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10/16/1988 - untitled by William L. Melvin

NOT FOR PUBLICATION WITHOUT WRITER S CONSENT INSTITUTE OF CURRENT WORLD AFFAIRS WLM October La Paz BOLIVIA Peter Bird Martin Executive Director Institute Current World Affairs Wheelock House West Wheelock Street Hanover NH 03755 Dear Peter It La Paz waking In narrow alley Plaza Alonzo Mendoza small group begins gather At first glance these poorly clothed ragamuffins might bandits Fagan Bolivia The luckier patches covering holes their trousers older baiaciavas protect against accompanied early arrival rainy season Though youth bandits orphans arisen early money shining shoes These lustra botas shoeshine begin inspect tools their trade With practiced precision seriousness beyond years their hands small wooden boxes serve shoeshine footrests plucking shoeblack check content To expensive shoewax farther lustra botas brewed black known afialina Since La Paz Municipality allows lustra botas charge centavos about U S cents shine thrift byword The competition between these between years fierce Anyone willing headcount would lustra botas blocks separate Plaza Alonzo Mendoza Plaza P6rez Velasco The lustra botas burgeoning informal economy accounts approximately economic activity Bolivia The informal economy composed mainly street people women spread blanket sidewalk display cigarettes hilly avenues La Paz holding Swiss Army knives shoelaces In never enter store La Paz ready availability consumer goods street Known ambulantes these vendors little taxes establish fixed prices operata without receipts This economy never books The informal economy Bolivia influenced greatly narcotics trade flourishing business contraband goods smuggled Peru Chile Argentina Brazil At every politician bureaucrat Bolivia trying figure World Bank published targets augmenting William L Melvin Fellow Institute studying South American Indian societies Andean affairs export volume between maintaining stable society encourage domestic savings investment I0 gross domestic product present level economy rarely shows official figures deserves ntion Jeffrey Sachs Harvard economist consultant Bolivian government Victor Paz Estenssoro since La Paz angered politicians stripes spots urged political parties contesting presidential election specifically outline expect achieve economic growth Andean country decade As principal architects liberal import policy currency stabilization scheme Sachs point New Political Economy implemented beginning fruit To restore income levels fallen since Sachs Bolivians straight narrow fiscal discipline least years But consider informal economy never makes export column wonder economy needs which The informal economy really early decade General Luis Garcia Meza Teada negated June election results golpe estado As European diplomat confided Garcia Meza ruled country personal finca No attention economy warnings about commodity markets since prices remained Bolivians still about El Delinquente trepidation Human rights violations common U S neighboring Andean Pact nations diplomatic relations Garcia Meza regime became clear members junta involved trade When democracy eturned Bolivia Unibn Democr Popular Hernn Siles Suazo chose finance fiscal deficit inherited expanding money supply M1 rather reforming inefficient bloated public sector As mentioned WLM inflation skyrocketed unprecedented levels inflation nearing housewives begin forming lines bread One Japanese diplomat The economy ceased function Add chaos gross domestic product declined every single layoffs implemented present government order restore sense order public sector pices collapsed created situation which women Bolivia willing money whatever What actually makes informal economy Most visible informal economy streets Jeffrey Sachs himself stepped around least ambulante while La Paz These ambulantes usually fixed depend grace house owners wealthy neighborhoods tolerant policeman provisional public sidewalks plazas La Paz Ambulantes greatly description success The newest usually start blanket which display their wares frequented This ambulantes direc conflict other sidewalk space actually kicking other pulling tugUof WLM PHOTO Ambulantes selling toilet paper detergent towels La Paz Cemelery PHOTO A young lustra awaits customer Plaza P Velasco squatter rights Women actually ambulantes Bolivia Ambulantes working established clientele usually metal kiosk These kiosks cement commonly wheels rolled place early morning stored evening The Aurora young Aymara woman typical Aurora became ambulante after lucky enough persuade uncle Bolivianos US I Bs start capital She commutes center rather operate barrio marginal euphemism neighborhood E1 Alto where lives because Here people without grumbling In El Alto these difficult times everyone expects discount Of original Bs which started approximately Bs waited months receive vendor license Mayor office This compare Bolivian process legalizing small business Peru In Hernando Soto definitive study Peruvian informal econom E1 Otto Sendero researchers shown holding taped trail necessary documentation measures meters For Bolivians however legalization process expensive lengthy bother prefer occasional police officer might vendor license cannot produced Since Aurora legally street suffers harassment She Bs Mayor office month right occupy sidewalk Bs metal kiosk wheels Her Aurora estimates earns Bs working But Even estimate income Bs month nottoo difficult understand attractiveness informal sector According Central ObreraBollviana COB minimum monthly Bs Primary secondary school professors currently strike demanding augment present basic salary I15 Bs month The miners still parastatal mining COMIBOL starting salary Bs factory workers average Bs month But average ambulante still matching income Representative Senator Bolivian Congress Both Bs monthly serve Republic While penetration informal sector within economy whole table below useful light sheds composition informal sector itself DISTRIBUTION OF EMPLOYMENT IN LA PAZ Total Formal Informal Domestic Economy Economy Service I00 Industry Manufact I00 Construction I00 Retail Commerce Transport Servlces Source Encuestra Urbana Migracibn Empleo Proyecto BOL P03 Ministerio Trabajo Desarrollo Laboral UNFA OIT PHOTO Women Aymara Indian dressed regional Viacha clear majori street vendors PHOTO A hawking brooms feather dusters works through Saturday crowd El Alto section La Paz Sis nificantly those working retail commerce employed informal sector Women usually enter selling because easiest requires learned skills other location sense supply demand customers happy TraditJ onally however retail sales quickly affected downturns economy But Bolivian businessman La Paz pointed sector where growth strongest today hinting economy critics would believe Indeed fastest growing industries three years packaging brewing industries The owner Cerveceria Nacional Max Fernandez taken sponsoring public events style Budweiser presidency election The drink industry fared badly either Carlos Barrero Bolivian American Chamber Commerce Santa Cruz Coca Cola bottlery experienced highest growth retail sales distributor world Coca Cola network Since drinks often through ambulantes algument ambulantes benefit It illustrates difficulty defining exactly where formal economy iniormal economy begins It worth noting though unplanned boost Revolution provided informal economy Not attendant Agrarian Reform freed Instead campesino being pongeauje obligatory service andlord Aymara uechua campesino became responsible welfare The result stream steady unspectacular migration urban centers La Paz Cochabamba since campesinos round necessary integrate themselves money economy order survive In Bolivia population inhabited cities By cities Bolivia population Current imates immigrants arriving La Paz around By standards migration experienced other Latin American cities could hardly called immigrants For example Mexico City thought absorb nearly million immigrants But migration continue pressure urban economies create employment According recent survey conducted Instituto Nacional Estadisticas INE number Bolivians living cities should million person figure projected national population In study conducted Centro InvestigaciOn PromociSn Campesina CIPCA adult Aymaras surveyed responded La Paz search better future That bound disappointment leave behind countryside The Agrarian Reform principally affected Altiplano Cochabamba valley transforming fincas terratenientes landholdings satisfy immediate desire expressed campesinos Thus three decades problem reversed latifundia minifundia Though there scholarly debate actual inheritance practices among Aymara Altiplano experience tells there simply enough children women inherit So children inherit themselves wealth migrate In migrating financial pressure family countryside Page PHOTO With circulation dollars contraband profits luxury autos become favorite investment those afford PHOTO This Quechua Indian Potosi support herself child Potosinos flocked urban centers search economic elief drought southern department familial links urban economy The CIPCA survey found these immigrants return average least their community origin When return often share their earnings family countryside fiestas fertilizer university education younger siblings Not after arriving La Paz fortune Fernando Baptista Gumucio economist chair historian served Minister Finance Siles Suazo government When asked Minister Baptista thought continued migration country would consequences Bolivia Peru where ambiance discontent social unrest prevails pueblos jovenes Baptista quick point difference between Peruvian Bolivian migration In Peru argues Baptista migration country accompanied different phenomenon campesino undergoes culture shock leaves behind ancient traditions sierra encounters hectic lifestyle Lima coast You should forget Lima artificial creation Conquistadores afraid settle capital Incas Cuzco sierra general being overrun still hostile though repressed indigenous population In Baptista campesino comes La Paz Potosi merely changing rural scenery sierra urban scenery sierra In La Paz already inhabited Aymaras Conquest The Aymara settlement known Chukiyapumarka The Aymara scholar Jesuit priest Xavier Alb6 differently Baptista would agree writes La Paz Chukiyapu parallel cities faces dialectical reality COCAINE AND THE CONTRABAND TRADE Though visible ambulantes cocaine contraband trade greatly influence lives Bolivians It estimated cocaine trade alone supplies approximately persons another And while contraband trade cannot claim large impact deprive Bolivia needed customs revenues threatens domestic industries cannot compete illegal flood goods cross borders almost Conclusive place cultivation processing economy fairly difficult hands there rarely agree Nevertheless Samuel Doria Medina strikes Doria educated first Catholic University La Paz before going complete Master Degree London School Economics worked Ministry Finance during Siles Suazo government Then Doria wrote La Economia Informal Bolivia His estimate value cocaine production proportion formal gross domestic product figures issue The Economist chosen Doria because following table gives better value cocaine production leaped while formal GDP declined Page PHOTO Bolivian Armyadets weekend leave Besides offering cadets opportunity serve patria arned services provide financial security PHOTO A La Paz policeman directs traffic Buenos Aires narket Unlike their Peruvian counterparts Bolivian traffic police white loves armored vests LM Page RELATION OF COCAINE PRODUCTION AND FORMAL GDP IN BOLIVIA O00 U S dollars Year GDP GDP Re1ation Formal Cocaine NB Doria valued cocaine U S kilogram produced Beni Yungas Chapare Bolivia Source Banco Central Bolivia Unidad Analysis Politicas Econ6micas UDAPE Perhaps importantly Doria calculated extent capital flight aeneated profits cocaine trade CAPITAI FLIGHT GENERATED BY COCAINE PROFITS O00 U S dollars Year Coca Cocaine LJ2_ Capital F l_ig_h_t Value Added Value Added NB Assumes price US kilogram ocessed Assumes ratio cocaine based U So Drug Enforcement Agency price US kilogram processed cocaine Assumes value actually stays Bolivia Doria assumption money farmers stays Bolivia could flawed reasonina campesinos likel money Bolivia since access knowledge international investments Even research overestimates capital flight should clear great majority cocaine profits besides taffickers wealthier stated WLM profits helped water electricity light remote areas Bolivia diplomats economists skeptical maintain instead repatriated dollars luxury automobiles electronic goods No matter cocaine profits spent unregulated dollars Bolivian economy small headache poficymakers Of course bringing subject cultivation processing prominent Bolivians touchier citing above statistics Aymaras Ouechuas stoutly defend their right When asked young Aymara chewi PHOTO An ivately owned taxis buses source transpoltation Paceos PHOTO On Saturday mornings black market known Miamicito attracts Pacefios foreigners eager money buying contraband Page among Andean Indians actively encouraged Spanish during Colonial Period religious purposes happy hungry Quechuas iymaras forcibly brought mercury mines Huallcavelica Peru silver mines Potos1 Bolivia under terms blinked He replied nothing wrong chewing allowed entire University Mayor San Andres without worrying about eating money except daily commute Altiplano When pressed further asked think using still hunger pains brought poverty cruel using cocaine recreational purposes cadent quick disagree But believe understood questioning utilitarian value attached chewing moral repugnance attached cocaine snorting My Aymara friend because countrymen cocaine because there world difference between paying US leafs Yungas whipping US cocaine Washington D C Given dichotomy prominent Bolivians loathe condemn cultivation processing without qualifying debate As pointed WLM Bolivians single United States source problem since U S demand drives market And cultivation disappear tomorrow Bolivia businessmen there would adequate trade concessions U S legislators One Bolivian inessman turned attention sponsored Senator Ernest Hollings South Carolina would limit increases imports clothing textiles Although destined Senate House Representatives conference differences between Senate House versions introduction leaves Bolivians feeling American trade policy entirely their And since textiles clothing exports usually first industries Third World countries their times recovery businessmen irked As capital flight suitcase along cocaine production heard grumblings One particularly articulate young spoke diplomatic gloves usually wears Bolivia negotiating privately external discount bluntly Look pressure under illegal economy revolves around cocaine production private commercial banks Europe Caribbean U S prove origin their deposits Welt maybe debate deserve qualification But deserves straight thining Even Bolivian businessman griped about trade concessions admitted Bolivian exporters earthly fully exploit trade allowances allowed under Generalized S Preferences And banking friend forgot mention Paz Estenssoro government office banks allowed month grace period during which dollar deposits accepted questions asked Yet PHOTO Ii The peeling facade broken windows proud Academy Fine Arts reflect general state higher education Bolivia PHOTO Protest poster prepared rotskyite intel lectuals University Mayor San Andres It reads STUDY FIGHT TO TRANSFORM should happy learn U S Customs Service indictment Bank Credit Commerce International charges laundering U S million dollars The Bank BCCI based Luxembourg registered through holding company located Cayman Islands With branches countries including Panama Uruguay Bahamas BCCI exactly moved friend protest But US million bucket The international banking community Investigations along lines carried U S Customs Service which agents worked secretly organize sting years duplicated All toooften dollars strangely odorless And regardless trade concessions Bolivia other Andean countries cannot count rising demand cocaine forever Like snuff tobacco efore cocaine could become suddenly unfashionable Then Bolfvia another commodity Were cocaine legalized suggested WLM Bolivia another problem money Bolivia legal Previous investment trends during times other commoditiy booms silver rubber recently particularly encouraging But right cocaine illegal The nalcotics trade violence corruption And money Not European ambassador posted Lima wrote letter after visited Santa Cruz eastern lowlands Bolivia He wrote exactly reading Gideon Bible during genuinely surprised Santa Cruz The discotheques seemed those Miami Vice though perhaps impressed sophisticated By means visit least It really Bolivian Everyone drives BMW Mercedes The brought development region The question development justified based cocaine THE PROBLEM OF CONTRABAND The problem contraband though insidious cocaine poses equally aggravating dilemas formal economy cannot compete smuggled goods A personal example illustrative import house La Paz would order typewriter ribbons until verified could price typewriter ribbons black market La Paz Like cocaine contraband other Andean economies Peru closed borders Ecuador Chile Bolivia June series suprise raids Customs borderposts revealed caches dried meats drugs short supply Peru itself Peruvian Customs agents business smugglers assure goods moved across borde bribe slight delay The inflation Peru devaluation Peruvian Inti against US dollar contraband trade lucrative small smugglers found could neighboring Bolivia Chile where prices higher thanecould legal inside Peru PHOTO Two cultures Aymara mother under King Kong I One formidable obstacles solving contraband problem existence completely honest Customs officials With kilometers frontier patrol Bolivian Customs agents overworked underpaid stuck isolated posts might Robinson Crusoe wince In environment superiors civilization temptation rules present To combat problem Bolivian government contracted Specialist Services International Ltd British determines value imported goods purposes levelling duties esorting outside proved successful customs revenues doubled those collected Nearly customs revenues derived repot derived exports In imports olivian economist Samuel Doria Medina calculates US million dollars between value customs revenues those collected accour inflation those years But dependence foreign firms declines diverts attention corrupt inefficient Bolivian Customs Service As diplomat explained You cannot station Englishman every border crossing So still confont situation which trader crossing border televisions razil leaves customs house paying false relieved TV Newspaper radio editorials suggested Bolivian Customs privatized encourage efficiency unless private customs remunerate employees Bolivian government error their corruption unlikely contraband disappear anytime Nor there political necessary seize contraband reaches cities The called black market Miamicito operates openly within walking distance Customs Service office building The difficulty shopping Miamicito seems convincing ambulante receipt demand foreign foundation Bolivian government Otherwise business usual Marie Lissette Canavesi Sahonero Uruguayan economist teaches Catholic University La Paz shared preliminary research students conducted Miamicito She counted nearly persons passing through black market Saturday rning observations customers gamut dressed suburbanites Altiplano Aymaras La Paz shopping Chilean Argentine goods dominate market stalls since transport cheaper goods brought those countries Sra Lissette students found approximately merchandise Miamicito manufactured another country But ambulantes black market reluctant provide informa being taxed there sales their colleagues street black market vendors charged nominal occupy public domain bears relation their profit Even tnformation Sra Lissette students pulled together indicates incomes black market range Bs month Not consider Miamicito Wednesdays Saturdays Buyers usually travel frontier gions twice month replenish stocks depending capital available buyer these trips quite lucrative indeed One buyer responding Sra Lissette survey admitted frontier US normally recouped investment handsome profit weeks An interestin footnote Sra Lissette research level education found among ambulantes selling Miamicito In survey vendors possessed basic readin skills finished elementary school completed elementary school passed school entered University San Andres La Paz latter failed graduate statistic telling As Peru Bolivian professionals formal economy could public university graduates prospect regularly complaints about generation Bolivian students value enough university deCree enroll enouCh university enrolled Thosedo manage graduate often poorly prepared demands private formal economy While prejudiced because rigorous Jesuit raining month spend University Mayor San Andres UMSA extremely frustrating Classes rarely shuttled continually between different classrooms course professor showed liked Luckily degree could afford continue language study outside UMSA imagine years study inconveniences resented WLM Page heaped faculty student strikes regularly paralyze learning shutting UMSA there The To everyone deserves equal crack higher education But admissions system UMSA promote equality It promotes mediocrity Therelis trance examination If student Bs tuition semester right study With enrolled students tuition enormous strains University UMSA constantly lurching fiscal crisis another Under austere economic regimen three years entire Bolivian university system suffered equally other public institutions University system administrators assert approved budget short actual needs million Bs Public universities short funds running deficit nothing First World But country Bolivia really afford continue financing university system according Comit6 Ejecutivo Universidad Boliviana fails graduate every students enter doors Equally compelling universities budget pains attitude students taken toward admissions tests Unpert urbed thinner graduation majority students think admissions would discriminate favor those Bolivians attend private schools block their social aspirations But happens those lofty aspirations students because knows whether should studying geometry geography neither Most friends UMSA revere university degree ticket winning social economic legitimacy Bolivia Of course their ideas shaped their earlier UMSA educated students enjoying almost budget terms seems paltry today Such attitudes difficult impossible convince struggling student might better employed welder electrician unemployed historian lawyer So Bolivia suffers shorta level qualified techicians build natural pipeline Brazil financed through formal economy oversupply university minding store black market The private sector turns poorly educated prepared students should needs providing realistic options students societies might doctors pumping money higher education For example Bolivian brewer Max Fernandez experience govern Bolivia But possess capital trade school train mechanics necessary repair tractors recently promised Altiplano communities outskirts La Paz In could assure Fernandez enduring legacy erstwhile forgotten leaders Bolivia governed weeks months before being overthrown golpe estado The solely absence admissions criteria starts earlier Malnutrition common among children living Altiplano barrios Then primary secondary schools countryside spend inordinate amount class drilling students march Avenida Julio La Paz national holidays Finally student reach university level finds himself prepared neglect studies difficult engage protest politics It would erroneous misleading state every student University Mayor San Andres spends organizing hunger strikes cracking books enough their politicized colleagues studyin atmosphere chaotic uncertain Since there incidents kidnapping office storming University carried group Trotskyite intellectuals themselves Urus Serious students culrently unable University library because locked prevent student occupation The kidnappings lasted consisting short brawls forced detention faculty students uncomfortable night locked auditorium lecture hardly stuff academe think radicalism partly notion shared students their years University their first chance public forum attention One friend referring student kidnappings remarked Posters posters Without violence politicians administrators never seriously remember asking young woman students concerned about raduating marching against imperialism proposed curriculum changes Her answer poignant description barrios marginales where UMSA studen Of course seems crazy But their students lives crazy They study there light If morning there water Their fathers knows Jobs And politicians looking forward 19957 grown pacing streets La Paz living strings Bolivians themselves tryin Humpty Dumpty economy together As Received Hanover