Oct 16th 2003 
From The Economist Global Agenda

IT SEEMED a recipe for trouble when, last year, Bolivians put a free-market conservative, Gonzalo S·nchez de Lozada, in the presidency, while giving strident leftist coca growers and Andean Indian protesters a large share of congressional seats. So it has turned out. Though Mr S·nchez de Lozada survived a serious outbreak of unrest in February over his austerity measures and a scheme to eradicate coca plantations, the protests have now returned with a vengeance. In recent days, up to 70 people have died in clashes in and around the capital, La Paz. The leaders of the protestóthis time triggered by a proposed gas pipeline to Chileósay it will not cease until the president resigns. 

With thousands of angry farmers, miners and Indians marching on La Paz, the army has been put on to the streets. On Wednesday October 15th, two protesters were killed as soldiers fought to halt a group of miners armed with dynamite sticks on one of the roads leading to the capital. Mr S·nchez de Lozada announced a series of concessions, including putting the controversial gas project to a referendum and rewriting an unpopular energy law.

Boliviaís explosion of unrest only adds to the deep malaise being felt across the Andean countries. Venezuelaís populist president, Hugo Ch·vez, survived an attempted coup last year and is now resorting to any means at his disposal to cling to power, while his opponents seek to unseat him through a Californian-style ìrecallî election. On Sunday, Mr Ch·vez promised the armed forces a 30% pay rise to discourage any further plots among their ranks. Meanwhile, Colombiaís decades-old civil war shows little sign of abating: at the weekend, at least 17 paramilitaries died in clashes with government troops. In Peru, there is talk of a comeback by the Shining Path, a Maoist guerrilla movement whose uprising in the 1980s and early 1990s left tens of thousands dead. And Ecuadorís President Lucio GutiÈrrez is facing strikes and protests, having lost the backing of the Andean Indian groups that helped bring him to power. A state of emergency was been declared this week, as banana growers (Ecuador is the world's largest exporter of the fruit) blocked roads and ports, demanding higher prices and more state aid. 

Of the five members of the Andean Community trade block, Venezuela has the direst economic crisis. Thanks to Mr Ch·vezís incompetent rule, a nation that once merited the label of ìdeveloping countryî is now spiralling into deep poverty, despite its large reserves of oil. A United Nations report in August reckoned that GDP per head in Venezuela will fall by almost 15% this year, having plunged by almost 11% in 2002. Income per head is set to fall by 0.3% in already impoverished Bolivia and Ecuador, while Colombia is set to enjoy modest growth of 0.8% after two years of decline. Peru is expected to be one of the regionís few bright spots, with income per head growing by 2%.

Even these less than rosy forecasts will not be fulfilled if the region is hit by a fresh wave of political strife. Boliviaís anxious neighbours have given Mr S·nchez de Lozada their backing and offered to mediate between the government and the protest leaders. But the opposition seems in little mood to talk. Calling the president ìthe peopleís assassinî, Evo Morales, the coca growersí leader, says there will be no peace until he quits.

The government wants to boost economic growth by exporting Bolivian gas through a new pipeline, to be built by British and Spanish firms, to a northern Chilean port, most likely Patillos. But the protesters say most of the economic benefits would go to foreignersóincluding the Chileans, whose northern coastline belonged to Bolivia until they seized it in a 19th-century war. Though Mr S·nchez de Lozada has suspended the gas project pending a referendum, it was only the catalyst for the riots, which have been fuelled by a number of other causesónot least the presidentís failure to fulfil his election promise to create large numbers of new jobs.

As in neighbouring countries, Boliviaís government is trying to press ahead with austerity measures and other economic reforms. In the long term, these should provide the basis for faster growth. In the short term, though, they seem only to add to the hardship that the regionís people are suffering. Reforms that smack of American-inspired ìneo-liberalismî have become a particular target for populist protest movements. Bringing in foreign capital and expertise to develop the regionís sizeable oil and gas reserves remains deeply unpopular. In the past week, violent protests have halted work on the Yucal Placer gas project, involving French and Spanish firms, near the Venezuelan capital, Caracas. In Ecuador, workers have staged strikes against Mr GutiÈrrezís plans to let private (meaning foreign) firms break the state oil firmís monopoly. 

In Colombia, too, economic reform is controversial. President ¡lvaro Uribe is seeking popular support in a referendum (set for October 25th) on a reform package that includes cutting state pensions and freezing public servantsí pay. Unhappily, this coincides with a resurgence of fighting between Colombiaís paramilitaries and government forces. After last weekendís battle, the ceasefire agreed between the government and the right-wing paramilitaries is in doubt. Last weekend, the leader of the largest left-wing rebel group, the Revolutionary Armed Forces of Colombia (FARC), wrote to the armyís commanders offering peace talks. But this seems little more than an attempt to sow division between the armed forcesí chiefs and Mr Uribe, who has urged them to crack down hard on the rebels. 

Though attacks by Peruís Shining Path rebels died out soon after the capture of their leader, Abimael Guzm·n, in 1992, there have been recent reports of a revival in their activities, including ìtaxingî illegal drug trafficking and logging in the Amazon rainforest near the Brazilian border. According to Peruís Truth and Reconciliation Commission, which reported in August after two years of investigation, almost 70,000 people died or disappeared in the conflict between the rebels and the security forces. Much blame was laid on the deeply inadequate responses of successive governments, which veered between inaction and brutal repression. The current government, led by Alejandro Toledo, is weak and unpopular, and has faced big protests in recent months. A rebel revival is about the last thing it needs. 

The continued strife across the Andean region hardly makes it easy for its leaders to get across the message that a few sacrifices now will pay off in future. Despite this, Mr Uribe, Mr Toledo and Mr GutiÈrrez have all made some headway with their reform programmes in recent months. With luck, efforts to put the Andean countries on the path to prosperity may also be helped by the improving world economic outlook and by foreign investorsí renewed enthusiasm for emerging-market debt. Freer access to world markets would also help: on Wednesday, the Andean Community and European Union made some progress towards a proposed free-trade deal, in talks in the Ecuadorian capital, Quito. But things could quite easily get worse, especially if escalating violence led to a democratic rupture in Bolivia or Venezuela. If so, the regionís chances of escaping from its grinding poverty might be put back for years.



 
 
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