La Paz, Bolivia

The tens of thousands of Bolivians in the streets in October demanding the resignation of President (now ex-) Gonzalo Sanchez de Lozada came from all walks of life and included teachers, health workers, street vendors, miners, farmers and others. First sparked by the long-excluded indigenous majority, the protests demanded not just greater benefits from privatized natural-gas reserves and an end to the neoliberal economic model but also the restoration of the nation’s dignity and sovereignty. As Aymara Indian leader Felipe Quispe told me: “We are like foreigners in our own land.”

For most of the past two decades, the United States and the International Monetary Fund have engaged in what amounts to economic blackmail to force Bolivia–which, despite being South America’s poorest country, spends as much in foreign debt service as on social programs–to follow their directives. Highly dependent on foreign aid and loans, the country has little ability to do otherwise. Now, despite seventy-six deaths and the overwhelming demand for revisions to the law governing privatization of the gas industry, the intimidation continues. US Ambassador David Greenlee has warned in the local media and in meetings with new government officials that “the country is in danger of losing foreign investment” if it “changes the rules of the game.”

Many in Washington still cling to denial. Recently a Washington Post editorial called Sanchez de Lozada “a moderate and modernizing leader.” True, market reforms he installed in 1985 while planning minister did succeed for a while in boosting growth. But the modest gains did not trickle down. Privatization resulted in tens of thousands of layoffs and caused prices for essentials like water and fuel to rise significantly. After Bechtel took over the water service in Cochabamba three years ago, poor residents earning less than the monthly minimum wage of $67 received monthly water bills of $20 or more. When two of the nation’s oil refineries were privatized in 1999, there was an immediate 15 percent hike in gas prices and transportation strikes. In 1975 per capita income in Bolivia was $1,200; today it is $884. Seven out of ten jobs created in the past fifteen years have been in the “informal sector”–street jobs selling produce or other wares.

According to the UN Economic Commission on Latin America and the Caribbean, foreign direct investment in Latin America in the 1990s was about thirteen times higher than during the import-substitution policy days of the 1970s, but the average growth rate in the 1990s was 50 percent lower. ECLAC foreign investment expert Graciela Moguillansky adds that the many privatizations over the past decade did not have the hoped-for results with regard to an increase of capital formation and sustainable economic growth. “This was due to various factors, but above all to the lack of a sufficient regulatory framework,” she said.

Bolivia’s struggle with neoliberalism–and its recent citizen protests over the low level of benefits it is getting from its privatized gas reserves, its most valuable economic resource–is not an isolated case. In Argentina, phone and energy bills rose by 30 percent on average after privatization, further contributing to that country’s implosion. In Peru, martial law was declared last year when riots broke out in Arequipa over plans to privatize the electric utility. Similarly, in Paraguay last year privatization protests ended in violence and martial law.

The problem with privatization is not foreign investment per se but the insistence that governments follow “Washington Consensus” market reform policies that include deregulation to sweeten the pot for investors along with investment rules that grossly favor transnational corporations over the people. As Bolivia has shown, the longer the shift away from anti-poor neoliberal economic policies is postponed, the more likely it is that the people will explode in protest.