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The Bolivian Miracle: a Master class in political economy

NacionalizadoCambio Newspaper April  19, 2014

Juan Carlos Zambrana Marchetti / correspondent in the United States 

Beyond the ideological differences and political rivalries that may exist in Bolivia, one thing that cannot be denied is that currently it is a very different country from the one that President Evo Morales found when he took power in January 2006.

With the re-founding of the country was born a new nation that took the first steps of its process of change, led by the hand of a young socialist government that confronted a capitalist world designed to boycott whatever political force opposed it. It was no easy task, and many doubted that the anti-imperialist project of an indigenous union leader could survive in such an adverse world.

However, eight years later, Bolivia’s economy has gone from being the poorest in the region to being one watched and emulated by other countries.

The Bolivian economic leap forward is an event so rare, extraordinary and marvelous that it fits perfectly the definition of miracle. The problem is that the miracles of a revolutionary government of the Left, apart from being abstract (impossible to understand within the logic of the Right), generate among the skeptics a curiosity to understand what is in fact the miracle, and what is the economic model that is achieving it.

That is why, when I learned that Bolivia’s Minister of Economy and Public Finance, Luis Arce Catacora, was in Washington, DC, I asked him for an interview to clear some of my doubts.


Asked about the difference between the new economic model and the neoliberal models of the past, he said that the fundamental change had been the recovery for the people of Bolivia of the ownership of the natural resources that the neoliberal governments had ceded to the transnational corporations, which took out of the country the greater part of the profits.

That multiplied income immensely, and it is on that basis that new policies for the management of those resources were initiated for the benefit of the Bolivian people.

That entails a redistribution of resources to benefit the population, by means of building infrastructure throughout the country, and cash bonuses for children, the elderly and expectant mothers, plus subsidies divided between the rural and urban areas, with good prices on electrical tariffs, communications, etc.

The third element is a heads-on struggle against poverty. He cited as an example that in 2005 extreme poverty in Bolivia exceeded 38 percent, the highest in South America, and that it has been reduced to 21 percent.

Another significant measure was that of income inequality, as in 2005 Bolivia was the second most unequal country in the continent, surpassed only by Brazil. Now, Bolivia is among the seven countries with the least inequality, having closed the gap between the richest and the poorest, but not to the detriment of the richest, but rather through an improvement in the economy of the poorest.

With respect to the extraordinary control of inflation that has been achieved, he said that Bolivia has shown that a social agenda can be fulfilled without altering macroeconomic stability, and that this is made possible by an adequate management of the income and expenses of the public sector, an adequate exchange-rates policy, and an impeccable management of the currency. That is the base on which a new country is being built –industrialized, productive, without poverty or illiteracy.


I asked him how the socialist ideology promulgated by President Evo Morales is related to the strictly economic principles that Bolivia applies in a capitalist world. I found his answer enlightening.

First, it must be recognized that the capitalist system is in crisis. In that context, it is necessary to look for an alternative road to development.

The construction of the socialist way of our country is very clear. What happens is that the manner and speed at which we can advance toward the final objective determine the economic policies. And so, when the President met with the entrepreneurs and organizations that at first were not committed to the process of change, it was done because the inclusive nature of the new economic model, in contrast to the model of exclusion of the past, which kept certain sectors out of the economy.

Our model, rather, is characterized as one in which the private sector take part as well as the cooperatives, because they have to be brought in, under the umbrella of the State, in the construction of the new Bolivia.

Building the new economic model requires the participation of all in the construction of a new Bolivia, which must have a high social content. At this point it’s important to underline that the political and ideological principles will never go away, because the technical elements of an economy are just that, technicalities that obey an ideological and political line.

What we have done is to recover a Bolivian economy that was dependent, dollarized, and under enormous fiscal deficits, in order to make it independent, national, more just, and with a surplus. We have recovered the instruments to be able to lead to where we want to be, gradually, together with all of our sectors, as our Political Constitution of the State says, but not forgetting to where we are headed. 


I asked him about the accusations from a sector of the Bolivian Right that, lacking arguments for use in its electoral campaign, has tried to downplay the economic success of the Left by claiming that the country’s prosperity derives from drug trafficking. He answered that he has had several debates with the opposition about this topic. He asked them how much money drug trafficking handled in Bolivia at present. The answer, according to one of their own foundations (Millenium Foundation), was that it was 100 million dollars, to which Arce responded that that meant nothing in an economy that moves 31 billion dollars.

He added that the Right has no alternatives to propose to the country, and that, therefore, it talks about drug trafficking, corruption, or anything else in an effort to besmirch economic results that have been praised not only at a national level, but above all by international organizations.

He said that the government is not concerned by this kind of commentary that lacks a scientific base, as it has requested an impartial entity, as is the European Union, to analyze the economy of coca in Bolivia, and that, further, its policies on coca are transparent and broadly supported.

The Right, to the contrary, has nothing to support its opinions except the bilious liver provoked by its fury that the Left has shown them that it knows how to manage well the economy. The Right had 20 years to do it, but it achieved not a single positive result for society, for the people, and this is why now their theory of neoliberalism has collapsed on them, like a ceiling on one’s head, without their being able to even understand what happened nor what the country needed.


I reminded the Minister that at the beginning of the process of change some leftist idealists had criticized it for not having cut off at the roots the relationship with the International Monetary Fund (IMF) and the World Bank, credit institutions that historically functioned as conveyor belts of political ideology through dependency on conditioned credits, like the one that closed down several of our mines.

Considering that he had carried forward this economic model without fighting over it with anyone, it fell to me to ask him whether it is possible to do away completely with these institutions that promote neoliberalism, whether that was utopian, and whether it is possible to deal with them without applying their policies and without leaving the country’s doors wide open to foreign intervention.

He explained that the first thing decided by the administration of Morales when he rose to power was to have no program with the IMF; that the country had a program that had been adhered to by prior administrations, but that in April 2006 it was suspended, and that from that time there is no relationship of requirements with the IMF to tie the country to any program.

He said that the country remains a member of the IMF, of the World Bank, and various international organizations only because they are good forums for making known the new Bolivian policies. He ended by saying that the administration had recovered sovereignty not only as to politics but also as to economics.

Asked about the international reserves, he said that they had received a country with $us 1.7 billion, deposited mainly in dollars and in banks of the United States.

Now, the reserves are around $us 14.5 billion, but with a much more diversified makeup in which gold has grown and the Euro and other currencies have been introduced, while a percentage of U.S. dollars has been retained, but… all of it is deposited in banks that give Bolivia the greatest assurance of preserving sovereignty over its resources.

In other words: a recovery of natural resources, a fair redistribution, a struggle against poverty and inequality, productive organization, and an implementation of inclusive policies seem to be the secret of this novel model whose name says much: the Productive Communitarian Social Economic Model. Without a doubt, the Bolivian Miracle that this model has wrought shows that it is a valuable road map for the liberation of the oppressed peoples. Another contribution of Bolivia to the world.

About Juan Carlos Zambrana Marchetti