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BOLIVIA’S MOVEMENT TO A LEFTIST GOVERNMENT

 

Dr. Antonio Morales Pita, DePaul University

Anavelia Mauricio, Graduate Student of International Studies, DePaul University

   

With this paper, Cubanálisis-El Think-Tank continues the publication of several monographic studies about Latin American countries, as a contribution to underestand the context where Cuban international politics take place.

 

Introduction

 

Bolivia is a country that has been plagued by wars, weak governments, and military coups. After obtaining independence from Spain in 1825, the country was inundated by various wars with other Latin American countries and economic instability. The country was able to maintain prosperity with political and economic stability for a small portion of the late 19th century; however, the stability proved to be short. The prosperity brought about a small class of social elites that gained control of economic and government policies resulting in huge income disparities between them and the indigenous population. The indigenous population, which is the majority of Bolivia’s population, remained oppressed and was denied access to any economic, educational, or political participation for most of the 20th century. Discontent among Bolivians created an unstable political environment leading to various military coups up until 1982. From 1982 until 2005, the government returned to civilian rule and elected leaders attempted to use free market principles to improve its economic and social shortcomings.  However, civil unrest due to its attempt to eradicate the coca market and a gas exporting project led to two presidential resignations. 

 

During the 2005 elections, Bolivia elected Bolivian Indian activist Evo Morales of the Movement Toward Socialism (MAS) party. Since his elections, Morales has promoted the coca industry as well as the nationalization of important industries. Government policies have created economic growth, and the government profits have been invested in social programs like education to empower the indigenous population. While economic and social progress has been positive, the political situation could hinder further growth in the country.  Also, propaganda in education programs and state-controlled media could hinder individual freedom of thought limiting social progress as well. Economically, Bolivia has cut important ties limiting its access to the global trade market. The government also seems to be becoming extremely far-left with its policies, and it has relied heavily on its political ties to Venezuela and Cuba.

 

The Cuban economy has been in shambles for decades. It could survive during three decades thanks to the Soviet Union subsidies, fell to unimaginable levels during the last decade of the 20th century, and as of the beginning of the 21st century it has been supported by the Hugo Chavez’s government. If any of the two countries were to suffer from a catastrophic economic downturn – which could be triggered by Fidel Castro’s death – Bolivia will be heavily impacted on all political, social, and economic components of the country. Its recent problems with the United States could also have a negative impact on foreign aid and special trade agreements. Therefore, current growth and development will not likely be sustainable in the long run because protectionist policies will limit trade and foreign direct investment, leading to the continued failed development of the country.

 

The objective of this research paper is to prove that there are political, social, and economic factors explaining the movement to the left in Bolivia. The first section of this paper will analyze the political history, its extreme right policies and disregard for its indigenous population, which led to the rise of populist leader Evo Morales and his socialist party. The second section will analyze social progress by looking at the improvements and limitations of its investments in social welfare programs. The final section of the research will look at economic policies and its shift from neo-liberal free trade to the protectionism and nationalization of important industries and the short-term and long-term impacts of this shift. 

 

Section I - Political History

 

Bolivia is a country rich in natural resources and cultural diversity, but it has a history plagued by political instability, persistent corruption, extreme poverty, large income disparities, and regional and ethnic tensions. Weak political institutions have allowed the country to shift from authoritarian to extreme right and extreme leftist political influences. For this analysis, we will focus on 1982 to present, which is the period under which the country’s civilian rule was reestablished and maintained. 

 

The democratic rule of the 1980s was plagued by economic troubles because of major external shocks affecting its export prices and severe internal problems with hyperinflation.  In the 1985 elections, Paz Estenssoro was selected to serve a fourth term as president. When he took office in 1985, economic output and exports had been declining for several years. Its problems with hyperinflation meant prices grew at an annual rate of 24,000% (US Department of State). In 1985, Bolivia became the first Latin American country to adopt austere economic policies using “neo-liberal” reforms in attempt to stabilize their economy and stave off hyperinflation (Ribando 2007).  

 

Bolivia’s government was making a major attempt to maintain and develop its democracy, consolidate macroeconomic stability, and carry out structural reforms designed to open up the economy and raise economic growth and the well being of the population. During the 1990s, related reforms opened up the country’s natural gas industry and other state-owned industries to foreign direct investment. The government also made an agreement with the US to eradicate coca production. Bolivia is a major producer of the coca leaf, which is a main ingredient in cocaine but also produced for various traditional uses among the indigenous population. The government’s attempt to decrease cultivation by 50% as agreed with American created economic hardship on many coca-growing regions which were mainly indigenous. This discontent led to a rise in coca growers’ trade unions and the creation of the Movement Toward Socialism (MAS) party (Ribando 2007) which would arise to power when another economic downturn would create civil unrest. 

 

By 2000, large portions of the Bolivian population believed pro-market reforms had failed to create any economic and social improvements.  It also became very skeptical of privatization, and obtained a very anti-globalization sentiment especially with the continued US pressure for coca eradication. Violent protests broke out in October 2003 when the government proposed the export of natural gas through a pipeline to Mexico and California that ran through Chile, a country viewed as an adversary after they lost land to it with the War of the Pacific. Adding to the anger was the continued sentiment of the economic marginalization of the poor through government budget cutbacks and proposals to raise taxes (Veillette 2005). The political protests led to the resignation of President Gonzalo Sanchez de Lozada whom had just been elected 15 months earlier.  His vice president, Carlos Mesa, became president but his term was also short lived as continuing street protests in 2005 led to his resignation. Those protests were in response to the approval of a law that would establish a 32% tax increase on hydrocarbon production (U.S. Department of State). He was replaced by Eduardo Rodriguez, the head of the Supreme Court, and he called for elections within six months.

 

On December 18, 2005, Juan Evo Morales Ayma of the MAS party was elected president with an overwhelming 54% of the vote (U.S. Department of State). As an ethnic Aymara, Morales was the first president to represent the indigenous majority. During his campaign, he had been very critical of neo-liberal economic policies implemented by government over the past two decades. He promised to alleviate poverty, empower the indigenous population, and nationalize hydrocarbons. Considering all the social and economic ailments of this political institution, it is easy to see why he was able to win the election. Morales was quick to act on his promises. In May 2006, he issued a decree nationalizing the hydrocarbons sectors. An attempt to fulfill another campaign promise was soon carried out by securing the passage of legislation creating a special assembly to draft a new constitution. The new constitution would increase the recognition and participation of the indigenous and other traditionally excluded groups in the political and cultural life of the country. However, the assembly had been in a political deadlock and the constitution was not enacted until 2009 after Morales won his re-election. On January 22, 2010, President Morales declared Bolivia to be a “pluri-national” that guarantees equality and justice for all. He proved this by appointing 10 female ministers out of the 20 for his new cabinet (Rosario 2010). Morales also hopes to gain greater state control of all its natural resources like its natural gas, and use it to continue to fund his social programs.

 

Section II - Social Progress

 

Bolivia is one of the least developed countries in South America, where 2/3 of the population live in poverty (many are subsistence farmers). The new leftist-government has attempted to help the country create social progress.  The government has invested in education and health programs to reach the usually excluded majority population. This helps create not only equality to help the indigenous that have suffered for decades by the government’s lack of interest in their interests, but it is also improving human capital that could help improve its economic conditions in the future. It is quite a shift from the historical exclusion of the indigenous population which makes up more than 60% of Bolivia’s population and speaks primarily Aymara and Quechua. For most of its post-colonial history, only Spanish-speaking whites and mestizos held ministerial or judicial positions, positions of leadership in the armed forces, or any type of high-level public office (Zibechi 2005). The indigenous population had limited rights or adequate access to health and education. In education, for example, approximately 90% of the children attend primary school but often for a year or less. The literacy rate is lowest rural areas ("BACKGROUND NOTE: BOLIVIA," 2009).

 

Under President Morales, a number of rural and urban areas have been declared “illiteracy free” but the level of literacy is often quite basic, restricted to writing one’s name and recognizing numbers. Morales has also invested in various welfare programs to extend healthcare and access to education to the rural regions, or more specifically the indigenous populations. The nationalization of various important economic industries has provided the capital needed to invest in such programs. While economic stability and growth had been maintained before Morales held office, the economic growth had failed to produce social well being for the population. There was no “trickle down” effect that was expected from its free market, neo-liberal policies. In fact UN data demonstrates a 2% increase in inequality from 1997-2002. A small increase in a 5 year period but it helps provide an understanding for the frustration of the 65.2% of the population waiting to reap the benefits of capitalism (UNDP, 2009).  Now, under Morales, the government is directing money to promote the social well-being of its people. Below is a table with social indicators for Bolivia to see how much progress has been created with the leftist-government in areas of human development.

 

 

Table 1: Bolivia Social Indicators

POPULATION

1999-2001

2002-2008

Total Population,
mid year (millions)

9.2

9.7

Growth rate
(% annual average for period)

2.0

1.9

Poverty (% of population)

62.7

65

SOCIAL INDICATORS

 

 

Public Expenditures

 

 

Health (% of GDP)

4.3

6.4

Education (% of GDP)

6.4

18.1

Net primary school enrollment

 

 

Total (% of age group)

95

108

       Male

95

108

       Female

96

108

Access to improved water

 

 

Total % of population

85

86

Immunization Rate
(% of children 12-23 months)

 

 

      Measles

64

81

Life Expectancy

65

66

Infant Mortality

54

46

Source: World Bank Development Indicators Database, 2006 and 2009

 

 

The two periods represent the period before Morales took office and the one after.  Changes in human development have improved but the changes have been minimal. The biggest change is the increase in social programs like health and education.  The largest increase in government spending has been in education. This is due to President Evo Morales objective to include the majority that has primarily been excluded from receiving a decent education. He has even suggested a dual-language program so that indigenous children are taught in their native tongue. The enrollment in primary education has, according to the World Bank, increased to over 100 percent. Such an increase creates some skepticism but enrollment was relatively high before so it may be possible. Such social incentives by the Morales administration are beneficial for the country, and could help improve human capital for future economic efficiency. Still, despite large investments in social welfare programs, Bolivia still cannot decrease the percentage of population living in poverty.  According to the table above, there has actually been a slight increase in poverty levels. 

 

While investment in social programs like education and health care are a much needed remedy for the progress of the country, its propaganda used education reform and state-controlled media may be an impediment. Extreme-leftist policies where only certain views are expected of its population limit individual freedom of thought which can limit social progress in the long run. There is also the continual civil unrest because of tensions between the central and west regions, and its wealthy eastern provinces. The eastern provinces have been placing a strong opposition to Morales socialist policies, and have demanded more regional autonomy. The tensions among the civil society could also hinder social progress if it creates economic and political instability that limit government spending in its social welfare programs. The slowness of social programs to materialize into actual social progress could be another obstacle if it continues to frustrate the indigenous population, adding to future political unrest, but for now President Evo Morales remains a hero to the majority of the population.

 

Section III - Economic Progress

 

As mentioned before, Bolivia’s return to democratic rule in the 1980s also led to the implementation of various neo-liberal policies by the government.  It was an attempt to improve the economic, social, and political stability of the nation as well as gain access to the international market. More importantly, to create ties with the hegemonic power that is the United States. Bolivia followed the Washington Consensus model by its privatization of nearly all of Bolivia’s state-owned industries. It allowed foreign direct investment, and sold its natural resources to foreign-owned companies. However, this aggressive push towards opening up its economy only benefited a tiny minority of large business owners, and the working majority suffered (Fuentes 2005) which created large income disparities. While gross domestic product growth averaged 3.5% from 1990 to 2000, the country remained highly dependent on foreign aid, and it had an extremely high debt/GDP ratio. Then, its lower economic growth from 2001 to 2002 created the view that globalization and free market economic policies did not work because of its inability to produce any improvements in its social well-being (Ribando 2007).

 

Under the current leadership of President Evo Morales, government economic policies have been exactly the opposite of those pursued twenty years earlier. The country had an economic growth rate of 4% in 2004 and 2005 which allowed him to capitalize on the nationalization of the hydrocarbon sector (Ribando 2007). The revenue that now belonged to the state allowed Morales the income to invest in the country’s infrastructure, and begin to fulfill some of his campaign promises. Apart from the nationalization of the hydrocarbon sector, he expropriated some large international companies, including the telecommunications Entel Company and the tin smelting company Vinto. Foreign energy firms were given six months to sell at least 51% of their holding to the state and negotiate new contracts or leave the country ("BACKGROUND NOTE: BOLIVIA," 2009).In 2006, he laid out an ambitious five-year national development plan to increase economic growth, create jobs, and reduce the poverty level below 50%. The most controversial components of the plan is the nationalization of the gas sector, the industrialization of the coca leaf for licit uses, and enacting large-scale land reform (Ribando 2007). 

 

Such overly ambitious leftist policies may have had some positive economic outcomes, but problems particularly in the long-run are also becoming evident. The positive outcomes from the government’s economic policy occurred mainly during his first term as president as Bolivia continued to show economic growth and decreased unemployment rate. The GDP growth was at 6.1% in 2008 compared to 1.9% in 2003, and the unemployment rate of 8.5% in 2009 compared to 11.4% in 1997.  The country was also able to bring down its 14% inflation rate in 2008 to 4.3%in 2009 (CIA, 2010). Bolivian exports were approximately $6.8 billion for 2008, up from $652 million in 1991. Imports were $4.9 billion in 2008. Bolivia enjoyed an estimated $1.9 billion trade surplus in 2008("BACKGROUND NOTE: BOLIVIA," 2009).However, current economic problems such as the reduction in GDP growth for the current reporting year may pose a threat to the economy and social well being of the country. The country needs to maintain a GDP growth of 4 to 5 percent per year if it is going to make any gains at reducing poverty through social programs and job creation (Arias and Bendini 2006). Projections by most business and economic sites predict a continued low GDP growth of around 3% for the next few years.  Below is a table that illustrates Bolivia’s economic indicators, and exemplifies the changes that have occurred since the protests of 2003 that led to the rise of Evo Morales to the present or most current statistics: 

 

Year

GDP - real growth rate

Rank

Unemployment rate

Rank

Inflation rate

Rank

2003

2.50 %

127

7.60 %

121

3.30 %

107

2004

3.70 %

112

11.70 %

82

4.90 %

144

2005

4.10 %

115

9.20 %

81

5.40 %

146

2006

4.50 %

120

8.00 %

81

4.30 %

119

2007

4.60 %

122

7.80 %

90

8.70 %

178

2008

6.10 %

57

7.50 %

96

14.00 %

183

2009

2.80%

68

8.50 %

97

4.30%

131

                          Source: CIA World Factbook

 

The table shows the decrease in GDP growth which as stated above is likely to continue to show a low GDP growth rate if current policies continue. The unemployment rate has also shown a slight increase which continues to show the weakness in the government’s objectives to improve the economy to create jobs, markets, and opportunities for the Bolivian population. The main economic problems of Bolivia lay within 1) the business environment it is creating with its greater state control of the economy and certain business sectors and 2) the political ties it is creating with Cuba and Venezuela.

 

According to the Latin Business Chronicle, Bolivia is considered the fourth-worst place to do business in Latin America. It reports that this business climate has led to a significant decrease in foreign direct investment which had a 40 percent decline from 2007 to 2008. FDI is generally believed to promote economic growth in the recipient country by increasing total investment and improving efficiency through the introduction of new technology and better management practices. Bolivia does not have the technological or financial capacity to develop if FDI continues to decrease. The chart below illustrates the extreme decrease that can occur if businesses feel a country is unstable. The civil unrest that occurred prior to Evo Morales election in 2005 impacted the FDI which was in the negative field that year. While this chart shows an increase after Morales election, his current economic policies have led to another decrease in FDI. Foreign direct investment (FDI) inflows fell by almost 50% year on year to US$207m during the first nine months of 2009 which coincides with the current concerns over nationalization of key industries, and my even also be due to the strained political relations with the United States. After all, political ties are important and in economics, you want to have more trading partners than less.

 

                                             Chart 1: Bolivia’s FDI Inflows

 

https://www.fdi.net/country/images/bolivia.jpg

 

Apart from expelling a US diplomat and the Drug Enforcement Agency from Bolivia in 2009, political ties with Cuba and Venezuela have also strained its relations with the United States.  Since Bolivia has been one of the largest recipients of U.S. foreign assistance in Latin America, and has received trade preferences from the U.S., it really cannot afford to be so hostile towards such a great political economic power.  Especially considering all the economic assistance programs U.S. has provided, including the 2006 $16.5 million in Child Survival and Health (CSH) funds and 2007 $14.7 million to support health programs, HIV/AIDS programs, nutrition and vaccination programs for children, the Amazon Malaria Initiative, and Avian Flu initiatives (Ribando 2007). 

 

Bolivia’s bold actions against such a strong hegemonic power are due to the fact that the real threats to the country’s economy would lie with other countries like Brazil and Argentina because they are the Bolivia’s biggest recipient of gas exports.  Brazil, in particular, has many interests in Bolivia. Petrobras, the Brazilian state-owned giant, controls 25% of the natural gas reserves in the nearby Tarija districts. The Brazilian company also owns the pipelines for exporting gas to Brazil and it owns two of Bolivia’s petroleum refineries (Zibechi 2005). According to the Business Monitor International, the Bolivian government had announced it would boost investment in its oil and gas sector to boost output. This is likely an attempt to keep the region’s biggest exporter demand up because the economy heavily relies on this sector. However, as President Evo Morales’s nationalization drive in certain sectors to increase state revenues may undermine demand from the market. Brazil continues to wean itself off its reliance on Bolivian gas exports in favor of Liquefied Natural Gas (LNG) which was partly in response to Bolivia’s 2006 move to nationalize energy reserves and raise the price it charges to Brazil. Since there has been a slight decline in demand from Brazil, Bolivia looked to Argentina to replace its demand, and it has agreed to triple imports of gas over the next twenty years starting in 2010. Also, Brazil is contractually obligated through 2019 to purchase a minimum of 20 mn cm/d, which means that a total collapse in market demand is very unlikely. So, it provides an economic safety net that will keep its economy from suffering any catastrophic collapse. But as mentioned earlier, it still will not provide the overall GDP growth rates necessary for social and economic development.

 

Conclusion

 

While President Evo Morales and his MAS party maintain strong support from the Bolivian population, its ability to maintain the political, social, and economic progress of the country with extreme leftist policies is not likely.  Politically and socially it appears to be implementing necessary reform, but it must refrain from going too far-left with its policies to prevent civil unrest between the central and western provinces and its eastern province counterparts. The close dependence on Chavez’s government, which has helped the Bolivian government, may turn to be detrimental if the Venezuelan economy continues experiencing serious economic issues. This is important when looking at it from a social perspective because tensions between the different factions could create political and social instability, which may hinder its objectives towards social progress.  The actions of the government must not alienate one group while incorporating another.  The point is to have an inclusive, educated, and active civil society that can create important contributions to the development of the country.  If the country cannot work together socially, then both the political and economic spheres will also continue to be unstable. Such social instability provides a negative environment for business. Bolivia cannot afford to create an unhealthy business environment because that will create a further decline in foreign and domestic investments into its sector. 

 

Also, the government does not have the capacity to efficiently run important natural resources. Mistakes in state-run economic plans could plunge the country into an economic downturn. From the perspective of investors, the instability may create a strong hesitance to invest their money for predictions or speculation of loss of profit.  Speculation alone can put a country in an economic downturn. Other resource rich developing countries that have attempted to nationalize import industries have at some point suffered economic hardships even if they had several years of positive growth.  Alternate changes from growth to stagnation lead to a stagnate state of development.  Currently,the Bolivian government’s socialist policies have had negative effects in the key mining and hydrocarbons sectors. Despite an economic surplus and revenues in the past two years, a lack of investment and exploration has led to declines in both mineral and natural gas production. 

 

It is also important to look at the situation in Bolivia from a political perspective.  Politically, Bolivia cannot afford to break ties with the United States because the United States continues to provide large quantities of money through investments and assistance for the Bolivian government and its economy. Such benefits have allowed Bolivia to continue its growing social welfare programs. A clear example of how political hostility can affect the economy is the suspension of trade benefits by the United States with Bolivia. The United States is a powerful player in the global economy, and future decisions to place pressure on the Bolivian government through economic sanctions because of continued hostilities could have a detrimental effect on the country as a whole.  While Brazil and Argentina provide an economic safety net in the gas exporting industry, it would still not create the necessary economic growth that would allow Evo Morales to reach all his social and economic objectives. Also, the country has become heavily reliant on Venezuela and Cuba. Such reliance makes it susceptible to severe developmental setbacks given the political, social, or economic downturns within either of those two countries. Therefore, the government of Bolivia should keep itself open to negotiating with other countries instead of closing important doors with access to necessary funds that would help the country move forward. 

 

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