The Plan
bolivia | by Miguel Centellas | 03 Feb, 2004 at 01:16 PM | comments (2) | trackback (0)

Mesa presented his austerity plan (of sorts) Sunday night. There's no gasolinazo nor garrafazo in store — at least not yet. The entire plan includes 23 executive decrees & 3 bills presented for parliament's approval. It also involved six "focus areas": austerity; production, exports & job creation; solidarity; highway infrastructure; changes to the Ley de Hidrocarburos; and fighting the fiscal deficit. Mesa labeled his his strategy as a "heterodox." But while Mesa emphasized the idea of collecting more state revenue, his plan actually increased government spending in many areas.

In terms of austerity, the government plans to spend less & fight corruption. This involved cutting the bonuses paid out to employees of the executive branch, as well as 5-10% cuts in salaries. The adjoining reduction in the infamous "gastos reservados" (supposedly used for internal security, but actually a source of corruption) means a reduction of almost 60% salaries & "bonuses" for executive branch employees. Additionally, limits are now placed on phone & car privileges, overtime, and other niceties of bureaucratic life.

Mesa announced the creation of a hospital de empresas, a sort of safety net for struggling enterprises (a plan previous administrations also tried, to no success). The administration also promises to increase its purchase of nationally produced goods & to give advantage to national producers (a good idea for any nation-state). It also plans to more actively promote exports. Previously, the state promoted four sectors: leather, wood, gold, and textiles. Now it'll promote all sectors equally. Additionally, bank lending credits are now limited at 2.5% monthly rates.

Measures to combat poverty — including a special Fondo Pro País of $30 million — focus on El Alto & the rural altiplano. Additionally, the government will create a Fondo de Inversión Productiva especially for indigenous communities. Money for these funds comes from the Corporación Andina de Fomento (CAF) & the Inter-American Development Bank (IADB).

The government will spend $15 million on road infrastructure. Also giving the military a greater role in Puerto Busch, to strengthen access to the Paraguay River.

Changes to the Ley de Hidrocarburos return property rights over out-of-the-ground hidrocarbons to the Bolivian state (current law gives state property only to gas & oil still in the ground, pumped gas & oil belongs to the company that extracted it). The changes also impose a new tax on oil & gas transnationals of as much 32%. Mesa also announced that the gas referendum will also ask Bolivians if they want to strengthen YPFB, the state-owned oil & gas corporation. Additionally, the government promises to continue installing domestic gas lines.

To close the fiscal deficit, Mesa announced a flat rate tax (of 1.5%) on all Bolivians w/ more than $50,000 as well as a tax on bank transactions. The tax on bank transactions covers all bank accounts in any currency w/ a rate of 0.3% tax on the total for every transaction (including withdrawals). If this means what I think it means, I'm closing my bank account.

While there's no immediate rise in the price of gasoline & domestic gas (for cooking), the goods' prices are now unfrozen. While not removing the government's hefty subsidy on these goods, it will mean the price will fluctuate (up or down) according to the international market. This didn't spark the immediate strikes threatened by the COB, though it did produce some grumbling — more to come, of course, when the prices start creeping up.

Oddly, though, Mesa's one-hour speech didn't address a critical question facing Bolivia today: land & property rights. While the Movimiento Sin Tierra has gone on a spree of land takeovers all over the country, Mesa's speech gave no indication of what the government's policy is. Land owners (large & small) and businesses have demanded the government guarantee property & juridic rights. Mesa's silence on this issue is puzzling.

In the end, this wasn't an austerity plan at all. Merely a way to indefinitely postpone social unrest. Additionally, Mesa's plan doesn't do enough to bridge the government's budget deficit. So. Where's the other 40-50% of the government's budget gonna come from? Why, from international aid, of course. Here's to going hat in hand to the international community.

" comments

this plan sounds like a disaster- a lot of short term red meat to some interest groups, but (as you say) doesn't address any of the serious problems facing the Bolivian govt. & econ.

question: i haven't looked at his speech yet, but the changes to the ley de hidrocarburous look ominous- will gasoline sold at service stations be the governments' property? i imagine foreign oil companies would be worried about nationalization of their assets by future governments given this change...

Posted by mike d | February 4, 2004 11:16 AM

While I don't think the "government ownership" over hidrocarbons goes all that far, it is a dangerous thing to do in the face of skeptical investment. Oil & gas companies aren't all that interested in countries that are (seemingly) on the verge of nationalization. This didn't do much (if anything) to ease those fears.

Posted by miguel | February 4, 2004 12:32 PM

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"President Mesa finally announced the questions for the gas referendum. And although there are five of them, they seem rather vague & almost destined to win a "yes" vote by their very wording (which, I'm sure, was the point). But. Despite that, the questions are unclear as to what they..."
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