Of Tin Mines, Coca Leaves and Eternal Recurrence

“He won’t be back until tomorrow”, his smiling wife gently told me at the doorstep of their house. Would it be OK if I phoned next morning to arrange for another appointment? After a short hesitation, she answered in a sorrowful tone, still smiling at me sympathetically, “He won’t quit accepting to be interviewed and then change his mind. Es un hombre difícil.”

So I had been warned in La Paz, “He’s a difficult man. He’s going through hard times. To make things worse, he’s definitely cucufato (Bolivian idiom for “nuts”): he chews too much coca leaves. Chances are he’ll stand you up.”

It was 11 o’clock on a rainy Sunday morning, it was Labor Day and my flight back to La Paz would not depart until 8:00 pm. But I did not have time to feel frustrated because on the ride back to my hotel an unexpected announcement came on the taxi radio: the whole country’s hydrocarbons’ industry had just been nationalized by the newly elected president.

I have arrived, I think, to the the point of this story. As I turned on my hotel room’s TV set, the theatrics of yet another Latin American nationalization looked back at me with its all-too-familiar elated rhetoric, the fervid speeches evincing historical antecedents and consequences, the cheering crowd, the T-shirts, the slogans, the indefectible military music that accompanies the taking over of an industry hitherto run by foreigners.

It was not something distinctively Bolivian. We Venezuelans, for example, have lived through at least three land reforms and two oil industry nationalizations in the relatively short span of 50 years. Each one has been announced as the real thing meant to put an end to the make-believe oil nationalization or the deceitful land reform that came before. Last May Bolivian nationalization was the third “definitive” nationalization in less than a century.

Why is it —I wondered as I watched the ceremony of hauling up the Bolivian banner in a remote oil facility— that no governmental economic initiative can evolve in our countries towards stable institutions able to bring about predictable long-term public policies? Are we condemned to start over again and again from scratch, each time resolved to redress all wrongs past, each time resolved at long last to do it right? Why do we Latin Americans have to be so bombastically self-righteous about our predecessor’s economic performance? Is this “let’s start-afresh” recurring approach to economic policies something “cultural”? Is it in any way avoidable?

In 1985 Bolivia was going through harsh economic times. Hyperinflation threatened to reach 25,000% by year’s end. The minimum wage was at its lowest in decades: a monthly US$7. The then newly elected president, Mr. Víctor Paz Estenssoro, a nationalist left-of-center leader who ruled the country for the fourth time in his life, was forced to take bold decisions.

The boldest one was to adopt his defeated rival’s economic adjustment plan, the same plan that he had venomously attacked during the election campaign, only a few weeks earlier. He also hired his rival’s American economic advisor, professor Jeffrey Sachs.

Broad-based economic reforms ensued and some of them went well beyond currency stabilization. “The draft plan was revolutionary—recalls Professor Sachs—calling for Bolivia to move from a statist and closed economy—typical of third world countries of the day—to a market-based open economy. The plan prefigured the changes that would take place later in the decade in Eastern Europe.”1

Hyperinflation was swiftly abated and the economy experienced an unprecedented boost at the price of dismantling the state model that president Paz Estenssoro had conceived and created 25 years earlier.

Paz Estenssoro (1907-2001) was the most relevant politician in Bolivia’s 20th century history. A lawyer by training, he distinguished himself during his youth as a brave front-line commanding officer during the Chaco War.

This now forgotten war, waged by Paraguay and Bolivia in order to gain control over an arid, almost uninhabited region plagued by malaria known as the “Boreal Chaco”, was the longest and deadliest armed conflict ever fought by two Latin American countries during the 20 century.

It was the first modern war ever waged in Latin America. More than 150,000 Paraguayan soldiers battled some 250,000 Bolivian servicemen. The large number of troops and modern war matèriel deployed during those three terrible years has not been paralleled ever since, not even during the Falklands War or the so-called Central American wars of the Eighties. Yet malaria, the environment’s unhealthy conditions and draught caused more casualties than the top-notch weaponry frenziedly acquired by the small impoverished countries at war.

It was widely believed at the time that large deposits of oil laid beneath this frontier land crossed by the Paraguay River. Apparently, this belief prompted the Paraguayan invasion. Being Mediterranean countries, both Paraguay and Bolivia lack coastlines, so control over the disputed region and its waterways would not only achieve sovereignty over large oil reserves but a passage to the Atlantic Ocean.

Bolivia had lost its Pacific Ocean harbors to Chile as a result of a late 19th-century war, so national pride added fuel to Bolivia’s warring spirit. Peace was signed after an excruciating diplomatic process that involved the rest of the Latin American nations led by Argentina. When a cease-fire came at last, in 1935, Paraguay had occupied 75% of the Boreal Chaco territory only to find out that there had never been oil in the disputed region. The war was disastrous for both countries’ economy.

As many other young men of his generation, the futility of the war made a tremendous impact in Mr. Paz Estenssoro. His conviction that the carnage had been stimulated by warmongering international oil companies paralleled his abhorrence of Latin American militarism… and oil and mine foreign concessions.

He and many others that shared this feelings decided to go into politics. Less than twenty years later, in 1952, Paz Estenssoro led a nationalist revolution that was to shape modern Bolivia’s economic and political system: nationalization of the country’s natural resources, namely the tin mines, and a nationalist government that patronized a powerful federation of radical labor unions with thousands of affiliate miners.

At the same time, the ruling party—the MNR, the Spanish acronym for Nationalist Revolutionary Movement—promoted a new electoral system to guarantee voting rights for all, including women and the illiterate indigenous population. “For Bolivia, the 20 century began in 1952”, goes one saying.

This populist system based on the state’s ownership of all natural resources prevailed, though shakily, for the rest of the 20 century through the ups and downs of many military coups—characteristically followed by short, fragile periods of “democratic” rule—,until the complete exhaustion of the system in the mid Eighties.

Ironically, the same man who founded statist populism in Bolivia was now leading a successful market-oriented reform plan. His former left-leaning friends and political allies gave him a rough time for it.

In October, 1985, trading on tin was suspended by the London Metal Exchange. Tin prices plummeted over the following months by 35%. Bolivia had already fallen from the second to the fifth position among tin producers. The losses accumulated by the state-owned tin mines went over the US$750 million over the last 10 years. Productions costs were five times the revenues. 26,000 miners were laid-off out of a pay-roll of 30,000. Bolivia had been exporting tin ever since 1861 but now it was all over.

Here is where the difficult man of Cochabamba comes into my story. The laid-off miners scattered all over Bolivia and tried to rebuild their lives plowing the scarce arable land they could find. One of the most attractive zones to try a hand at farming was El Chapare district, near Cochabamba: the coca-leaf growing country. The difficult man, as well as many other former miner’s union leaders, settled down in El Chapare.

Coca leaf is a staple in Bolivia. Dry coca leaves make a stimulating infusion quite helpful at fighting high-altitude discomforts. It was a traditional farming product long before the Spanish conquest in the 16 century and it has a ritual value for many ethnic groups. In 1950 there were roughly 3,000 coca-leaf growers in all Bolivia. But by 1985, with the closing of the tin mines, coca growing employed more than 60,000 people, mostly laid-off miner’s relatives. That year they grew more than 100 thousand tons of coca leaves. 80% of it went into producing cocaine.

The Bolivian and the U.S. governments were forced to compromise on the ways to combat illicit plantations. Coca leaf is a sensitive ethnic and cultural issue, so fumigation was definitely not the right approach to erradicate plantations exceeding the traditional market needs. Markets, on the other hand, had ceased to be “traditonal”, thus insuring high prices for the leaves. So incentives had to be created by government agencies and US Aid to lure the peasants into growing bananas and other exportable crops.

The former miner’s union leaders hit the jackpot when they took to organize the coca-leaf growers. Now they had a brand new constituency and an assortment of political and social issues—to have the government secure prices for the farmers, to get low-interest credit for them, etc. The anti-Americanism involved in fighting a war on drugs that was—and still is—controverted in the United States came in handy.

As if to illustrate a story of undesired results and eternal
recurrences, the El Chapare coca-leaf growers’ union eventually
morphed into a powerful national political party. In 1999, large deposits of gas were discovered in Bolivia, attracting large foreign investment, mainly from Brazil’s Petrobras gigantic gas and oil company. The discovery prompted all kinds of expectations among Bolivians.

Public debate about what to do next was then dominated by strong urges
to revert the concessions regime that had regulated foreign
investments in the energy sector since the Eighties. By 2003, bloody
clashes between government forces and violent demonstrators who
advocated the country’s gas reservoirs nationalizaton left a death
toll that counted by the hundreds. A referendum was convened to decide
on this issue and most Bolivians voted for nationalization. Early
elections were also convoked to avert further bloodshed.

So the young man from Oruro became the president of Bolivia who last
month decreed the third definitive nationalization of the country’s natural resources, the one meant to redress all wrongs past.