Bolivia: Fuel subsidy backdown reveals pressures on Morales

Protest against fuel subsidy cut, El Alto, December 30.

By Federico Fuentes

January 24, 2011 -- Green Left Weekly -- On December 31, the Bolivian government of President Evo Morales repealed a decree, passed five days earlier, to remove subsidies for fuel. The repeal came after protests and discontent at the resulting price increases from many of the government’s poor supporters.

“Why is the government making us suffer during these days … I don’t understand, I don’t understand”, Carla, a housewife in El Alto told Radio Atipiri on New Years Eve. An elderly woman expressed the shock of many supporters of Bolivia’s first indigenous president: “We are poor, we don’t have anything, what are we going to now, Evo has betrayed us, he must go.”

They were among the many that came out against the government’s decree, which sent petrol and diesel prices up by 73% and 83% respectively. It also caused spikes in the price of transport and food.

The government said it introduced the measure because the US$500 million going towards the subsidy was helping promote contraband.

Unable to cover rising internal demand, the government is forced to import diesel and petrol at international prices and then sell it at much lower local prices fixed by law. An estimated $350 million a year is being lost due to illegal smuggling across to neighbouring countries, where it is resold at international prices.

On December 28, the government introduced measures seeking to compensate for the price rises, including a 20% pay rise for teachers, health workers, soldiers and police officers. It also announced new investment into poor urban and rural areas to stimulate employment and the peasant economy.

However, the decree had an immediate negative impact on the pockets of ordinary Bolivians.

In response, bus and transport drivers initiated a 48-hour general strike. Miners at the state-owned Huanuni mine downed tools for a day. Angered by rising food prices, housewives and neighbourhood activists marched in their thousands in La Paz and El Alto, setting alight buildings belonging to the government and its supporters.

Important protests were held in other traditional strongholds of the governing Movement Towards Socialism (MAS).

With various sectors promising to march on La Paz in the new year, Morales repealed the decree. He maintained the measure was needed, but said further such changes would be predicated on prior consultation with social movements.

Unlike previous presidents that faced the real prospect of being overthrown for daring to partially remove subsides, few doubt Morales could have ridden out the wave of protests. His presidency still enjoys strong support, especially among the Indigenous poor.

Nature of process

Nevertheless, the chain of events has again raised questions about the nature of the process of change his government is leading, as well as the serious challenges it faces less than a year into its second term.

During Morales’s first term (2005-09), his government took important steps towards breaking Washington’s traditional hold over the Bolivian government. It strengthened anti-imperialist alliances with other left-wing governments and movements and nationalised important sectors of the economy. It also expanded Indigenous rights, eradicated illiteracy through popular education programs, provided greater access to education and healthcare, and reduced poverty.

Most importantly, the Morales government stimulated a powerful sense of pride among the Indigenous people that make up a majority of the population. This is expressed through the now commonplace idea that the most marginalised and oppressed cannot only govern the country, but can do so better than those that have come before.

Many of these gains were won through successful struggles against often-violent right-wing opposition directed by Washington and the eastern-based business elites tied to gas transnationals and agribusiness.

The second Morales government, which began in January 2010, has continued to advance on several fronts. These include new anti-racism and education laws, which have pitted the government against the opposition-controlled corporate media and church hierarchy.

Under the Morales government, Bolivia’s gross domestic product (GDP) has almost doubled. Its international reserves are at record highs and greater state intervention via nationalisations has resulted in the state’s share of GDP rising from almost nothing to 33%.


However, it is in its proposed industrialisation projects to develop the impoverished country that the government has faced its greatest challenges.

The failure to convert strong macroeconomic gains into tangible development projects at the regional and local levels, and the absence of a strong right-wing opposition, has opened up cleavages in the ranks of government supporters.

Those sectors that most closely identify with the government, mainly Indigenous peasants, continue to maintain a strong loyalty to it. However, a certain process of bureaucratisation has occurred as many of their leaders have taken posts within the state.

An indication of difference between the base and leaders came when, despite disgruntlement among their base at the fuel subsidy cut, many peasant union leaders said it was peasants who must carry the burden of the fuel subsidy cuts.

Roberto Coraite from Bolivia’s main national peasant confederation, said peasants are “the owners of the process of change, therefore we have the patriotic duty of defending it at all cost”.

Those sectors that did protest against the measure tended towards a combination of sector-specific demands and attacks on particular ministers rather than the government as a whole or Morales.

A December 28 statement by the national confederation of factory workers, which is generally hostile to the government, acknowledged the tremendous drain that the subsidy represents for the budget. However, it raised the alternative of a national campaign limited exclusively to a pay rise for factory workers.

Both wings of the once powerful, but now divided, Federation of Neighbourhood Councils of El Alto focused their attacks on ministers who were seen to be “undermining the support of the government”. It also raised the fact that the 20% pay increase offered as compensation would not affect informal workers — the majority of El Alto’s workforce.

Morales’ decision to revoke the decree came after holding several meetings with different social organisations. He said he would “continue to govern by obeying the people”.

Revoking the decree may have defused the situation, but it is unlikely to have resolved the underlying problems.


The government faces pressure from gas transnationals to go even further than its original decree and eliminate price controls on internal fuel consumption. On the other hand, it faces huge problems in the state hydrocarbon sector.

As a result, the government needs to move beyond an economic policy that seems determined by improvisation and reliance on using profits to provide about one-third of Bolivians some form of social security payment.

A serious national discussion is needed on a program for generating and redistributing profits aimed at industrialising the nation to resolve some of the underlying tensions.

This could alleviate the pressure of spontaneous, sector-specific protests. But, by itself, it would not deal with problems resulting from social movements with a sector-specific outlook increasingly seeking to rely on the old capitalist state inherited by the Morales government to solve their problems.

The encouragement of experiments in participatory democracy and worker or community management could play an important role in reinvigorating and politicising the base of the Morales government. Such experiments could serve as schools for training in running public and workplace affairs.

They could begin to create the structures and experiences needed to replace reliance on the old capitalist state with a new state built from the ground up.

Importantly, the government and social movements have in their favour the new constitution. Article 242 allows for “social control over public management at all levels of the state, and public, mixed and private companies and institutions that administer fiscal resources”.

[Federico Fuentes is editor of Bolivia Rising. This article first appeared at Green Left Weekly, Australia's leading socialist newspaper.]