Bolivia: Uncertainty continues ahead of October election re-run

  • Polls indicate a possible first-round win for Socialist candidate, Luis Arce, of former President Morales's MAS party
  • Last week's surprise withdrawal of interim leader Áñez could help consolidate the centre-right vote and force a run-off
  • Moody's downgrade to B3 this week highlights the challenges ahead
Bolivia: Uncertainty continues ahead of October election re-run

Bolivia’s Presidential election re-run, now scheduled for 18 October, looks set to be a two-horse race between the leftist candidate Luis Arce of the MAS party of former (now exiled) President Evo Morales and centrist former President Carlos Mesa, after interim President Jeanine Áñez surprisingly dropped out of the race last week. Áñez had been lagging in the polls and said her decision was to avoid splitting the centre-right vote.

Polls indicate possible first-round win for Arce

Arce, a former economy minister under Morales, appears to be well in the lead. In an influential opinion poll published by Jubileo Foundation on 16 September, Arce had 40.3% of the vote. Mesa, who came second behind Morales in the since-annulled 2019 election, was second, with 26.2% of the vote. Áñez had slipped to fourth, with 10.6%, behind civic leader and anti-Morales campaigner Luis Fernando Camacho in third place, with 14.4%. Still, the poll also showed that over one-quarter of voters were undecided.

Arce is therefore well placed to win outright in the first round and avoid a run-off, which requires either at least 50% of the vote or 40% with a 10-point lead over the second-place candidate. Otherwise, the election will go to a second round on 29 November.

But there is still much to play for

Both camps will want to appeal to the high number of undecided voters, which could swing the overall vote, making it either very close, or a landslide. Political strategists think Arce’s best chance is to win in the first round, as a unified anti-MAS vote will limit his chances in a second round. MAS said that it hopes to gain 30% of those currently undecided votes. Meanwhile, Áñez’s departure will aim to consolidate the centre-right vote, although it is not clear how much of her vote will switch to Mesa, its most competitive candidate. It was probably a shrewd move on her behalf.

Áñez took over as interim leader after President Evo Morales, in power since 2006, and other senior officials, resigned in November 2019, after weeks of protests following disputed elections in October 2019. But she had become deeply unpopular, first after reversing her initial position to announce that she would stand in the fresh election, and then after delaying the elections numerous times due to the coronavirus pandemic. This raised concerns that she was seeking to remain in power undemocratically by repeatedly delaying the election, something that led to widespread protests last month. She has also been accused of authoritarian rule and criticised for the government’s response to Covid.

Still, the political atmosphere is highly polarised and the risk of a contested election, or unrest, remains. A MAS victory would be a marked reversal in fortunes for the party following Morales’s exit nearly 12 months ago, although it may lead to concerns among the centre-right, and possibly among those on the left as well, that Arce is merely a puppet of Morales, and Morales is really the person in charge. After last year’s debacle, amid allegations of vote-rigging, will either side accept the result?

Also important are the legislative elections, which will be re-run at the same time, after the 130 members of the lower house (Chamber of Deputies) and the 36 members of the upper house (Chamber of Senators) were elected in the disputed October 2019 elections. The future direction of policy will be determined by the legislative makeup in addition to the winner of the presidential election; the Chamber of Deputies must approve the policies of the president. Áñez’s minority government shows the difficulties this can have for governance.

Policy uncertainty

As for policies, we haven’t heard much about what Arce and Mesa would do in office, although we can learn from their previous roles. Arce was economy minister from 2006-17, therefore presiding over one of the country’s most successful periods in terms of economic performance (at least until around 2013, when public spending ramped up significantly), although this time around he may not enjoy the gas windfall that characterised that time.

According to a Bloomberg report on 31 July, Arce said he would seek to renegotiate multilateral debt if he wins, while avoiding a default on the country’s bonds (note that Bolivia is not eligible for debt service relief under the G20’s debt service suspension initiative, although a possible expansion of scope may be considered at the upcoming IMF/WB Annual Meetings next month). We observe that he couldn’t claim the country’s three eurobonds were illegitimate, or odious, in any way, as they were issued on his watch. Arce has also spoken of a wealth tax, from which he intends to raise US$400mn.

Meanwhile, Mesa was president from 2003 to 2005. He wants to attract foreign capital into the country’s energy and mining sectors by introducing a more investor-friendly business environment, according to a Bloomberg report on 4 August. He said there was no scope to change royalties. He also warned that a lack of transparency and information under the interim government could mean the economic situation is much worse than it looks currently.

Both candidates, however, agree that they want to avoid adjusting the exchange rate, which has been fixed against the US dollar since 2008.  

While we await more detail and policy substance, we suspect a Mesa victory would be better received by markets than an Arce victory (assuming a smooth handover in either eventuality). However well-regarded Arce's tenure as finance minister is seen, his election would still signal a return of MAS, bringing with it the risk of populist policies; moreover, financing and fiscal constraints may be more binding this time around, which will constrain what he can do, and risks disappointing high expectations. That said, a Mesa presidency could still be hamstrung if MAS remains dominant in Congress.


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