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In September 2003, violence erupted again following the announcement that Bolivia would export natural gas to the US and Mexico through a port in Chile, its historic rival. Protesters from El Alto, the impoverished city above La Paz, blockaded the capital.

For at least three weeks, the country teetered on the brink of anarchy. (Smith 2004)

For a time ‘Sánchez de Lozada was replaced by his Vice-President, Carlos Mesa, a television journalist and historian’ and Bolivia ‘maintained a degree of stability’ (Smith 2004). Through 2004 a referendum on gas exports backed greater government control of energy resources, and a deal was signed to allow Bolivia to export through a Peruvian port (rather than Chile), but mass protests of fuel prices and local control of energy resources continued through January-June 2005 (BBC 2005). Former President Mesa resigned in June 2005 on the basis of the country being ungovernable, leading to a short caretaker president (Eduard Rodriguez), with elections thereafter (BBC 2005).

Bolivia, in spite of having South America's second largest gas and oil reserves, remains one of its poorest in the region, and has had to cope with the issue of the tradition growing of coca by indigenous groups (Economist 2005). Morales speeches over the last several years have spoke of nationalising the energy sector, but living up to the contracts made with companies and other countries (such as Petrobras of Brazil), as well as the plan to de-criminalise the growing and use of coca, the leaf, thus ending the forced eradication of the crop, while at the same time still banning cocaine, the refined product (Economist 2005; Economist 2006). However, this could lead to a 'decertification' of Boliva's anti-drug efforts, and reduced aid and trade flows (Economist 2005). Morales' party, the Movement to Socialism (MAS) was based on unions, social movements, and his own coca growers union, has promised to boost the guidance and ownership role of the state in the economy, finance new smaller firms, and promote the use of new technology in manufacturing, agriculture and mining sectors, as well as triple the minimum wage to around $190 a month (Economist 2005; Economist 2006), but will thus need to control government spending, possible future inflation, and also find ways to maintain some flow of investment into the country. Morales will also need to balance the power of the central government with the new elected prefectos (governors) of the 9 semi-autonomous departments, who want a greater share of control of government revenues: they control only around 25% at present (Economist 2005). From June 2006 MAS also wishes to proceed with a constituent assembly to rewrite the constitution, perhaps allowing some land redistribution and greater indigenous rights. Morales, in spite of seeming to lean towards a Venezuelan model, also needs to keep positive relations with the US to support a small manufacturing sector (mainly clothing and jewellery) exporting under favourable conditions into the US through 2006, but best supported in the long run by some kind of free trade agreement, with the US also offering some $593 million in infrastructure development aid (Economist 2005). This sector is worth around $150 million in exports and some 100,000 (Economist 2005). Likewise, foreign aid, largely from the US, accounts for a total of 10% of GDP (Economist 2006).

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