Gonzalo Sánchez de Lozada
Gonzalo Sánchez de Lozada (born July 1, 1930) is a Bolivian businessman and politician who served as the 61st president of Bolivia from August 6, 1993, to August 6, 1997, and again from August 6, 2002, to October 17, 2003.[1][2] Raised in the United States after his family went into exile, he earned a degree from the University of Chicago and returned to Bolivia to build a career in mining before entering politics, where he played a pivotal role as planning minister in the 1980s in curbing hyperinflation through market-oriented stabilization measures.[2] During his first presidency, Sánchez de Lozada advanced neoliberal economic reforms, including the capitalization program that partially privatized state enterprises such as hydrocarbons, railways, and telecommunications to attract investment and foster growth amid chronic fiscal deficits.[3][4] These policies contributed to macroeconomic stability but exacerbated social inequalities and indigenous marginalization, fueling opposition from labor unions, coca growers, and rural communities. His second term, secured through a congressional alliance after a fragmented election, encountered immediate resistance to plans for exporting natural gas via Chile, sparking the 2003 Gas War protests that paralyzed the country and resulted in approximately 60 deaths when security forces responded to blockades and riots. Sánchez de Lozada resigned amid the unrest and fled to the United States, where he has resided in exile; Bolivian courts have since convicted him in absentia for related charges, while a U.S. federal jury held him civilly liable in 2018 for human rights abuses, leading to a damages settlement in 2023.[5][6][7] Extradition requests to the U.S. have been denied, reflecting ongoing tensions over accountability for the violence.[8]
Early life and education
Family background and childhood
Gonzalo Sánchez de Lozada was born on July 1, 1930, in La Paz, Bolivia, into a family with deep roots in Bolivian politics and diplomacy.[1] His father, Enrique Sánchez de Lozada, served as a Bolivian diplomat and university professor, and was a political exile during periods of instability in Bolivia. The family traced its lineage to notable figures, including Sánchez de Lozada's grandfather, Daniel Sánchez Bustamante, who held the position of Minister of Foreign Affairs in Bolivia. Due to his father's diplomatic postings and exile status amid Bolivia's turbulent political climate in the 1930s, the family relocated to the United States when Sánchez de Lozada was a young child.[2] He spent much of his early years in the U.S., initially in the Washington, D.C. area and later in West Branch, Iowa, where his father engaged in academic pursuits, including teaching political science at Harvard University.[9] This expatriate upbringing distanced him from Bolivia during formative years but immersed him in American educational and cultural environments from an early age.[10]Studies in the United States
Sánchez de Lozada, born in La Paz, Bolivia, in 1930, relocated to the United States as a child with his family due to political exile following the 1930s unrest in Bolivia.[2] His father, a diplomat and professor, secured a teaching position in political science at Harvard University, enabling the family to settle in the U.S. where Sánchez de Lozada completed his elementary, secondary, and higher education. He pursued undergraduate studies at the University of Chicago, graduating in 1952 with a Bachelor of Arts degree in philosophy and English literature. Rather than focusing on economics, Sánchez de Lozada enrolled in the university's Great Books program, emphasizing classical texts and humanistic inquiry over specialized vocational training.[2] This curriculum, rooted in liberal arts traditions, exposed him to foundational philosophical works but did not include formal coursework in economic theory, despite later associations with Chicago School ideas in his policy career.[2] Prior to university, Sánchez de Lozada attended preparatory schooling in Iowa, completing much of his early American education there before transferring to Chicago for higher studies.[11] His U.S. immersion shaped a bilingual, bicultural perspective, fluent in English and attuned to American academic rigor, which contrasted with Bolivia's turbulent political environment during his formative years.[12] Upon graduation, he briefly explored business interests before returning to Bolivia in 1953.Business career
Involvement in mining and industry
Upon returning to Bolivia after his studies in the United States, Gonzalo Sánchez de Lozada initiated a series of business ventures spanning media, services, and resource extraction. In 1953, he founded Telecine Ltda., a company dedicated to documentary and commercial film production, which he managed until 1957.[1] He then established Andean Geo-Services Ltd. in 1957, providing aerial photography services primarily to oil exploration firms, overseeing it until 1962.[1] These early endeavors laid the groundwork for his entry into extractive industries, including petroleum services.[2] Sánchez de Lozada's most significant industrial involvement began in 1962 with the founding of Compañía Minera del Sur (Comsur), Bolivia's preeminent private mining enterprise.[1] [13] As president from 1962 to 1979 and again from 1980 to 1982, he directed operations extracting zinc, tin, gold, silver, and lead from deposits in southern Bolivia.[1] Comsur expanded under his leadership to become the country's largest mining company, leveraging Bolivia's rich mineral reserves amid nationalization challenges faced by state entities like COMIBOL.[9] This mining focus generated substantial wealth for Sánchez de Lozada, establishing him as a leading figure in Bolivia's private sector and influencing his subsequent political trajectory.[1] By the early 1980s, Comsur's success underscored the viability of private enterprise in an economy dominated by state control, though it operated parallel to broader industry turbulence from fluctuating global metal prices and domestic hyperinflation.[2]Wealth accumulation and economic influence
Sánchez de Lozada entered the resource sector in 1957 by founding Andean Geoservices, a company focused on geological exploration and services, marking his initial foray into Bolivia's extractive industries. By 1966, he established Compañía Minera del Sur (COMSUR), a private mining enterprise specializing in tin and other minerals, which rapidly expanded amid Bolivia's mineral-rich Potosí region.[13] [1] COMSUR's operations grew substantially during the 1970s and 1980s, leveraging Bolivia's mineral deposits and Sánchez de Lozada's management expertise to become one of the country's leading private mining firms, producing significant output in tin, silver, and zinc. This success directly contributed to his wealth accumulation, transforming him into one of Bolivia's wealthiest individuals through profits from ore extraction, export sales, and efficient operational scaling in a sector historically dominated by state entities like COMIBOL.[13] By the early 1990s, COMSUR employed thousands and controlled substantial mining concessions, underscoring Sánchez de Lozada's economic influence as a key private actor counterbalancing nationalized industries.[14] His business acumen extended to strategic investments beyond core mining, including ventures in oil exploration and related services, further diversifying revenue streams and amplifying his financial standing. Sánchez de Lozada's enterprises exerted influence on Bolivia's economy by advocating for market-oriented policies in industry associations, fostering private investment in a resource-dependent nation where mining accounted for over 10% of GDP in the late 20th century.[7] [2] Post-political career, he maintained involvement as non-executive chairman of international mining investment firms, sustaining economic ties across the Americas and Europe.[15]Political ascent
Affiliation with the MNR party
Sánchez de Lozada's entry into formal politics occurred through the Movimiento Nacionalista Revolucionario (MNR), Bolivia's historic party founded in 1941 and instrumental in the 1952 National Revolution. He served as Minister of Planning and Coordination in the administration of MNR president Víctor Paz Estenssoro, appointed on August 6, 1985, following the party's return to power after the 1985 elections.[16] In this capacity, he authored Supreme Decree 21060 on August 29, 1985, enacting neoliberal structural adjustments including privatization, deregulation, and fiscal austerity to address hyperinflation exceeding 8,000% annually.[16] These measures marked a shift from the MNR's earlier populist nationalism toward market liberalism, aligning with Sánchez de Lozada's background as a mining industrialist.[17] After Paz Estenssoro's term ended in 1989, Sánchez de Lozada emerged as the MNR's presidential candidate for the June 1989 elections, capturing a plurality of approximately 26% of the vote but failing to secure a congressional coalition for victory, which went to Jaime Paz Zamora of the MIR in a runoff.[15] This campaign positioned him as the party's standard-bearer, leveraging his technocratic reputation from the 1985 reforms. In 1990, he succeeded Paz Estenssoro as MNR leader, inheriting guidance from the aging founder and steering the party toward renewed electoral competitiveness amid Bolivia's fragmented politics. [17] Under Sánchez de Lozada's leadership, the MNR adapted to post-hyperinflation realities by emphasizing capitalization—partial privatization of state enterprises—while maintaining alliances with smaller parties like the UCS and MBL. This strategy culminated in the party's plurality win in the June 1993 elections, with Sánchez de Lozada receiving 36% of the vote, enabling his selection as president by Congress after forming a pact with the UCS.[3] His tenure as party head revitalized the MNR's influence, transitioning it from ideological nationalism to pragmatic economic liberalism, though internal factions persisted due to the party's revolutionary legacy.[18]Ministerial role in hyperinflation crisis (1985)
In 1985, Bolivia confronted a severe hyperinflation crisis, with annual inflation rates exceeding 24,000 percent, driven by chronic fiscal deficits, excessive money printing to finance public spending, and structural inefficiencies in state-controlled enterprises.[19] Following the July 1985 congressional elections, Víctor Paz Estenssoro assumed the presidency on August 6, and shortly thereafter appointed Gonzalo Sánchez de Lozada, a senator and president of the Senate from the Nationalist Revolutionary Movement (MNR), as Minister of Planning and Coordination.[2][9] Sánchez de Lozada, leveraging his background in economics and business, led a small team in rapidly formulating Supreme Decree 21060, enacted on August 29, 1985, after approximately three weeks of deliberation.[2][20] This neoliberal "shock therapy" package dismantled price controls, ended automatic wage indexation to inflation, devalued the currency and allowed the exchange rate to float freely, slashed public-sector subsidies (particularly on fuel and transport), and imposed fiscal austerity measures including the dismissal of around 20,000 excess public employees.[21][22] It also required the Central Bank to align monetary policy with fiscal realities, submitting regular reports to the Finance Ministry to prevent renewed deficit monetization.[23] The decree's implementation triggered immediate social and economic disruptions, including widespread layoffs and protests from unions and miners, yet it effectively curbed hyperinflation, reducing monthly rates from over 50 percent in mid-1985 to single digits by early 1986 through restored market signals and investor confidence.[2][17] Sánchez de Lozada defended the approach as essential for survival, arguing in later reflections that gradualism had failed previously and that the crisis demanded decisive structural adjustment to avert total economic collapse.[20] This role established his reputation as an architect of Bolivia's stabilization, though critics attributed short-term hardships, such as rising unemployment, to the austerity's rigor.[21]First presidency (1993–1997)
Implementation of capitalization program
The capitalization program, a central element of President Gonzalo Sánchez de Lozada's "Plan de Todos," was formally proposed during his 1993 presidential campaign and enacted following his election on June 6, 1993.[24] It targeted six major state-owned enterprises (SOEs) in strategic sectors—electricity (ENDE), telecommunications (ENTEL), airlines (LAB), railways (ENFE), hydrocarbons (YPFB), and smelting (EMV)—through a model distinct from traditional privatization. Under this approach, 50% of shares in each enterprise were sold to strategic private investors via international competitive bidding, with proceeds directed as new capital investments into the companies rather than the national treasury; the state retained the remaining 50% ownership, which was allocated to a Collective Capitalization Fund (CCF) to support pension reforms.[25] Workers received options to purchase minor shareholdings (under 1%) at preferential rates, aiming to broaden participation.[25] Implementation began with the passage of the Capitalization Law on March 21, 1994, after extensive legislative drafting and amid opposition from labor unions, including a nationwide strike by the Central Obrera Boliviana (COB) on August 25, 1993.[24] Supporting frameworks included the Sectoral Regulation System (SIRESE) Law on October 28, 1994, which established oversight agencies for privatized sectors, and sector-specific regulations like the Hydrocarbons Law in April 1996.[25] Initial capitalizations occurred by late 1995, with ENDE attracting $139.83 million from investors for power generation upgrades and ENFE securing $38.8 million from Cruz Blanca for rail infrastructure.[24] Further bids in 1996 capitalized ENTEL for $610 million, enhancing telecom expansion, and YPFB for $835-836 million in December, focusing on oil and gas exploration; LAB received a bid from Brazil's VASP, while EMV (including Vinto) faced investor reluctance and was not fully capitalized due to domestic protests.[25] [24] The program integrated pension restructuring via Public Law 1732, signed November 29, 1996, which privatized pension management under two selected administrators (e.g., Invesco/Argentaria and Banco Bilbao Vizcaya) through competitive bidding in January 1997; the CCF, transferred to these funds by April 1997 and valued at approximately $1.7 billion, financed the Bonosol scheme, delivering $204-250 annually to citizens over 65 starting late May 1997.[25] By June 1997, total committed investments reached about $1.7 billion across the capitalized firms, boosting foreign direct investment and contributing to annual GDP growth of 4-5% from 1995 to 1997, though regulatory enforcement remained limited and public resistance—fueled by nationalist concerns over resource sectors like YPFB—prompted a state of siege from April to October 1995.[24] [25]| Enterprise | Sector | Capitalization Date | Investment Amount (USD million) |
|---|---|---|---|
| ENDE | Electricity | 1995 | 139.83 |
| ENFE | Railways | 1996 | 38.8 |
| ENTEL | Telecommunications | 1996 | 610 |
| YPFB | Hydrocarbons | December 1996 | 835-836 |
| LAB | Airlines | 1996 | Not specified (VASP bid) |
Economic stabilization and growth metrics
During Sánchez de Lozada's first presidency from 1993 to 1997, Bolivia maintained the macroeconomic stability established by the 1985 Decree 21060, which had ended hyperinflation through fiscal austerity, monetary restraint, and market-oriented reforms that he had co-authored as planning minister. Inflation rates remained in single digits throughout the period, averaging approximately 8.7 percent annually, a stark contrast to the over 8,000 percent hyperinflation peak in 1985. This stability was supported by continued fiscal discipline, including budget surpluses in some years and accumulation of international reserves, which helped anchor expectations and prevent monetary overhang.[26][27] Real GDP growth averaged 4.6 percent per year, reflecting sustained expansion driven by private investment inflows and export recovery in sectors like mining and hydrocarbons, though moderated by external shocks such as fluctuating commodity prices. Per capita GDP rose from about $757 in 1993 to $922 in 1996, indicating modest improvements in living standards amid population growth of around 2.3 percent annually. Commercial bank deposits more than doubled over the period, signaling increased financial deepening and confidence in the stabilized environment.[28][29]| Year | GDP Growth (annual %) | Inflation (CPI, annual %) |
|---|---|---|
| 1993 | 4.27 | 8.53 |
| 1994 | 4.67 | 7.87 |
| 1995 | 4.68 | 10.19 |
| 1996 | 4.36 | 12.43 |
| 1997 | 4.95 | 4.71 |
Structural reforms in education and hydrocarbons
During his first presidency, Gonzalo Sánchez de Lozada's administration advanced the ongoing education reform initiative through the promulgation of Law 1565 on July 7, 1994, which restructured the national education system to emphasize decentralization, intercultural bilingualism, and improved access for marginalized groups.[31][32] The law divided primary education into three two-year cycles focused on basic skills, community relevance, and production-oriented learning, while introducing flexible curricula to incorporate local indigenous languages and cultures alongside Spanish, aiming to address Bolivia's high illiteracy rates—estimated at over 15% for adults in the early 1990s—and low enrollment in rural areas.[33][34] This structural shift transferred administrative responsibilities to municipal governments and schools, supported by a World Bank-backed structural adjustment loan that funded teacher training and infrastructure, though implementation faced resistance from unions over merit-based evaluations and reduced central control.[34] By 1997, coverage expanded modestly, with primary net enrollment rising from 89% in 1992 to around 93%, but quality metrics like repetition rates remained high at 10-15% due to uneven rollout.[35] In the hydrocarbons sector, Sánchez de Lozada pursued liberalization via Hydrocarbons Law 1689, enacted on April 30, 1996, which dismantled the state-owned YPFB's monopoly on exploration and production while affirming constitutional ownership of subsurface resources by the state.[36][37] The law authorized private firms to enter operations through risk-service contracts or joint ventures, differentiated fiscal terms between "old" (pre-1996) and "new" fields—imposing 50% royalties plus taxes on new explorations versus lower rates on legacy areas—and established a regulatory framework to attract foreign investment amid stagnant production, which hovered below 30,000 barrels per day for oil in 1995.[38][39] This reform boosted exploration activity, with drilling rigs increasing from 12 in 1996 to over 20 by 1997, and laid groundwork for subsequent capitalization by enabling private capital infusion without full privatization, though critics argued it diluted state control and favored multinationals like Enron and Shell.[37][40] Natural gas reserves, Bolivia's primary hydrocarbon asset at around 4-5 trillion cubic feet proven in the mid-1990s, saw initial export growth to Brazil via pipeline expansions, contributing to a 5-7% rise in sector GDP share by term's end.[41]Inter-presidential period (1997–2002)
1997 election defeat and analysis
In the Bolivian general election held on June 1, 1997, Gonzalo Sánchez de Lozada, the incumbent president and candidate of the Movimiento Nacionalista Revolucionario (MNR), secured approximately 18% of the popular vote. His main rival, Hugo Banzer Suárez of the Acción Democrática Nacionalista (ADN), received 22%, with the remaining votes fragmented among more than a dozen parties and candidates, preventing any from achieving the absolute majority needed for direct election under the constitution.[42] The absence of a majority shifted the decision to the National Congress, where Banzer garnered overwhelming support through pre-election coalitions with parties such as the Movimiento de la Izquierda Revolucionaria (MIR) and others, securing the necessary two-thirds majority on August 6, 1997. Sánchez de Lozada's MNR, despite retaining significant congressional seats, could not muster sufficient alliances to counter ADN's maneuvering.[42][43] The MNR's defeat reflected a sharp decline in its electoral base, with vote share falling from 35.6% in 1993 to about 22% in 1997, amid heightened party fragmentation driven by the dissolution of prior opposition pacts like the ADN-MIR Patriotic Accord and the effects of the mixed-member proportional system, which rewarded regional strongholds and enabled smaller parties to claim seats. This outcome underscored growing voter disaffection with the MNR's neoliberal capitalization reforms, which stabilized the economy but yielded uneven poverty reduction—real GDP grew at an average 4.4% annually from 1993 to 1997, yet rural and urban unemployment persisted above 7% and 10%, respectively, alienating key demographics without proportional social gains. Electoral analysts attribute the MNR's erosion partly to these dynamics, as reformist governance prioritized fiscal discipline over inclusive distribution, fostering perceptions of elite capture despite empirical macroeconomic successes.[44][45]Party consolidation and opposition activities
Following his narrow defeat in the 1997 presidential election, where Hugo Banzer of the Nationalist Democratic Action (ADN) party secured victory in Congress with coalition support despite receiving only 22% of the popular vote compared to Sánchez de Lozada's 18%, the latter retained leadership of the Movimiento Nacionalista Revolucionario (MNR) and prioritized internal party reorganization to address electoral shortcomings.[46] This involved strengthening urban and middle-class bases while navigating factional tensions within the MNR, which had fragmented during the campaign due to perceptions of elitism and insufficient outreach to indigenous and rural voters.[47] By maintaining centralized control and fostering alliances with smaller parties like the Movimiento de la Izquierda Revolucionaria (MIR) in anticipation of the 2002 elections, Sánchez de Lozada positioned the MNR as a viable neoliberal alternative, culminating in a congressional victory in 2002 with 22.5% of the vote through pact-making rather than outright popular dominance. As the primary opposition figure, Sánchez de Lozada vocally critiqued Banzer's ADN-led coalition government, which controlled 75% of Congress despite minimal electoral support, for stalling reforms initiated under his prior administration and mismanaging economic pressures.[48] In the wake of the April 2000 Cochabamba water crisis—sparked by privatization concessions leading to widespread protests—he accused Banzer of inadequate preparedness, initial denial of the crisis's severity, and delayed imposition of a state of emergency, framing these as symptoms of governance failure exacerbating social unrest.[48] Similarly, he opposed the administration's aggressive forced coca eradication campaigns, which intensified rural discontent, publicly affirming the MNR's consistent resistance to coercive measures that ignored alternative development strategies. These opposition efforts highlighted the MNR's role in parliamentary debates and public discourse, where Sánchez de Lozada emphasized continuity of market-oriented policies amid Banzer's perceived corruption and coalition infighting, though the party avoided direct alignment with emerging radical movements like the Movimiento al Socialismo (MAS).[49] By 2001–2002, as Banzer's term waned amid declining approval ratings below 20% due to unresolved protests and economic stagnation, the MNR under Sánchez de Lozada leveraged these critiques to rebuild credibility, securing key pacts that enabled his return to power despite polarized electorates.[47]Second presidency (2002–2003)
Initial policy priorities and cabinet
Sánchez de Lozada assumed the presidency on August 6, 2002, following a narrow victory in the June 30 elections where his Movimiento Nacionalista Revolucionario (MNR) secured 22.5% of the vote, necessitating a coalition with the Movimiento de la Izquierda Revolucionaria (MIR), Unidad Cívica Solidaridad (UCS), and Movimiento Bolivia Libre (MBL) to achieve a congressional majority of 84 votes against Evo Morales's 43.[3] This alliance enabled governance amid economic stagnation, with GDP growth at approximately 2% and a fiscal deficit of 8% of GDP, compounded by prior social protests over coca eradication and resource policies.[50] Initial priorities centered on economic reactivation, including job creation targets of up to 200,000 positions through infrastructure like a national road network, combating extreme poverty, and enhancing education access.[51] [52] The administration emphasized reducing corruption and bureaucratic inefficiency to restore stability, while pursuing open-market reforms and alternative coca development to address illicit drug production, aligning with U.S. commitments for democracy and anti-narcotics efforts.[53] [54] Sánchez de Lozada announced emergency measures upon inauguration to revive the stagnant economy and generate employment, reflecting continuity with his prior neoliberal framework despite opposition from cocalero movements.[55] [56] To support these goals, the executive structure was reorganized on August 7, 2002, expanding to 18 ministries by adding two and creating three new ones—Desarrollo Municipal, Hidrocarburos, and Asuntos Financieros—prioritizing social sectors like planning and rural development, while eliminating the Ministry of Governmental Information in favor of a secretariat.[57] [58] The cabinet blended MNR loyalists in core political roles with MIR technocrats in economic and social portfolios, alongside UCS and MBL representatives for broader legitimacy.| Position | Minister | Party |
|---|---|---|
| Presidency | Carlos Sánchez Berzaín | MNR |
| Finance (Hacienda) | Javier Comboni | MNR |
| Sustainable Development and Planning | José Guillermo Justiniano | MNR |
| Interior (Gobierno) | Alberto Gasser | MNR |
| Defense | Freddy Teodovic | MNR |
| Foreign Relations | Carlos Saavedra Bruno | MIR |
| Economic Development | Oscar Farfán | MIR |
| Agriculture and Rural Development | Arturo Liebers | MIR |
| Justice | Gina Méndez | UCS |
| Peasant Affairs and Gender | Amparo Velarde | MBL |