• Bolivian President Rodrigo Paz introduced Law 157 to boost agribusiness activity and revitalise Bolivia’s economy.
• Discontent among indigenous and peripheral communities led to 53-day-long protests and roadblocks that cost at least 24 lives and USD 3 billion.
• Paz repealed the law but had to invoke a state of emergency to quell the protests, losing much domestic support.

Why is Paz FREEZING?

Answer: Paz is FREEZING following the passage and subsequent repeal of Law 157, which proposed a conversion mechanism for small-sized holdings.

Rodrigo Paz, the centre-right President of Bolivia, was elected last October, ending nearly 20 years of socialist rule under Evo Morales and Luis Arce. He focused most of his electoral campaign on plans to boost Bolivia’s struggling economy, which has faced consecutive years of contraction and rising inflation. He planned to do this with a liberal market reform approach, captured by his slogan “capitalism for all”. By promising to maintain cash transfers and environmental and indigenous protections, Paz managed to secure the left-leaning indigenous community vote against his more hardline right-wing rival Tuto Quiroga, winning the election.

However, on April 8th, Paz signed and passed Law 157, which instantly drew criticism from the same indigenous community. The five-article bill allowed small-sized holding owners to convert their land to medium-sized holdings. Doing so would allow farms and landowners with plots below 50 hectares to use their properties as collateral, and therefore apply for bank loans instead of relying on unofficial lenders with higher interest rates. Paz was primarily looking to boost agricultural commerce and investment with this law as part of his mission to reverse Bolivia’s struggling economy.

Despite this, the indigenous and peripheral communities who would be most affected by this law quickly expressed their discontent as they claimed the legislation removed key protections they had. Since 2009, the Bolivian Constitution explicitly protects small holdings, which encompass over 92% of all farming units, from taxation and land seizure. The conversion to medium-size classification that Paz’s legislation offered removed these protections, allowing for potential foreclosure. Paz mobilised the Bolivian Parliament to repeal the law in May in an effort to conciliate, but protests lasted 53 days before their eventual conclusion.

What is changing Paz’s heat level?

Answer: The 53-day-long protests and road blockades FROZE Paz as several dozen people died and USD 3 billion were lost throughout the unrest.

The 53-day-long protests started in April and became some of the largest Bolivia had seen in decades. Roads between major cities like La Paz and El Alto were blocked, cutting off commutes and supply routes between them. Violence between protesters and police, and ambulances not being able to deliver patients to hospitals in time, led to at least 24 deaths. 

Additionally, prices for some supplies increased by 2.7 times as food, medicine, and fuel needed to be airdropped to major population centres. By the end, an estimated USD 3 billion, around 6% of Bolivia’s GDP, in economic activity was lost due to the unrest. Less than a year after his inauguration, Paz was facing an economic crisis that was worse than the one that he inherited and campaigned to fix, resulting in a loss of public trust.

In an effort to quell the unrest, Paz announced the repeal of Law 157 on May 13th, but was unable to end protests. On May 20th and May 25th, respectively, he announced a Cabinet reshuffle and a cut to his and his Cabinet’s wages. Furthermore, on June 19th, he met with the leader of the Bolivian Workers Confederation, which was taking part in the protest, and came to an agreement but was unable to satisfy the demands of other protesting groups. This is largely due to the differing demands from the various protesting groups, including minimum wage increases and calls for Paz’s resignation. 

Ultimately, facing a record-low approval rate of 46.4% and an inability to satisfy all protesters’ demands, Paz resorted to enacting a state of emergency on June 20th, demonstrating his government’s inability to resolve the unrest through negotiations. By doing so, the Bolivian President was able to ban protests and deploy the military domestically, but could not counteract the USD 3 billion loss of the national GDP and the deaths of dozens of civilians.

What is driving Paz?

Answer: Paz’s focus on revitalising Bolivia’s economy clashes with the environmental protections he promised voters.

As expressed during his election campaign, Paz’s main priority is revitalising Bolivia’s declining economy. Thus far, he has been unable to reverse the rising unemployment rate, reduce the cost of living, or lower the number of more than 36% of Bolivians living below the national poverty line. By cutting gas subsidies in January, thereby increasing energy prices, and spring legislation that eased environmental regulations on mining operations, his principal strategy is directly stimulating economic activity. Law 157 was similarly intended to increase agribusiness activity, which is considered one of Bolivia’s most promising sectors but has historically been managed controversially. 

Bolivian agribusiness is largely split between two markets: the much more industrialised and profitable Santa Cruz market centred around soy and meat exports, and the family-run small-scale market in Southern provinces heavily run by indigenous farmers. Paz collaborated with Senators seen as Santa Cruz allies like Branko Marinkovic to pass Law 157 due to lacking a Senate majority, but doing so reinforced indigenous communities’ concerns that the legislation threatened constitutionally protected land. While market reforms such as his legislation may stimulate economic activity in the long-term, his political survival hinges on appeasing the over ⅓ of Bolivia’s population identifying as indigenous, and winning back their lost confidence in his leadership.

What does this mean for you?

Answer: Paz is continuing to introduce market reform to stabilise Bolivia’s economy while attempting to win back domestic support.

Paz is continuing his economic reform strategy as he introduced new legislation throughout June and July, including a new and more flexible exchange-rate system as well as a new hydrocarbon law to boost investment in natural gas production. He is also displaying an effort to win back indigenous communities through a new mining law that promotes “clean and responsible extraction methods”, hoping to reverse the criticism he faced from those communities with his spring mining regulation.

While he has already seen an almost 3 percentage point increase in approval ratings since the protests, his support remains low among lower-income voters. Furthermore, Bolivians have the lowest confidence in domestic institutions in Latin America, which Paz will have to reverse to avoid future violent protests emerging.

As the right-wing wave continues to spread through Latin America, following the recent Peruvian and Colombian elections, Paz will have more regional allies to rely on for cooperation and bilateral agreements, which could help stabilise  Bolivia’s economy. Deals like the US Drug Enforcement Administration agreement that allows their activities within Bolivia, or the March reactivation of an energy alliance with Brazil, will help Paz use other methods to stabilise Bolivia’s economy beyond domestic market reforms. This approach is likely to face less resistance from lobbying groups and will allow him to start rebuilding the economic activity he lost since April.