Bolivia’s new president, Gonzalo Sanchez de Lozada, speaks Spanish with a thick American accent and English like a Midwesterner.
The son of an exiled Bolivian diplomat, Sanchez de Lozada grew up in Washington and Boston, went to high school in Iowa and has a philosophy degree from the University of Chicago. As a private businessman, he has made a fortune in mining. As a top government official in the mid-1980s, he helped this country lick 23,000 percent annual inflation.
Now, Sanchez de Lozada-known here as Goni-is trying to streamline the Bolivian government and stage a massive fire sale of state-owned companies in an effort to reduce corruption, lure investment and spur economic growth in one of the poorest and most politically unstable countries on Earth.
“This is a window of opportunity, like a moonshot. We have to take advantage of it,” said Sanchez de Lozada, 63, puffing on a cigar in the Presidential Palace. “We have to continue with radical change.”
Since taking office last month, Sanchez de Lozada has proposed reducing the number of federal ministries from 17 to 11 and decentralizing the nation’s bankrupt public health and education system. He also wants to sell to private investors a 49 percent stake in the nation’s largest state-owned enterprises, including Bolivia’s oil, electric, railroad, airline and telephone companies.
Sanchez de Lozada says attracting foreign investment is the only way to kick-start the economy and create jobs in a nation in which the annual per-capita income is the equivalent of $950 and more than 50 percent of children are malnourished.
But diplomats and economists say it may be difficult for Bolivia-a rugged, landlocked nation of 6.4 million people-to privatize industries at a time when capital worldwide is tight and many other nations are selling state-owned enterprises.
Also, Bolivia’s powerful labor unions are fighting Sanchez de Lozada’s privatization efforts, saying a sell-off of public enterprises will boost unemployment. “Multinational corporations will not invest in this country to help develop it but to make money,” said Edgar Ramirez, secretary general of Bolivia’s largest miners’ union. “Goni’s plan will impoverish Bolivia and create instability.”
“These people are living in the past. They don’t accept that socialism is dead,” responds Sanchez de Lozada, referring to union leaders. “The people voted for change. . . . They want these companies to leave the public sector. They are hotbeds of corruption and inefficiency.”
Despite abundant gold, silver, tin and other mineral resources, Bolivia has long been the poor man of South America-a nation that can’t get any respect. An estimated 3 million Indians died here digging silver and gold for Spanish colonialists in a system of forced labor known as the mita.
Since independence in 1825, Bolivia has suffered repeated military coups, and nine presidents have died violently in office. Bolivia has also coughed up more than half its territory in lost wars with neighbors.
It was Bolivia’s humiliating defeat in the 1930s war with Paraguay-along with a 1942 massacre by soldiers of 400 striking tin miners-that radicalized politics and helped leftist Victor Paz Estenssoro win the presidency in 1951. Paz Estenssoro nationalized Bolivia’s mines and confiscated large estates and redistributed the land.
More than three decades later, a collapse in gas and tin prices coupled with hyperinflation forced Paz Estenssoro-who was re-elected president in 1985-to institute radical free-market reforms that included devaluing the currency by 95 percent, slashing government subsidies and dismantling import tariffs. He also closed seven of the state’s 16 major mines and fired 22,000 state-employed miners.
The stabilization program, designed by Sanchez de Lozada and Harvard economics professor Jeffrey Sachs, has reduced annual inflation to 8 percent and brought six consecutive years of 2 to 4 percent economic growth-though until 1991 the gains were outstripped by population growth.
“There is real economic growth, but the problem is that Bolivia is so far behind the rest of Latin America,” said one diplomat. “A 2 or 3 percent-a-year growth rate just won’t do it, because the country is so poor.”
According to Sanchez de Lozada’s economic program-called the Plan de Todos, or Everybody’s Plan-the government will sell up to 49 percent of six state-owned enterprises to foreign investors, who will have management control over the companies. The remaining, non-voting shares will be distributed free to Bolivia’s 2 million adults-though the shares will be held in trust for several years by the government.
Details of the plan, such as what power, if any, the Bolivian government will have over the privatized enterprises, remain unclear. Government officials say the sales, which they hope to complete by the end of 1994, could raise $2 billion. The money will be plowed back into the companies-something government officials say could bring 10 percent annual economic growth by the end of Sanchez de Lozada’s four-year term.
“If investment is taking place, the economy will grow and there will be jobs,” said Juan Antonio Morales, an economist who helped write the Plan de Todos. “We are trying to capitalize the companies. We are trying to get money to make them more profitable and more productive.”
But most diplomats and economists say the government will have problems finding buyers for such bloated and inefficiently managed companies as Lloyd Aereo Boliviano, the national airline. The company has nine planes and more than 1,700 employees.
Investors also shy away from Bolivia because of the nation’s poor infrastructure. There is not a single paved road leading out of the country.
Many foreign investors also fear a reversal in the nation’s free-market reforms, though Sanchez de Lozada has tried to ease concerns by packing his economics team with internationally known business leaders.
Diplomats and economists predict that unemployment, estimated at 20 percent, will rise in the short term when the newly privatized companies lay off unneeded workers-something that could spark social unrest.
Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, the national oil company, recently announced plans to cut by half its 5,500-member work force in an effort to reduce costs and attract investors.
“If you turn these companies over to private investors, the first thing they are going to do is reduce costs, and the easiest way to do that is lay people off,” said Angel Curet, manager of Mobil Corp.’s Bolivian operations. “There will be a lot of pain.”
