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Bolivia: Government Ends Fuel Subsidies, Protests Expected

The day after the Christmas holiday, Bolivian Vice-President Álvaro García Linera announced that the government would end state subsidies on gasoline and diesel. The main reason for the measure, García Linera explained during a television address on the morning of the 26th of December, was that the $380 million that the government spent toward the subsidies had illegally benefited individuals involved with selling the contraband fuel to neighboring countries where the price was much higher. To prevent public funds from being used in this manner, the price of gasoline increased by 73% and the price of diesel increased by 83%

As expected, the announcement caused much concern in the Bolivian population because of the uncertainty of what effect the increase would have on the cost of living. Hours after the announcement, long lines could be observed at some gas stations with drivers hoping to fill up before the price hike took effect. Drivers like Santiago Terceros (@sterceros) made some calculations that his monthly expense for gasoline would increase by US$80 [es].

Long lines to enter gas station in Santa Cruz on Sunday, December 26. Photo by Jessica Olivares and used with permission.

But it is the higher expenses for heavy transport that will affect the cost of daily goods, as Terceros rhetorically asks, “What things do not need to be transported?” [es]. The day following the Sunday announcement, Twitter users began to report on some of the price increases of goods and services around the country. For example, Jorge Bueno (@jj_creativos) reported on an increase in the price of cement, bread, and his daily lunch in the city of La Paz. Jorge Marco Zárate (@jmarcozarate) even noticed employees of his local supermarket in Santa Cruz changing the prices on the products on the shelves.

It is also the cost of public transportation that concerns many daily users of this form of transit. Many of the public transport syndicates met on Monday, December 27th to determine whether they would enter into a general strike or raise fares for the passengers. Reyqui of the blog Bolivia Informe [es] provides an overview of the price increases to take effect in the four largest Bolivian cities. The price will increase between 66%-100% in the cities of La Paz, El Alto, Santa Cruz, and Cochabamba.

The availability of public transportation on the day following the announcement was irregular, as many bus drivers waited to see what the syndicate leaders would decide. As a result, the Bolivian Armed Forces helped to provide free transportation to some passengers. Tonny López (@tonnylp) took this Twitpic of one of these military transport vehicles in the city of El Alto.

The measure has been called the “gasolinazo” by the media and has been a popular hashtag [es] used by Bolivian Twitter users. The suffix “-azo” added to the end of the word gasolina (gasoline) conveys the act of a “strike or blow,” and reflects the feeling that the raise in prices is a blow to the cost of living.

Some wonder whether such a price increase was the first option, especially since those involved with contraband were the main culprits. The digital magazine La Mala Palabra tweets [es] that the Armed Forces should have been called in to tackle the contraband. Better control at the border may have been a way to prevent subsidized fuel from being sold in neighboring countries.

García Linera made the announcement in his function as acting President, since President Evo Morales was in Venezuela delivering aid to flood victims. However, some thought that it was no coincidence why the Vice-President made the unpopular announcement. Ivan Terceros (@ivntres) wrote:

Por que Evo no anunció el #gasolinazo ?? fácil, la imagen del Presidente no puede caer…

Why didn't Evo announce the #gasolinazo?? That's easy, the President's image cannot be allowed to go down…

It was also the timing of the December 26th announcement [es] that Juan Carlos Véliz (@jcvelizmorejon) found to be telling:

El Gobierno lanzó el gasolinazo en un momento en que la población está adormilada por las fiestas de fin de año.

The Government launched the gasolinazo at a time when the population was asleep because of the year-end holidays.

Some agree that the subsidies were unsustainable for the Bolivian economy including economist Carlos Gustavo Machicado of the blog Guccio's [es], who applauds the new measure:

Y si bien yo soy bastante crítico de lo que hace el gobierno, esta vez debo admitir que fue una medida buena, donde triunfo el mercado y aplastó una vez más esos discursos de patriotismo barato. Ciertamente no hay nada como el poder de los precios y de la libertad económica para frenar el contrabando y la especulación y lo que esta medida hará es justamente ordenar el sistema de precios y proveer la información correcta que los agentes necesitan

[…]

Muchas cosas pueden pasar y las magnitudes dependerán de las expectativas, entre ellas esta: Presiones salariales, ajuste de todo el sistema de precios, depreciación de la moneda nacional, entre otros. En todo caso lo importante es no alarmarse, esto es algo que tenía que suceder y mejor que sucedió ahora.

I normally have been a critic of what the government does, but this time, I must admit that it was a good measure, where the market triumphs and crushes the rhetoric of cheap patriotism. Certainly there is nothing like the power of the prices and the economic freedom to halt contraband and price speculation and what this measure will do is fairly order the price system and provide the correct information that the agents need

[…]

Many things can happen and the magnitude depends on the expectations, among these: salary pressures, adjustment of the entire system of prices, depreciation of the national currency, among others. In any case, what is important is not to be alarmed, this is something that needed to happen and it is best that it happened now.

In his blog, former Minister of Hydrocarbons Mauricio Medinaceli compares the 2010 price increase with similar increases in recent history [es]:

Efectivamente, revisando las estadísticas de los últimos 20 años lo que sucedió el día domingo 26 de diciembre del año 2010 es históricamente notorio. Como se observa, los valores históricos se situaban entre el 8% y 35%, lo que vivimos ahora es un ajuste del 73%… sí, 73%.

In fact, reviewing the statistics from the last 20 years, what happened on Sunday, December 26, 2010 is historically noteworthy. As you can see, the historical values were located between 8% and 35%, what we are seeing now is an adjustment of 73%… yes, 73%.

Mabel Lafuente Azad (@la_mabel) writes that such an increase was “necessary,” [es], but she adds that “once again the people with low incomes will be the ones who sacrifice the most.” And that is what many of the protests say that the ordinary citizen will the one most affected. While some citizens have announced plans for citizen street protests, blogger Mario Durán, who has been following the developments on his blog Palabras Libres [es] found it odd that some social movements had not reacted to the price increase. He wonders whether their silence could be explained because they feel like “this government is ‘their’ government.” However, later in the day, Durán noted that organizations like the Departmental Worker's Center (COD for its initials in Spanish) and the Federation of Neighborhood Organizations in the City of El Alto (FEJUVE for its initials in Spanish) came out in opposition to the decree [es]. Social movements like these have traditionally been strong allies of Morales and his administration.

Even though there are plans for an increase in wages for public sector workers in February 2011 [es], there are some employees who do not have a promised raise. Alhen Wiki (@alhen_) writes about those who may be left behind:

Felices los del transporte pueden doblar sus precios. A mi quién me dobla el sueldo?

Those in the transportation sector are happy because they can double their prices. But, who will double my salary?

4 comments

  • I think that my translation is a bit out of context. I mean that it’s good for them that they can raise their prices to the double, so they can compensate the raise in gas prices. I don’t think they’re happy with this decree. Tricky language Spanish, huh? The mention about the raise show my concern about Linera’s speech related to the salary raise. He mentioned that public employees will get the raise. The rest of us will have to pray that our companies can make enough to compensate the correspondent raise in prices. Besides, we have to consider that only 11% of the population in Bolivia get a salary monthly. Numbers will say everything in February. Until then, we’ll have to make do with our old salary vs the new prices.

  • […] Angel Caido [es] shares photos and a video of the protests that took place on December 30 in Bolivia over the rise in the cost of fuel. […]

  • […] “largely paralyzed La Paz” on Thursday. The protests have come as a response to an announcement earlier in the week that gasoline prices will be increased by some 73 percent. The hike is intended […]

  • […] Weeks updates his readers on the “Gasolinazo“: “Evo Morales revoked the decree removing subsidies (and thereby drastically raising […]

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