1952) 22, 25, 26, 33, 34, 35–6, 37, 43, 52, 161–2 rule of law 4, 6, 7, 33, 179–85, 188, 227 SAFCO law 50, 196, 201–9, 227, 231 Saint Lague formula 150 salinization see land degradation Sánchez de Lozada, Gonzalo 35, 39, 53, 58, 98, 144, 154, 160, 176 sanitation 70, 72, 76, 86, 121, 131 Santa Cruz 44, 52, 54, 55, 77–8, 85, 90–1, 92, 100, 109, 144, 146, 156 Santa Cruz, Andrés 186 savings 51–2, 163, 173–4 schools (see also education) 124, 126, 127–30 Siles Zuazo, Hernán 26, 28, 35, 45, 143, 162 sindicatos see trade unions slums 85, 100 social exclusion 13, 34, 41, 58, 79, 84, 100–1, 219–22 Social Investment Fund 127–8 soya 44, 55, 88, 89, 91, 92, 108, 231 structural adjustment see economic liberalization Sucre (Chuquisaca) 22, 23, 24 suffrage (see also elections) 25, 26, 27–8 sugar 92 Supreme Court 11, 183, 184, 189–90 taxation 46, 49, 50–1, 55, 162, 200, 208 teacher training 124, 126, 128, 130 Technical Support Team for Educational Reform (ETARE) 125, 126 technocrats 56, 147, 149, 153–4, 222

terrorism 209 tin 42–43, 46, 161–2 ‘tin barons’ 42, 52 trade liberalization 45, 53, 162 trade unions 11, 12, 25, 28, 36, 43, 68, 125, 129, 141, 143, 162, 200, 217 rural unions 68, 74, 75, 76 transparency 196, 202–7, 208, 210–11, 213, 228 transport 33, 89, 90, 231 Túpac Amaru, rebellion of 23 Unión Cívica Solidaridad (UCS) 10, 74, 145–6, 147, 152, 156 Unión Democrática y Popular (UDP) 32, 35, 143, 151 Unit for Economic Policy Analysis (UDAPE) 55 United Nations Development Programme (UNDP) 200 United States 10, 32, 45, 89, 188, 217, 229, 230 Universidad de San Francisco Javier (Sucre) 23 Uruguay 15 USAID 98–9, 201 Venezuela 15, 17, 223 voter turnout (see also elections)

11

wages 49 ‘war of powers’ (see also division of powers) 5, 6 watershed management 101, 109, 110, 111–14, 115, 116, 221 World Bank 50, 58, 96–7, 98–9, 185, 200, 201, 203, 206, 207, 229, 231 Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) 44, 49, 54, 207