Pubdate: Wed, 22 Oct 2003
Source: Dow Jones Newswires (US Wire)
Copyright:  2003 Dow Jones & Company, Inc
Author: Charles Roth
Bookmark: http://www.mapinc.org/areas/Bolivia

BOLIVIA'S MESA FACES DAUNTING CHALLENGES, HARD DECISIONS

DOW JONES NEWSWIRES NEW YORK -- As La Paz burned last week, Carlos
Mesa, Bolivia's new president, publicly broke ranks with his former
boss, Gonzalo Sanchez de Lozada, who had ordered troops to put a stop
to violent demonstrations.

After at least 65 deaths, the demonstrators won, Sanchez de Lozada
went into exile and Mesa, who previously served as vice-president,
took over. He now faces a baptism by fire.

A political independent with no power base, Mesa will have to balance
competing demands from powerful, polarized sectors, both domestic and
foreign, amid a tremendous public financing crunch.

As if all that weren't enough, the leaders of the demonstrations have
given him precious little time to heed their aggressive demands.
"Within a month, he has to start giving some clear signs" of
cooperation, said Evo Morales, head of the Movement Toward Socialism
party and top representative of Bolivia's coca growers. "If not, once
again, people will take to the streets."

Morales narrowly lost to Sanchez de Lozada in 2002
elections.

Another indigenous leader, Felipe Quispe, warned of "more blood, more
fighting, more rebellions" if Mesa doesn't implement policies to help
Bolivia's poor indigenous majority within 90 days.

But, as Bolivian daily La Razon reported Wednesday, those policies
"seek to annul the spinal cord of the liberal state." Among the dozens
of demands now being made on Mesa are the spiking of the current
hydrocarbon and pension laws; a land reform with property endowments
to the land-less; re-nationalization of certain privatized state
assets; increased public spending on health and education; suspension
of coca eradication programs; and rejection of the Free Trade Area of
the Americas.

A further demand is the industrialization of natural gas in Bolivia.
It was a proposal to export natural gas through a Chilean port that
last month sparked the protests, which quickly turned against Sanchez
de Lozada, a white, U.S.-educated millionaire, and his government's
coca eradication program.

Bolivians still resent Chile for the loss of its coastline during a
19th century war. And coca, a traditional Andean crop that is used as
a mild stimulant and for medicinal purposes, is the base element for
cocaine .

Mesa, a former journalist and historian who shares much the same
background as Bolivia's elite, hasn't yet stated his position on coca
or most of the other demands, but has proposed a referendum on the
export of gas.

The three states where the gas reserves are located - Tarija, Santa
Cruz and Chuquisaca - all favor gas exports. Proponents note that
Bolivia has been exporting gas to Argentina and Brazil for years.

Tarija residents want the $5.2 billion gas pipeline project through
Chile to go forward. They not only oppose the referendum, which has
dubious constitutional support, but are starting to make noises about
regional autonomy.

After four years of anemic economic growth, Bolivia could certainly
use the investment from the pipeline and the forecast $1.5 billion
that it would annually yield. Mesa has tapped energy analyst Alvaro
Rios as the new energy minister and ordered him to organize a vote, as
well as to review the hydrocarbons law, which provides the legal
framework for production contracts with foreign oil companies.

But short term, to stay alive politically, Mesa will have to find a
way to increase social spending. Money will be hard to come by,
though, as Standard & Poor's made clear in its Monday downgrade of the
country's debt rating to B- from B. S&P also revised its outlook on
Bolivia to negative from stable.

"The downgrade reflects the intensifying policy challenges stemming
from severe political and institutional deterioration, in the context
of an extremely weak fiscal position," S&P said, noting that a 2003
fiscal deficit projection of at least 7% will now be hard to meet.

"Official sources of funds were expected to finance the fiscal
deficit, but official creditor financing will rely upon the policy
measures of the new, untested government," S&P added.

Sanchez de Lozada is now in Washington talking to the International
Monetary Fund and World Bank officials in the hope that credit lines
will be maintained, a senior adviser to the former president who had
worked with him till the end, told Dow Jones Newswires.

Meanwhile, U.S. Ambassador to Bolivia David Greenlee informed
journalists Tuesday after meeting with Mesa that Washington supports
the new president, but also continues to support coca eradication,
free markets and free trade. Greenlee also warned that changes to the
hydrocarbons law could affect badly needed foreign investment in the
country.

A proposal to form a constituent assembly that would revise that law
and others, including those involving property rights, could also hit
domestic investment.

Mesa, somehow, will have to balance the competing interests.

"It remains unclear whether President Mesa will have the support of
either of the two dominant and polarized groups that represent most of
Bolivian society: the demonstrators...on the one hand, and the
political and economic establishment on the other," S&P said.

Mesa, a meztizo, or mixed-race, has appointed a cabinet composed
mainly of Europeanized elites. But as mostly liberal independents,
Mesa hopes they can rise above the political fray and push reform
based on merit. But without a power base, the strategy is risky,
analysts warn. Mesa has also created an Indian Affairs department.

All the challenges notwithstanding, Mesa has a few things going for
him. Sanchez de Lozada's adviser noted that continuity in the
government is likely, with mid- and upper-level public officials
willing to remain in their posts as long as Mesa wants them. Also,
Finance Minister Javier Cuevas has moved up from his previous
vice-minister post.

Furthermore, although Mesa had no experience in politics before
becoming vice-president, he's a "smart man" and "a great speaker,"
which should help him garner support among the people, the adviser
suggested.
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MAP posted-by: Larry Seguin