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Bolivia Can’t Afford to Isolate Itself, Former VP Candidate Says

In an interview with Bloomberg Línea. Gustavo Pedraza laments La Paz’s failure to condemn Russia’s invasion of Ukraine at the United Nations, and talks about the war’s economic impact on Bolivia

Gustavo Pedraza, Bolivian former vice presidential candidate.
May 03, 2022 | 06:30 pm

Bloomberg Línea — Gustavo Pedraza, who stood as candidate for the Bolivian vice presidency in 2019 for the Comunidad Ciudadana coalition, and which lost to current President Luis Arce, considers that his country was wrong to join the 35 countries that abstained from condemning Russia’s invasion of Ukraine, a decision that he describes as “the worst mistake of the Arce administration”.

“The impact [of that decision] will be reflected in the short term in Bolivia’s economy,” Pedraza tells Bloomberg Línea.

‘An Accomplice to Aggression’

Bolivia voted to abstain on the U.N. resolution condemning the invasion of Ukraine that demanded Russia withdraw its troops. Under the U.N. voting system, if a permanent member country does not fully agree with a proposed resolution, but does not wish to cast a veto, it may choose to abstain, allowing for the resolution to be approved if it obtains the required number of nine votes in favor.

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In matters of international relations, “to abstain in cases such as these means being an accomplice to aggression,” Pedraza says.

But Bolivia was not alone in abstaining, and joined a long list of countries that have been reluctant to show support for Ukraine and instead opted for silence: Algeria, Angola, Armenia, Bangladesh, Bolivia, Burundi, China, Central African Republic, Congo, Cuba, El Salvador, Equatorial Guinea, India, Iran, Iraq, Kazakhstan, Kyrgyzstan, Laos, Madagascar, Mali, Mongolia, Mozambique, Namibia, Nicaragua, Pakistan, Senegal, South Africa, South Sudan, Sri Lanka, Sudan, Tajikistan, Tanzania, Uganda, Vietnam and Zimbabwe.

“Our small economy, whose annual GDP is comparable to the price Elon Musk paid for Twitter, cannot afford to isolate itself like this from the international community and lose the interest of foreign investors who condemn these countries for being accomplices in the armed conflict,” Pedraza says.

As a result, he says, Bolivia will suffer the impact of the war in the second half of the year in the price of wheat and sunflower oil, and the Food and Agriculture Organization (FAO) of the U.N. has already warned of a global increase in food prices of between 8% and 22% due to Russia’s invasion of Ukraine.

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A lawyer with a degree in public administration from Harvard, Pedroza, 58, held the position of Social Development and Planning Minister in the government of former president Carlos Mesa Gisbert for 10 months, until February 2005, and has worked as a consultant to the FAO, as well as to the United Nations Development Program (UNDP), the Danish Cooperation Agency and the World Bank in areas such as development management.

He now works in agriculture and runs Gestión de Capital Social (GCS), a company specializing in political and social research, based in Santa Cruz, from where he talked to Bloomberg Línea.

This interview has been edited for length and clarity.

Bloomberg Línea: How do you analyze this last year of President Arce’s administration?

Gustavo Pedraza: An acute economic crisis has been prevented, but we do not know how sustainable it is because a crisis has been avoided at the cost of indebtedness. The high percentage of unemployment has not been solved, nor the issue of reactivation of the productive economy. We are talking about the first year, now we will see how it goes in the remaining years. I am not optimistic.

The conditions of the country’s economy are not good and neither are the prospects. Our foreign indebtedness shows the incapacity of the state to have been able to develop projects to replace the gas production volumes of eight years ago. We have untapped lithium, and the productive economy of Santa Cruz is unable to develop. There are no incentives for exports, rather there are restrictions and ceilings for businesses. I believe that the government should have a long-term and a more open vision. The main thing is to leave aside the retrograde discourse of imperialism, which is no longer appropriate in this era. That discourse only leaves us on the side of countries that are not good examples of democracy and development, such as those who voted to abstain from condemning the current war.

How will the war in Ukraine affect the Bolivian economy?

We are going to feel the impact of the war on wheat: the size of the marraqueta [the typical loaf of bread of the region] will decrease, or the price of the marraqueta will go up. The same with noodles, which is the food of the majority of the poor population. We buy 70% of our wheat from abroad and our production is only 30%. I think we are going to feel this in the second half of the year. Russia and Ukraine are large producers of cereals, including wheat. In response, the Bolivian government has created a company to grow wheat. But it is making a mistake; that is not the short-term solution. I believe that a quick public policy would be a wheat price incentive. I hope they are looking at that.

Another issue will be the price of fuels, not internally, because I don’t think the government will increase the price. But every year we import more diesel and more gasoline, so the subsidy that the government pays is going to be higher. Experts say that the price of a barrel of oil is going to rise progressively. So what does this mean? That last year our gas export volume revenues were almost equal to the fuel import volume costs. This year, with this projection, fuel imports will be higher than gas exports. This will be very harmful for the domestic economy.

On the other hand, these two countries at war are also the largest sunflower producers. Sunflower oil is not going to have the same global production levels as last year, the ports are now militarized because of the war, so sunflower oil will surely have a higher price. This will also be felt locally.

What will be the impact of Bolivia not having condemned the Russian invasion of Ukraine?

The government made the decision to abstain. Although it is a right in the United Nations voting system, in political terms it shows that there is an alignment of the Bolivian government with Russia. If I see that a country is being attacked, that civilians are being killed, and I do not condemn that, then I am an accomplice, am I not? The Bolivian government has demonstrated this in successive votes; not only in the United Nations, but also in the Organization of American States.

We are in a bloc aligned with Venezuela, Nicaragua, Russia, China... This has been isolating us from the international community. It is not good for us, and this will be reflected in the economy. No large company or private investor is attracted to a country with such positions. This does not generate incentives for foreign investment. Investment does not come to countries that have institutional decomposition, that have judicial manipulation, from those in power, or that support causes that are being condemned all over the world.

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Speaking of foreign investment, how has the country been doing business with China? Some of the projects have been strongly questioned for alleged acts of corruption and non-compliance.

Not at all well, in fact it is rather harmful for the country. Since Evo Morales became president, [his party] MAS decided to align itself with China, Russia, Venezuela, Nicaragua and Cuba, and to do business with China before doing business with the United States or Europe. That bad decision is reflected in the roads. Countless resources have been invested when there was an economic boom, when gas prices were at their peak. The majority here, almost all of the public bids, went to Chinese public companies. The result is projects that were never executed and those that were, have been very deficient.

A state has to do business with everyone. Imagine that the recent purchase of Twitter was more expensive than Bolivia’s annual GDP. Such a small state, like ours, cannot afford to isolate itself like that. And a country has to build its roads with the best technology. And if there are national companies that can do it, even better. The worst thing is to align ideologically and compromise the economy for those decisions. I believe this has been the most serious mistake the government has made.

Translated from the Spanish by Adam Critchley