The unrest that broke out Wednesday in La Paz, Bolivia — with a death toll at latest reports reaching 17 — is rooted in protests against new taxes announced during the current visit of an IMF delegation to the country.

Yesterday's events have other components — a labor action by police demanding pay raises; a gunfight between the police and the army — but we understand from colleagues in Bolivia that there is no real dispute that the core issue is the IMF tax program.

In response to the unrest, the President quickly announced the withdrawal of the program. Where that leaves the government's negotiations with the IMF is undetermined, and given the President's evacuation of the official residence will probably remain so for several days at least.

English-language reports from Northern wire services (the most recent, from Associated Press, is below) have so far omitted any reference to the IMF. This can probably be attributed to the fact that the IMF has not publicly acknowledged making the demands; as a Bolivian newspaper reports, the Governor of the Central Bank was careful to say that the IMF demanded that the budget deficit be reduced. On paper that is no doubt true; in reality it is widely known that the IMF takes an active role in proposing solutions to the problems it identifies. The introduction of new taxes on the working population was widely-known to be the IMF's favored remedy for the deficit.

The AP report does say that in addition to the new tax program, protesters were infuriated by cuts in social spending announced by the government. We don't know for a fact that the IMF demanded those, but it does sound like them, doesn't it?

The website of La Razon, a newspaper in La Paz, reported on Wednesday that the protests were linked to the presence of the IMF delegation and the announcement of the “impuestazo,” a 12.5% super-tax on the salaries of the 20% of Bolivans who remain employed after 5 years of devastating recession. The move is reported as an effort to reduce the country's fiscal deficit of 8.6%.

The protests actually began on Tuesday (the 11th), when a 2.2% pay raise for the police was annouced; officers in four precincts refused to begin patrols and demanded a 40% pay increase, leading to a general police strike by morning. The announcement of the impuestazo further inflamed the tensions and motivated many Bolivians to join the police force in its protests. 20,000 public school teachers representing the La Paz Teachers union are expected to join the general protest on Thursday.

President Gonzalo Sanchez de Lozada has issued a suspension of the impuestazo, as he urged citizens to remain calm.

La Razon further reports that the President of the Central Bank of Bolivia, Juan Antonio Morales, said the IMF gave the government its endorsement of the new tax, but stated that the recommendation given by the IMF was not this tax per se, but rather the reduction of the deficit, thus denying the imposition of the tax by the Fund. Morales characerized the tax as a necessary short-term step in a long-term plan to reduce the deficit, as mandated by the IMF.

Bolivia has been in negotiations with the IMF since October, after a Bolivian mission travelled to Washington to attend annual meetings of the Bank and Fund, where they reached a provisional accord for a $4 billion loan.

When discussing the need to spread the cost of the tax across sectors, Enrique Garcia, the president of the Andean Development Corporation said “Sadly, there is no free lunch; you will all have to share the costs. He also drew attention to the fact that an 8% deficit is not sustainable, and that an economist and any citizen with common sense would know that.”

Opposition to the new tax comes from a broad cross-section of Bolivia: the private sector, which has begun to put pressure on Congress to reject the measure; the banking sector; workers across sectors; academics who are calling for adjustment in other sectors as an alternative; professionals, police; and economic analysts, who warn that the result will be widespread tax evasion.

[end summary of La Razon article]

Agence France-Presse is reporting that Evo Morales, a progressive member of the legislature and long-time representative of coca farmers who nearly staged an upset in last years presidential election, has urged farmers to block key highways and called on President Sanchez de Lozada to step down. Sanchez was driven away from the palace under heavy guard just after noon.

The latest, for now, from Associated Press:

17 Killed in Bolivian Violence
Wednesday, 12-Feb-2003 8:00PM PST

LA PAZ, Bolivia (AP) — Striking police officers and civilian protesters clashed Wednesday with government troops, leaving at least 17 people dead, 100 injured and the ruling party headquarters and the main jail in flames.

Government troops fired tear gas, rubber bullets and live ammunition at the demonstrators, who stormed the presidential palace to protest government proposals to raise taxes and cut spending on social programs.

As smoke from fires swirled through La Paz's historic center, President Gonzalo Sanchez de Lozada gave a nationally televised speech appealing for calm and announcing he would suspend the tax increases. "I plead with all Bolivians to put an end to the violence and to begin honest negotiations," Sanchez de Lozada said. "I ask one more thing from our father above — God save Bolivia."

The death toll rose steadily as the violence continued. Officials late Wednesday night put the death toll in the clashes at 17 with more than 100 injuries.

As the president withdrew all troops from the historic center, protesters set fire to seven government buildings that burned throughout the night as the city's firefighters abandoned their posts and joined the police in the protests. Protests then turned to looting. Before thousands of cheering onlookers, protesters tossed computers and books from the windows of the government buildings.

A large cheer came as protesters eased a large oak desk out a fifth-story window, and then turned to screams of panic as it landed squarely on a man walking below.

Several hundred demonstrators later attacked the brick and stone headquarters of the president's party, burning the three-story building and destroying a minibus in its garage. Not far away, inmates set fire to the city's largest jail but firefighters arrived on scene and began extinguishing the flames. There were no immediate reports of injuries. With no police or military presence, the city plunged into chaos.

Ambulances screamed through the city, carrying the injured to hospitals, which pleaded for blood donations. Tired nurses and doctors created a human chain to keep grieving family members from forcing their way into the city's emergency rooms, surgery wards and morgue. "I've been a doctor here for 30 years and I've never seen such a bloody day," said Eduardo Chavez, director of the capital's main public hospital. Chavez said five of the dead were police officers who died from gunshot wounds.

There were no immediate details on what caused the deaths of the other victims nor of how many of the injured were civilians, police or government troops. At least one 27-year-old man who was shot in the eye by soldiers said he was a volunteer firefighter who was only helping an injured police officer into an ambulance.

The mutiny began Tuesday night when officers in four precincts refused to begin patrols and demanded a 40 percent pay increase. Officers in the capital are paid the equivalent of about $105 per month, a salary that would have been eroded by proposed income tax increases ranging from 7 percent to 13 percent.

By morning, nearly all police in La Paz and the surrounding area had left their posts despite talks with government officials to avert the strike.

Street protests began Monday after Sanchez de Lozada, struggling to lift Bolivia out of a five-year recession, approved tax hikes that would reduce the buying power of South America's poorest nation. "The citizens here are full of fear," said Fernando Solis, a businessman who was trapped by the protests inside the Paris Hotel in the city's historic center.

Labor unions, business interests and others came out against the tax increases, but it was the police revolt that appeared to spark the violent street clashes with government troops. Police officers, dressed in green fatigues, seized the foreign ministry, firing tear gas in support of the demonstrators who laid siege to the presidential palace across the square.

All shops were closed within at least 12 blocks of the historic center as smoke from tear gas and burning tires, wood and other debris filled the air. "I'll continue fighting until the government is deposed," said Juan de Dios, a 17-year-old high school student who joined a mob attacking the presidential palace.

Television reports said human rights representatives were attempting to mediate between the police and the government. "We're living a total chaos," said Sonia Rocha, a restaurant owner. "The government should really have thought before announcing these new taxes. We're just too poor to pay them."

Wilma Plata, head of La Paz's Teachers union, said some 20,000 public school teachers would join the police in a general protest Thursday. "The government has created this crisis, and expects the nation's workers to shoulder the burden," she said. "The government is destroying us."