Thursday, December 30, 2010

Gasolinazo part 2

Some prominent Bolivian labor and environmental activists have written a highly critical open letter to Evo Morales and Alvaro García.  From Narco News:

Did the people send you to impose such a brutal, irrational, arrogant and neoliberal “gasolinazo” (an 82 percent hike in gasoline prices) that will make the people, who barely survive if they have the luck to have a stall in the market or a job, even poorer?
You always said that neoliberalism has failed. Is the gasolinazo a revolutionary and popular measure? Or is it that your economic model has failed?

Evo Morales decreed a 20% wage hike in the areas of health, education, police, and the armed forces (of course!) as a cushion.  But still, at least some Bolivians are getting nervous, and lines at banks are getting longer.  However, the wage hikes go into effect in 2011, i.e. a few days, so will that calm things?

My previous post on the topic (with the government's rationale) here.  Boz speculates on how Evo Morales might well get through it based on past experience.


Tambopaxi 6:17 AM  

I commented to Boz the other day (via Twitter, you may have seen it) that the Gasolinazo headlines beg the backstory: How did this all come to pass in first place?

Up to this point, conventional wisdom has been that Morales has been doing bang up job of managing Bolivia's macro-finances, that the country's reserves were better than ever, debt down, etc., en fin, a pretty picture all around - and now, suddenly this, where Morales is doing exactly the same things that Mesa and others had done in the past, while claiming that he needs the money for social programs.

It's clear that basic living costs (transport, food) will go up with the gasolinazo move, which is about a negative hit as Morales can make on his electorate, so why would he do this? Are the macro-econ and fiscal situations not as rosy as we'd been given to believe? If not, why not, and what does that portend? Even more interestingly, if the macro-econ and fiscal situations ARE ok, then the gasolinazo (gotta love that word!) is even more puzzling...

ConsDemo 10:10 AM  

I´m not normally a fan of Evo, but he is spot on here. In an interview with CNN en espanol he cliamed widespread smuggling of subsidized gasoline is going on with Peruvians and Brazilians getting gas from Bolivia that is much cheaper in their own countries. I´ve seen this in Venezuela, Brazilians line up at the gas stations just across the border to fill up on cheap gas (no, that isn´t smuggling but the concept is similar).

I don´t know if Morales has said the following but he certainly could, given he is a big proponent of curbing global warming, that cheap gas encourages excess consumption and thus harms the environment.

Tambopaxi 5:32 PM  

ConsDemo, What can I infer from your comments? That so much Bolivian gas was being smuggled out of the country that there were gasoline shortages in the country? That seems to be the implicit argument or defense, that Morales is making for what he's done, which doesn't make much sense to me...

ConsDemo 3:18 PM  

Tambopaxi, I think the original justification was that Bolivia is spending a ton on gas subsidies much of which supports low cost purchases by foreigners. I suspect the real reason was the subsidies are a big strain on Bolivia´s finances.

In any case, it appears Morales caved and revoked the gas hike. I take back any compliment, he is just another dopey populist who tells people what they want to hear. Anyone holding Bolivian currency may want to get rid of it Bolivia can´t control its spending as a result of the continued subsidies.

Tambopaxi 6:50 AM  

I'm still assuming that Morales did the gasolinazo move to begin with because he was fiscally hurting, so abrogating Decreto 748 will only (re) exacerbate his problem.

As well, he's now shown that he'll back down, just as his predecessors did, and we know what that got them.

I know I sound like a broken record, but I'd love to know just what's happened to the GOB's finances over the past year such that Morales has gotten himself into this fix. La Razon now says that in abrogating 748, the cost will now be $750m, much more than the $350m savings figure I'd seen earlier. This doesn't bode well for the government budget (whatever that might be; any GOB budget analysts out there?).

En fin, looks like Morales is stuck between the populist rock and the fiscal hard place. This coming year should be intersting for him and for Bolivia..

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