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On Sunday 26 December Bolivia’s government abruptly ended a six-year freeze on fuel prices, raising the price of gasoline by 73% and diesel by 83%.  Vice president Alvaro Garcia said this change in policy was necessary because the subsidy cost US$380 million a year- 2% of Bolivia’s gross domestic national product and US$150 million of the gasoline was smuggled into other countries and sold at higher prices.  The cost of the subsidies was projected to increase to over US$1 billion in 2011.

Hernán Siles Zuazo took office in 1956 during a politically and economically unstable time in Bolivia and throughout Central America. There had been a succession of violent revolutions in the region.  This was Siles’ first time as elected president, although he had previously had a brief stint as acting president while he was vice president.   

Since the Nationalist Revolutionary Movement Party (MNR) overthrew the military junta in April 1952, Bolivia underwent major reformations in its political and institutional structures and economic policies. Aside from establishing universal suffrage, the government nationalized the tin mine business. It also set up the Mining Corporation of Bolivia (COMIBOL), a semi-governmental company, to take control of the mines. Because the miners made up a large part in the revolution and the tin mine was the most lucrative business in Bolivia, miners were granted great political power.

Throughout the 90s, Bolivia came under increasing pressure from the World Bank to privatize public goods in order to fulfill loan conditionality. In September 1999, in response to this pressure, the Bolivian government auctioned off the municipal water system ‘SEMAPA’ of Cochabamba, a city of 800,000 residents. When the auction drew only one bidder, the government signed water resources over in a 40-year concession to Aguas del Tunari, a foreign-led consortium of private investors dominated by the Bechtel Corporation.