WSJ: Evo Morales’s Victims Push Back by MARY ANASTASIA O’GRADY

May 7, 2012 8:19 am0 commentsViews: 4

The left-wing populist strategy of demonizing the investor class has one big drawback: the law of diminishing returns. As the available targets dwindle, so do the dividends.

President Obama may eventually figure this out. Bolivian President Evo Morales is living the lesson now.

In May 2006 Mr. Morales nationalized the Bolivian gas industry on the grounds that it is some kind of collective patrimony. National pride swelled on the news, and the gratification for the president was immediate. But it was not lasting. He would need further fixes.

The latest came six days ago on May 1—Workers’ Day for socialists—when he announced the nationalization of Red Eléctrica, a Spanish electricity-transmission company. Images from Cochabamba, where jackbooted soldiers in riot gear surrounded company premises, showcased Morales machismo. At the Palacio Quemado in La Paz, the president was photographed triumphantly pumping his fist in the air.

It was high drama, but not representative of what’s really happening in Bolivia.

Mr. Morales has serious political problems. He won re-election in December 2009 with 64% of the vote. But now his approval rating hovers in the mid-30% range and even though he has control of the courts, the Congress and the electoral authority, he is having trouble governing.

As president, Mr. Morales has continued to rely on the primitive methods he used to gain power—namely roadblocks, street protests and mob violence—to run his government. But Bolivians are fed up. Seen through the prism of his falling popularity, the Red Electricá seizure looks more like an act of desperation than defiance.

Associated PressBolivian President Evo Morales in Vienna, Austria, March 12

The international left has explained Mr. Morales’s early popularity in racial terms, painting him and his white upper-class Marxist Vice President Alvaro Garcia Linera as noble liberators of an indigenous nation. This ignores the fact that a majority of Bolivians are culturallymestizo, meaning that regardless of their bloodlines they no longer live like their ancestors did 500 years ago and they speak Spanish. What the socialists also miss is that indigenous Bolivians are no more interested in being tyrannized by someone who looks like them than by someone who doesn’t.

Things ought to be going well for Mr. Morales. Bolivia is a resource supplier, and commodity prices on the whole are booming. Yet the economy has performed only so-so. Gross domestic product averaged an anemic 2.9% annual growth from 2005 through 2010. Last year it expanded at an estimated 5% but still missed the 6% target that economists say developing countries must maintain over a decade to make an impact on poverty rates.

One reason is the dearth of private investment. Total investment is running around 16% of GDP when something closer to 25% is needed to generate strong, long-term growth. Worse, most of that investment comes from the public sector and is increasingly financed by the central bank. Private investment has been running at only 6% to 7% of GDP, suggesting that investors are worried about country risk.

His gas industry venture isn’t working out well either. After the 2006 gas nationalization, he backtracked on a long-term contract to supply Brazil through a Petrobras pipeline and tried to raise the price. Petrobras responded by increasing its capacity to handle imported liquefied natural gas and began to invest heavily to exploit domestic Brazilian resources. It is no longer reliant on Bolivian gas.

Meanwhile, Mr. Morales’s real problem, Bolivian hatred of his authoritarianism, is spinning out of control. The trouble started with a December 2010 effort to raise gasoline prices by 70%. The uprising—known as the gasolinazo—was so violent that he was forced to back down. The incident badly damaged his image.

Next he announced plans to put a Brazilian-financed highway through an Indian reserve in the Bolivian Amazon known by its Spanish initials as the Tipnis. Inhabitants asked for a rerouting to spare their ancestral lands. When Mr. Morales refused, hundreds of Indians took off on a 500-kilometer protest march to La Paz. Along the way they encountered a pro-Morales roadblock and were tear-gassed by police. When the government rounded up some 300 marchers and tried to fly them out of the area, local townspeople set fires on the airport runway in solidarity with the captives.

Mr. Morales has suspended construction on the highway but is still insisting that the road be built because the coca growers—his most important constituency—need it to expand their businesses.

The Tipnis has now become the symbol of a national pushback against Mr. Morales’s heavy hand. The Spanish newspaper La Gaceta reported that in March alone there were 123 protests around the country. Even the United Nations has said it is worried about the rising level of conflict and the persecution of political opponents. Mr. Morales is worried too, which probably explains why he went after Red Electricá on May Day.

Write to O’Grady@wsj.com

Original Article