Bolivia - Domestic policy

Although inflation and macroeconomic instability have disappeared from Bolivia's daily life, the economy has failed to achieve sustained rates of growth. Poverty remains widespread and unemployment and underemployment are high. While President Sánchez de Lozada's challenges during his first term where clear, his tasks for the second term are more complex. In his first term, Sánchez de Lozada had to fight inflation and balance the fiscal accounts. That generated conflicts with different interest groups and forced the government to cut fiscal spending.

During his second term, the aging president will need to maintain his solid economic policies but will need to be more proactive in generating conditions for economic growth and employment creation. Pressures from different interest groups and government workers will make it difficult for the new president to balance the budget. Yet, running budget deficits will have a negative effect on the availability of credits in the domestic and foreign markets. Luring foreign investors to bring capital to generate economic activity will also be more difficult than during his first administration. Because of the slow world economic growth, mining production has fallen along with declining world prices. Political and social conflicts have hindered other economic opportunities. A recent project to build a gas pipeline from Bolivia to the Pacific Coast in Chile has been delayed for almost two years as a result of Bolivian nationalists who demand that Chile make territorial concessions to get the project done. Although the gas was going to be transported to California, having it loaded in Chilean ports that were part of Bolivia in the nineteenth century made the multibillion dollar deal impossible.

President Sánchez de Lozada will need to show political muscle to take advantage of business opportunities for his country even at the expense of alienating hardcore nationalists. Popular discontent with the economic situation will likely turn into discontent with the Sánchez de Lozada government if the economy does not grow at healthier rates in the first two years of his administration. A weakened and unpopular Sánchez de Lozada government will further fuel speculations about an early retirement for a president that will turn 77 during his last year in office.

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