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The rebellious Bolivian region of Santa Cruz took a step towards full autonomy this week, in a move that could have serious implications for the future of South America's poorest country.

Government negotiators agreed late on Wednesday to allow the direct election of regional governors, following weeks of intense protest in the wealthy agricultural south-eastern region.

Tens of thousands of residents are expected to gather on Thursday to celebrate--it had originally been planned as a meeting to declare autonomy for the region unilaterally. Santa Cruz's autonomy campaign is the latest challenge to President Carlos Mesa, who has been under pressure from both left and right since he took office following the violent overthrow of his pro-US predecessor, Gonzalo Sánchez de Lozada, in October 2003.

However the agreement could spark opposition from largely indigenous left-leaning groups in Bolivia's bleak Andean highlands, who suspect the intentions of the more free-market-oriented south-eastern region.

Indigenous protests this month forced the cancellation of a 30-year water contract signed in 1997 for one multinational company, Suez Lyonnaise des Eaux.

The indigenous groups are pressing the government to introduce draconian terms for companies such as BP, British Gas and Repsol that have invested billions of dollars in the country's gas industry.

The scale of regional inequalities, deep political differences and the weakness of the state have raised fears that Bolivia could become the first Latin American republic to break up in 150 years.

Santa Cruz leaders insist that theirs is not an independence movement and they do not seek secession. Juan Carlos Urenda, of the Committee for Santa Cruz, which has been co-ordinating the protests, said yesterday: “Decentralisation movements have been linked to separatism, but we just want to make government more efficient and democratic.”

The campaign is confident of the outcome of a national devolution referendum on April 10. “The government has to respect the rights of minorities and this department,” said Mr Urenda. “If they do not, the movement will become more radical.”

Accepting the possibility that some departments may want to proceed faster than others, civic leaders cite the example of Spain, where decentralisation allowed differences in the form of regional governments.

The protests in Santa Cruz, which have involved a hunger strike by municipal leaders and the occupation of public buildings, was sparked by a 23 per cent rise in diesel prices, introduced to comply with International Monetary Fund agreements. The government has reduced the increase to 18 per cent, but insists it must stand.

The region, which consumes 60 per cent of the country's diesel, was particularly hard hit. A backwater until the early 1950s, the land-rich department has grown rapidly, mainly on a boom in soya farming and cattle ranching.

Although only a quarter of Bolivia's 8m population live in Santa Cruz, it produces 62 per cent of the country's exports and accounts for 50 per cent of bank loans.

Santa Cruz campaigners complain that the government does not fully take into account the region's interests.

Santa Cruz's dynamism contrasts with the economic stagnation of older cities in the highlands, such as La Paz, the capital, which depends heavily on public-sector employment.

Copyright The Financial Times Limited 2017. All rights reserved.
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