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- NOVEMBERIDECEMBER 1984 '-a"""- lr"- "C( i,. t- _ils- a 9 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 Zamora. 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 10 REPORT ON ThE AMERICAS 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. 'K- NOVEMBER/DECEMBER 1984 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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