[lbo-talk] 'New Deal' for Bolivia

[Colin Brace]

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/17/AR2006061700303.html

Bolivia to Spend $6.8B to Fight Poverty

By FIONA SMITH
The Associated Press
Saturday, June 17, 2006; 9:46 AM

LA PAZ, Bolivia -- Bolivian President Evo Morales' leftist government
says it will fight poverty, hunger and homelessness in South America's
poorest nation by investing $6.8 billion through 2010, much of it with
ambitious public works projects.

The funding will come chiefly from Bolivia's recently nationalized
natural gas wealth, with international lenders and foreign investment
also important sources.

The development plan, announced Friday, would significantly boost the
state's role in the economy, creating jobs and delivering more basic
public services such as subsidized meals for school children and
greater access to potable water.

Bolivia will be "dismantling the neoliberal policies that have
impregnated Bolivia in recent decades in order to build a social and
communal state to live well," Carlos Villegas, the planning and
development minister, told a crowd of dignitaries at the presidential
palace that included foreign diplomats and representatives of the
country's indigenous poor.

Although Villegas didn't mention Venezuela by name, many of the social
projects he mentioned are similar to programs created by that
country's leftist president, Hugo Chavez.

The administration already has about 60 percent to 70 percent of the
funds it plans to invest over the next few years in projects beginning
with housing and highway construction and including the creation of a
metallurgy industry and the retooling of Bolivia's electrical grid,
Villegas told The Associated Press.

The rest would come from international lenders, said Villegas, who are
to convene jointly with the government in the last quarter of 2006 to
work out details.

It was unclear whether the government, which is currently in testy
negotiations with Brazil and Argentina over natural gas price
increases, will be able to cover all the plan's costs.

Foreign diplomats said much would depend on Bolivia's gas revenues.
The vice minister of planning and development, Noel Aguirre, said the
plan was also predicated on gas sale revenues from Paraguay.

He said Bolivia was also negotiating to sell gas to European and Asian
countries he would not name.

With the heavy public investment, the government hopes to create
90,000 jobs per year and cut the current 8.4 percent unemployment rate
by more than half by 2011.

Over the same period, it also wants to drop the poverty rate to just
under 50 percent from the current 59 percent and close the gap between
the rich and the poor.

Currently, the top 10 percent of Bolivians earn 25 times what the
bottom 10 percent. The government seeks to reduce that to 21 times by
2011.

In the next five years, the government also wants to nearly double
Bolivia's gross domestic product growth rate from 4.1 percent in 2005
to 7.6 percent, reduce deficit spending from 3.1 percent to 2.1
percent, be self-sufficient in agricultural production, bring
electricity and gas to hundreds of thousands of families, create a
state development bank and build more roads.

"We need to get into more depth to know whether we'd support this or
not," said Roberto Mustafa, president of The Association of Private
Business Leaders of Bolivia, one of the country's biggest industry
groups.

"We've heard the what, but we still need to know the how _ and with
what," he said.

Business leaders have been critical of Morales' economics, especially
after he said he would "never" negotiate a free trade agreement with
the United States, instead signing an alternative "people's" trade
pact with his close allies Venezuela and Cuba.

The government changed its position Friday, however. Celinda Sosa, the
country's minister of production and small business, told reporters
Bolivia would like a trade deal with Washington.

While the export of raw materials such as minerals and timber are
important to Bolivia's economy, it depends most on its vast natural
gas reserves.

Morales nationalized Bolivia's natural sector on May 1, giving the
state energy company majority control over all operations and telling
foreign companies operating in Bolivia they had six months to
negotiate new contracts or leave.

In the mining sector, Villegas reiterated earlier statements that the
government would be looking to boost revenues by raising mining taxes
and would revert unused mines back to state control.

Associated Press Writer Frank Bajak contributed to this report.

(c) 2006 The Associated Press

-- 
  Colin Brace
  Amsterdam