Not working for the Yankee dollar
IPN Opinion article
The sweeping victory of Evo Morales in Bolivia's recent presidential election marks another step back in Latin America from slow liberalization and free trade toward socialism and anti-Americanism: a few U.S. corporations may suffer a little but the real victims, as ever, will be the poor. Mr. Morales' 54 percent mandate has made the former coca farmer and grass-roots activist the nation's strongest elected leader since the end of the last military dictatorship in 1982 and has given him an unprecedented opportunity to transform the impoverished Andean country. Impoverished? Yes -- but not poor. Its energy resources are second only to Venezuela's in Latin America, with some 54 trillion cubic feet of natural gas reserves and the world's fifth-biggest oil reserves. The Mutun hill alone holds 40 billion tons of iron and 10 billion tons of magnesium which represents 70 percent of the world's reserves. Despite all this, the World Bank estimates 63 percent of the 8.9 million inhabitants live in poverty: Mr. Morales blames "neoliberalism" and figures socialism is the cure. Before Mr. Morales reforms Bolivia, he should examine how socialist policies around the world have failed to bring prosperity to the poor. Perhaps then he would understand, unlike his political ally in Venezuela, Hugo Chavez, and their hero Fidel Castro, that property rights would provide stability and free markets would enrich those millions of poor Bolivians. But that won't happen: "This movement is not only in Bolivia: Fidel in Cuba and Hugo in Venezuela are achieving triumphs in social movements and leftist policies," Mr. Morales said Jan. 3 in Caracas. Messrs. Castro, Chavez and Morales are betting their movement will spread to Peru in its April elections and that socialist candidate Ollanta Humala will cancel that country's bilateral free trade agreement with the United States. Thus poor Latin Americans see market reforms slipping away before they even grasped them. Natural resources may provide free money but specialization and exchange is the only way to generate wealth for all its participants, in any part of the world. There is no other. This system -- the market system -- creates and distributes wealth best when the property rights of all individuals are respected, meaning there is also the rule of law and respect for contracts. In respect for property rights, Bolivia's record is dismal. As in other Latin American countries, underground mineral rights in Bolivia belong to the state -- rather, its ruling cliques. Bolivia state rights include above-ground assets, such as forests. There is more. Bolivia's Congress recently increased energy companies' taxes by 32 percentage points and decreed they renegotiate their contracts signed in the 1990s, demonstrating the prevailing disdain for property rights and the rule of law. Given this background, one cannot expect much from Evo Morales. The views of his Movement to Socialism (MAS) are quite the opposite: populism, socialism, protectionism and animosity toward the market and free trade, all at odds with property rights, markets and the rule of law. Indeed, his campaign was built on the promise to nationalize all energy resources and communications and to void the more than 70 gas exploration contracts with foreign companies. He has only slightly modified his stance since. Although erroneous, Evo's position is understandable. He is an Aymara Indian -- he will be the first Indian president since Bolivia declared independence from Spain in 1825 -- who has seen very little, if any, improvement in the lives of the Aymaras, Quechuas, Guaranies and Chiriguanos over the centuries. Under the tutelage of the state, Bolivia's natural riches have been ransacked by the white and mestizo political clique that has run the country since independence. Roberto Laserna, professor of Social Sciences at the Universidad Mayor de San Simon in Cochabamba, points out that the mountains of silver in Potosi and tin in Oruro have given up their wealth without any development or betterment of the Indians. This "curse of natural resources," states that governments with large incomes from minerals tend to be oppressive because they do not need to govern by consent, raising taxes or holding elections, nor do they need a functioning economy. And whether those resources are owned by the Catholic Church, white colonialists or a socialist government, the poor remain without property rights, disenfranchised politically and economically. What could a popular leader do if he really wanted to improve the living conditions of poor Bolivians, especially the indigenous Indians? He should not succumb to pressure from activists and virtually confiscate foreign investments. Instead, he should strengthen property rights and the rule of law by honoring contracts and resolving disputes over foreign investment in a legal manner widely perceived as fair both by Bolivians and international investors. He should devolve natural resources to the Bolivians by forming corporations and giving shares to the citizens. These corporations, and not the government, could strengthen the partnerships forged in the 1990s with international firms and develop the country's basic industries and services: So far, more than a decade of half-hearted liberalization has had not much effect on average incomes. Morales now can free his country's markets and people. But this is very unlikely: Slow liberalization allowed the left to claim free markets have failed. Under Mr. Morales, Bolivia is more likely to undermine its investment conditions, renege on contracts, attack foreign capital, milk the rich (he has already promised to slap a tax on anyone with assets over $300,000), nationalize and exploit resources through state companies. This can only repeat the history of sustaining the political kleptocracy, the inefficient bureaucracy and other special interest groups with gigantic and useless development projects, to be pilfered, mismanaged and squandered, all to the detriment of poor Bolivians and Latin America in general. Mr. Morales may get voted out when his policies fail, but the poor will pay the price. Rigoberto Stewart is president of the Institute for Liberty and Policy Analysis in Costa Rica.