The Paz Estensorro Administration (1985-1989)

By contrast to Siles Suazo, President Paz Estensorro fully embraced the

neoliberal economic agenda.²⁷ Looking to overcome the congressional blockages that had hindered his predecessor and ensure the passage of his reform program, the veteran leader of the MNR formed a voting alliance with the centre-Right ADN, led by the former-dictator, Banzer. ADN’s backing ensured the

government had the congressional votes to push ahead with its stabilisation plan: la Nueva Política Económica (NPE – New Economic Policy). The ADN had proposed a similar program in the run-up to the election and so was willing to

27 One US Embassy official (interview, 2013) described his view of Paz Estensorro: ‘It was the fourth time he had been elected over a period of 35 years. (He) was in his late-70s at that point, (and) his objective was to correct the errors he had made in his three previous administrations.

It was a noble activity. By that time, he had the maturity and the experience to have figured out (things) he wished he had done differently, and to make a stab at it.’

support the government. However, they still extracted a number of concessions, such as control over state corporations. These powers were used to feed the party’s patronage machine (Gamarra, 1991: 13). The Pacto por la Democracia thus gave Bolivia’s ‘new’ politics a decidedly retro feel, both in terms of the actors involved and the clientelistic practices which sustained it. Nevertheless, the Bolivian government’s close adherence to the NPE, and the positive

macroeconomic performance it achieved, made Bolivia a model for the

Washington Consensus. Hyperinflation was brought under control, tax revenues increased, debt shrunk and modest levels of economic growth were registered (Lehman, 1999: 197).

These achievements, though, had severe social costs, as levels of poverty increased, living standards dropped and unemployment soared (Conaghan &

Malloy, 1987: 186-187). Furthermore, tin prices collapsed two months into Paz Estensorro’s term. This caused both a surge in unemployment and further drops in Bolivia’s exports. While in 1980, tin accounted for 40 per cent of Bolivia’s exports, by 1987, this figure had fallen to 8 per cent (Ibid.). This time,

opposition to the government’s policies was met with force (Mesa, et. al., 2008:

581-583). For example, as the unions moved for a general strike in mid-1985, Paz Estensorro declared a state of siege. Here, pacted democracy gave the executive a freehand to implement the NPE over social opposition. In addition to this, the government was reliant on the police to quell the societal unrest. In return for supporting this agenda, the police were guaranteed their autonomy (Quintana, 2005: 96). As discussed in Chapter 6, these dynamics were

demonstrative of Bolivia’s uneven democracy. Informal rules continued to govern relations between elite factional interests; reflected in the informal modes of exchange between elements of the state and the drug trade.

As in the case of Siles Suazo, coca-cocaine eased the pressure on Paz

Estensorro’s government. The drug trade helped to mediate the harsh societal effects of the NPE by providing employment for a large sector of Bolivian society; a fact recognised by the US Embassy in the following cables:

While accepting the necessity of continuing to pursue the traditional priority on eradication, (the Embassy’s strategy) argues for greater

emphasis on interdiction. The latter appears to have a far more immediate impact on coca by depressing prices (and implicitly

cultivation), provokes far less governmental and opposition resistance and ultimately comes closer and faster to (counterdrug) objectives. (US

Embassy La Paz to Secretary of State, 1985b)

No, repeat no, Bolivian government has been able to survive against strong and united campesino opposition (campesinos increasingly view coca cultivation as the main escape from abject poverty). (US Embassy La Paz to Secretary of State, 1986a)

Furthermore, coca-cocaine also boosted national reserves and stimulated inward investment (Conaghan & Malloy, 1994: 198; UDAPE, 1990). For example, in 1987, the President announced a tax amnesty on repatriated capital, relaxing disclosure requirements and banning investigations into new wealth brought into the country (Menzel, 1996: 11). As such, drug money flowed unencumbered into Bolivian banks, helping to stabilise the economy, augment internal investment and bolster national reserves (e.g. see Ramos, 1988).²⁸ The reforms were technically in keeping with the neoliberal orthodoxy advanced by the IMF, i.e.

relaxing regulation and capital controls. But they also indicated Paz Estensorro willingness to put economic, social and political goals ahead of the ‘war on drugs’.

His government had already sought to leverage support for US counterdrug goals for greater economic assistance (Lehman, 1999: 200). Paz Estensorro looked to reverse US perceptions that the Bolivian government was uninterested in the

‘war on drugs’ and re-establish good relations.²⁹ In collaboration with the US Embassy, the Bolivian government helped form 1986’s Operation Blast Furnace:

a landmark militarised US-Bolivian joint-operation that included the US army for the first-time in counter-supply efforts abroad (Walker III, 1994: 3).³⁰ In addition

28 The policy has clear parallels with efforts by the Burmese government to induce drug traffickers to share their wealth (see Snyder, 2006: 960).

29 As a result of Bolivia’s failure to meet eradication targets, US Congress had withheld US$9.5 million in economic and military assistance for FY1986 (GAO, 1988: 49). Funds were withheld again in FY1987, this time, US$8.7m. (GAO, 1988: 49), before US Congress became convinced of the Bolivian Government’s commitment to the ‘war on drugs’ (Gamarra, 1999a: 191).

30 US agencies distrusted UMOPAR, believing corruption was rife. For this reason, they were often only informed of the identity of targets at the last minute (Menzel, 1996: 18; Painter, 1994: 82). Through a combination of leaks and press coverage of the operation, though, traffickers were able to anticipate raids and escape before the arrival of the security forces (Malamud-Goti, 1990: 41).

to this, Paz Estensorro passed the 1988 Ley del Regimen de la Coca y Sustancias Controladas (Law 1008) in response to US concerns over Bolivia’s fragmented and incomplete laws on coca-cocaine (GAO, 1988: 55). Law 1008 established distinctions between legal and illicit coca, and brought in tough penalties for trafficking.³¹ Taken together – Law 1008 and militarisation – these elements formed the basis for counterdrug policy in Bolivia through the 1980s and 90s, and reassured the US of the Bolivian government’s commitment to the ‘war on drugs’

There was a certain tension, then, in Paz Estensorro’s approach to the ‘war on drugs’: extending counterdrug operations with the US, while balancing the reality that coca-cocaine was hugely important to the economy and, by

extension, political stability. Indeed, this tension may be identified across the Bolivian administrations of this period. Economic and political realities made cooperation in the ‘war on drugs’ unavoidable, but the terms demanded by the US ‘could not possibly have been met without destroying both the constitutional order and the economy’ (Dunkerley, 1990: 4). The web of state-narco

interactions were part of this calculus, as these networks formed part of the post-transition political order.