The Bolivian Wonder

Bolivia has historically been subjected to a social apartheid regime that has kept wealth in the hands of white and creole elites, while a multitude of indigenous people and their descendants have been embittered by poverty and social and political exclusion. The country has enormous mineral and hydrocarbon reserves that underlay the centuries-long natural resource exploitation, since colonial times. Today Bolivia is the country with the lowest per capita income in the region,² where the colonial heritage still marks its socioeconomic situation.

The rise of a popular leader into the ranks of government in Bolivia is the result of a long historical process. The resistance to neoliberalism exploded in the paradigmatic Water War in 2000 and became effective with the 2005 election of Evo Morales as the country’s first indigenous president, who promised fundamental transformations to construct a fairer and more egalitarian society. The Andean indigenous worldview laid at the base of this political project through the preponderant role of (indigenous) social movements. Amin (1989) proposes the idea that America is historically transmuted to be an extension of Europe, where the hegemony of social construction is guided by Eurocentrism. However, in Bolivia, society remained divided or abigarrada, therefore, other worldviews have prevailed next to ethnic apartheid (Zavaleta Mercado 1990). The rise of the MAS promotes precisely the political emancipation of the indigenous worldviews, mainly originating from the peasants and Andean indigenous people, that enters in conflict with Eurocentrism, in an intercultural perspective (Albo 2008).

The above has resulted in a dialectical process marked by the struggle to build a decolonized state while resisting neoliberalism, distribute income without dismantling traditional elites, preserve the environment while maintaining the economy’s extractive activities, build national sovereignty amid structural dependency, move towards socialism without breaking with great private property. These are some of the contradictions that emerge in the national project proposed to Bolivia with the rise of MAS to power, expressed in the two fundaments of this process: the new economic model and the vivir bien.

New economic model

Bolivia’s new economic model was presented as an antithesis of the neoliberal model and with a view to transition to a new society. In other words, it is a ‘transitional project’ whose horizon is the so-called community socialism to ‘living well’. For Farah H. and Vasapollo (2016), this horizon has its origins in the recovery of debates that question the individualistic and economicist unilateralism of the capitalist rationality, which in its neoliberal phase is increasingly unfair, depredating, and undemocratic.

In this perspective, the new model is based on three areas: Social, to solve social problems before individual ones; Community, for privileging the common before the individual, and for being aligned with native peoples’ traditions and values; and Productive, to transform the productive model and overcome poverty in a dignified, sustainable and responsible way. Hence the name: New Social, Community, and Productive Economic Model (Arce Catacora 2011). The goal is to free Bolivia from the primary-exporter model to build an economy based on industry and high productivity. Nevertheless, as a transitional model, it means that Bolivia will remain a supplier of raw materials, at least in the short and medium-term. The change is that, with the nationalization of natural resources, the surpluses of extractivism are distributed to transform the country.

The new economic model is established in two pillar sectors. The Strategic Sector based on natural resources is responsible for generating economic surpluses and is managed by strategic public companies; the Employment and Income Generating Sector brings together private companies, cooperatives, and communities to transform the country’s production structure (Arce Catacora 2011).

In short, the model is based on the distribution of economic surpluses generated in the strategic sector through the role of the State. The proposed transition aims to overcome, in the first place, the poor distribution of income in the country and diversify the economy, so that, in the long run, conditions are made possible for a society that transcends capitalism. For this, the new economic model is based on a pragmatic macroeconomic policy that uses Keynesian concepts to organize the country and maintain stability.³

With a stable economy, the Employment and Income Generating Sector finances investment, primarily through the Bank of Productive Development (BDP). In addition, there are subsidies and incentives for the industrialization of manufacturing, tourism, agricultural development, transportation, handicrafts, housing, and commerce. This allows the Bolivian currency to circulate more intensively internally in the country, strengthening economic relations, avoiding dollarization, and controlling inflation. Figure 5.1 shows the flowchart of the model.

REDISTRIBUTION

Figure 5.1 Flowchart of the New Social, Community and Productive Economic Model.

Source: own elaboration, adapted from Arce Catacora (2011).

The new economic model is based both on the exploitation of natural resources and on a pragmatic macroeconomic policy, while deployed through public investment and income distribution. Natural resources were nationalized in 2006, through Supreme Decree (DS) No. 28701, envisioning a model marked by the exploitation of resources through joint ventures with foreign companies. In this process, contracts with multinationals were reviewed and adapted to the guidelines of the new policy.⁴ The process also relied on some advantageous developments in the international market, particularly the rise in the price of commodities. Roca Sanchez (2017: 23) indicates that gas income jumped from an annual average of USS 888 million between 2000 and 2005 to USS 4,316 million between 2006 and 2015. In combination with the nationalization of the hydrocarbon sector, this explains the growth of gas exports volume by 69%, between 2005 and 2014, and an increase of the gas income by more than 450% in the same period (INE 2020). In Bolivia, as well as in other countries in the region, the increasing global demand stimulated the economy’s concentration on commodities. The positive results lead to consistent economic growth and enabled a great leap in the country’s income distribution. Despite some significant progress, the economic structure has remained largely unchanged. Looking at the Bolivian export agenda, there is a noticeable concentration on a few economic activities. In 2013, gas alone accounted for almost 50% of Bolivian exports (INE). The first two terms of Morales (2006— 2014) were marked by this high liquidity from exports, on average around 43% of GDP.

The economic policy of the Morales administration has shown to be conscious of the risks involved in maintaining an economic model based on commodity export, and has proposed to overcome it by a two-fold strategy: the diversification of the primary export matrix and the industrialization of natural resources. The diversification of the export matrix answers to the realization that the good yields from the gas export would not last much longer. Brazil, the largest importer of Bolivian gas, has shown an inclination to become self-reliant in the medium term, through the pre-salt resources.⁵ This has stimulated the strategy to find an alternative to gas while transforming Bolivia into an ‘energetic power’ (ENDE 2018). Today, approximately 64% of the energy generated in Bolivia is through thermoelectric plants using gas. Still, there is a great impetus to move to renewable sources, including wind, solar, and biomass projects which already generate 6% of the country’s energy.

Yet the core of the strategy is found in the further development of hydroelectric plants - currently producing 30%. The aim is to generate up to 74% renewable energy, with a capacity to export 12,000 MW (Castro and Rosental 2017). A project like this is viable, but it is not without impediments. On the one hand, it takes time to consolidate as it depends on the construction of joint transmission infrastructure between the countries involved. On the other hand, the construction of large hydroelectric power plants has a major local impact on the environment and social organization. This has triggered environmental and social conflicts that have slowed down the implementation of projects, and have made clear that it is necessary to mitigate and compensate for social and environmental damage.

Another area of export diversification lies in the agribusiness, with the expansion of the agricultural frontier. Between 2005 and 2019, agriculture jumped from 2.4 million to 3.8 million hectares, marking a 59% expansion on the agricultural frontier (INE). In this regard, products derived from soy have significant values, with export volumes jumping from 1.3 million tons in 2005 to 2 million tons in 2019. At its peak in 2014, the export value of soy products reached almost a billion dollars.

All of this data indicates that the Bolivian economy has remained anchored in the logic of the export primary products, where the six most relevant products from the list of Bolivian exportables (gas, fuels, zinc, silver, gold, and soybeans) accounted for approximately 70% in 2018. The most important industrialization projects to break with this are that of gas and lithium, which have received the highest volumes of investment in the country’s history.⁶ It must be emphasized that the industrialization projects are at an initial stage, heavily dependent on continuous investment while facing impediments related to infrastructure, education, and knowledge and technology.

The second part of the new economic plan refers to pragmatic macroeconomic policy. According to Luis Arce Catacora (2011), stability is not an end on its own, as in the neoliberal logic, but the starting point to structural economic transformation. This translates into a rather contradictory situation in which the state’s sovereignty is reasserted in macroeconomic policies while seeking to maintain alignment with the international market.

At the national level, the goal is to pursue social inclusion through employment and income, to stimulate domestic demand, to reduce external dependence, and to maintain price and currency stability: an endogenous development project. In parallel, there is the accumulation of international reserves from the strategic sector surplus, increasing from USS 1,795 billion in 2005 to USS 1,513 billion in 2014, accounting for approximately 45% of GDP in the same year.

Bolivia’s macroeconomic policies under the MAS administration have garnered praise from the IMF (2018), in consideration of the positive results achieved: average economic growth of 5% per year; average controlled inflation of 5.2%; unemployment below 4% since 2008; exchange Rate (USD/BOL) controlled by 6.91 since 2012 (World Bank indicators 2020). In the first two terms of Morales, given the international liquidity and the nationalizations, it was possible to build this economic stability, while keeping the tensions around the development project relatively controlled. By the end of 2014 commodity prices begin to plummet on the international market, submerging almost all countries of the region in economic crisis, affecting particularly the exporter sector. The weight of exports to Bolivia’s economy fell from 43% of GDP in 2014 to 31% in 2015 and 24% in 2016. Still, the economy remained growing, contrary to what happened in other countries in the region, mainly due to the countercyclical policy measures during Morales’ third term.

Reserves at the end of 2018 were USS 8,929 billion, equivalent to GDP of 22%. The adoption of a more accelerated endogenous growth strategy to supply the drop in the share of exports in the country’s GDP managed to maintain economic growth. But it came at a political cost: growing contradictions around power at the domestic level. The eastern provinces, particularly Santa Cruz, receive the largest volume of income from the country’s exportable products. The abrupt fall in export results destabilized the political balance that had been attained by means of concessions for the approval of the 2009 Constitution, reigniting regional polarization.

Income distribution was able to relieve more than 3 million people from poverty, contributing to a development by which Bolivia became the country with the best indicators of inequality reduction of the region in the period 2006-2018, according to the Gini index (Table 5.1). The two impulses of this process were the conditional cash transfer programs - the so-called bonos - and the increase in the minimum wage, which jumped almost 500% in nominal terms (INE). Table 5.1 presents some selected social indicators that illustrate these advances.

Amidst the promotion of industrialization, the diversification of production, building infrastructure and social spending, public investment rose sharply from USS 629 million in 2005 to USS 5,323 by 2019.

This process provided the impetus to transform the domestic market into one of the main growth drivers in the country. The resources used for this almost 750% expansion in investment originated from surpluses of the strategic sector, in the first two terms of Morales, and from indebtedness and use of reserves in the third. Morales took over the country with an external debt/GDP ratio of 52% (2005), achieving in 2014 an index of 18%. With the crisis starting at the end of 2014, this logic changed, raising indebtedness at the same time that part of the reserves were used to maintain the public investment, as can be seen in Figure 5.2. This external balance made it possible for Bolivia to adopt

Table 5.1 Social indicators advancement in the ‘process of change’

Source: World Bank (2020), INE (2020), MMAyA (2017).

Figure 5.2 Ratio (%) of GDP with external public debt and foreign exchange reserves.

Source: own elaboration from BCB (2020).

External public debt/GDP

Foreign exchange reserves/GDP

autonomous policies, without resorting to the IMF for example, even in crisis, through anti-cyclical policy.

Next to productive investments and social spending, an effort has been made to update the archaic infrastructural situation of the country. Infrastructural investment constituted a boost to the country’s integration, whether through paving highways, urban transport, access to electricity, or telecommunications.

In short, this is the model proposed to overcome underdevelopment, achieve national sovereignty, reduce inequalities, and eradicate poverty. For authors like Katz (2015), Gudynas (2011), Postero (2017), it is a social developmental model that has encountered difficulties to achieve the structural transformation and that is still far from the ideal of ‘living well’. According to these authors, much of the success of the ‘process of change’ is due to the fact that the Bolivian starting point was so backward that there was much room for great initial qualitative leaps.

Transitioning to vivir bien

The ideal of vivir bien constitutes the horizon of the transitional economic model. Vivir bien has been characterized as a collective construction, a non-monolithic process, and a utopia. For this reason, it engenders great and controversial debates in scientific and political discussions around the world (Ranta 2016).

In the Bolivian Constitution (Bolivia 2009: 158), vivir bien is placed as the supreme objective of the Plurinational State. The former president (Morales Ayma 2011) sees vivir bien as a system that transcends capitalism, a doctrine and practice that is based on the philosophy of Indigenous Peoples. He points out the need to build a society for ‘living well’, based on ethical and moral principles that stand as the antithesis of capitalism, and put forward ‘community socialism’ as its way of consolidating it. He emphasizes that it can only be built on the basis of life in harmony with nature and complementarity between peoples.

Farah H. and Vasapollo (2016) interpret the Bolivian attempts to implement ‘living well’ as a renewal of humanism and environmentalism, that intersects with the re-emergence of the peasant and indigenous movement against the crushing of workers by neoliberalism. In this sense, the authors argue that these claims go beyond the discussion about the emancipation of the working class, as they are based on the recognition and recovery of their own social reproduction experiences.

Thus, the ideal of ‘living well’ leads us to understand that it is fundamentally an ethical principle that shapes discourses and seeks a balance with practice to advance the transition to a new society.

The political interpretation of ‘living well’ has been subject to much criticism for the permanent contradiction between pursuing the vivir bien and using the resources of extractivism for its realization. Gudynas (2011) complains that the Plurinational Constitution does not recognize the rights of nature. For Stefanoni (2012), policies could not and did not try to reflect the worldview of the native communities. Lalander (2016), points to an extractive dilemma, where the rights of nature and the indigenous people suffer a partial and selective sacrifice to supposedly achieve the objectives of general social welfare. The author indicates the reinforced ethnic character of the Morales government at the global level, while often relativized in favor of extractivism at the local.

For Linera (2019), the nationalization of natural resources cannot be fully achieved without an industrialization stage. It is necessary to offer goods with added value in global value chains to boost income and to promote greater productivity in Bolivia, along with technological management and scientific knowledge. Nevertheless, the author understands that this process generates undesired results regarding the environment, even if the end is the satisfaction of human needs, not profit. In his words ‘damages that, in the long run, irrevocably affect the human being ... We have to avoid this fatal destiny’ (ibid.: 64).

Linera situates the solution in the community’s productive forces, starting from the conception that ‘the community’ proposes a different form of social development in which nature is conceived as an organic extension of human subjectivity. However, he reinforces the idea that industrialization and science, which can generate material and technological conditions for production that is more adequate to human and natural needs, is necessary to transfer power to workers (ibid.).

On this point Stefanoni (2012) disagrees. In his view, the economic pluralism model that projects a final solution in communities does not give due importance to workers, touching upon the key point of this transition which is still poorly resolved in the Bolivian model. The way to systematically transfer the political and productive power from the state level to the community level of the associated workers remains to be elucidated.

Linera (2018: 118) believes that ‘the State cannot create the community, because it is the perfect antithesis of the community ... The State itself is unable to restore the life-giving metabolism between human beings and nature’. In this sense, a State within the scope of the ‘transition’ has the purpose of protecting the anti-capitalist community and cooperative initiatives and improve the living conditions of workers. In that way, the workers are given time to try new social forms until it is possible to overcome the bourgeois order in a universal and irreversible movement.

In our view, vivir bien as a more ideological measure can be thought of as the cultural revolution necessary to move toward a society that transcends capitalism. Something like the ‘new man’ thought by Ernesto ‘Ché’ Guevara (Lôwy 2003) that overcomes the limitations of 20th-century socialism and moves toward a break with a mercantile and destructive society, to find balance between human life and nature. Therefore, the historical and transforming meaning of vivir bien refers to the search for the construction of balance in a plurinational society. This process takes place in a context full of imperfections arising from five centuries of institutional violence, and despite its intrinsic contradictions, it has managed to achieve significant economic and social emancipatory improvements. However, in addition to a sovereign nation project and the solution of some historical problems, new tensions and contradictions have emerged. That is why the possibility of looking at an emancipated horizon for the Bolivian people is only real to the extent that a long process of decolonization and the construction of a new society is assumed. The aim to develop the lithium industry can be seen as emblematic of the intrinsic contradictions of the ‘process of change’. Despite being inserted in a still extractivist perspective, this is the main Bolivian bet to generate material conditions to overcome underdevelopment through the transition project.

Reasserting sovereignty in the Bolivian lithium project

Given its strategic character for the current global energy transition and the fact that Bolivia has the largest reserve in the world, the lithium strategy was configured as the main bet of MAS to overcome underdevelopment in the country.

Lithium is the lightest of the components in the metal chain and has great electrochemical and energetic potential, which gives it ‘exclusive properties to store and transport significant electrical charges’ (Gouze 2010: 84). Therefore, portable devices that need autonomy of displacement, such as smartphones, computers, tablets, cameras, drones, electric cars etc., use lithium batteries. The emergence of new battery technologies, in the 2010s, promoted the initial dissemination of the so-called Electric Vehicles (EV) (Narins 2017) as the starting point for solving the problem of fossil fuels, as the capacity to store allows the use of alternative sources of energy generation.⁷ Although EVs is not likely to solve the energy generation problem, it is significant in as much as it breaks the exclusivity of fossil fuels. In other words, EVs facilitate the decarbonization of the system and, therefore, are central to the global energy transition.

On the other hand, it is important to highlight that lithium extraction has a process with a strong impact on the environment. Takemura (2018) indicates that it can cause irreversible impacts on ecosystems, calling the controversy over lithium ‘dirty business for clean energy’. This means that advancing in the extraction requires large investments so that the risks of unwanted effects are mitigated, which seems crucial from the ‘living well’ perspective.

On the economic side, lithium is concentrated in a few regions. It is estimated that 70% of the total lithium available worldwide lies in South America, in the region of the Andean salt flats, referenced conventionally as the ‘lithium triangle’. The market is quite restricted and access to these reserves is likely to bring about a new race for natural resources (Mining Dot Com 2018). Figure 5.3 shows the evolution of lithium carbonate prices for which in recent years the Chinese market has produced approximately 60% of the world’s batteries.

With the beginning of the spread of EV, the price of lithium grew exponentially. However, at the end of 2018, prices dropped, leading some market analysts to suspect a lithium bubble (Sanderson 2017). Nar-ins (2017) indicated that the lithium market is quite contradictory and that there is a tendency for the raw material price to drop related to the politicization around the exploration, the quality of the inputs, and the scarce existing infrastructure. Even so, lithium remains fundamental

Figure 5.3 Lithium Carbonate 99.5%Min China Spot (price).

Source: authors elaboration from Investing (2020).

for battery production and geopolitical movements point to the expansion of its importance. According to the Global EV Outlook (IEA 2020), in international agreements to reduce CO₂ emissions, 17 countries have already announced their goal of transforming the vehicle fleet to 100% EV by 2050. To illustrate, a standard Tesla EV uses 63 kg of lithium carbonate, the equivalent to producing batteries for 10,000 smartphones (Engdahal 2019).

The development of greater capacity batteries proposes at least three other important impulses, mainly based on the possibilities generated by the dissemination of 5G technology. The first is the energy storage capacity in a decentralized way, which allows greater autonomy for local energy sovereignty and avoids the need to build large transmission infrastructure, in addition to encouraging generation through renewable means such as wind and photovoltaics (Goldthau 2014). The second is the military industry, which has increasingly relied on portable devices, such as drones, in a context called ‘video game war’ (Gregory 2011). The third is the axis of the production mode itself. In this case, given a system highly determined by the automation of productive processes, the organization of work tends to distance itself from formal hegemonic employment. The increase in the informality of the economy is the touchstone of this process, implying greater ungovernability over workers, a model that some authors call ‘uberization’ (Hughes and Southern 2019). In this scenario, the control capacity through portable devices that need to stay connected for extended periods and that requiring high capacity batteries will be increasingly linked to the process of governance and capital accumulation. Consequently, the race for lithium is closely linked to the reorganization of the global geopolitical space. Countries that have access to this natural resource may have a preponderance in the international division of labor in the new wave of microelectronic industrialization, often named the ‘era of 5G’ or the ‘industry 4.0’.