Economic Policy – Analysis – Eurasia Review

By Jake Johnston, Joe Sammut, Mark Weisbrot and Miguel Carvalho *

This article examines the economy of Bolivia during the de facto government that seized power following a military coup in November 2019 and ruled for a year. The coup overthrew a democratically elected president, Evo Morales, who still had months until his election in 2014. Other reports have documented violence and human rights violations committed by the de facto regime. Harvard Law School’s International Human Rights Clinic (IHRC) and the University Network for Human Rights (UNHR) found that the number of killings of civilians by state forces in November 2019 was the second highest in nearly 40 years old.1 Two massacres committed by security forces less than a week after the de facto government seized power left at least 23 dead and at least 230 injured.2

The IHRC / UNHR report highlights the racist nature of the violence, including the fact that all of the victims of these massacres were indigenous. Bolivia has the largest percentage of indigenous people in the Americas, and Evo Morales was the country’s first indigenous president. His government had undertaken many reforms and economic policies that benefited the indigenous peoples of Bolivia, who are economically disadvantaged compared to the rest of the population.3

Despite its apparent status as an “interim government”, the de facto government has instituted a number of regressive economic policy changes. He also mismanaged the response to the pandemic and related recession in a way that indicated he was undertaking an economic policy agenda, as well as its political agenda, very different from that of the previous government.

In the fourth quarter of 2019 (when the coup took place), public sector spending fell sharply, falling by 7% of quarterly GDP compared to the previous period.4 While some of that drop was recovered in the first quarter of 2020 (3 percentage points), the cuts hurt the economy ahead of the pandemic and recession.

The de facto government has also failed to raise the face value of the minimum wage for the first time since 2006, and has sharply cut public sector wages. These were more indications of his goals of changing the policies of the previous elected government.

According to IMF projections, real GDP would have decreased by 7.7% in 2020.5 Most of this was the result of the pandemic, including shutdowns of economic activities that were implemented in order to contain the spread of the virus. Nonetheless, pre-pandemic austerity contributed to the deep recession. In early February 2021, although it had significantly cut public sector spending in the previous quarter, the de facto government announced that further deficit reduction was a priority.6

However, this was not possible when the pandemic struck; the budget deficit for 2020 stood at 12.3%, about 5.7 percentage points above the government’s de facto target.7 The opposition Movement Towards Socialism (MAS) party of the previous government still held a majority in the Legislative Assembly; and in part because of this majority, the government adopted a number of countercyclical fiscal policies. Some of these measures – for example, financial relief and deferral of loan / interest payments – have mainly benefited higher income groups; but most spending was more targeted to the majority of the population.

These measures included income transfers amounting to around 1.8% of GDP, including three programs that compensated for the loss of family income resulting from the pandemic / recession. There have also been reduced tariffs for utilities, a reduction or postponement of tax collection, loan and interest repayments, an increase in public health spending, and a financial aid program targeting small businesses. . At the end of 2020, these tax measures totaled around 5.2% of GDP, although some were implemented after Luis Arce took over the presidency in November.8

The de facto government also continued the expansionary monetary policy of the previous government. It included measures to ensure the liquidity of Bolivian financial institutions, and real interest rates remained low.

Nevertheless, the actions taken by the de facto government after the start of the pandemic were insufficient to counter the impact of a severe recession. Although there are no measures available of the increase in poverty, it seems likely that it increased considerably in the year following the coup. At the same time, the political damage was enormous and, as noted above (and detailed below), state violence and other human rights violations, the overthrow of democracy, and the damage to people. democratic institutions were serious.9

In October 2020, Luis Arce, who was Minister of the Economy under President Morales, was elected president with more than 55% of the vote and a margin of 26 percentage points ahead of his opponent. Arce affirmed his intention to reactivate growth as well as economic and social progress, mainly, according to him, by returning to the policies which were successful during the Morales years.ten During these years (2006-2019), poverty was reduced by 42% and extreme poverty by 60%.11 Real GDP per capita has grown by over 50%, and over the past five years has grown faster than any other country in South America.12

The IMF forecasts a strong rebound in the Bolivian economy in 2021, with a real growth rate of 5.5%, one of the strongest rebounds in Latin America.13 Annual interest payments on public debt, both external and domestic, are quite low, at around 1% of GDP.14

But to prevent the recurrence of such attacks on democracy, human rights and inclusive economic growth involved in the overthrow of a democratically elected government, the institutional basis of the coup must be addressed. In this case, the leadership of the Organization of American States (OAS) – backed by the Trump administration – played a major, perhaps indispensable role in the coup.15 He did so by acting as an official observer promoting a patently false account of fraud, which became the political basis of the coup.16 (See below, for some details, as well as references to, the extensive evidence of what the OAS has done.)

At present, the best hopes for the necessary investigation come from both the United States and Latin America. Many members of the United States Congress not only denounced the violence committed by the de facto government, but also demanded responses from the OAS and an investigation into the role of the OAS in promoting the coup.17

“Secretary Almagro and his colleagues continue to avoid responding to statements and actions that may have contributed to the erosion of democracy and human rights in Bolivia,” a letter from 25 members of Congress said. .18 They also noted, “The US Congress appropriates the majority of the OAS budget.

Latin American governments and leaders have also taken a step forward. Mexico, at the OAS, denounced “the will of the Secretary General to intervene in the internal affairs of our states and to harm our democracies. What happened in Bolivia must never happen again.19

The Grupo de Puebla, in a statement signed by four former Latin American presidents, said that “there had been no fraud in the October 2019 elections and that Evo Morales should have taken office as as legitimate president of Bolivia if the OAS, in its capacity as an observer, had not ignored the results of the elections.20

The evidence (see below) against the false allegations repeatedly made by the OAS – both before and after the coup – has already passed a reasonable doubt. It only remains to establish responsibility.

Click here for the full report

The authors wish to thank Alex Main, Annee Lorentzen, Dan Beeton, Brett Heinz, Jeremy Ross and Franklin Serrano.

  1. Alvelais, and. Al. (2020).
  2. Same.
  3. Arauz (2019) and Gibler (2009).
  4. The data are seasonally adjusted.
  5. IMF (2021b).
  6. MEFP, MPD and BCB (2020a).
  7. IMF (2021b) and MEFP, MPD and BCB (2020a).
  8. IMF (2021a).
  9. Amnesty International (2021) and HRW (2019).
  10. Toledo (2020).
  11. Arauz, and. Al. (2019, p. 14).
  12. Ibid., P. 14.
  13. IMF (2021b).
  14. Calculations by the authors of BCB (Nd c)
  15. US Department of State (2019) and Weisbrot (2020).
  16. CEPR (2019); Weisbrot (2019a); Johnston and Rosnick (2020); Rosnick (2019); Rosnick (2020a); Rosnick (2020b); Rosnick (2020c); Idrobo, Kronick and Rodriguez (2020); Curiel and Williams (2020a); and Curiel and Williams (2020b).
  17. Murphy (2020) and Schakowsky (2019).
  18. Sanders (2020).
  19. The Espectador (2020).
  20. Puebla Group (2020).

About Joel Simmons

Check Also

Amid Biden’s strong jobs report, US recession still looms: Larry Summers

Economist Larry Summers threw cold water on Friday’s jobs report, saying its data reaffirmed that …