Restoration of civilian government

García Meza resigned in August 1981, faced with widespread opposition, domestic and international condemnation, and a deteriorating economy. Congress was reinstated, and in 1982 it returned Hernando Siles Zuazo to the presidency; Jaime Paz Zamora became vice president. During the next year Siles wrestled with disagreements within the ruling government coalition, heavy deficits incurred by the state mining company Comibol, and social unrest, all of which contributed to the collapse of the economy and a breakup of the ruling coalition. When Siles stepped down in 1985, a year before the expiration of his term, hyperinflation was at unprecedented levels, the economy was in shambles with banks virtually shut down, state mines were suffering enormous losses, and the industrial sector was at the edge of collapse. In addition, unusually strong El Niño weather patterns caused disastrous crop failures. With the legitimate economy failing, cocaine trafficking became a major source of foreign exchange; the government, because of its lack of resources and the strong opposition it faced from coca leaf farmers, was unable to curtail the trafficking. Despite all his government’s failings, however, his main legacy was to turn over power to a democratically elected president.

In the peaceful elections of 1985 the Nationalist Democratic Action (Acción Democrática Nacionalista; ADN), led by Banzer, narrowly edged out Paz Estenssoro’s party, the MNR, but, with the acquiescence of Banzer, Paz Estenssoro was elected president by Congress. The new president implemented drastic economic reforms to end the country’s hyperinflation, which by then was the highest in the world. He greatly devalued the Bolivian peso while increasing gasoline prices, freezing wages, and eliminating price supports. The country’s conservative government also shut down most of its tin mines and laid off some four-fifths of the miners in response to a sharp drop in international tin prices and Comibol’s large deficits. To quell a general strike and the mobilization of miners, the government temporarily sent dozens of labour leaders to detention centres in the Bolivian tropics. Overall, however, there was little actual violence, despite the tremendous social and economic upheaval caused by the economic reform programs. To carry out the economic reforms, Paz Estenssoro formed an alliance with General Banzer and his party. During this period Paz Estenssoro dismantled the state mining company, which he had helped set up after the 1952 revolution, and he opened up the economy to foreign investors.

The new president held to his plan in the face of public pressure, and after several months the Bolivian economy began to recover, as its ruinous hyperinflation rate was reduced. Although this was an encouraging step, Bolivia still faced numerous debilitating problems, particularly unemployment; under an emergency employment program, work was provided for tens of thousands of unemployed miners.

The government’s difficult fight against the large underground cocaine economy was somewhat strengthened, partly as a result of pressure from the United States. Actions taken—with the aid of U.S. troops and helicopters—included the eradication of illegal crops and processing laboratories and the implementation of a program of crop substitution.

In the May 1989 presidential elections the main candidates were Banzer, Paz Zamora, and Gonzalo Sánchez de Lozada Bustamente, a newcomer to national politics. Sánchez de Lozada, a philosophy graduate of the University of Chicago and owner of the profitable COMSUR mining company, had assisted with the economic reforms in 1985 under Paz Estenssoro. Sánchez de Lozada and the MNR came in first in the popular vote but did not receive an absolute majority, whereupon Congress again selected the president. Paz Zamora, with his Movement of the Revolutionary Left (Movimiento de la Izquierda Revolucionaria; MIR), unexpectedly secured the presidency by forming a coalition government with Banzer’s ADN. In most respects, Paz Zamora continued his predecessor’s policies, except for a new emphasis on national production of food and raw materials and negotiations with Brazil on the construction of a natural gas pipeline. Under the threat of losing U.S. aid, Paz Zamora also continued to help fight the drug trade.

In the 1993 presidential election, Sánchez de Lozada and the MNR won a plurality, and, in order to ensure his selection by Congress, he formed an alliance with the Solidarity and Civic Union (Unidad Cívica Solidaridad; UCS). Sánchez de Lozada soon initiated a privatization and capitalization program that brought huge amounts of investment capital into the economy. The government sold its controlling interests in electrical energy, transportation, communication, hydrocarbon, and airline companies to foreign partners; the remaining government stake in these companies was transferred to a new national pension fund system. Sánchez de Lozada also finalized an agreement with Brazil for the construction of a major natural gas pipeline (opened in 1999) between Santa Cruz and São Paulo, Brazil, and this undertaking in turn stimulated foreign investment in the petrochemical industry. The reorganization of the pension fund system also removed widespread corruption and inefficiency from the government bureaucracy. Sánchez de Lozada ended his term in 1997 with a growing economy, increased foreign investment, and reduced coca leaf cultivation and drug trafficking.

Elections in 1997 gave Banzer a plurality of the vote, and he emerged victorious in the Congressional decision through the support of the UCS and the populist Conscience of Nationhood (Conciencia de Patria; Condepa) party, which was led by Carlos Palenque, a popular radio and television talk-show host. The new government intensified the war on drugs and furthered its predecessors’ efforts toward economic development. Banzer resigned before the end of his term, which Vice Pres. Jorge Quiroga completed.