[Home] [Current Tables of Contents]

[ HLAS Online Home Page | Search HLAS Online | Help | FAQ | Comments ]

Volume 65 / Social Sciences


BARBARA KOTSCHWAR, Research Associate, Peterson Institute for International Economics, and Adjunct Professor, Center for Latin American Studies, Georgetown University

WHILE MUCH OF THE POLITICAL ECONOMY LITERATURE of the 1990s and early 2000s focused on complimenting or critiquing the results of the Washington Consensus reforms implemented in the 1980s and 1990s, subsequent works have begun to look at specific economic issues—energy and environment being major topics of interest—and at the future direction of economic policy.

Bolivia and Peru have confronted many of the same economic and political challenges. Both countries suffered from extremely high levels and volatility of inflation and high levels of external debt—Bolivia with inflation rates of over 10,000 percent per year with external debt stocks exceeding 150 percent of GDP in the mid 1980s, while Peru by 1990 had inflation rates of over 7000 percent, with debt stocks over 100 percent of GDP. Both experienced dramatic shifts in economic policy from state-centered capitalism to a neoliberal embrace of the free market model: Bolivia in 1985 under President Paz Estenssoro (with Planning Minister future-President Gonzalo Sánchez de Lozada), and Bolivia under Alberto Fujimori, who dramatically overturned many of the populist economic policies implemented by his predecessor (and Peru's current President) Alan García.

Both have recently experienced relatively high levels of economic growth. Both also continue to suffer from high levels of poverty and have instituted propoverty programs: Peru's Juntos program, a conditional cash transfer program established under President Alejandro Toledo and Bolivia's much more recent efforts to use increased hydrocarbon tax revenues resulting from high oil prices for social protection programs.

Another significant factor is the countries' demographic composition: Bolivia and Peru are the South American countries with the highest percent of indigenous peoples in their population. In both countries indigenous peoples are more likely to be poor and traditionally have less access to political power. These combined factors have been elemental in recent elections in both countries. In Peru this was manifested in bringing of Alejandro Toledo, an economist of Quechua heritage from the north coast of Peru, to power in 2001. This also played a role in the last election, where Alan Garcia's narrowly beat opposition candidate Ollanta Humala, who has been associated with the indigenista movement. In Bolivia current President Evo Morales came into power through his Movimiento al Socialismo (MAS) movement in December 2005. Morales' legitimacy stems in part from his ethnicity: in a country that is over 50 percent indigenous, he is Bolivia's first indigenous head of state. His popularity has steadily increased since being elected, despite instituting controversial policies such as nationalizing the hydrocarbons sector, gaining more than two thirds of the vote in a 2008 recall referendum.

While both countries have seen great improvements in their macroeconomic picture, each faces serious economic and political challenges. Both countries have seen an increase in inequality over the past two decades, with Gini coefficients rising from about 42 in 1990 to 58 for Bolivia and 52 for Peru in 2005. Whereas in 1990 17 percent of Bolivia's population was living on less than two dollars per day (PPP) this percent rose to 30 by 2005. In Peru the increase was from 5 to 19 percent during the same time period. The challenge is how to translate the significant improvement in macroeconomic stability and the gains from high commodity prices into better welfare for the population. Both countries also face a dilemma in their wealth model and will soon need to reconcile their dependence on natural resource extraction with the environmental impacts thereof.

The works reviewed here reflect these challenges. CEDLA's Legitimando el orden neoliberal: 100 días de gobierno de Evo Morales (item #bi2009002340#) criticizes the Morales government for maintaining neoliberal economic policies despite its critical rhetoric. They especially find fault with continued ties to transnational corporations. Amparo Ergueta echoes this fear of foreign investment in her assessment of the role of Spanish investment in Bolivia (item #bi2009002321#). While she recognizes that Spanish investment has improved the quality of service in certain sectors, she also sees them holding monopoly power and worries that foreign investors are interested more in their profits than the welfare of the Bolivian people. McGuigan (item #bi2009002339#) evaluates the costs and benefits of privatizing the hydrocarbons sector, using the period 1999–2004 as reference. She finds limited gains and finds that costs were incurred to the poor in the form of higher consumer prices. These critiques illustrate a dilemma for the Morales government, which must strike a balance between satisfying its power base and maintaining economic stability. The UNICEF document tracking Bolivia's spending on youth (item #bi2009002337#) shows that Bolivia has made progress in addressing youth poverty (even while overall poverty has increased) but that much more progress needs to be made in order to meet Bolivia's MCC goal.

Natural resources provide much of Bolivia's prosperity and are also a source of great political contention, both internal and external. This debate, particularly the internal component, is detailed in Gas: debate nacional, a collection of stories from the El Pulso del País newspaper (item #bi2009002301#). Zeballos and Queroga Crespo (item #bi2009002342#) examine the potential for alternative energy in Bolivia, recognizing the political complications of such an endeavor. Mamerto Pérez Luna cautions about the overreliance on soya in No todo grano que brilla es oro: un análisis de la soya en Bolivia (item #bi2009002323#).

In Peru the situation is also complex. Economic reforms have stabilized the economy but without increased prosperity or opportunities for large segments of the population. Moisés Arce studies the interaction between societal groups and economic reforms in "the societal consequences of market reform in Peru," (item #bi2007000423#) arguing that while political space was largely closed during the Fujimori years, neoliberal reforms did stimulate new groups to act and those groups impacted the implementation (or not) of different policies. Ruiz Torres (item #bi2007003273#) discusses the lengthy implementation of the neoliberal model in Peru and points to various factors that led to the internalization of globalization in Peru, including the economic crisis, a political system lacking in legitimacy, and the large swaths of poor and unemployed Peruvians. The role of economic elites is explored by Figueroa (item #bi2007004148#). He criticizes the current government for continuing with this model, stating that it has not led to economic development and has simply reinforced inequality. He attributes this continuity to a lack of opposition, brought about by Fujimori's transformation of the state. Victor Vich (item #bi2008001671#) also criticizes the neoliberal model, accusing President Toledo of being a glorified tour guide and pandering to international media with a view to influencing investors' perceptions of Peru. He also accuses him of exploiting indigenous Peru. Juan Martin Sanchez's "Hatun Willakuy, importancia del relato en la política," (item #bi2007000318#) assesses the results of Peru's truth and justice commission, arguing that the main importance of this work is in its transparency and its ability to stimulate dialogue among Peruvians. Sanchez sees this as an important step in Peru's future. Azpur cites political centralization as one element that has maintained the structure of inequality in Peru (item #bi2007003221#).

María Isabel Remy examines the associations of small coffee producers (item #bi2009002328#) and concludes that while this is a sector that has been largely left from the state's support, it has managed to create a strong dynamism, partly through external factors such as the emergence of the fair trade market and partly through internal factors, particularly the spirit of cooperativism among the small producers. Finally, Paula Castro, Javier Coello and Liliana Castillo examine an emerging sector—that of biodiesel (item #bi2009002327#). They examine the current debates on biodiesel versus traditional energy sources and place these debates within a Peruvian context.

Overall, these works point to a continuing evaluation of the successes and failures of the past economic models and identify some important current issues whose treatment by policymakers no doubt will be discussed and debated in the next tranche of political economy analyses. As pointed out by the books and articles reviewed here, Bolivia and Peru each face major challenges in the areas of poverty alleviation and unequal access to political and economic resources. How they deal with these compelling societal issues will help determine their success in tackling the important challenges in issues such as energy and the environment facing them in the short and medium term.

Go to the:

Begin a Basic Search | Begin an Expert Search

[ HLAS Online Home Page | Search HLAS Online | Help | FAQ | Comments ]

Library of Congress
Comments: Ask a Librarian (9/23/14)