The Impact of Privatization and Nationalization on Boliviaʻs Indigenous Citizens

Research Paper (undergraduate), 2012

19 Pages, Grade: 1,0




Table of Charts


1 Introduction

2 The Economy of Bolivia
Period of Privatization
Period of Nationalization

3 The Indigenous People of Bolivia
The situation of indigenous people in the period of privatization
The situation of indigenous people in the period of nationalization

4 Discussion

5 Conclusion

6 Annex

1 Introduction

This seminar paper approaches the economic situation of the indigenous people in Bolivia. By using this example, it may be recognized that the past of this country is substantially influenced by different economic orders, politics and in particular by foreign relations.

Personal travels and studies in and about South America made social studies becoming an important issue of interest. Besides the social or cultural issues, it is interesting to consider accurately the economic development of a country. Furthermore, it is a personal enrichment for every student to learn about the relation of economy and politics.

Economic policy is an important issue for today’s society and development. Therefore, the right economic order has to be chosen by a government to meet the needs of a country’s population. Bolivia is one of the poorest countries in South America (Cf. Weisbrot et al. 2009) and social inequality has always been one the countries issues (Cf. Von der Heydth-Coca 2009). Furthermore, Bolivia experienced two periods of different economic orders in the last three decades. These periods have to be analyzed and compared to find an economic solution to solve the issue of poverty. This concerns the indigenous people who are in particular affected.

In 1985, Williamson stated that privatization and nationalization can be seen as two different “governance structures”. The discussion, for and against one of them, is still part of the scientific discussion. In regard of Bolivia, the two “governance structures” have to be seen in perspective of the people of the country.

This two “governance structures” were part of Bolivia’s economic history and therefore can be compared to gather information about the structure that should be preferred to serve all the people of Bolivia, especially the indigenous population.

Chang et al. (2012:6) states that “nationalizations and privatizations are repeated, cyclical phenomena, which often come in waves common to several countries”. Furthermore, Chang et al. (2009) states that this cycles occur in countries that are rich on natural resources like Bolivia.

In this research paper, we try to answer the following questions:

How and in which extend are the indigenous people in Bolivia affected concerning their economic life in periods of privatization and nationalization? How did this periods influence the situation for Bolivia’s indigenous people? Which “governance structure” could be the best solution for the poor in Bolivia?

By studying data, statements and critiques about this subject, answers for these questions are tried to be found.

2 The Economy of Bolivia

Although Bolivia is rich on natural resources, it has always been one of Latin Americas poorest countries (Cf. Country Watch 2009:57). One of the main reasons for this is the exploitation of the natural resources of the country by few people. An elite who traditionally administrated the state revenues from these resources, benefited vastly from this (Cf. Van der Heydt-Coca 2009) whereas the majority of the countries citizens did not profit from of their country wealth. Therefore, the past of Bolivia is characterized by many different types of economic orders, slow economic development, political and social instability, inequality and corruption (Cf. for example: Salman 2007, Von der Heydth-Coca 2009).

Period of Privatization

After Bolivia experienced many previous periods of different political and economic orders, the political and economic agenda of the country between 1985 and 2005 was characterized by neoliberalism and privatization (Von der Heydt-Coca 2009:347).

During the economic crisis in the eighties, Bolivia faced the first attempt to improve the countries situation by the Stabilization Plan, implemented by Sanchez de Lozada, who was minister of finance during the government of Estenssoro. He followed the idea of Jeffrey Sachs, and American economist, and opened the country’s borders to external import and free exchange rates, therefore the import of foreign products increased. At the same time, public expenditures were reduced (Cf. Von der Heydt-Coca: 2009), subsidies for fuel and staples were cancelled; wages of jobs in the public sector were reduced or not paid out. Furthermore, the state owned petrol company YPFB[1] had to deliver 65% of its revenues to the state for remediation of the country’s foreign debt (Fritz 2006:8). This weakened YPFB, one of the economically most valuable companies of Bolivia and forced them to take loans for maintaining production.

Economically, this development led to a period of macroeconomic stability and a substantial decline in inflation whereas an increase in economic growth followed in the 1990s (Country Watch 2009). However, many citizens lost their jobs and because of the increasing commodity prices, the poor could not even afford to provide themselves with necessary goods (Von der Heydt-Coca 2009).

In 1993, Gonzalo Sanchez de Lozada became president of Bolivia and under his government the political agenda persisted in capitalization a form of privatization, in which state-owned corporations such as oil corporations, the communication system, airlines, railroads and electric utilities (Cf. U.S. Department of State 2008) were assigned for 50% to primary foreign investors (Cf. U.S. Department of State 2008). Moreover, to gain foreign investment, many state-owned corporations were privatized, in particular the oil and gas industry. The government tied to attract foreign investors by certain regulations like for example a tax reduction from 50% to 18% (Von der Heydt-Coca 2009). This resulted in a further settlement of transnational corporations, mainly coming from Europe, Brazil and the US (Cf. Fritz 2006). Because of the needed investment, technology and the professional know-how they contributed, they took over an increasing role in the country concerning gas and oil, later hydrocarbon exploration (Moreno & Higgins 2003-2004). However, before capitalization 60% of government revenues came from state-owned corporations. Especially gas and oil provided 48% of the state revenues. This resulted in a lack of financial resources for the government. Furthermore, there was no creation of new jobs, like Sanchez promised in the beginning of his tenure. The consequences were a large amount of layoffs (Von der Heydt-Coca 2009).

In 1997 Banzer was elected and after a period of economic growth, in the context of rising social tensions and political instability, the growth performance deteriorated 1999 and 2003 (Cf. Country Watch 2009:57). Job creation remained limited and public perception of corruption was high. Both factors contributed to increasing social protests during the second half of Banzer's term (Cf. U.S. Department of State 2008). However, between 1999 and 2003 the growth performance deteriorated in the context of rising social tensions and political instability (Cf. Country Watch 2009:57). The neoliberal policies resulted in an increase of prices for essential commodities such as water and a loss of public services in transportation and resulted in unemployment and underemployment. Many bolivian citizens protested against the sale of public assets, which lead to the resignation of Lozada after the gas war in 2003 (Cf. Spronk & Webber 2007). This development just continued the previous circumstances, an enrichment of few people, instead of a fair distribution of wealth for all population groups (Von der Heydt-Coca 2009:348). This failure of the neoliberal prescription made it possible that a convergence between peasant, urban movements and the discontented middle sectors occurred and elected indigenous Evo Morales for president and a nationalistic agenda.


[1] Yacimientos Petrolíferos Fiscales Bolivianos

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The Impact of Privatization and Nationalization on Boliviaʻs Indigenous Citizens
Karlshochschule International University
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Diese Arbeit entstand im Rahmen des Modules Regional Studies an der Karlshochschule. Autoren sind Catherine Reber und Micha Schlittenhardt.
Bolivia, Economy, Privatization, Nationalization, Poverty, Indigenous
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Micha Schlittenhardt (Author)Catherine Reber (Author), 2012, The Impact of Privatization and Nationalization on Boliviaʻs Indigenous Citizens, Munich, GRIN Verlag,


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