Bolivia's major foreign policy position in the twentieth century concerned its demands for a Pacific Ocean coastline on territory lost to Chile during the War of the Pacific (1879-80). In the early 1980s, the Siles Zuazo administration sought the support of the Nonaligned Movement at its conference in Managua. Although Bolivia secured multilateral support for its claim, international pressure produced few results. In fact, Chile refused to deal with Bolivia unless multilateral organizations such as the Nonaligned Movement and the OAS were excluded from the negotiations.
Relations with Chile changed following the election of Paz Estenssoro. Bedregal met on a regular basis with his Chilean counterpart to negotiate an outlet for Bolivia. Bedregal proposed the creation of a sovereign strip sixteen kilometers wide that would run north of the city of Arica and parallel to the Peruvian border. The tone of the negotiations suggested that an agreement was imminent.
On June 10, 1987, however, Chile rejected Bedregal's proposal, sending shock waves through the Bolivian government. The confidence of the Paz Estenssoro government was seriously shaken by this foreign policy defeat, especially after so much emphasis had been placed on its success. Bolivians were, however, swept by another wave of anti-Chilean nationalism in support of the government. Members of Bolivia's civic organizations spontaneously imposed a symbolic boycott of Chilean products. Relations with Chile were again suspended, and little hope for any improvement in the near future remained.
Relations with Argentina and Brazil, in contrast, showed improvement. A bond of solidarity developed among the three nations owing to their common dilemma of trying to democratize in the midst of deep economic recessions. Tensions arose, however, over Argentina's inability to pay for its purchases of Bolivian natural gas. United States intervention on Bolivia's behalf provided some relief to the Bolivian economy. Although by early 1989 Argentina still owed over US$100 million, a joint accord reached in November 1988 reduced tension. Revenue from natural gas sales was crucial for the success of the new economic model adopted in 1985. Hence, Argentina's discontinuance of purchases of Bolivian natural gas in 1992 when the sales agreement was due to expire could prove to be catastrophic.
Fortunately, Bolivia signed important trade agreements with Brazil in 1988 and 1989. Brazil agreed to purchase approximately 3 million cubic meters of Bolivian natural gas per day beginning in the early to mid-1990s. The sales were projected to yield approximately US$373 million annually to the Bolivian economy. Brazil also agreed to help Bolivia build a thermoelectric plant and produce fertilizers and polymers. Finally, Bolivia and Brazil signed an agreement for the suppression of drug traffickers, the rehabilitation of addicts, and control over chemicals used in the manufacturing of drugs.
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