Bolivian President Evo Morales defended an 83 percent hike of gasoline prices, saying previous subsidies were a “drain on the economy” after bus drivers announced an open-ended strike.
Bolivian Vice President Alvaro Garcia decreed the price increases — which also involve a 73 percent hike in diesel prices — on Sunday by removing subsidies that cost about US$380 million per year to keep fuel prices artificially low for more than a decade.
It was the sharpest price increase since 1991, when prices went up 35 percent, and follows six years of stable prices.
The government says the price increase was necessary in part because subsidized fuel was being smuggled across Bolivia’s borders into neighboring countries.
“That money should stay here and the resources we will obtain from this move will be spent on productive local irrigation projects,” Morales said at a ceremony at the presidential palace.
However, Franklin Duran, the head of the Confederation of Drivers, which represents about 175,000 workers, urged the government to “go back on this measure.”
“We reject the measure taken by the government, and so we declare an indefinite strike” across Bolivia starting on Monday, he said.
Faced with the growing criticism, Morales vowed the step would “not hurt anyone.”
“The government and the president will never ignore the workers, but we cannot allow the money to continue trickling out through smuggling and corruption,” the socialist president told mayors of towns near La Paz.
Private companies operate the buses and mini-buses that provide public transportation in Bolivia -under Morales.
Up to now, only the drivers and a union representing city teachers have voiced opposition to the sudden price hikes.
While some taxis and city buses operated early on Monday with unregulated higher prices, army trucks were drafted into service to shuttle between the working class neighborhood of El Alto and downtown La Paz.
Exempted from the price increase was natural gas for household use and for vehicles. Prices for basic services — water, electricity and telecoms — were also frozen.
The government is encouraging city buses to modify their vehicles to run on natural gas, but at the moment, fewer than 3 percent of public transportation vehicles have converted.
Residents rushed to fuel stations before the price increase went into effect at midday on Sunday.
Bolivian Finance Minister Luis Arce said prices should stabilize by the middle of next month.
However, economist Gonzalo Chavez of Catholic University said gasoline prices were the benchmark for the entire transportation sector, itself a reference for dozens of other products.
“We already were finishing the year with inflation rising to 6 percent and this is going to drive up inflation even further for the next three to four months,” he said.
Economist Alberto Bonadona, another Catholic University professor, said the measure was hitting ordinary Bolivians the hardest.
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