President Morales’s Christmas Gift to Bolivia: Double the Cost of Living

For the Christmas Holiday I had to travel across Bolivia from Samaipata, a pueblo on the East side of Bolivia, to La Paz, the capital city in the West.  The journey is broken down into two bus rides, Samaipata to Cochabamba and Cochabamba to La Paz.  We left Samaipata at 3 o’clock on Sunday afternoon and arrived at the Cochabamba Bus Terminal twelve hours later.  While waiting for our changeover bus to arrive, the ticket counters never opened.  Scheduled departure times came and went, and still, nobody tended to the empty booths.  I finally went to the information desk.

Christmas weekend travelers wait in the
Cochabamba Bus Terminal for the government
and strikers to reach a swift agreement so that
transportation can resume.

“You didn’t hear?” The distracted girl asked.  “Last night gas prices doubled and all the bus companies are protesting!”

Overnight, the government lifted petroleum subsidies and let domestic gas price jump to those set by world-markets.  Gasoline rose 72% from 3.74bs/ltr to 6.47bs/ltr and diesel rose 82% from 3.72bs/ltr to 6.80bs/ltr.  In response to the sudden spike, bus drivers declared an inter-city transportation strike. 

Angry grassroots protestors inside the Cochabamba Bus Terminal
before organizing a roadblock.

We were stranded in Cochabamba.  Inside the bus terminal, grassroots anger was already mounting.  Community members standing on stools yelled through loudspeakers to a growing crowd, denouncing the government action that burdened travelers during the holidays and betrayed the President’s base – the poor and indigenous populations. Enraged banter quickly motivated the crowd to march to the street and block traffic passing through the city center.  The roadblocks started.

It quickly became evident that if we didn’t get back to La Paz before nation-wide strikes picked up momentum, we would easily get stuck in Cochabamba.  Once organized, public city bus and freight truck drivers will likely to put the entire country on standstill. Similar negotiations with the government in the past have lasted days, other have lasted weeks.

Beginnings of a roadblock outside the main bus
terminal in the center of Cochabamba.

On the outskirts of the bus station, we found a van that agreed to take a group of us to La Paz.  Loading into the vehicle, we caught the attention of the angry mob.  While the leaders argued with the driver, fuming followers slashed the tires of the van and shouted to us inside, “Nobody leaves the city!”

A half hour after dismounting the van, I agreed to reorganize the same group and find a willing taxi to smuggle us out of Cochabamba.  The regular bus price to La Paz is 15bs.  The cheapest any taxi was willing to transport us for was 150bs – ten times the usual fare.  Boarding the taxi on a clandestine street corner a couple blocks hidden from the eyes of roadblock, we safely secured a ride back to La Paz.

Beyond bad timing for busy Christmas travelers and New Years budgeting, lifting the petroleum subsidy will paralyze the Bolivian economy.  Since labor costs are so low, transportation already accounts for a large majority of final product prices.  Food and consumer goods will all experience similar price surges to those of petroleum, starting with the most basic basket of goods.  People will therefore cut spending and buy fewer goods, dedicating larger portions of incomes to foreign oil, transportation, and food. 

*Prices in Bolivianos (bs) per Liter. Conversion Rate 7bs:1USD.

The full value of the lifted subsidy isn't in its dollar (or Boliviano) amount; this money stimulated the economy by reducing input costs, lowering final prices, and encouraging spending.  When the subsidy was in place, the velocity of money increased, as did the demand for further production of goods.  Eliminating the subsidy has the opposite effect.  Already, back in Samaipata, stores have closed temporarily while owners wait for new market prices to settle.  The town is at a halt.  

As the Bolivian economy drastically slows, President Morales agreed to raise government wages 20%.  Unfortunately, this falls short of the compensation needed to account for other price increases. People will still have relatively less disposable income.  And when businesses look to lower prices and cut costs, jobs and wages will be the first affected.

The “let them eat cake” decision to lift the petroleum subsidy and let domestic prices rise will slow the already fragile Bolivian economy. Doubling gas and diesel prices overnight will ripple throughout the nation with tsunami-like force.  This gracious Christmas gift from President Morales, a man with a heavy socialist platform, infuriated his grassroots base.  Bolivians will not accept these price increases without a fight.

President Morales’s Christmas Gift to Bolivia: Double the Cost of Living