Morales-Arce feud could hinder passage of Bolivia's 2024 budget bill

Bolivia’s 2024 budget debate in congress will mark the next chapter in the ongoing feud within the ruling MAS socialist party, as President Luis Arce’s government will likely face stiff opposition from supporters of former leader Evo Morales.

“It's going to be very hard. There’s going to be a lot of fighting, but in the end, I guess they’ll have to approve it; otherwise, the situation could become complicated in economic terms. There’s some pragmatism, but the 2024 budget will be one of the big battles" between Morales and Arce, says Gonzalo Chávez, head of the productivity and competitiveness school of Bolivia’s Universidad Católica (UCB).

Economy minister Marcelo Montenegro said the government is working on the budget bill and has all of November to submit it to congress, daily La Razón reported.

Last year, Morales’ allies in the lower house rejected the 2023 budget bill with support from the opposition, although it was later passed after negotiations between the pro-Arce and pro-Morales factions of MAS.

But the rift has worsened considerably since then, with the Evista camp that backs Morales voting to impeach Arce’s interior minister Eduardo del Castillo with the help of the opposition. However, the president later reinstated him via decree. 

Morales, meanwhile, has increased the intensity of his attacks on the current administration over issues such as economic management and corruption. At the same time, Arce’s supporters accuse him of trying to regain the presidency at any cost. 

This has also resulted in a legislative deadlock in which Arce’s government has been unable to obtain congressional approval for multilateral loans required for investment projects, which are now badly needed in the face of slower economic growth and dwindling hydrocarbon revenues.

“There’s a governability problem in congress, and there’s also a governability problem in the streets because a good chunk of MAS had very strong popular support and that has become divided as well,” Chávez tells BNamericas. 

The rift also comes at a time when Bolivia’s economic model, pushed by Morales when Arce was his economy minister during most of his 2006-19 government, is showing major cracks, according to the economist. 

The model depended heavily on hydrocarbon exports, which have been in decline since peaking in 2014. And now the government is leaning heavily on public spending and multilateral loans to boost economic growth, which is slowing. 

The 2023 budget was based on expected GDP growth of 4.8%, but the World Bank currently predicts only a 1.9% increase.

“Because of the lack of resources, things are being halted, though the government keeps announcing many state projects, especially in the hydrocarbons sector,” according to Chávez, who added that he expects investment in infrastructure, mostly financed through multilaterals, to slow down as well. 

“The problem is that those loans help in infrastructure projects but not in terms of dollar liquidity because those loans aren’t freely available. They have to be used in a specific project. Bolivia needs dollars, especially to pay subsidies,” Chávez says, pointing to fuel subsidies of US$1.7bn last year.

These and other subsidies, Chávez says, are the main reason why Bolivia’s inflation is much lower compared to the rest of the region, running at 2.9% in the 12 months ending September, according to the central bank. 

Bolivia experienced dollar shortages earlier this year as the central bank’s reserves reached their lowest level in 15 years due to dwindling gas revenues. 

TENSIONS HIGH

At the end of the day, Chávez says, the Morales-Arce clash is about who will represent MAS in the 2025 presidential election.

Morales announced his intention to run last week at a MAS convention that was not attended by Arce or his supporters, who were declared as “self-expelled” from the party by the pro-Evo leadership that proclaimed the former president as the only MAS candidate.

That convention was suspended by a ruling from the constitutional court, and Arce’s supporters were readying a separate convention for Tuesday afternoon with thousands gathering in the city of El Alto neighboring La Paz. 

Although the president will assist, there will not be any announcements regarding a 2025 candidacy, interior minister Eduardo del Castillo told state news agency ABI.

This has only intensified the clash between supporters of the two factions, with delegations traveling to the pro-Arce convention denouncing Evistas for harassing them on the way to the event and blocking roads, while Morales called such accusations false. 

“The government’s false accusations show that they're preparing self-imposed attacks to gain some legitimacy,” the former president said on social media. 

Chávez does not believe that Morales will try to oust Arce before the 2025 vote and said that both sides are currently testing their strength to see who can win the MAS nomination, while the opposition has not been able to take advantage of the split in the ruling party, which is suffering its biggest internal crisis since it came to power in 2006.

“This is a crisis that hasn’t fully manifested itself yet,” Chávez says, but warns there are visible signs already, such as the economic slowdown, the low level of public investments due to a lack of resources, increased public debt and high job market informality.