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The Political and Economic Crisis in Bolivia
On 26th June, a column of soldiers and armoured vehicles led by the now dismissed and arrested Army Chief, General Juan José Zúñiga staged an attempted a military coup against the Government of President Luis Arce in Bolivia. The event lasted for around five hours and saw an armoured vehicle attempting to smash through the palace gates at the Plaza Murillo which houses the main Government buildings including the Presidency and the Congress. It ended after President Arce issued a video message rallying citizens for support and after a brief stand-off between President Arce and General Zúñiga, leading to the latter’s arrest. General Juan José Zúñiga even claimed that it was President Luis Arce who had instructed him to organise the attempted coup, to boost his popularity, which the President summarily dismissed. President Arce immediately appointed General Jose Wilson Sanchez as the new Army Chief. The coup attempt received international condemnation, with regional leaders declaring the General’s actions unconstitutional. Leaders from Chile, Ecuador, Peru, Mexico, Colombia, and Venezuela condemned the attempt and urged the upholding of democracy.
While Bolivia is no stranger to coups, the recent attempt can be seen in the context of Bolivia’s underperforming economy and a profound division within the ruling party, the Movement Towards Socialism (MAS). Bolivia is undergoing an economic crisis with high inflation, low employment and a shortage of essential commodities such as fuel, consumer goods and a low foreign exchange reserve. The political fissure between a faction of the MAS led by former President Evo Morales and another led by current President Luis Arce has led to difficulties in administration and an inability to provide relief from the economic crisis.
In this regard, this paper examines the reasons behind the attempted coup which can be traced to the growing political fissure in the MAS and the deepening economic crisis in Bolivia.
The Presidency of Evo Morales
To understand the political fissure within the MAS[i]and the recent economic crisis, it is necessary to retrace it to the Presidency of Evo Morales. Evo Morales won the Presidential elections in 2005, 2009 and 2014 which cemented his position in the political landscape of the country[ii]. However, these Presidential terms should not be seen as mere political victories but in the larger context of social movements in Bolivia where racial, economic and political differences are dominant. Evo Morales’ Presidential terms embarked on a financial programme to benefit the indigenous people, coca farmers, and the informal sector. He proceeded with improving Bolivia’s infrastructure and engaged in generous welfare schemes, mostly financed by revenue generated from the export of natural gas. This resulted in a substantial poverty reduction, increasing Bolivia’s financial reserves. Bolivia’s economy depended on the export of natural gas and other primary resources and after becoming President in 2005, Evo Morales nationalised the hydrocarbons sector which significantly boosted the state's resources and encouraged its expansion. However, the economic growth was short-lived as the country failed to economically diversify and was too dependent on the export of natural gas and other primary resources.
Since 2014, Bolivia’s economy began faltering as its export revenue fell by one-third due to reduced international prices for natural gas[iii]. Since then, it has been difficult to revive and diversify the economy. Instead, the Bolivian government attempted to compensate with an expansive public investment program, unaware of the looming economic disaster[iv]. Public investment increased, putting pressure on the already strained current expenditure. These investments did not yield long-term profits due to several inefficiencies such as a surge in cost of operations and low returns. Private investment did not grow as much, and the sectors that benefited the most during this period were imports and credit consumption. This contributed to a weakening currency, trade imbalance and a balance of payment crisis. Hence, Evo Morales’ Presidential term from 2014 till the elections[v] in 2019 faced a growing economic crisis and public discontent.
The onset of the Political Rift within the MAS
Challenges notwithstanding, Evo Morales, sought a third term in October 2019, winning under allegations of electoral fraud, that ignited riots killing 36 people[vi]. Facing mounting pressure from the people, the opposition and the military, he resigned leaving behind a political vacuum, and paving the way for conservative leader Jeanine Áñez to assume the office as an interim President. After a brief period under the interim Presidency of Jeanine Áñez which witnessed its share of political violence in a deeply divided country, elections were held in October 2020 resulting in a comprehensive victory for the MAS under the leadership of President Luis Arce[vii]. President Arce was the former Economy Minister and there were expectations in recalibrating the faltering economy of Bolivia.
The seeds of a political fissure between President Luis Arce and Evo Morales were already sowed in the backdrop of the 2019 elections which gradually widened owing to the deepening economic crisis. On being elected as the President, Luis Arce was determined to reduce the influence of Evo Morales within the MAS and the government[viii]. Evo Morales on the other hand intended to maintain his influence and returned to Bolivia in October 2020 from exile in Argentina and announced his intent to contest in the 2025 elections which led to friction with President Luis Arce[ix]. The political rift between the factions is based on style of governance, voter base and persona. Arce, an economist, is regarded as more technocratic and enjoys popularity in urban areas. Whereas Morales, who rose to popularity through a coca growers union, holds greater appeal and influence, especially with rural workers[x]. While President Arce sought greater private investments, diversification of the economy going beyond the sale of natural resources and balancing with public spending, he faced difficulties convincing representatives allied with Evo Morales. Morales' allies in Bolivia's Congress have regularly opposed Arce's attempts to take on borrowing to alleviate the pressure. Bolivia has the highest lithium reserves, but lawmakers allied with Evo Morales object to international firms investing in it.
President Arce wields authority over government institutions and his cabinet, and Evo Morales has greater hold over the party structure and its apparatus which again leads to a widening schism between the two factions as both seek to exercise their influence over the party[xi].
For instance, in October 2023, President Luis Arce and twenty other deputies were expelled from the MAS party at its 10th Party Congress led by Evo Morales leading to clashes between the factions. Following this, in December 2023, Bolivia's Constitutional Tribunal passed a judgement denying a candidate the opportunity to serve more than two terms, consecutive or not, effectively rendering Evo Morales ineligible. Morales condemned the decision arguing that it was influenced by President Luis Arce. His supporters took to the streets, clashing with security forces.
Even in the context of the latest attempted coup, Evo Morales and President Luis Arce traded accusations. Evo Morales alleged that the attempted coup was orchestrated by President Luis Arce to boost his popularity and divert attention from the prevailing economic crisis, which was denied by the President. Clashes occurred between supporters of both factions in July 2024 outside the office of the Supreme Electoral Tribunal.
Bolivia’s Worsening Economic Crisis
President Luis Arce assumed office in 2020 as Bolivia’s economy showed signs of a looming crisis showcased by rising inflation, shortages of fuel and other essential commodities, and dwindling foreign exchange reserves. This is in contrast to the preceding decade when the country saw rapid economic expansion and the country's GDP increased by more than 4% until the coronavirus outbreak threw it into a tailspin. However, difficulties began in 2016, when prices of commodities fell and the government had to delve into its foreign exchange reserves to keep spending[xii]. It subsequently drew on its gold reserves and even offered dollar-denominated bonds domestically. Hence, Bolivia is facing a shortage of foreign exchange, necessary to make payments for its imports. To make matters even worse, Bolivia witnessed dwindling natural gas production and exports leading to shrinking revenue receipts. Lack of foreign investments in the natural gas sector coupled with failing maintenance and upgradation of infrastructure were the main reasons for Bolivia’s struggling natural gas production. As of now, Bolivia is a net importer of energy and requires annually US $ 2 billion to meet its energy requirements which causes a major strain on its economy. For 2024, the International Monetary Fund estimates 1.6% growth, the lowest in 25 years if the pandemic era is excluded. Bolivia's Central Bank had over $15 billion in foreign reserves a decade ago; today, it has only $2 billion[xiii]. Importers feel the effects of dollar scarcity, as they struggle to buy goods from other countries. These concerns may intensify when the government restricts access to foreign currencies.
Meanwhile, the increasing demand for dollars has resulted in unofficial currency exchanges, where one dollar is worth significantly more than its official value. Signs of an impending balance-of-payments crisis are abounded and the paucity of dollars, has resulted in a scarcity of drugs, medical supplies, and agricultural and mining equipment. Bolivia has abundant gas and lithium reserves yet to be tapped to their full potential, but such incidents and political issues dissuade investors[xiv].
Hence, the problems ahead of President Arce are not just limited to an economic crisis. The Morales faction within the MAS holds significant sway and could pose challenges even though Evo Morales has been barred from contesting the elections slated to be held in 2025[xv]. The political infighting and economic crisis have provided opportunities to the conservative opposition which will seek to gain politically. As a result, for the current government in addition to addressing the political crisis within the MAS, stabilising the economy is also a priority.
Conclusion
Political instability coupled with a prolonged economic crisis and internal fragmentation within the MAS, the ruling party, were reasons for the attempted coup. Even though President Arce and his cabinet managed to avert it aided by widespread public mobilization, the government has a series of challenges to respond to. These range from ironing out fissures within the ruling party to addressing the economic crisis. Besides, the conservative opposition will seek to turn the tables in the upcoming elections in 2025 and the electoral challenges are mounting. What remains to be seen is how President Arce addresses these challenges and whether there is a possibility to politically reconcile with Evo Morales, who still holds significant sway within the MAS.
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*Dr. Arnab Chakrabarty, Research Fellow, Indian Council of World Affairs, New Delhi.
The views expressed are personal.
[i] The MAS (Movimiento al Socialismo) was formed on the grounds of ensuring rights for coca farmers, and workers and nationalisation of sectors dedicated to the extraction and export of Bolivia’s natural resources such as gas, minerals and lithium. Based on the concept of plurinationalism, the MAS drew its strength from the indigenous people who make up around 40 percent of the country’s population.
[ii] Megan Janetsky (1st July 2024). Bolivian President orchestrated a ‘self-coup- political rival Evo Morales Claims. Accessed 22nd July 2024, https://apnews.com/article/bolivia-coup-accusation-arce-morales-b0051f5a98fdd7ec5ba212bbe49d9850.
[iii] Joe Daniels ( 5th July 2024). Botched Coup attempt in Bolivia Highlights deepening Political Dysfunction. Accessed 23rd July 2024, https://www.ft.com/content/9914da71-55f0-4bf9-b702-1e4d9bb489a6.
[iv]Monica de Bolle (29th March 2024). Bolivia’s Balance of Payment Crisis brings back bad memories. Accessed 24th July 2024, https://www.wilsoncenter.org/blog-post/bolivias-balance-payments-crisis-brings-back-bad-memories.
[v] In 2016 a referendum was held regarding allowing Evo Morales to contest a third term under the 2009 Constitution. With 51.30 per cent voting against it, Evo Morales lost the referendum and to override this, the Plurinational Constitutional Court abolished term limits, thus allowing Evo Morales to contest again in 2019.
[vi] BBC (25TH October 2019). Bolivia Elections; Protests as Evo Morales officially declared Winner. Accessed 25th July 2024. Evo Morales, sought a third term in October 2019, winning under allegations of electoral fraud, that ignited riots killing 36 people, https://www.bbc.com/news/world-latin-america-50178188.
[vii] Nicolás Devia-Valbuena (5th June 2024). Can Bolivia avoid Renewed Election Violence in 2025? Accessed 22nd July 2024, https://www.usip.org/publications/2024/06/can-bolivia-avoid-renewed-election-violence-2025.
[viii] President Arce and his cabinet were of the opinion that to restore the economy, policies which encouraged private and foreign investments, reduction in public expenditure and licencing exploration of Bolivia’s lithium reserves were significant.
[ix] Voice of America (1st July 2024). Economic turmoil in Bolivia fuels distrust in government and its claim of a 'failed coup'. Accessed 25th July 2024, https://www.voanews.com/a/economic-turmoil-in-bolivia-fuels-distrust-in-government-and-its-claim-of-a-failed-coup-/7679029.html.
[x] Rich Brown (30th May 2024). In Bolivia, an “Intense” Battle Between Arce and Morales. Americas Quarterly, Accessed 25th July 2024, https://www.americasquarterly.org/article/in-bolivia-an-intense-battle-between-arce-and-morales/.
[xi] Thomas Graham (25th May 2022). A New Reality for the MAS in Bolivia. Americas Quarterly, Accessed 25th July 2024. https://www.americasquarterly.org/article/a-new-reality-for-the-mas-in-bolivia/.
[xii] The Economist (18th April 2023). Bolivia is on the brink of an economic crisis. Accessed 26th July 2024, https://www.economist.com/the-americas/2023/04/18/bolivia-is-on-the-brink-of-an-economic-crisis.
[xiii] International Monetary Fund (2024). Steady but Slow: Resilience amid Divergence. Accessed 27th July 2024,
https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024.
[xiv] Rich Brown (17th May 2024). Bolivia’s Faded Star, Americas Quarterly, Accessed 27th July 2024,
https://www.americasquarterly.org/article/bolivias-faded-star/
[xv] Evo Morales declared his intention to run for President in 2025, however, he was barred from contesting by the Bolivian Constitutional Court in December 2023.
