Sánchez de Lozada and Banzer: Liberalizing the economy

Gonzalo Sánchez de Lozada pursued an aggressive economic and social reform agenda. The most dramatic reform was the "capitalization" program, under which investors, typically foreign, acquired 50% ownership and management control of public enterprises, such as the state oil corporation, telecommunications system, airlines, railroads, and electric utilities, in return for agreed upon capital investments.

The reforms and economic restructuring were strongly opposed by certain segments of society, which instigated frequent and sometimes violent protests, particularly in La Paz and the Chapare coca-growing region, from 1994 through 1996. The de Lozada government pursued a policy of offering monetary compensation for voluntary eradication of illegal coca by its growers in the Chapare region. The policy produced little net reduction in coca, and in the mid-1990s Bolivia accounted for about one-third of the world's coca that was being processed into cocaine. The coca leaf has long been part of the Bolivian culture, as indigenous workers have traditionally used the leaf for its properties as a mild stimulant and appetite suppressant.

During this time, the umbrella labor-organization of Bolivia, the Central Obrera Boliviana (COB), became increasingly unable to effectively challenge government policy. A teachers' strike in 1995 was defeated because the COB could not marshal the support of many of its members, including construction and factory workers. The state also used selective martial law to keep the disruptions caused by the teachers to a minimum. The teachers were led by Trotskyites, and were considered to be the most militant union in the COB. Their downfall was a major blow to the COB, which also became mired in internal corruption and infighting in 1996.

In the 1997 elections, General Hugo Banzer, leader of the Nationalist Democratic Action party (ADN) and former dictator (1971-1978), won 22% of the vote, while the MNR candidate won 18%. General Banzer formed a coalition of the ADN, MIR, UCS, and CONDEPA parties, which held a majority of seats in the Bolivian Congress. The Congress elected him as president, and he was inaugurated on August 6, 1997. During the election-campaign, Banzer had promised to suspend the privatization of the state-owned oil-company, YPFB. But this seemed unlikely to happen, considering Bolivia's weak position globally. The Banzer government basically continued the free-market and privatization-policies of its predecessor.

The relatively robust economic growth of the mid-1990s continued until about the third year of its term in office. After that, regional, global and domestic factors contributed to a decline in economic growth. Financial crises in Argentina and Brazil, lower world prices for export-commodities, and reduced employment in the coca-sector depressed the Bolivian economy. The public also perceived a significant amount of public-sector corruption. These factors contributed to increasing social protests during the second half of Banzer's term.[citation needed]

At the outset of his government, President Banzer launched a policy of using special police-units to physically eradicate the illegal coca of the Chapare region. The policy produced a sudden and dramatic four-year decline in Bolivia's illegal coca-crop, to the point that Bolivia became a relatively small supplier of coca for cocaine. Those left unemployed by coca-eradication streamed into the cities, especially El Alto, the slum-neighborhood of La Paz. The MIR of Jaime Paz Zamora remained a coalition-partner throughout the Banzer government, supporting this policy (called the Dignity Plan).

On August 6, 2001, Banzer resigned from office after being diagnosed with cancer. He died less than a year later. Vice President Jorge Fernando Quiroga Ramírez completed the final year of his term.

In the June 2002 national elections, former President Gonzalo Sánchez de Lozada (MNR) placed first with 22.5% of the vote, followed by coca-advocate and native peasant-leader Evo Morales (Movement Toward Socialism, MAS) with 20.9%. Morales edged out populist candidate Manfred Reyes Villa of the New Republican Force (NFR) by just 700 votes nationwide, earning a spot in the congressional run-off against Sánchez de Lozada on August 4, 2002.

A July agreement between the MNR and the fourth-place MIR, which had again been led in the election by former President Jaime Paz Zamora, virtually ensured the election of Sánchez de Lozada in the congressional run-off, and on August 6 he was sworn in for the second time. The MNR platform featured three overarching objectives: economic reactivation (and job creation), anti-corruption, and social inclusion.

In 2003 the Bolivian gas conflict broke out. On October 12, 2003 the government imposed martial law in El Alto after sixteen people were shot by the police and several dozen wounded in violent clashes which erupted when a caravan of oil trucks escorted by police and soldiers deploying tanks and heavy-caliber machine guns tried to breach a barricade. On 17 October 2003 Evo Morales' supporters from Cochabamba tried to march into Santa Cruz de la Sierra, the largest city of the eastern lowlands where support was strong for the president. They were turned back. Faced with the option of resigning or more bloodshed, Sanchez de Lozada offered his resignation in a letter to an emergency session of Congress. After his resignation was accepted and his vice president, Carlos Mesa, invested, he left on a commercially scheduled flight for the United States.

In March 2004, the new president Carlos Mesa announced that his government would hold a series of rallies around the country, and at its embassies abroad, demanding that Chile return to Bolivia a stretch of seacoast that the country lost in 1884 after the end of the War of the Pacific. Chile has traditionally refused to negotiate on the issue, but Mesa nonetheless made this policy a central point of his administration.

However, the country's internal situation became unfavorable for such political action on the international stage. After a resurgence of gas protests in 2005, Carlos Mesa attempted to resign in January 2005, but his offer was refused by Congress. On March 22, 2005, after weeks of new street protests from organizations accusing Mesa of bowing to U.S. corporate interests, Mesa again offered his resignation to Congress, which was accepted on June 10. The chief justice of the Supreme Court, Eduardo Rodríguez, was sworn as interim president to succeed the outgoing Carlos Mesa.

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Sánchez de Lozada and Banzer: Liberalizing the economy

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