(left) ADDS ID OF EVO MORALES- An indigenous woman wears a hat with a picture of President Evo Morales holding a coca leaf, as she attends a rally in front of the U.S. embassy on the inauguration of national day of coca leaf-chewing in La Paz, Bolivia, Wednesday Jan. 26, 2011. Bolivia has petitioned the U.N. to end an international ban on coca leaf-chewing and the U.S. will file a formal objection Wednesday to Bolivia's proposal, according to a senior U.S. government official. (AP Photo/Juan Karita)

5 years on, Morales' Bolivian revolution falters
January 27, 2011 - Associated Press

LA PAZ, Bolivia (AP) -- The fiery coca growers' union leader who rode discontent over his predecessor's pro-business policies to Bolivia's presidency is suddenly grappling with a sharp drop in popularity.

Ironically, Evo Morales' troubles are related to his handling of the economy.

The very "originarios," or native peoples, who ensured the re-election of Bolivia's first indigenous leader a year ago with 64 percent of the vote are now echoing the complaints of his longtime critics: Morales has bungled the economy, alienated foreign investors and favored political cronies over technocrats, they say.

"The president thought that by putting ponchos and polleras (the petticoat-layered skirts indigenous women favor) in his Cabinet the country would run better, but that's not the case," Jimena Mendoza, 40, said as she queued up recently for sugar at a state-run store.

In an Ipsos poll released earlier this month, Morales' approval rating plummeted to 36 percent -- a low point after five years in power. The plunge followed Morales' attempt to lift subsidies on gasoline, sugar and flour just after Christmas. In response, protesters had flooded into the streets, hurling stones at the headquarters of unions closely allied with the president and stoking street bonfires with portraits of him.

Morales backed down -- the 78 percent gas price increase was simply untenable. But the damage was done, as reflected in the poll of 1,080 people in four cities Jan. 6-11 that had a 3 percentage point error margin.

The protest's epicenter was El Alto, the teeming La Paz satellite that is a magnet for indigenous poor migrants from the countryside.

In 2003, El Alto was the locus of a popular uprising that toppled then-President Gonzalo Sanchez de Lozada after troops killed at least 63 people. That unrest ignited over what many considered the government's planned fire sale of Bolivian natural gas to the United States and Chile.

The irony of December's protests was not lost on anyone: Morales was now asking people in a country with a per capita annual income of $1,700 to absorb -- overnight -- hefty price increases for gasoline, sugar and flour.

Morales apologized, but few heads rolled.

He replaced three of his 20 ministers last weekend. What remains is largely what he began with: loyalists representing constituencies including organized labor and indigenous confederations.

"I've only been honest with the people and I don't care about my popularity but instead about taking care of the interests of the country," he told reporters.

He also announced a new strategy: He would remove subsidies, but gradually.

On Jan. 15, Morales raised sugar prices by 23 percent, fanning inflationary fears in a country that was ravaged by hyperinflation in the 1980s.

Bolivians want to know how it is that this country of 10 million can't feed itself despite being rich in arable land.

"We feel defrauded. How can it be possible that in this city with four sugar mills there's no sugar?" retiree Hugo Salvatierra remarked to Erbol radio in the eastern lowland city of Santa Cruz. He said he'd stood in line for three hours to buy 8.8 pounds (4 kilos) of sugar.

A drought hurt sugar production last year. The government then prohibited exports, encouraging a now burgeoning black market. Now it says it needs to begin importing corn for chicken feed, which economists say will make chicken more expensive.

Confidence in Morales has so eroded that a protest Monday over rising prices in Llallagua, a mining town dominated by indigenous Quechua speakers in the southern highlands, devolved into looting where not just food but also televisions and computers were stolen.

Columnist Maria Teresa Zegada wrote in the La Paz newspaper Razon that Morales' was a government of patronage incapable of medium- or long-term planning.

And Andres Soliz, Morales' first hydrocarbons minister, accused his former boss of exhausting his inventory of bold, radical reforms, which began in 2006 with Morales rewriting the rules so Bolivia kept a larger share of mineral and gas royalties.

Critics say he's driven away foreign investors.

At the same time, Morales has increased government subsidies.

Smuggling of contraband gasoline and diesel fuel to neighboring Peru -- where it costs twice as much -- then spun out of control. Government subsidies for the fuels jumped from $108 million in 2005 to $660 million last year -- equal to nearly a third of annual natural gas export earnings.

Historian Carlos Mesa, one of the four presidents that Bolivia cycled through in the instability of 2001-2005, says Morales has become hostage to the very social movements whose street violence he rode to power.

"The 'gasolinazo' (late December gas-price riots) shows that governability was never established," Mesa said in a column.

The cushion that Bolivia enjoyed from a big jump in raw-material prices in Morales' first three years as president -- 2008 saw an unprecedented 6 percent rise in gross domestic product -- is now beginning to evaporate.

Bolivia's mining boom and natural gas "nationalization" helped reduce extreme poverty in those years as annual exports grew from $1 billion to $6 billion. And Bolivia built up more than $10 billion in foreign reserves.

Then, last year, mining output dropped and foreign investment eased.

Direct foreign investment fell to $156 million in the first quarter of 2010, from $245 million in the year-before quarter, according to the National Statistics Institute.

"Most serious analysts of the hydrocarbons sector say that at this rate Bolivia in 10 years will not be able to meet domestic (oil and natural gas) demand," said political scientist Eduardo Gamarra of Florida International University.

On the bright side, he says, Morales is becoming more pragmatic and less dogmatic.

It's high time, says Gamarra, that Morales turns away from an economic model that ignores market mechanisms.

"This is a model that wasn't going to last."

Associated Press writer Frank Bajak contributed to this report from Bogota, Colombia.