Economy in Chaos : Bolivia--Only Lawless Prospering

A caravan of three shiny new four-wheel-drive vehicles drew into the adobe-walled yard outside Bolivia’s customs and immigration offices on the desolate border with Chile.

Immediately, there were difficulties. The customs forms on the three vehicles all contained irregularities, and one of the drivers did not have a valid driver’s license.

The vehicles, the travel documents and the customs forms were examined by 11 different officials, among them agents of the national police, customs inspectors and tax collectors. After lengthy negotiations, the officials agreed to accept bribes totaling less than $100 and waved the vehicles through. At their destination, Santa Cruz, which is the hub of the cocaine traffic in tropical eastern Bolivia, the vehicles would be worth $35,000.

‘Customers in the Mafia’

“I have never sniffed cocaine in my life, but you can smell it all over Santa Cruz,” Luis Benjamin Bowles, who brought in the three vehicles and plans to bring in nine others, remarked after clearing the frontier. “I know that some of my customers are in the Mafia.”

Bowles, 28, is a wiry, quick-talking salesman given to wearing a black leather jacket and tight jeans. His father owns a cattle ranch in the Beni region of eastern Bolivia. The younger Bowles studied ranch management at West Texas State University, but he said he devotes more time to his auto import business than to the ranch.

“You can’t make money as a rancher with price controls, no bank credit, transportation strikes all the time, and the crazy inflation,” he said, “but a new sports car here is fast money.”

Bolivia, a country of 6 million people, used to be one of the most traditional Indian cultures in South America. Now it is caught up in crisis. Now its social values are being severely tested by virulent inflation, an economy based on cocaine, widespread official corruption and political disorder.

The new vehicles had set out from Arica, a Chilean port on the Pacific, and en route to Santa Cruz they moved along an axle-jolting dirt road that crosses the Bolivian high plateau. Some say the road is kept in a virtually impassable state of disrepair in order to discourage the Chilean army from coming back into Bolivia. (Chile seized much of Bolivia’s national territory, including Arica, in a war more than a century ago.) But the condition of the road does not discourage smugglers.

Bribes Paved Way

Between the border and Santa Cruz, the travelers bribed officials at six different customs and police posts. Despite rock falls, washouts and other hazards along what Bolivian maps show as “national highways,” the vehicles got through intact.

The 850-mile trip took 26 hours, across the highlands, down the central valleys and into the lowlands. Virtually everywhere there were signs of economic deterioration and the breakdown of the national government.

Thirty years ago, a nationalist, populist revolution ended the rule of the “tin barons” who had run Bolivia as a mining country for 50 years. The revolutionaries nationalized the big mines and broke up the larger estates for distribution among the Indian peasants.

President Dwight D. Eisenhower’s Administration decided to support the economic development of this mineral-rich but agriculturally poor country in the South American heartland. And the best investment seemed to be a national highway system to link the food-producing eastern lowlands with the cities and mines in the highlands.

The showcase project was an $80-million, 320-mile highway spanning the rough terrain from Santa Cruz to Cochabamba. It is now in ruins. Where it passes through mountains, the pavement is all but gone; landslides and floods have bitten great chunks out of the roadbed. For miles, trucks churn axle-deep through the red mud. Maintenance is minimal.

At a key ford on the Piray River 50 miles west of Santa Cruz, a bridge was torn away two years ago by floodwaters. It has never been repaired. Before dawn on a recent morning there were 60 trucks waiting to be pulled across the swift river by a tractor. The tractor owner charged each driver the equivalent of $4. By contrast, the toll charge for trucks to use the entire length of the Cochabamba-Santa Cruz highway is the equivalent of $2.

Payment in Dollars

The trucks moving out of Santa Cruz were loaded with rice, bananas and lumber. According to drivers interviewed at cafes along the road, much of the rice would be sold across the border in Peru, with payment in dollars. This diversion of goods is one of the effects of inflation, which has reached an annual rate of 10,000%. The Bolivian peso has so little value that anyone with something to sell will accept in payment almost anything but pesos.

The dollar is now the preferred currency in Bolivia. Dealing in pesos means counting hundreds of bills and carrying wads of money just to buy groceries. Housemaids and gardeners ask to be paid in dollars. If they are paid in pesos, they convert into dollars what they are not going to spend immediately.

For lack of foreign exchange, Bolivia’s Central Bank has halted interest payments to foreign private banks, and it rations import licenses. But there is no shortage of dollars on the street. Currency exchange dealers line the streets of downtown Santa Cruz, waving bills at passing cars.

Dollars flow into the country as a result of the flourishing cocaine traffic. Bolivia is one of the world’s largest producers of coca leaf, and processing the leaves is a cottage industry here.

Huge ‘Parallel’ Economy

But the cocaine dollars do not go into the Central Bank, as is required for legal exports (which amounted to $800 million last year, mainly from tin). The cocaine money finances a huge “parallel economy” that is believed to be as large as its official counterpart. There is an abundance of foreign cigarettes, whiskey, electronic goods and late-model automobiles.

Wealthy Bolivians’ demand for foreign goods is so strong that a jet cargo plane was chartered recently to bring in 40 tons of canned goods, breakfast foods and the like from Miami. The shipment was sold out in a week and the importer put in an order for more.

The Bolivian state airline, LAB, has put into service a Boeing 707 that can carry up to 19 automobiles on a weekly flight from Panama. It is fully booked by importers. The documentation is arranged in the customs office at Santa Cruz’s Viru airport, a $150-million facility built with Japanese financing.

Stolen Car Market

The new cars have to compete with a stream of automobiles that are stolen in Brazil, driven across the Mato Grosso and brought over the border after appropriate payments have been made to the Bolivian army commanders in the frontier regions--according to the testimony of car thieves arrested in Brazil. The vehicles are sold from lots on the main streets of Santa Cruz, sometimes with the Brazilian license plates still on them.

Such manifestations of the so-called parallel market take place beyond the purview of the tax collector. As a result, Bolivia’s national treasury is losing needed revenues. It is estimated that by early July, more than 60% of the government’s payroll and other expenses were being met by simply printing new money.

Inflation is out of control. Price increases of 10% to 20% a week for basic household needs are commonplace. The outgoing government of President Hernan Siles Zuazo tried to put a brake on government spending by halting the printing of money, but the labor union at the Central Bank took over the presses and printed streams of new paper money in order to meet political pressure from civil servants, state enterprises and unions that had gone on strike in the mines, the public transport system and other vital areas.

To bring inflation under control, the government that is to take office this month will have to begin collecting import duties, which are now being evaded or diverted, and it will have to begin collecting revenues from state enterprises such as the state oil company, which is selling gasoline at 15 cents a gallon and losing money.

But to do this means bringing order to what has become chaos. And that calls for cooperation among political leaders, businessmen, union leaders and the military.