Guest Column

Cycle of Instability in the Andes: Bolivia, Ecuador and Peru

Drafted By: Dr. Michael A. Weinstein
Power and Interest News Report (PINR)

January 31, 2005
The core Andean states -- Bolivia, Ecuador and Peru -- form the most politically unstable region in South America today. Political instability is no stranger to the Andes -- the three states in the heart of the mountains have long histories of veering from military rule to authoritarian and quasi-democratic civilian governments, and have political cultures that encourage direct extra-legal action as a social counterbalance to formal institutional and constitutional processes. At present, each of the Andean states is in the throes of a political crisis. The immediate causes of the crises are local and the forms they take are different, yet they express the same basic and persistent social tensions, making their simultaneous occurrence an indication of region-wide problems rather than simply a coincidence.

In Bolivia, the integrity of the state itself has come into question as protests initially mounted to oppose increases in fuel costs have escalated into autonomy and secessionist movements in the country's energy rich and relatively prosperous south and east. In Ecuador, the integrity of the constitution has become problematic in the aftermath of a congressional decision instigated by President Lucio Gutierrez to remove 27 of the 31 justices of the country's Supreme Court and to replace them with others. In Peru, President Alejandro Toledo's approval rating has fallen to eight percent in the wake of an electoral fraud scandal and a raid by radical nationalist militia on a police station in the town of Andahuaylas. In each case, the major issues are surrounded by other conflicts, leading to uncertainty about each country's political future.

Cycles of stability and instability corresponding to periods of economic growth and decline have become normal in the Andean states. In a recurrent pattern, relative economic prosperity covers over underlying social tensions, which come to the surface when the economy contracts. Deep social divisions between the minority of European and mixed ancestry that controls each country's wealth and forms its political class, and the indigenous and mixed majority of peasants and mine workers are activated in recessionary times and are expressed in both direct forms of confrontation and derivative conflicts within the political class.

A cycle of instability sets in when a government fails to satisfy the economic expectations of important segments of the population, or when it fails to provide adequate security or services. In stable constitutional regimes, policy failures and reversals engender vigorous opposition within the institutional system and, in most cases, only spill outside it on the margins. In contrast, where -- as in the Andean states -- constitutional norms are not supreme and are coordinate with or subordinate to broader social norms and expectations, failures and reversals quickly spark a variety of forms of direct and extra-legal action, stemming from rapid loss of the leaders' authority with an impatient and distrustful public.

The indicators that a cycle of instability is underway are mass protest marches, road blocks, seizures of government facilities, regional rebellions, disunity within the regime and bids by the regime to exceed or expand its constitutional authority. All of those features are present in the current political crises in the Andean states.

Although cycles of instability have been recurrent in the Andean states -- indeed, it is arguable that they have become normalized and even ritualized, and function to keep the societies in which they occur intact -- they do not float free from particular historical circumstances. The present round of instability has been triggered by the failure of neo-liberal policies to produce sufficient economic growth and a broad enough distribution of income and wealth to make up for dissipation of subsidies and protectionist measures. As is the case throughout the world in states that lag in the globalization process, resistance to market reforms has emerged in the Andean region, following the pattern of traditional social divisions.

The characteristic form of opposition to globalization in South America is populism, which combines strands of socialism with community defense -- a defensive nationalism that takes the side of the poor -- "the people" -- against the rich. In the Andean states, community defense is uppermost and takes the form of direct action because the indigenous segment of the population has retained its communal bonds and solidarity, and is readily mobilized for resistance, starting at a local level, but able to rise to a national plane once the cycle of instability begins. Political opposition in the Andes is never simply parliamentary; there is an unwritten constitution that makes a place for many forms of extra-institutional direct action and normally limits their severity, stopping short of civil war, but periodically rebalancing power.

Bolivia

Andean instability has recently become most severe in Bolivia, a country of eight million people, 55 percent of whom are indigenous and 70 percent of whom live below the poverty line. The country has been long dependent on mining and subsistence farming, but, in the 1990s, large natural gas deposits were discovered in its southeastern province of
Tarija and since then have become the major focal point of a political conflict over how the resources will be developed, processed and marketed.

Like many other South American countries, Bolivia, until recently, has gone through a period of governments that pursued to varying degrees neo-liberal economic policies of fiscal austerity and privatization, especially the pro-Washington administrations of Gonzalo Sanchez de Lozada who held the presidency from 1993 through 1997, and 2002 through 2003, when he was forced to resign after a failed police revolt and a wave of strikes, blockades and demonstrations against his gas policies.

The troubles occurred in the context of an economic recession that exacerbated long standing social tensions between rich and poor, indigenous and non-indigenous sectors of the population, and relatively wealthy and impoverished regions. The success of popular resistance in ousting Sanchez de Lozada spelled the end of aggressive neo-liberal policies and the onset of a cycle of instability that had been in the making through the four years of recession.

After Sanchez de Lozada's resignation, power passed to Vice President Carlos Mesa, an independent politician and former television journalist and historian who promised social reconciliation, an end to violent repression of protests and a referendum on energy policy. The strikes and blockades ceased, and the referendum was held and passed in 2004, allowing the government to negotiate with the foreign energy companies that took over hydrocarbon development after Sanchez de Lozada privatized
Bolivia's oil and gas industry.

Mesa's uneasy honeymoon with the dissident sectors of Bolivia's society ended in December 2004, when his government acceded to demands from the International Monetary Fund (I.M.F.), which had suspended its agreements with La Paz, to hike subsidized energy prices in order to roll back a rising budget deficit. In response to announcements that the price of diesel fuel would rise by 23 percent and gasoline by 10 percent, protests were mounted throughout the country and were joined by all sectors of the population, from the indigenous poor in the central highlands to the wealthy industrial and agribusiness interests in the south and east.

As strikes and demonstrations spread and intensified through January, the general movement for rescinding the fuel price increases became a magnet attracting grievances in every quarter of Bolivian society. In Potosi, demonstrators demanded that the government hand back three hydroelectric plants to the municipality; in the coca growing region, protestors called for construction of a military police base to be halted; in the mushrooming city of El Alto, near La Paz, that is populated mainly by indigenous migrants, there were calls to reverse the privatization of the water utility; and, most seriously, in the wealthy city of Santa Cruz, a movement was underway for regional autonomy and even secession. The familiar pattern of strikes, road blocks, mass demonstrations and marches emerged full blown. True to his promise, Mesa refrained from ordering force to be used against protestors and said that he would rather resign than repress.

In order to defuse the protests, Mesa canceled the private water company's contract in El Alto and, on January 20, cut the new diesel fuel price by 13 percent and the gasoline price by 6 percent. Nonetheless, the wave of direct action did not subside, having taken on a momentum of its own, with all factions demanding a complete price roll back and left wing leaders Evo Morales and Felipe Quispe calling for renationalization of the oil and gas industry, and the right wing in Santa Cruz, which supports privatization, accelerating its move for autonomy.

With Bolivian society becoming polarized and both sides resorting to direct action, Mesa's policy of social reconciliation and moderation no longer seems tenable. Even before the fuel price increases, the country was splitting, as Congress rewrote a hydrocarbons bill to enhance state control over the energy sector and the Civic Committee of Santa Cruz responded in November 2004 by threatening to seek autonomy or to secede if the gas industry was nationalized. The present crisis has put the legislation on hold and its fate remains uncertain as Santa Cruz, now joined by the Tarija Civic Committee, seeks to realize its aims through direct action.

The revolt of the south and east has crystallized the conflict for the moment. The Civic Committee of Santa Cruz is moving forward on plans to declare a "provisional autonomous government" that would effectively separate the region from the rest of Bolivia. In response, Mesa has mobilized troops in the region. Reversing his anti-government stance, Morales, whose base is among coca growers and whose Movement Toward Socialism is the largest bloc in Congress, has thrown his support to Mesa. Underlying social tensions in Bolivia are now overt and stand out in bold relief, with the integrity of the state in question.

Ecuador

Less severe than in Bolivia, political stability in Ecuador follows the same pattern of political tensions surfacing in the wake of resistance against neo-liberal economic policies that have been instituted in response to pressures from international financial organizations. Two-thirds of the country's population of 13.7 million is of mixed Spanish and indigenous ancestry, 25 percent is indigenous and 7 percent is European (mainly Spanish); but 40 percent speak the indigenous language Quechua. Like Bolivia, 70 percent of the population lives below the poverty line, reflecting a sharp rise that occurred during the Andean recession. Large oil deposits were discovered in the country during the 1970s, supplementing its agricultural base and providing cause for conflicts over the distribution of revenues and how the resource should be exploited.

As in Bolivia, Ecuador's present cycle of instability was triggered by the effects of policies aimed at satisfying international lenders in a period of economic stress. In Ecuador's case, the precipitating cause was President Jamil Mahuad's decision in 2000 to substitute the U.S. dollar for the local currency, the sucre, which affected the poor adversely but left the rich, who had a large portion of their assets in dollar investments, untouched. The "dollarization" policy was met with protests, culminating in a demonstration by indigenous groups in the country's capital Quito that security forces refused to contain and that resulted in the seizure of the National Assembly building by protestors who mounted a successful coup, forcing Mahuad to resign in favor of Vice President Gustavo Noboa.

Noboa, a member of the right-center Social Christian Party, continued the dollarization policy and failed to satisfy demands for economic relief. He was replaced in the 2003 elections by retired Colonel Lucio Gutierrez who had participated in the coup against Mahuad and who campaigned on a populist platform with the support of left and center-left parties that gave him a razor-thin majority in the legislature.

Gutierrez soon found that he was unable to satisfy the demands of the left for a rollback of neo-liberal policies. Under pressure from the I.M.F., he cut subsidies on food and cooking oil, is planning to scrap Ecuador's national health program, and has maintained the dollarization regime. As a result, Gutierrez has lost support from his left coalition and has had to govern through patchwork alliances crafted from Ecuador's fragmented political parties.

Lacking cohesiveness and credible leadership, the left has not been able to mount effective opposition to Gutierrez and his neo-liberal policies; resistance, instead, has come from the right. In November 2004, the right wing opposition, led by the Social Christian Party -- the most coherent formation in Ecuador's legislature -- moved to impeach Gutierrez for misuse of public funds. The attempt failed when Gutierrez was able to mobilize left support and reconstitute his original coalition, which deemed the Social Christians a greater threat to its interests than the president.

In retaliation against his opponents, Gutierrez, in December, convinced Congress to replace 27 of the 31 justices of Ecuador's Supreme Court, although it has no constitutional authority to do so. The ousted justices are affiliated with the Social Christian Party and their replacements are connected with the populist Roldosista Party (P.R.E.) and National Action Institutional Renewal Party (P.R.I.A.N.). Gutierrez defended the revision of the Court as a "bloodless revolution" against a "corrupt elite" and a transitional step toward a constitutional reform that would depoliticize the selection of justices by taking the power to appoint them away from Congress and giving it to a body of non-partisan civic groups.

Gutierrez's extra-constitutional coup against the Supreme Court provoked a predictable backlash from the opposition. The ousted justices have formed a court in exile and, more importantly, the Social Christians have widened the conflict to include issues concerning security and distribution of public funds, pressing their demands through direct action. In Guayaquil, Ecuador's largest city, Social Christian mayor Jaime Nebot organized a mass march of 250,000 people on January 27 to demand that the central government meet its obligations to fund security, health and sanitation services. In response, the P.R.E., led by former president Abdala Bucaram, who fled Ecuador to Panama to escape prosecution for corruption, mounted a counter-demonstration, in which 10,000 people participated, in support of Gutierrez and aimed at preventing a Social Christian "coup." Although the demonstrations were kept apart by large contingents of security forces, the conflict has overflowed institutional confines, setting the stage for a downward spiral in the cycle of instability.

Although, as in Bolivia, the major threat to Ecuador's stability currently comes from the right, the left is likely to mobilize more effectively as Gutierrez moves to expand privatization of the oil industry by making the national oil company a "mixed capital" enterprise with private and public shareholders. Gutierrez acknowledges that his plan will face opposition from trade unions and analysts predict that it will have rough going in Congress, where a populist majority looks forward to 2006 elections. The kind of general conflict that has broken out in Bolivia is still incipient in Ecuador, but the conditions for a breakdown of authority are forming.

Peru

Whereas in Bolivia, the state itself is in question, and, in Ecuador, constitutionalism is threatened, in Peru, it is only the administration of President Alejandro Toledo that is problematic. With a population of 27 million that includes a 45 percent indigenous plurality, with people of mixed ancestry (37 percent) and European ancestry (15 percent) composing most of the rest, Peru's poverty rate of approximately 50 percent is lower than those of the other core Andean states. Its economy is also more balanced than those of its neighbors, though it is still in great part dependent on resource extraction, and it has gone furthest on the path of market reform.

During the 1990s, Peru was governed by the regime of President Alberto Fujimori, who assumed office in 1990 after the failure of the center-left administration of President Alan Garcia to curb hyperinflation, which reached 7,650 percent in 1990. After having endured Garcia's economic mismanagement, Peruvians were willing to accept aggressive neo-liberal policies that included fiscal austerity and large scale privatization. Institutional opposition to his policies was eliminated in 1992 when Fujimori dissolved Congress and changed the country's constitution to give himself more power, paving the way for a period of authoritarian rule.

By 2000, the neo-liberal push was grinding to a halt with the onset of the Andean recession, and Fujimori had lost his popular support as a result of bribery scandals and evidence of fraud in his election to a constitutionally questionable third term. In the face of popular resistance, Fujimori resigned and fled Peru for Japan to escape corruption and war crimes charges stemming from his counter-insurgency efforts against the Maoist Shining Path guerrilla movement, paving the way for an election in 2001 that brought the pro-Washington neo-liberal Toledo to power.

Toledo restarted the neo-liberal push, but met with populist opposition in 2003, when a wave of strikes in the public and agricultural sectors of the economy broke out, marked by road blockades throughout the country. Toledo responded by declaring a state of emergency, which has since been lifted except in areas where the resurgent Shining Path is active.

Since the 2003 disturbances, Toledo's popularity has plunged, having now fallen to an eight percent approval rating due to an array of sex and corruption scandals, an armed challenge to state authority from the extreme nationalist right and credible charges of electoral fraud. The institutional opposition has called for Toledo to step down, but his hold on the presidency does not seem to be immediately threatened because there is no strong figure to serve as an alternative to him and Peru's economy has picked up (exports hit a record $12 billion in 2004 and the country's budget deficit is low compared to its neighbor's, its monetary reserves have increased and its inflation rate is under control).

Despite Peru's relative economic health, the same populist pressures for greater public sector spending and broader income distribution that sparked the 2003 disturbances remain in place. In light of Toledo's plummeting popularity, it is far from certain that his neo-liberal policies will be maintained after the 2006 presidential elections, in which the center-left has an opportunity to regain power. Opposition to market reforms has emerged beyond the revolutionary Maoist guerilla movements and Peru is moving closer to being drawn into a cycle of instability.

A deepening of political conflict began on December 31, 2004 when ex-army major Antauro Humala and 186 members of his Etnocacerista Movement seized control of a police station in the town of Andahuaylas. In an ensuing gun battle with government security forces, six people died and Humala was eventually captured.

Humala's aim is to form a nationalist indigenous movement that will take control of the state -- by force of arms if necessary -- and take back control of Peru's economy from foreign investors. Financial Times correspondent Hal Weitzman quotes Professor Wilfredo Ardito of Lima's Catholic University as estimating Humala's support at 28 percent of Peruvians: "Poor and excluded Peruvians see Humala as an alternative. And particularly in the south, he also shows a lot of support from the middle class, who feel that all the important decisions are made in Lima." Ardito does not believe that support for Humala necessarily extends to the radical program of his movement; he is a symbol of gathering discontent and dissent.

The Andahuaylas incident reverberated in Peru's political institutions when the center-left National Unity coalition mounted an effort in Congress to censure Prime Minister Carlos Ferrero and Defense Minister Roberto Chiabra for their negligence in failing to prevent the attack. Falling short of the 61 votes necessary for a no-confidence declaration, coalition forces were able to muster a majority of 43-42 with 13 abstentions.

As the censure battle unfolded, polls showed that 59 percent of the public favored Toledo's immediate resignation or removal from office by Congress. The National Unity coalition quickly announced that it would issue a formal request for Toledo's resignation, to which the President responded by calling for social peace and promising to reshuffle his cabinet.

Toledo's position has been severely weakened by accusations of sexual misconduct, bribery scandals and, most importantly, charges of massive electoral fraud. While he was dealing with the effects of the Andahuaylas incident, a police investigation found that 78 percent of the 520,000 signatures that Toledo gathered to place himself on the presidential ballot in 2001 were made up. A judge has already placed Toledo's sister under house arrest for running a "signature factory" and the President has vowed to cooperate with the investigation.

Toledo will probably be forced to resign if his direct involvement in the signature fraud is proven, but even if he slips through the legal thicket, he will be a lame-duck president, struggling to maintain his hold against a refractory Congress and adverse public opinion, resulting in deflation of his authority.

Economists believe that Peru's governability crisis will not severely impact its export-driven economic system in the short run, but could slow or reverse the country's economic policies and retard foreign investment if a cycle of instability takes hold and especially if populist political forces become ascendant.

Conclusion

Political instability has been the norm rather than an exception in the three core Andean states. With societies deeply divided by class, region and ethnicity, the values of constitutionalism and indirect institutional action have never taken root in Bolivia, Ecuador and Peru. In their stead, direct action has become the means by which readjustments in the balance of power among social groups have been effected.

The present cycle of instability in the Andes has a common origin in the strains created by neo-liberal policies in a period of economic recession. Since the Andean states are dependent on foreign financing of their debt and foreign investment for the exploitation of their natural resources, their leaders have been constrained to make concessions to the I.M.F. and World Bank, even when they were committed to satisfying popular demands for social spending. Mesa and Gutierrez have suffered crises of authority when they angered their constituencies by complying with I.M.F. demands to cut subsidies on staples. Although Peru has fared better with international financial organizations, Toledo has faced similar pressures and now they are intensifying with the appearance of support for right wing radical nationalism.

The political forces in the Andean states are so complex that it is difficult to predict how the cycle of instability will play out in each case. In Bolivia, populist pressures in the indigenous regions have gained strength at the same time that secessionist tendencies in the wealthier and pro-market south and east have surfaced, eliminating room for Mesa's moderate policies to be effective. In Ecuador, severe partisanship overlaid on regionalism has forced Gutierrez to build tenuous ad hoc coalitions in order to govern. In Peru, armed resistance, though still marginal; halting progress on social services and broader income distribution; and revelations of corruption and electoral fraud have drained Toledo's authority.

Although the outcomes of the cycle of instability cannot be predicted in detail, it is likely that the period of aggressive neo-liberalism has come to an end in the Andes. The question now is how deep the inroads of populism into market reform will be, and how pro-capitalist interests will respond to them. At the very least, civil conflict is a likely scenario in the three core Andean states.

As the Andean states work through their cycle of instability, Washington is pushing Ecuador, Peru and Columbia to sign a free trade agreement as part of its strategy of instituting its plan for a Free Trade Area of the Americas in piecemeal steps. The recent bout of Andean instability has not yet derailed the agreement, but, even if it is signed (disputes on agricultural goods and treatment of foreign corporations have yet to be resolved), its effectiveness would be in question were the Andean states to take a populist turn. Washington is not pleased with developments in the Andes, but there is little that it can do about them.
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Report Drafted By:
Dr. Michael A. Weinstein
http://www.pinr.com/

Please visit the following analysis that places today's analysis in context:

"Testing the Currents of Multipolarity"
http://www.pinr.com/report.php?ac=view_report&report_id=246


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