Since Evo Morales took power in Bolivia at the end of January, his government has often seemed like an administration in search of an economic policy.
The approach has appeared ad hoc and contradictory. Wages of politicians and civil servants were cut, while teachers and healthcare workers were given modest rises. The government allowed hundreds of jobs to be lost by expelling EBX, a Brazilian steelmaker, for breaking environmental rules, while announcing a short-term job-creation scheme. Statements have been made by junior ministers and withdrawn by senior colleagues.
“Everything the government does is driven by political ideology,” says a western diplomat in La Paz. “The instinct of nationalism has trumped any economic plan.”
In issuing his nationalisation decree this week, Mr Morales might have been seen to introduce such a programme. But observers say he was reacting to domestic political concerns rather than kick-starting an economic strategy.
“Nationalisation was decreed in a policy vacuum, not as part of a general government plan,” says José Mirtenbaum of Gabriel Rene Moreno university in Santa Cruz. “They were looking primarily for political impact.”
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In the words of Carlos Toranzo, a veteran political analyst in La Paz, the decree “won political plaudits and drew economic questions”.
A measure of the lack of general strategising is the policy’s questionable legal status. “An arbitration claim could hinge on the fact that it was made by decree, rather than by a law in Congress,” says Ramiro Moreno, a lawyer in La Paz and a former board member of YPFB, the state energy company. “It could even be declared unconstitutional by the constitutional court.”
And although the decree had been mooted and postponed several times, it was also apparently issued without consulting foreign investors. “The first the companies knew about it was via the media,” says an industry insider. “They had no idea how radical it was going to be.”
The nationalisation appears to have been timed to win Mr Morales a breathing space by diverting attention from some controversial areas of government policy.
He had been under fire from radical elements of his own base for not intervening to save Lloyd Aero Boliviano, the heavily indebted and loss-making national airline. Cedla, an influential leftwing think-tank in La Paz, issued a report this week attacking the administration for adopting the traditional export-centred economic model and abandoning its pledge to industrialise the country.
Two days after the nationalisation decree, the government announced a modest increase in the monthly minimum wage – from 440 to 500 bolivianos (about $62.50) – far less than the 100 per cent increase that had been originally promised.
Nationalisation has also taken attention away from a ragged trade agenda. The US refuses to extend trade preferences that expire at the end of this year, which could have damaging consequences for some assembly industries. The effects of Mr Morales’ stated intention to pull out of the Andean Community and throw in his lot with Venezuela and Cuba could harm sectors such as soya production.
But if nationalisation confirms that all politics are local, the effects have been global – it is his first action in office to have drawn international attention.
The repercussions, however, have not been as damaging as they might have been. At a summit this week in Argentina, regional leaders backed Bolivia’s right to nationalise. Petrobrás and Repsol, the largest foreign investors, will continue operating in the country.
The international reaction will be further tested when Mr Morales embarks on his first big trip since taking office. He will travel to Europe next week, and plans to make his first visit to the US on his way back.
For the moment, the response has been measured. But Mr Morales may have bought himself only 180 days, the window foreign investors have to agree new contracts. As Andres Soliz, the radical hydrocarbons minister, notes, “If the negotiations do not lead to a good result, then we will move on to expropriation.”
