Bolivia: first pebble in the financial avalanche

Press, 13 July 1984, Page 22

Bolivia: first pebble in the financial avalanche

From

HUGH O’SHAUGHNESSY

in La Paz

It was a Bolivian mother, legend has it, who said, “If I had known my son was going to become president I would have taught him to read.” Poor, destitute and incompetent, Bolivia — its own worst enemy and the eternal victim of its neighbours — has now caught the world’s attention as the first falling pebble in the disastrous avalanche of banking crises which are threatening to engulf the Western world. Just over a month ago the democratically elected Government of President Hernan Siles announced to the world that it could not — and so would not — pay the instalments on its foreign debt of $2700 million to the world’s commercial banks. Bolivia had stopped payment before but had never announced it in such an official way. Bolivia’s example was followed in short order by the Dominican Republic and it will certainly be followed swiftly by bigger debtors and the whole shaky edifice of .Western loans to the Third World will surely be shaken to its foundations. The reasons why this vast underpopulated country - twice the size of Spain, with only 7 million inhabitants - landlocked in the middle of South America, should trigger a world crisis are complex and ultimately baffling. Bolivia exhibits virtually all the social ills that a country can suffer. It is racially and linguistically divided, geographically split, socially riven between a rich elite and a mass of people on the starvation line. It has hyperinflation, generalised corruption and drug addition. Its principal source of income is the illegal traffic in cocaine which, brings in around $945 million a sgfr. It is being

bullied by the International Monetary Fund. The Reagan Administration, agonising over the fact that the Ministers of Labour and Mining are Communists, is backing the I.M.F. In so far as any country can go bankrupt, Bolivia has already done so. A number of Bolivians drawn from that section of the population politically conscious enough to realise that they live in a country called Bolivia, are wondering whether the country will not eventually be parcelled out between its more or less rapacious neighbours. Brazil, Paraguay, Argentina, Chile and Peru have all bitten off chunks of Bolivian territory. Bolivia’s plight was well summed up in recent events in La Paz, the chief city of Bolivia. The city lies on the roof of the world at 3300 metres in a chasm gouged out of the high Andean plateau, and is overlooked by Illimani, a peak of 6000 metres, eternally covered with snow. Social status in La Paz, the City of Peace, is determined by the height at which you live. Above the chasm, exposed to the coldest wind and beside the ice-fringed streams which flow down from the highest Andean peaks live the poorest. They are mostly Aymaras, many of whom cannot speak Spanish. Their women dress in layers of skirt and bowler hats and carry their babies on their back, in beautiful shawls. In the business quarter of the city proper, below the rim of the chasm, the black marketeers-.of Aveninda Camacho deal in ,®S.

dollars. In April the official price of the dollar jumped from 500 to 2000 pesos. The black market rate is around 3000. Such has been the speed of inflation that the largest bank note now in circulation is worth about 30 cents at the black market rate and barely buys two newspapers. A charter plane has just brought out billions of more pesos from England but until higher denomination notes are printed, the Central Bank is issuing its own cheques to use as bank notes. Last month the Central Bank reopened after a six-week strike during which no official foreign exchange operations were carried out and the country virtually came to a halt. The employees, followers of the anarcho-syndicalist leadership of the main trade union confederation, were protesting against the devaluation of the peso and the consequent inflation it brought. Further down the chasm stands the residence of President Siles, a miniature fortress. Bullet-proof glass of its reception window has been spattered by the impact of bullets. Alongside is the barracks of the Presidential Guard. Last week Siles, a veteran of the Left who in a previous presidency had nevertheless gone on hunger strike in support of an I.M.F. austerity programme, was grappling with a normal week’s politics, the uprising of some right-wing colonels in a distant town, the protests of the unions and the far left and the economic crisis. Siles was elected two years ago

after a reign of terror by a group of military ruffians led by General Luis Garcia Meza, whose links with the drug traffickers were notorious. The achievements of his Interior Minister included keeping a young American woman who served as correspondent of the London “Observer” locked up in a cupboard in his office for two days and physically demolishing the headquarters of the trade union confederation. Despite his popular backing, Siles has not felt strong enough to make a frontal assault on the drug traffickers. One of these, Roberto Suarez, offered to pay off the whole off Bolivia’s foreign debt out of his own pocket in exchange for a free pardon and the chance to visit the United States. The explanations of why Bolivia should be in such a mess vary according to whomever you speak, to. For the Left it is clearly the centuries of Spanish, British and U.S. colonialism which stripped the country of its mineral wealth, supported a local oligarchy, aborted a promising, social revolution in 1952 and therafter submitted the country to financial blunder at the hands of Wall Street and the European banks backed up by the I.M.F. There is much to be said for the Left’s case. Yet the unalloyed incompetence with which Bolivians of all political persuasions have managed their affairs over the last 160 years is inescapable. Some countries are destined to survive for centuries without being able to manage their affairs. But is, Bolivian incompetence any greater than that of the world’s Governments and bankers who have allowed the charming and feckless South Americans to lead the world towards a financial crisis?—(Copy--oght, London Observer Service.)