1982-1997 - Transition to Democracy

Siles Zuazo of the Democratic and Popular Unity (Unidad Deraocratica y Popular — UDP) coalition, was again elected president by Congress on October 10, 1982. The UDP was an amorphous entity that grouped Siles Zuazo 's own Nationalist Revolutionary Movement of the Left (Movimiento Nacionalista Revolucionario de Izquierda—MNRI), the Bolivian Communist Party (Partido Comunista Boliviano—PCB), and the relatively young Movement of the Revolutionary Left (Movimiento de la Izquierda Revolucionaria — MIR). Having been denied the presidency in three consecutive elections, Siles Zuazo 's rise to power was an auspicious occasion. He enjoyed overwhelming popular support and appeared to have a mandate to implement populist reforms. The military and its civilian allies were completely discredited and were no longer a threat or an alternative to rule Bolivia.

By 1982, however, Bolivia faced the most severe economic and political crisis of the preceding three decades. The economy was beset by chronic balance of payments and fiscal deficits. The most immediate manifestation of the crisis was an inability to service payments on its foreign debt of nearly US$3 billion. By 1982 the gross domestic product had dropped by nearly 10 percent. Siles Zuazo thus faced the dilemma of trying to democratize the country in the context of economic scarcity and crisis. The UDP promised to enact a more equitable development program that would address labor's demands for higher wages and other benefits. As the crisis deepened, however, labor became increasingly disaffected.

Under Siles Zuazo, the full complexity of the crisis emerged. From the outset, the government was weakened by a serious confrontation between the legislature and the executive over alternative solutions to the economic predicament. Responsibility for resolving the crisis rested with the executive, whereas Congress exercised its oversight powers. Additionally, the presence of minuscule parties in Congress exacerbated the confrontation between the UDP and the parties in the legislature. As a result of the government's inability to deal with Congress, Siles Zuazo relied on executive decrees. Congress, in turn, charged the president with unconstitutional behavior and threatened to impeach or overthrow him in a constitutional coup.

By 1984 the government was completely immobilized and incapable of defining effective economic policies. The result was the transformation of a severe economic crisis into a catastrophe of historic proportions.

In the 1985 elections, Gen. Banzer’s Nationalist Democratic Action Party (ADN) won a plurality of the popular vote (33%), followed by former President Paz Estenssoro’s MNR (30%) and former Vice President Jaime Paz Zamora’s Movement of the Revolutionary Left (MIR, at 10%). With no majority, the Congress had constitutional authority to determine who would be president. In the congressional run-off, the MIR sided with MNR, and Paz Estenssoro was selected to serve a fourth term as president. When he took office in 1985, he faced a staggering economic crisis. Economic output and exports had been declining for several years. Hyperinflation meant prices grew at an annual rate of 24,000%. Social unrest, chronic strikes, and drug trafficking were widespread.

In 4 years, Paz Estenssoro’s administration achieved a measure of economic and social stability. The military stayed out of politics; all major political parties publicly and institutionally committed themselves to democracy. Human rights violations, which tainted some governments earlier in the decade, decreased significantly. However, Paz Estenssoro’s accomplishments came with sacrifice. Tin prices collapsed in October 1985. The collapse came as the government moved to reassert control of the mismanaged state mining enterprise and forced the government to lay off over 20,000 miners. Although this economic “shock treatment” was highly successful from a financial point of view and tamed devastatingly high rates of hyperinflation, the resulting social dislocation caused significant unrest.

MNR candidate Gonzalo Sanchez de Lozada finished first in the 1989 elections (23%), but no candidate received a majority of popular votes. Again, Congress would determine the president. The Patriotic Accord (AP) between Gen. Banzer’s ADN and Jaime Paz Zamora’s MIR, the second- and third-place finishers (at 22.7% and 19.6%, respectively), led to Paz Zamora’s assuming the presidency.

Even though Paz Zamora had been a Marxist in his youth, he governed as a moderate, center-left president, and marked his time in office with political pragmatism. He continued the economic reforms begun by Paz Estenssoro. Paz Zamora also took a fairly hard line against domestic terrorism, authorizing a 1990 attack on terrorists of the Nestor Paz Zamora Committee and the 1992 crackdown on the Tupac Katari Guerrilla Army (EGTK).

The 1993 elections continued the growing tradition of open, honest elections and peaceful democratic transitions of power. The MNR defeated the ruling coalition, and Gonzalo “Goni” Sanchez de Lozada was named president by a coalition in Congress.

Sanchez de Lozada pursued an aggressive economic and social reform agenda, relying heavily on successful entrepreneurs-turned-politicians like him. The most dramatic program--“capitalization,” a form of privatization under which investors acquired 50% ownership and management control of the state oil corporation, telecommunications system, airlines, railroads, and electric utilities--was used to generate funds for a new pension and healthcare system called BonoSol. BonoSol funding was popular in the country but the concept of capitalization was strongly opposed by certain segments of society, with frequent and sometimes violent protests from 1994 through 1996. During his term, Sanchez de Lozada also created the "Popular Participation Law," which devolved much of the central government's authority to newly-created municipalities, and the INRA law, which significantly furthered land redistribution efforts begun under the MNR after the 1952 revolution.