“Bitter Medicine”

When Víctor Paz Estenssoro began his fourth and final term as president in August 1985, his Revolutionary Nationalist Movement (mnr) government inherited an economy in a staggering state of crisis. Although hyperinflation was the biggest concern, Bolivia, like other countries in Latin America at the time, also labored under massive amounts of debt to the International Monetary Fund. Paz Estenssoro appointed the president of the Bolivian Senate, Gonzalo Sánchez de Lozada, as minister of planning with the charge to implement dramatic changes to the Bolivian economy. Sánchez de Lozada applied “shock therapy” to bring about a rapid “structural adjustment” that drastically cut government subsidies, froze wages, and eliminated tens of thousands of jobs; pegged the Bolivian economy to the U.S. dollar; and opened up the domestic market by eliminating import quotas.

In the following informal address, from November 1985, given several months after the government decree (21060) that offcially launched the neoliberal regime in Bolivia, Sánchez de Lozada laid out the government’s rationale for what it called the New Economic Policy. It is notable that, at the time, he denied the mnr was breaking with the revolutionary nationalist model that it had inaugurated in 1952. Rather, he peculiarly compared Paz Estenssoro to Louis XIV, and justified the new measures on the grounds that the central state required more effective political control. He asserted that Bolivians would willingly accept the painful consequences of the new economy because they believed that “a medicine is only good if it’s bitter.” It is more likely that, after initial resistance, the population put up with the severe measures out of exhaustion and desperation, rather than conviction about the virtues of suffering. The government did succeed in halting inflation and in renegotiating the foreign debt, earning it substantial public approval. But the lack of economic reactivation and the vulnerable, precarious condition of the poor took a long-term toll. Some fifteen years later, laid-off miners and impoverished peasants who had migrated to the cities, swelling the unemployed or underemployed urban population living on the edge of subsistence, contributed to the powerful popular protests against the neoliberal model.