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Bolivia: Government and Politics
Country Study > Chapter 4 > Government and Politics


In 1989 Víctor Paz Estenssoro stepped down as president of Bolivia and on August 6 handed over power to the third democratically elected leader of the 1980s. Paz Estenssoro presided over four years of economic and political stability following two decades of military rule and nearly six years of a tumultuous transition to democracy.

When Paz Estenssoro assumed office on August 6, 1985, he inherited a society besieged by the most profound political and economic crisis in its history. Years of military rule had destroyed the nation's political institutions and eroded democratic traditions. The economy, in turn, had experienced a catastrophic downturn owing to years of mismanagement, the exhaustion of a state-centered economic development strategy, and extreme dependence on a single export commodity -- tin. By 1985 inflation had reached 24,000 percent, and growth rates were declining steadily by over 10 percent annually.

To revive an agonizing nation, Paz Estenssoro, the old politician who had led the 1952 Revolution, transcended electoral and party-based politics. To address the economic crisis, he commissioned a team of young technocrats. The resulting New Economic Policy imposed a severe austerity program that stabilized the economy and fundamentally transformed Bolivia's development strategy.

The political crisis, characterized by a recurrent conflict between the executive and legislative branches, required equally innovative answers. Soon after the announcement of the New Economic Policy, Paz Estenssoro and his Nationalist Revolutionary Movement signed the Pact for Democracy with former General Hugo Banzer Suárez's Nationalist Democratic Action party. With the Nationalist Democratic Action party's support in the National Congress, the New Economic Policy and related legislation were implemented successfully. The Pact for Democracy provided the needed support for implementation of the government's economic policy, as well as the basis for four years of political stability.

Although originally envisioned as a long-term agreement that could establish the foundations of Bolivian democracy, the Pact for Democracy proved to be a temporary marriage of convenience that the partners renounced owing to irreconcilable differences. By February 1989, the Pact for Democracy had collapsed, mainly because the campaign for the May elections had accentuated the differences between the two parties. Most Bolivian analysts hoped that the three years of the Pact for Democracy that enabled the New Economic Policy legislation to go forward were enough to establish the basis for positive growth in the 1990s. Each of the three leading presidential candidates in the May elections committed himself to the basic premises of the New Economic Policy.

Still, the most complex issue in Bolivian politics in 1989 remained the question of governability. The Pact for Democracy enabled Paz Estenssoro and the Nationalist Revolutionary Movement to govern for four years. With parties focused on the immediate task of getting elected, the more serious task of establishing the foundations of a stable political system was set aside. The key issue was whether or not political parties would be able to transcend the mundane worries about electoral politics to lay the groundwork for democratic rule. Their failure threatened to precipitate another round of military intervention.

Data as of December 1989

Last Updated: December 1989

Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Bolivia was first published in 1989. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on

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