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Morales reinstates Bolivian gas subsidies

By the CNN Wire Staff
  • NEW: "Everything returns to the way it was before"
  • The president made the announcement after meeting with his Cabinet
  • Gas prices spiked after subsidies ended

(CNN) -- Bolivian President Evo Morales has reinstated subsidies on petroleum products after protests over higher fuel prices, the state-run news agency ABI reported Friday.

Morales made the announcement from the government palace after meeting with his Cabinet, trade unions and social organizations in La Paz, the news agency said.

Supreme Decree 748, which ended the subsidies, was issued Sunday. On Monday, gasoline and diesel prices rose dramatically, sparking widespread protests in major cities.

"I want to say to the Bolivian people that this means that all the measures remain without effect," he said. "There exists no justification now to raise the cost of travel or to increase the price of food ... everything returns to the way it was before."

He added that, despite his firm defense that the measure would benefit the Bolivian people, "the moment is not opportune."

Gasoline prices soared by as much as 73 percent and diesel by 83 percent Monday. Subsidies had kept the price of gasoline at about 50 cents per liter ($1.88 per gallon). By comparison, neighboring Peru sells gasoline at $1 per liter and Brazil at $1.58 per liter.

Protests broke out in major cities, where marauding groups of young people pelted government buildings with rocks, shattering windows, and setting tires afire in the streets.

But Morales had given no indication he would fold.

He told CNN en Espaņol Thursday night 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. "For a small country, that's a lot of change," said Morales, the nation's first indigenous president.

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. But Friday's announcement annulled those plans, he said.

The president of the Confederation of Private Business People, Daniel Sanchez Solis, said Thursday that he was not opposed to raising the price of petroleum products, but he criticized what he said was Morales' failure to consult with other sectors prior to acting. "Why not build among all of us a productive policy?" he asked. "We want to build a country. We want to participate."