The election of ex-coca grower Evo Morales has transformed this negative dynamic somewhat.  Significant shifts in the nation’s drug policy and alternative funding sources have lessened Bolivia’s dependence on U.S. economic assistance. Funding from Venezuelan and European governments, as well as significant increases in hydrocarbons revenue, have provided an interesting counterweight to what amounted to a virtual U.S. monopoly on funding, with considerable strings attached.   For example, on March 19 the Bolivian government announced that the European Union would provide 60 million euros for drug control efforts supporting the Morales administration’s new strategy.  U.S. officials must now weigh whether Bolivia or the U.S. would have more to lose as a result of potential funding cuts.  

Within the framework of cordial but tense bilateral relations, potential decreases in U.S. funding are still considered a barometer for U.S. sentiments toward the Morales administration.  Despite recent shifts in funding sources, Bolivia continues to actively solicit US economic assistance, through an extension of the Andean Trade Promotion and Drug Eradication Act (ATPDEA), the Millennium Challenge Account and general U.S. funding.  Furthermore, Bolivia’s media, political opposition and occasionally the ruling party actively interpret, and at times misrepresent or even manipulate, information on US funding decisions to support their positions.

In 2007 there has been considerable internal debate about whether Bolivia will receive almost $600 million from the Bush Administration’s Millennium Challenge Corporation and the motivations for a proposed reduction in the 2008 U.S. general funding package for the nation.

Bolivian Press Distorts Status of Millennium Challenge Account

On March 14, one day before the US planned to announce whether Bolivia would continue to receive funding as a result of the anti-drug certification, major newspapers throughout Bolivia in front page articles quoted extensively an Associated Press article announcing that “Bolivia is not in the 2007-08 plans for the Millennium Account.” The AP article reported that the CEO of the Millennium Challenge Corporation (MCC), John Danilovich, did not mention Bolivia as slated to receive funding in a presentation to a congressional committee.

Based on the content of the AP article several Bolivian newspapers created their own headlines such as “The Nation Loses US$600 Million from the Millennium Account.”¹ 

The content of the AP article implied that Bolivian President Evo Morales was to blame for Bolivia’s exclusion from the MCA in 2007 and 2008.  The article stated “that until last year Bolivia was waiting to become the largest recipient in Latin America…but the expectations froze with Morale’s victory” and “the immediate attention to the case appeared to have stopped advancing with the actions of President Evo Morales.”  It also referred to the recent State Department reports on human rights and the war on drugs in Bolivia that contained “serious critiques” of the Morales government.

The Cochabamba newspaper, Los Tiempos heightened the political spin on the issue by adding, “The US had already warned that Bolivia was not going to easily have access to the money because first they must comply with some conditions such as respect for democracy and freedom of the press,”  when it published the AP article.²  The insertion of speculative analysis is a common practice of the Bolivian mainstream press.

Both the US Ambassador in Bolivia, Phillip Goldberg, and the Bolivian government rejected the assertion that Bolivia “lost” the money or was otherwise excluded from the Millennium Challenge process.   Goldberg said that Bolivia remains on the list of eligible nations for MCA funding, but the Morales administration has not yet presented a technical proposal to explain the use of the funds. Due to the limited MCA funding, not all eligible countries will receive funds in 2008.

Vice President, Alvaro Garcia Linera, assured that Bolivia is moving forward with the MCA proposal process and criticized the Bolivian press and some opposition congress members for launching unfounded attacks on the Morales government.  “Two things sadden me greatly: a couple of headlines that didn’t have anything substantial to back them up…(and)  unscrupulous statements from some parliamentarians who, after reading only half the  headline, stated equally unscrupulous and unjustified opinions.”³

It is still unclear whether the Bolivian government will complete the necessary bureaucratic requirements to obtain future funding from the account.  Furthermore, although the press distorted the status of the funding proposal and the political opposition further exaggerated the misinformation, it would be naïve to assume the Bush administration’s decisions on Millennium Challenge Corporation funding are not influenced by its relations with Morales.

Some analysts interpreted Bolivia’s unexpected initial qualification for the account during the Rodriguez administration as a political concession to impede support for Morales’s candidacy.  Bilateral relations between the two nations remain open, but noticeably strained.  If Bolivia follows through with its application to the MCA, the U.S. may opt to grant the considerable funding package as a “carrot” to maintain Morales’s interest or the US may withdraw its support to demonstrate its continuing disapproval for initiatives such as the rationalization and industrialization of coca, land reform, and nationalization of natural resources.

Reduction in Bush Budget Request for Bolivia Reflects Broader Trends

On February 14, 2007 the Bush administration presented its Foreign Operations Congressional Budget Justification for Fiscal Year 2008.⁴  The document explains the amounts requested by the administration for international funding.  The congressional debate on the proposed budget is not likely to occur until April 2007, and it is possible that Congress will modify the proposed amounts significantly.

While both Bolivian and international press have claimed that the 14% decrease in aid to Bolivia is a direct result of U.S. disapproval of Morales’ policies, in fact Bolivia received a much smaller decrease in funding compared to Mexico’s US-friendly government (30%), Panama (51%), Nicaragua (36%), Peru (35%) and Ecuador (31%). 

According to Adam Isacson, from the Center for International Policy, "Several countries viewed as important to drug control efforts would see a significant drop in aid. Their presidents' ideology appears to make little difference in the size of the cut. These countries are Bolivia, Ecuador, Mexico and Peru. Bolivia is to see a drop in counter-drug military and police aid, though economic aid will only be reduced slightly. Of the four Andean countries…Bolivia in fact will see the smallest overall cut in aid, measured as a percentage.”⁵

Overall in 2008, Latin America will receive 9% less funding than in 2006 with a few nations, significantly Colombia and Haiti, seeing budget increases while the majority will see big cuts.  The budget states that, “Colombia, Bolivia, Ecuador, Peru, and Haiti account for 70% of the region's FY 2008 budget request and remain priorities for the Administration.”

•    The $114.6 million requested for Bolivia is the third largest amount after Colombia, ($589.7 mil) and Haiti ($222.9 mil), showing a decline of 14%.

Bolivia receives both economic and military aid and the largest amounts of funding in 2008 are for Development Assistance (DA), the Andean Counterdrug Initiative (ACI) and as Economic Support Funds (ESF).  While Bolivia’s funding may be reduced from a variety of programs, the largest reductions will come from military and police funding – 16% less than 2006 levels, while economic and development aid will decrease by 11% overall.

The Bolivian government will feel the impact of reduced military and police funding, but drug policy analysts highlight that increased development aid may be an improvement.

Economic and Military Aid Requested for Bolivia
(all numbers in thousands of dollars)

Military and Police Funding

The Andean Counterdrug Initiative (ACI) “aims to reduce the flow of drugs to the United States and prevent instability in the Andean region.”  In 2008, the Bush administration has requested ACI funding for Colombia ($367 million), Peru ($36.8 million) and Bolivia ($30 million).  The ACI request for Bolivia is to “support the eradication of illicit coca cultivation, increase interdiction of precursor chemicals and cocaine products, continue current level of prosecutions of narcotics related cases, and improve the quality of investigations into alleged human rights violations.”

Although the Bush budget request states, “The reduction of Foreign Military Financing (FMF) to Bolivia reflects competing priorities worldwide,” and other military cuts appear substantial, Isacson affirms that “additional military assistance comes through the defense budget, particularly its counter-drug funding. While amounts of defense-budget aid are not available, the amount of military aid the hemisphere receives could be significantly larger (as much as $200-$300 million more region-wide).”⁶

Economic Aid

All alternative development funding has been transferred from the Andean Counterdrug Initiative and placed instead in the Economic Support Fund (ESF), monies intended “to bolster security, strengthen democratic institutions, promote prosperity and invest in people.”   Specifically, the request includes $17 million for the ESF in Bolivia, which is $19.6 million less than 2006 alternative development funding (under the ACI).  Although it is appropriate to put alternative development assistance in a development category, instead of a counterdrug account, this shift does not necessarily denote a change in policies or actors involved in alternative development efforts, long criticized for their poor performance.

While funding under the Child, Survival and Health accounts would be cut from $17.2 million to $11.5 million, Development Assistance to Bolivia would increase from $10 million in 2006 to $39 million in this budget request.  According to the Bush request, these changes will enable “critical interventions in health and education.”

Conclusion

Although the Bush administration’s reduced funding request for Bolivia appears to respond to broader shifts in funding and priorities, funding could be withheld as a result of the overdue anti-drug certification determination.  Continued opportunities for U.S. funding through the Foreign Operations Budget and the Millennium Challenge Account appear to be a U.S. attempt to maintain its wavering leverage within Bolivia and its ability to “keep its foot in the door” to continue to influence policy.  The failure to obtain Millennium Challenge funds or to extend trade preferences, or a funding cut through an anti-drug “decertification,” would still be a substantial blow to Morales and Bolivia.  In the current political scenario, these cuts could be equally damaging to Bush administration interests and cause the U.S. to lose even more influence in the region.

1 La Razón . “El país pierde $US 600 millones de la Cuenta Milenio.”  March 14, 2007.
2 Los Tiempos. “Ya EEUU había advertido que Bolivia no iba acceder fácilmente al dinero porque antes debía acatar algunas condiciones como el respeto a la democracia y la libertad de prensa.” March 14, 2007.
3 Opinión. March 15 , 2007.
4 Congressional Budget Justification Foreign Operations. February 14, 2007.
Available at: www.state.gov/documents/organization/80701.pdf
All figures used in this report are those published in the budget justification.
5 Isaacson, Adam.  “Highlights of the aid request for Latin America.”  Center for International Policy, Colombia Program.  February 6, 2007.  www.ciponline.org
6 Ibid.