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For Bolivia's president, subsidy cut could have political price

By the CNN Wire Staff
Riot police shoot tear gas prior to charge on December 30 on demonstrators who were marching along the streets of La Paz.
Riot police shoot tear gas prior to charge on December 30 on demonstrators who were marching along the streets of La Paz.
  • Popular support wavers for Bolivia's government after prices spike
  • An analyst says it was "the worst decision" President Evo Morales could have taken
  • The government has since reversed course after widespread protests
  • Bolivia's vice president says the situation shows the government listens to workers

La Paz, Bolivia (CNN) -- Bolivia's president could face high political costs after a policy change last month that sent gas and food prices soaring for several days in the South American country, analysts say.

"It was the worst decision that he could have taken at the worst moment," said political analyst Jorge Lazarte.

President Evo Morales issued a decree ending petroleum product subsidies in late December, then reversed the decision less than a week later -- after protests broke out in major cities across the country.

The nation's large population of poor have traditionally backed Morales' moves to protect the country's natural resources and increased social programs. But after the president ended gas subsidies, groups of young people pelted government buildings with rocks, shattered windows and set tires ablaze in the streets.

Analysts described it as the first major political defeat since the left-wing, populist president took office in 2006.

Fuel prices, fury soar in Bolivia
  • Bolivia

Protests surged as gasoline prices soared by as much as 73 percent and diesel by 83 percent. The cost of food and transportation also reportedly increased.

Prices dropped after the government's reversal, but Lazarte said the political consequences of the policy shift remained.

"The government has reached a crossroads. Whatever decision it makes or does not make will have political costs," he said.

Vice President Alvaro Garcia Linera defended the government's move to end petroleum subsidies -- and its later decision to reverse course.

"We are a government of the people," he told CNN en Espanol, noting that the government had listened to concerns from workers, unions and other organizations.

The groups acknowledged that the ending the subsidies was necessary, but asked the government to hold off on implementing the change, Garcia said.

Morales told CNN en Espaņol last week that the subsidies resulted in an artificially low price for diesel and gasoline. The low prices led to widespread smuggling of those products to neighboring countries, where it was sold for a profit. He estimated the loss to government coffers at $150 million per year.

Money saved under the new policy was to have been plowed back into the economy, with 20 percent increases in the minimum wage and spending in education, health, and security, he said.

Garcia said the government still planned to implement the changes eventually -- "when the people tell us, 'now, we are prepared.'"

"For me, this is not a defeat," he said. "For me, this is a reaffirmation of a government that makes decisions by visiting unions, visiting neighborhoods, visiting assemblies like no other president has done in the history of Bolivia."

Journalist Gloria Carrasco contributed to this report.