PATIENCE RUNS OUT IN BOLIVIA

FOR the third time in a year, Bolivians are on the march. Across one of
South America's poorest countries, farmers, coca-growers, public-sector
workers and the unemployed are taking to the roads, aiming to meet for a
demonstration in the capital, La Paz, on April 23rd. Police attempts to
disperse some groups before then have been met by threats of road blockades.

The protesters' demands are broad and hardly new. They want more public
investment in depressed rural areas, and an end to a United States-backed
programme of coca eradication. But the underlying message is more serious.
It is an expression of fatigue with 15 years of structural adjustment,
privatisation and free-marketry.

That ought to worry reformers elsewhere in Latin America. Bolivia was a
success story, combining stable democracy with steady economic growth,
which averaged 4% a year in the 1990s. Under Gonzalo Sanchez de Lozada, a
reforming president who pushed through privatisations, growth rose to 5%
and Bolivia seemed set for rapid development. Now things have turned sour.
Growth has slowed, income per head is below its 1998 level, unemployment is
rising, and the real value of wages is falling.

The slowdown owes much to the problems of Bolivia's big neighbours, Brazil,
Argentina and Peru. But the current conservative government of Hugo Banzer,
a military dictator turned democrat, has not handled matters well. Gonzalo
Chavez, who teaches finance at the Catholic University in La Paz, says the
government was slow to grasp that two of its most successful policies were
adding an extra brake to the economy: between them, coca eradication and a
customs reform, which clamped down on smuggling, removed several hundred
millions of dollars from the informal economy, in which many unskilled
workers make their living.

The government has also been slow to implement an anti-poverty policy, as
it is required to do by foreign donors under the Highly Indebted Poor
Countries scheme for debt relief. Such a policy was eventually agreed upon
last year, but the law to put it into practice is still awaiting
congressional approval.

Meanwhile, Mr Banzer has kept tight controls on spending. Admittedly, the
government has been constrained by a budget deficit that is running at
nearly 4% of GDP, partly because of the high transitional cost of a pension
reform. But most of the deficit is financed by foreign aid. Critics argue
that, given Bolivia's record of reform, it could have persuaded donors to
agree to a temporary relaxation of fiscal policy. They also claim, less
plausibly, that a government plan launched last year to "reactivate" the
economy by helping businesses with their debts was too timid.

Social unrest has been rising. Last September, ten people died during
protests led by peasant farmers in which trunk roads were blocked for
nearly three weeks, almost cutting off La Paz and Cochabamba, the country's
third-biggest city. The government bought time by agreeing to many of the
demonstrators' demands. Officials say they have done two-thirds of what
they agreed to last year, but need more time to find a compromise solution
to the protesters' demand to amend water privatisation and a
land-registration law. They also appeal for patience: they say the recent
"reactivation" measures need time to take effect.

But the protesters are in no mood to wait. They are being backed by an
increasingly co-ordinated anti-government movement, one of whose leaders is
Felipe Quispe, a radical and influential leader of the Indian communities
of the Altiplano, the bleak plateau above La Paz. He is planning a separate
protest starting on May 1st. Although vehemently opposed to the
privatisations, Mr Quispe is using one such reform to his advantage. He has
equipped far-flung supporters with cheap and now widely-available mobile
telephones, making the protests easier to organise and thus, perhaps, more
effective.

The government is right when it argues that Bolivia's economic prospects
are improving. Partly because of the privatisations, which involved oil,
gas and transport as well as telecoms, foreign investment is rising (from
around $450m in 1996 to over $1 billion in 1999). Rather than pay the
government for their stakes, the buyers were required to make investment
pledges (worth, in aggregate, $1.7 billion) in the privatised businesses.
Half of the foreign investment is going into oil and gas, stimulated by the
completion in 1999 of a pipeline taking Bolivian gas to Sao Paulo in Brazil.

The problem is that industries such as oil and telecoms are
capital-intensive, generating few jobs. Much of the economy remains
depressed: demand for electricity is falling, for the first time in a decade.

Mr Sanchez argues that the blame for the disappointing results of the
reforms lies with his successor. He criticises the government for its
economic management, and also for its "hyper-corruption", something he
blames on Mr Banzer's decision to form a five-party coalition. "You have to
give jobs and pork to an awful lot of people," he says.

Mr Banzer's term lasts until mid-2002. Mr Sanchez might then be voted back
into office, although he accuses the government of plotting to manipulate
the election. Mr Banzer himself is likely to back Jaime Paz Zamora, who
ruled before Mr Sanchez. The current round of protests may well end in more
talks, and more broken promises. But the signs are that a rising number of
Bolivians are becoming increasingly tired of politics as usual, and of the
reforms that served many of them so well for a time.

GRAPHIC: A new round of anti-government protests points to deep-seated
discontent with reform; The start of a long march