Bolivia 02/01/11

An eventful week saw mass protests successfully overturn government withdrawal of fuel subsidies that had seen prices rise by over 70%.

On 26 December the government announced the removal of state fuel subsidies. It claimed that the $380m they cost was no longer affordable. However, the immediate hike in prices (petrol by 70%, Diesel by 80%) led to widespread discontent and the mobilisation of indefinite strikes by leading transport unions.

After a week of nationwide protests, including a baker’s strike in La Paz and violent attacks on pay tolls in El Alto, President Morales announced a dramatic rescission of the proposed subsidy cuts, which had become known as ‘el gasolinazo’.

The events are widely considered to be one of the most challenging political tests which Morales has faced since coming to power in 2005. Criticised by the left for turning his back on the people, and by the right for not showing steadfastness in carrying through the necessary cuts, Morales now carries economic unease into the New Year.

El Deber, the Santa Cruz daily, stated the government had yet to give any indication of having a replacement plan for increasing fuel production efficiency and counteracting contraband, having thrown the subsidy cuts by the wayside.

Economic confidence was further hit on Wednesday when Morales was forced to publicly deny that limits on private bank withdrawals were going to be enforced.

The rumour had led to queues of panicked Bolivians withdrawing their funds from local banks. The vice-president, Álvaro García Linera, claimed that the rumour had led to the withdrawal of an estimated 200 million dollars from national bank accounts.