Carlos Mesa, Bolivia's president, is facing renewed political pressure after opponents vowed this week to continue their protests, in spite of a decision to reverse partially a controversial increase in diesel and petrol prices.

A movement of community and business groups in Santa Cruz is demanding that the government scrap the 10 per cent increase in petrol and 23 per cent rise in diesel prices decreed at the end of 2004. The ultimatum is one of a wider set of demands that also includes greater autonomy for the relatively wealthy eastern department.

“This botched agreement makes the president look weaker,” said Winston Moore, a La Paz-based political analyst.

The campaign is the latest challenge faced by Mr Mesa, a historian and journalist who took over following the resignation of Gonzalo Sánchez de Lozada, the pro-US president, in October 2003.

Last year Mr Mesa looked to have consolidated his position, winning a big victory in a referendum that backed his plans to increase state control over natural gas, the country's most valuable natural resource.

But since then the president has struggled to win congressional support for new legislation in the sector, and in recent weeks Mr Mesa has come under attack over a range of issues.

Last week he agreed to cancel a 30-year water contract for Suez-Lyonnaise des Eaux of France following days of demonstrations and road blockades in El Alto, the poor city adjacent to La Paz, Bolivia's capital.

Protesters in El Alto have threatened to target the activities of a local subsidiary of Iberdrola of Spain, and groups of farmers have blocked roads, demanding an end to efforts to eradicate coca. This week Bolivia's Congress again postponed discussion of hydrocarbons legislation and called on ministers to justify the price increases decreed last month as part of efforts to meet agreements with the International Monetary Fund.

Mr Mesa had been looking to reduce government fuel subsidies of about $30m (€23m, £16m) a year in line with an agreement to a fiscal deficit that equalled 5.9 per cent of output in 2004.

After scaling back the increase on diesel by 6 per cent, Mr Mesa said his government was “capable of listening and making concessions”. Analysts say the government had won a provisional agreement with negotiators in Santa Cruz, but this had not been accepted by protesters.

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