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The Bolivian economy continued to struggle in the years after the implementation of the far-reaching economic, political, and social reforms authorized by Supreme Decree 21060, which put Bolivia firmly in the grip of the Washington Consensus. Although hyperinflation was under control by 1987, the rate of economic growth remained anemic. Neoliberal technocrats blamed this on various factors, including weak rates of foreign investment, bureaucratic ineffciency (especially in banking and the legal system), and ongoing resistance to the broader process of structural adjustment by center-left political parties and the public-sector unions.

Despite Jaime Paz Zamora’s background as cofounder of the socialist Revolutionary Left Movement, his government (1989–93) responded to the ongoing problems in the Bolivian economy by staying the course with the neoliberal policies of his predecessor, Víctor Paz Estenssoro. Among other things, this meant closely following the prescriptions of the International Monetary Fund and the World Bank, which were deeply invested in Bolivia and concerned about its inability to make a full transition from “stabilization to sustained growth.”

In the following excerpts from a memorandum of 1990, the World Bank pushes the structural-adjustment process in Bolivia to the next level, by making the issuance of new credit and debt forgiveness conditional on the state’s radical divestment from all sectors of the economy not protected by the constitution (mining and hydrocarbons) or not involved in the provision of basic services. Although the bank carefully weighed what it considered the benefits and risks to what “may well be the final adjustment operation necessary for Bolivia,” its anticipation of the negative consequences of radical privatization would prove all too accurate in the years ahead.

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