By renationalizing its oil and gas, Bolivia has lifted its economy, but the country needs to invest in its people and diversify its economy in order to achieve sustainable growth. Brian Seavitt suggests how.
On the eve of his first year as Bolivia’s President, Evo Morales declared that expropriation of the country’s oil and gas by foreign companies had ended.
Morales renationalized those industries, contrary to earlier advice from the International Monetary Fund and the World Bank. However, those financial institutions are now praising him for his “prudent” economic policies.
Favorable economic conditions that accompanied Morales’s restructuring of oil and gas contracts have, without a doubt, helped Bolivia to stabilize its currency and grow its economy in recent years. However, the policy decisions being made today may not free Bolivians from their dependence on the country’s non-renewable resource wealth.
If Morales really wants to develop the country sustainably, he will need to diversify the economy by investing in systems that support the people. Otherwise, the most recent economic surge will likely lead to a repeat of the boom-bust cycle that Bolivians know all too well.
The Economist drew the same conclusion in 2012: “The real test of Morales’s nationalizations will come when the economy slows and hidden subsidies become unaffordable.”
In order to diversify the economy, Morales has been focusing on the industrialization of its natural resources while also paying attention to agricultural development and infrastructure projects. He pays less attention to the means by which the government acquires the land where these ventures are pursued.
However, ensuring people’s property rights is exactly what Morales needs to guarantee, especially in areas where development causes the displacement of communities.
Transitioning the government’s power to its people seems to be one of the most difficult hurdles for Morales to cross. In fact, he attempted to make this changeover in 2009 by introducing a new Constitution. In it, he inscribed several unprecedented rights that were meant to empower indigenous people.
To date, however, most of these political reforms have yet to advance beyond their rhetorical value. The highway being designed to cut through the protected territory of the TIPNIS, an indigenous rainforest reserve, is just one example of the government’s inconsistent policies regarding the rights of indigenous peoples.
Because Bolivia is so entrenched in the global economy, its dependency on natural resource wealth has had a lasting effect on the people as a whole. For example, Morales’s attempt to remove a fuel subsidy enraged the public, bringing the country to the brink of another resource nationalism movement – a frequent, albeit justified, occurrence in the country’s recent history.
These frustrations highlight individuals’ dependency on government subsidies, which, again, are mainly fueled by oil and gas revenues. Therefore, to reduce vulnerability to swings in market prices, Bolivia should help to relieve people’s dependency on government subsidies.
The best way for the government to assist its people in becoming more self-sustaining is to create bottom-up, institutional support systems that empower its people; this will also afford policy makers more flexibility when the economy slows.
Morales and the Movement for Socialism (MAS) government can do this by fulfilling the government’s human rights obligations in the area of displacement caused by development and by engaging indigenous communities as participants in the global economy. Here’s how:
To ensure the territorial integrity of communities’ lands, their property will need to be commodified – assigned more value – in its natural form. Otherwise, market forces will most likely overwhelm good faith efforts to preserve it.
To this end, the Bolivian government should support civil society organizations that work with indigenous communities to conserve Bolivia’s natural landscape through tourism. Bolivia’s giant fern forests and endless salt flats are two of the world’s most breathtaking sights.
In addition, Bolivia should work with international institutions to promote ways to protect South America’s forests, which are essential to preventing climate change.
Indigenous people can help their territorial cause by contributing to human health through the production of traditional medicines. According to a report by the United Nations Industrial Development Organization, Bolivia has approximately 1,000 species of medicinal plants throughout the country – 216 are officially accepted by the Ministry of Health for medical use. Bolivia’s government can help market these holistic remedies by working with international institutions, such as the World Health Organization, to guide, protect, and streamline the registration of these natural medicines for trade.
Finally, we should not assume that Bolivia will be able to transform its political, social, and economic landscape overnight. Years of dire economic conditions and corruption have had serious impacts on the country’s development foundations.
That being said, Bolivia should never sacrifice the rights of its people for the preferences of international investors. Beyond its improved credit rating, good governance is what Bolivia really needs to raise its standing in the international community.