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Government Marks First Anniversary Fighting Recession, Drugs

August 5, 1986

LA PAZ, Bolivia (AP) _ President Victor Paz Estenssoro’s government marks its first year in office Wednesday struggling against a deep economic recession and a billion-dollar illegal cocaine industry.

Paz Estenssoro, 78, inherited an economy in shambles, with a 20,000 percent annual inflation when he took office last Aug. 6.

Social unrest was widespread with militant labor unions staging daily strikes. The illegal cocaine producers operated with virtual impunity.

In July, the Reagan administration agreed to provide six Black Hawk helicopters and 170 U.S. troops for transportation and logistical support to Bolivian narcotics police in what was meant to be this country’s largest anti- drug effort.

While the highly publicized drug raids only netted two large abandoned cocaine labs, the U.S. military presence effectively shut down drug processing operations in the Beni, Interior Minister Fernando Barthelemy said.

″We must act decisively to confront the cocaine mafia because otherwise they could take over the government, even through democratic means,″ President Paz Estenssoro warned in a recent interview with The Associated Press.

The cocaine industry pours an estimated $600 million into Bolivia every year compared to around $500 million brought in by legal exports, Paz Estenssoro said.

The raids, while at least temporarily disrupting cocaine processing activities, had an almost instant negative impact on the economy, according to Finance Minister Juan Cariaga.

The availability of dollars on the black market dropped sharply and the demand for the Central Bank’s dollars increased accordingly. Purchase of dollars at the Central Bank quadrupled overnite to an average of $4 million a day.

″If this demand for dollars continues it could dry up our reserves and seriously threaten our anti-inflationary plan,″ Cariaga said in an interview.

Paz Estenssoro has been president four times. Just three weeks after taking office last year, he implemented some of the most drastic economic measures seen in South America. He devalued the peso 95 percent, raised gasoline prices tenfold, froze salaries, ended price subsidies and reorganized a number of state companies, allowing thousands of workers to be dismissed.

The leftist-controlled Bolivian Workers Central, the nation’s largest labor federation, said the package would lead ″to the people’s starvation″ and called a general, indefinite strike.

Paz Estenssoro, a leader in the 1952 revolution that nationalized the private mines and implemented agrarian reform, imposed a nationwide state of siege.

Hundreds of labor leaders were banished to remote internment camps in the Bolivian tropics. Public meetings and protest marches were outlawed, and strike leaders fired from their jobs.

South America’s poorest nation settled into a queasy calm.

Inflation took a downturn but then started to climb again in December as tin and natural gas, Bolivia’s main export products, dropped sharply in price on world markets.

With the estimated $500 million in legal export earnings representing a 30 percent drop from last year, the government’s anti-inflation program is seriously endangered, Planning Minister Gonzalo Sanchez de Lozada said.

At least 10,000 miners and several thousand public servants have been fired. Unemployment rose two points to 18 percent in less than a year, according to the government.

The U.S. government, meanwhile, made economic aid last year conditional on a 10,000-acre reduction in coca plants in the Chapare, a lush tropical region in the heart of Bolivia, that is the center of the country’s cocaine industry.

In November the government began a voluntary cocaine reduction plan. Farmers were offered $300 for every 2.5 acres they destroyed, compared to the $5,000 to $10,000 they earned by growing the coca.

The United States cut off $7.5 million in economic support funds when the goal was not met.

With inflation considered under control earlier this year, the government decided to ask for U.S. military aid in tackling the illegal cocaine industry that produces an estimated 50 percent of the cocaine on world markets.

For the last semester inflation has been running at three percent monthly, but the tight controls on money printing, low salaries and stiff competition from cheaper imports have deepened the economic recession, according to Bolivia’s Chamber of Industries.

Noticeably absent during this past year have been even the rumors of a military coup. The Aug. 6 anniversary marks the fourth consecutive year of democratic rule, an uncommon occurrence in Bolivia, whose political history has been marked by frequent military takeovers.