BOLIVIA'S "MACHO FINANCE" Labor Resists Austerity

September 25, 2007

"Macho finance" was the phrase used by Mexican President Miguel de la Madrid Hurtado to describe the de- fiant stance of the Bolivian labor movement on its country's external debt. As the economic crisis wears on in Latin America-and a number of countries fall prey to the IMF austerity route that has supposedly been so suc- cessful in reviving Mexico and Brazil-many of the smaller and less debt-ridden states have gone looking for their own solutions. Bolivian labor, in particular, has succeeded in
resisting the divide and conquer tac-
tics of the IMF-most notably by di-
rectly pressuring for last summer's
formal suspension of interest pay-
ments on the Bolivian private foreign
debt. Despite a long spell of military re-
pression and labor violence through-
out the 1970s, organized labor has
Carol Wise was a pre-doctoral fellow
last summer at the Bolivian Central
Bank. A graduate student in political
science at Columbia University, her
last contribution to the Report was
"Peru-Amnesty Speaks Out," in the
January/February issue.
revived itself to the point of playing
a major policy role in the center-Left
civilian coalition government of Presi-
dent Hernin Siles Zuazo. The Boli-
vian Workers' Central (COB)-the
national labor federation-has not ex-
actly been a welcome player along-
side Siles' Democratic Popular Unity
coalition (UDP). Yet, the UDP's in-
ability to formulate even the most
minimal program in the face of the
current economic crisis has provided
labor with what many view as an op- positional foothold unseen in the last
30 years.
While, at least theoretically, a
strong left-wing - labor movement
would seem a natural ally of a center-
Left regime, there are a number of
factors working against such an al-
liance. First is a longstanding and bit- ter personal rivalry between Siles and
COB leader of 32 years, Juan Lechin
Oquendo. Theirs is an animosity that
dates back to the first Siles Adminis- tration when labor split with Siles'
National Revolutionary Movement
(MNR) in 1957 over the implementa- tion of a severe economic stabilization
plan. Since Bolivia's revolution of the
1950s, the COB has periodically fi-
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gured as one of the region's strongest
labor movements.
A COB-UDP union has been
further hindered by the fact that each
is plagued with internal strife. Almost immediately upon election in 1982,
the UDP front fell into disarray, with heavy infighting between Siles' re-
formed "old" Left MNR and the vari-
ous "new" Left forces that have crys-
tallized in the Movement of the Revo-
lutionary Left (MIR) under the leader-
ship of Vice President Jaime Paz
Paz's MIR, which is looked to by
some in the region as one of the more
promising new Left groups, went so
far as to depart temporarily from the
government in frustration over Siles' passive wait-and-see economic pol-
icy. The MIR rejoined the UDP in
April when Siles, left alone in coali-
tion with the Bolivian Communist
Party, began losing political ground in
Congress against the ascendant right- wing Christian Democrats and the
conservative wing of the MNR. And
in a nation with 189 coups in 159
years, a military takeover remains a
not so remote possibility.
The COB's political makeup tends
to be even more complex. Besides the
various left and right strands of the
MNR, political representation runs the gamut from the pro-Chinese Com-
munists, to the MIR, to a small
Trotskyist faction. Lechin's National Revolutionary Party of the Left
(PRIN) remains active in the Work-
ers' Central, as well as a new anti-
government bloc known as the Un-
ified Revolutionary Directorate (DRU) which has drawn its membership from all of the other factions.
The MIR has been particularly criti-
cal of Lechin for not attempting to
form a left-wing coalition to compete electorally. In its own defense, the
COB contends that the revival of the
trade union movement over the past
few years has set off fierce leadership struggles within a number of unions
and between unions. Once these inter-
nal conflicts are resolved, the COB says it has every intention of doing
just that. But given the intense rivalry
between the COB and the Siles-Paz
government-with each accusing the
other of opportunism--it is not clearwhere such a coalition would come from.
Lechin has repeatedly stated his in-
tention to step down and make way
for new blood, implying that labor
will work primarily within its own
ranks to produce an electoral front.
Yet, the re-election of the septuage-
narian general secretary to his post by
a small margin at the COB's sixth Na-
tional Congress in September has set
the timetable back. It appears labor
will not move beyond its purely op-
positional role into a cohesive elec-
toral force in the near future.
Small Debt to Private Banks
On top of these political com-
plexities, it is the present economic
crisis that has driven the biggest
wedge between the government and
labor. The Siles regime is in the unen-
viable position of having taken over
just as Latin America entered the most severe stage of the debt crisis and in-
ternational recession.
In Bolivia the debt problem has
been buffered somewhat by a long
history of "soft" loans and develop- ment aid from major multilateral and
bilateral lenders such as the Inter- American Development Bank and the
U.S. AID. Thus, of the total $5.3 bil-
lion owed, only $720 million was
contracted with private banks on short payment terms and at interest rates
above the average international lend-
ing rate, known as the LIBOR. This
means that the bulk of the debt is
owed at lower interest rates and 10-15
year payback periods. And, for better
or worse, most of these loans are sunk
into specific development projects,
and not so easily siphoned off into the
infamous Miami bank accounts.
The international economic reces-
sion is another matter, and on this
front Bolivia has been hard hit. In
general terms, the drastic drop in de-
mand for raw materials in the indus-
trialized countries is reflected in a
21% decrease in the Gross National Product (GNP) between 1980-1983.
In 1984 alone inflation has been run- ning around 1000%, the fiscal budget
deficit at approximately 34% of GNP and unemployment is registering a
fivefold increase.
As with many countries in the re-
gion, exports have dropped back to
the levels witnessed in the early
1960s. The result is that Bolivia is
once again dependent on just one or
two exports-tin and natural gas-for
survival. Furthermore, although Bo-
livia's external debt is minuscule vis-
a-vis the other Latin American debt-
ors, combined interest and amortiza-
tion payments on the public and pri-
vate external debt easily surpassed
100% of export earnings this year.
Much of Siles' policy paralysis
seems to stem from a Catch-22 of in-
ternational finance. The banks won't
discuss renegotiation without an IMF
"adjustment plan." And the IMF
won't even consider formal "inter-
mediation," as the process is known,
without a domestic austerity scheme. Such was the standoff toward the end
of last year when the lending consor-
tium of 128 banks refused to budge on
the private portion of the external
debt. The UDP embarked half-heart-
edly on a series of austerity measures
which culminated last April in a 75%
currently devaluation and the lifting of
price controls on a long list of state-
backed commodities and services.
These measures have triggered an
intense struggle between the COB and
the UDP over economic policy. Con-
trary to regional trends, Bolivian labor
actually appears to be gaining quite a
bit of ground.
"Democratic Balance Threatened"
The COB's first major victory came
last November when workers assumed management of the state mining com- pany (COMIBOL). Workers con-
trol, or co-gesti6n obrera, was first
introduced as an ultra-radical goal in
the 1950s, but in the current eco- nomic crisis it has become labor's prime defense against apparent gov-
ernment intentions to return the bank-
rupt mining sector to private hands.
Siles initially resisted COMIBOL's domination by the powerful mine- workers' union (FSTMB) as "a threat
to democratic balance of power."
When presented with the ultimatum
of an indefinite miners' strike or co-
gesti6n, a workers' control scheme
was drawn up and approved by both sides.
Under the present plan the
FSTMB's general secretary, Victor
Lopez Arias, occupies the top execu-
tive position of COMIBOL's seven-
member board of directors. Workers
are a majority on the board. The min-
ing union, in collaboration with the
COB, is now in the process of estab- lishing a network of committees throughout the FSTMB to promote
maximum workers' participation in
managing the state mining company. According to Armando Morales, sec-
retary of the COB's economic com-
mission, negotiations are now under-
way for the implementation of similar
schemes in the state oil enterprise, as
well as the national railway company.
Through a series of 24-hour hunger
strikes and general work stoppages
over the last five months, workers
have also won back subsidies on seven items considered crucial to the
daily food basket, and a 130% retro-
active wage increase to compensate
for last April's currency devaluation. In a formal agreement signed between
the COB and the UDP in early July,
four other concessions were granted.
They ranged from a pricing policy
within the state oil company more fa-
vorable to local producers, to indef-
inite suspension of amortization and
interest payments on the $720 million
private external debt. Pressure from
the banks and the IMF have fanned the flames of nationalism. Many be- lieve that, at least for the time being,
it would be better for Bolivia to go it
alone in attempting to resolve the
problem of meeting payments on the
private debt.
On the debt issue, the COB has
won the support of a sizeable social democratic contingent within Boli-
via's 2,000-member Colegia de Eco-
nomistas, the country's major pro-
fessional organization of economists. Juan Carmona, president of the La
Paz branch and economics professor
at the Catholic University, estimates
that full implementation of last April's
austerity measures would have re-
sulted in a 400% average increase in
the metropolitan consumer price in-
dex. He points to the 36% drop in per
capita consumption between 1980- 1983, and an average minimum wage that has slipped well below $30 a
month, as signs that such an increase
REPORT ON THE AMERICAS 10would have been "absolutely intoler-
able for the working population." U.S.
Interest Rates Responsible
Bolivia, like many of the smaller
and poorer Latin American states,
would like to see the IMF adopt more
flexible lending policies, or stick to
its original mandate of lending solely
for balance-of-payments support, and
let borrowing countries tend to their own wage
and price policies. "Boli-
via will become more earnest about
straightening up its economy and at-
tacking the public sector budget de-
ficit as soon as Reagan shows signs of
doing the same," says COB's Ar-
mando Morales, expressing the bot-
tom line. Like many throughout Latin
America, the COB blames the pro-
jected U.S. $180-200 billion public
sector deficit for the unbearable inter- est
rates of the 1980s. No one expects
a full recovery until the U.S. prime rate
begins to ease down.
"Why doesn't the United States pay for
its own fiscal deficit and war costs?"
asked the minister of planning
in an August article in the La Paz
daily, La.Presencia. "Why do we
have to cover the North American de-
ficit? This point ought to be among
Latin America's common objectives
and plans."
The COB points out that even if
strict austerity were adopted, imple-
menting the plan against popular will
is another matter. Bolivia does not have the "authoritarian advantage,"
says the COB, of a Brazil or a Mexico
in handling the kinds of IMF-related turmoil witnessed last spring in the
Dominican Republic. Given the his-
torical backdrop of chronic military
coups, including a major coup attempt
by one of Bolivia's "secret" civilian-
military lodges as recently as June 30,
it is clear that formal IMF intervention could well be a case of political and
economic suicide. Interestingly, although official sus-
pension of payments on the private
debt has invited the expected threats from creditors, there have as yet been
no trade or investment sanctions
waged against Bolivia. This can most
likely be attributed to the extremely
small amount owed, and to the banks'
preoccupation with the outcome of the
Mexican, Brazilian and Argentinian
renegotiations. Multilateral lenders
such as the European Economic Com-
munity have readily continued lending
to the Siles regime since it became
one of the region's first debtors of the
1980s to formally break ties with the
private banks six months ago.
As the UDP approaches its third year in office with no official budget
or development plan, the Workers' Central has gradually formulated a
comprehensive oppositional economic policy which encompasses everything
from trade and exchange rates to a
renovation of the Ministry of Peasant Affairs. Most independent local ob-
servers attribute the COB's success in
asserting its economic will to the
MNR's inability to grapple with
San Jos6 tin mine, Oruro, Bolivia.
I today's pressing economic questions. Where hard-nosed solutions are called for, Siles seems to offer only the rhetoric of 1950s-style populism. On the other hand, the COB's ad- vances have not been automatic, nor have they been accepted unanimous- ly. The COB and the UDP remain at loggerheads over labor's demands for a comprehensive price stabilization plan and an index-linked basic wage. The private sector has split over the COB's gains, with the more moderate elements supporting the decision to suspend payment on the private debt, and the conservatives bitterly attack- ing the COB for failing to integrate a
more articulate fiscal policy into its
overall economic program.
Strikes Deemed "Destabilizing"
The labor movement has also come
under frequent fire from the new-Left
MIR. MIR leader Jaime Paz points to
the excessive number of strikes-a
total of 54 in the first eight months
of civilian rule-as "a destabilizing threat," and contends that "even the
military has shown better restraint."
As the COB's executive committee gradually settles in after the recent
elections, the UDP has clearly put any
further austerity attempts on the back
burner until the new leadership takes
over. According to one U.S. dip-
lomat, Siles was hoping that a less
combative COB would emerge with
the new executive committee, but the
mood of the COB Congress was
exactly the opposite. Despite fierce
infighting amongst the various politi-
cal factions, the agenda was domi-
nated by the formulation of a full-
scale Emergency Economic Plan.
The labor movement, if not the
government, has apparently recog-
nized that it is going to take much
more than -an improvisational eco-
nomic policy to bail Bolivia out of
its current economic woes. Mexico
and Brazil seem to have established
the regional austerity model for deal-
ing with the crisis, and have received
their creditors' accolades. Now Boli-
vian labor appears determined to set
the Latin American trend for resisting
such a model, and to seek solutions
which do not bear so heavily off labor alone.

Tags: Bolivia, labor movement, austerity, debt, strikes

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