Bolivia's Morales scrambles to stem crisis over massive fuel price hike

Bolivian President Evo Morales faces another day of demonstrations over an enormous fuel price increase today, after bus drivers and some citizens' groups rejected his conciliatory gesture to increase pay for minimum-wage workers and public servants.

The head of the national bus drivers' union, Franklin Duran, called for a national strike today after Mr. Morales last night reaffirmed his Dec. 26 decree to slash subsidies and raise fuel prices by more than 50 percent, the first price increase in six years.

"This speech didn't have much flavor for us," said Mr. Duran, whose union is one of the country's most powerful, as the vast majority of Bolivians travel by bus and striking drivers use their vehicles to block streets. "We were hoping he would solve our problem, both as drivers and as Bolivian families."

The conflict may be Morales's biggest crisis since taking office in 2006. While he faced a recall referendum and extremist demonstrations in 2008, he has never faced so much opposition from the small miners, peasant farmers, and urban poor that make up his base.

Morales's sales pitch

Morales tried to explain the cuts last night by pointing out that half of the $380 million the government spent this year to lower fuel prices ended up being skimmed off by smugglers – including some bus drivers – who filled up in Bolivia and sold gasoline or diesel in neighboring countries for a profit.

Ending the subsidy will also help state oil company YPFB increase oil exploration, raising the possibility that the country could end fuel imports, he added.

The president also raised the minimum wage to $117 a month and gave the police, military, health, and education workers 20 percent raises.

Why the poor don't welcome pay raises

Rolando Villena, appointed by Morales to be a government ombudsman this year, said the price increase would hurt the poor the most.

Indeed, hopes for long-term economic stability and the new public-sector raises don't help the poor, whose jobs don't pay hourly wages, says Mario Duran, a political analyst in the El Alto neighborhood on the outskirts of the capital, La Paz.

Most residents in El Alto run small businesses such as clothing workshops and mechanic shops, meaning they won't benefit from a higher minimum wage. They are, however, hit by the costs of the price increase, as bus fares have jumped 50 to 100 percent and lunches that recently cost $1 now cost $1.50 to $2, he says.

Almost 90 percent of the neighborhood's residents voted for Morales last year, Duran says, adding that the president's popularity was in part a result of his opposition to the last increase in fuel prices, at the end of 2004..

Contrast with Iran, which also cut fuel subsidies

The crisis over Bolivia's fuel price increase stands in contrast to the calm in Iran, which also cut fuel and other subsidies last week, says Armin Wagner, transport policy advisor at the aid agency German Technical Cooperation, in an e-mailed response to questions.

He compiles an annual survey of fuel prices worldwide. Governments do better if they announcements fuel price changes regularly, rather than waiting years between adjustments, he says.