The menacing atmosphere of dark manuevering and underworld-style feuding that has enveloped the new, reformist-labeled military government here for months has been heightened recently by a far more tangible crisis--a collapsing economy that has dumped Bolivia into a state of virtual bankruptcy.
Celso Torrelio Villa, the bulky, blunt general who was installed as Bolivia's president in September, has managed to defy continual predictions of his political downfall by gingerly separating himself from the powerful group of officers and alleged narcotics traffickers who violently ruled the country for 13 months after a July 1980 coup.
In the last few weeks, however, Torrelio's slow movements toward social and political reform have been stalled by mounting government debts, high inflation and plummeting industrial production. After years of relative neglect by Bolivia's constantly changing governments, these three factors finally have brought the national economy to a virtual standstill.
The economic crisis, described by government officials as the worst in the 156-year history of this perpetually impoverished country, has been watched with increasing concern by U.S. officials. The Reagan administration has strongly backed Torrelio's government as the best hope of stabilizing Bolivia and curtailing an annual cocaine business in excess of $1 billion that is believed to produce half of the illegal U.S. cocaine supply.
U.S. officials have urged economic stabilization measures on the Torrelio government, and now hope that a broad package of recently announced measures--including a 74 percent devaluation of the Bolivian peso--will rescue the country from financial collapse.
But as Bolivians trudged back to work last week after several days of protest strikes, there was ample evidence of growing financial and social tensions in a country with a history of 189 coups.
In the rickety suburbs that climb the brown hills around this high Andean capital, there are now shortages of meat and milk. In the glass office buildings downtown, a shortage of hard currency has produced long lines in the banks and a thriving business for black-market traders.
The strikes last week closed banks, factories and many of Bolivia's economically crucial mines, and the government struck back with a wave of arrests that brought some charges that protesters were beaten. The government's action has disrupted conciliatory talks between military and labor leaders and raised the prospect of a new round of the work stoppages and political violence that long have tortured the country.
"The only thing that is holding off a coup against Torrelio," remarked an opposition journalist, "is that none of the other generals wants to face this economic situation. They'd rather let Torrelio take the blame."
The most dramatic indications of the crisis are to be found in the government's central bank, which in the last several weeks has come dangerously close to running completely out of dollars--the currency both the government and private business need to pay foreign debts. This has meant that Bolivia has not been able to make payments due on $2.5 billion in foreign debt, much less supply dollars for the bills of state and private business.
At the same time, the deep recession and 50 percent inflation that have accompanied the currency crisis have helped sink the country's mineral production, which is the traditional foundation of the Bolivian economy, to its lowest level in nearly two decades.
Torrelio so far has tried to maneuver between competing economic pressures by combining devaluation and price increases demanded by the country's creditors, including the International Monetary Fund, with wage increases for state employes and negotiations with leaders of the country's most militant union, the tin miners. But Bolivian bankers and economists predict that the government soon must choose between even harsher economic measures and a default on its foreign debt.
The militant unions, meanwhile, are demanding very different measures, including large increases in the salaries of workers who now make less than $1 a day in towns where the price of scarce meat has reached almost $1 a pound.
In many ways, the crunch of financial and social forces that Torrelio faces is representative of the problems of other poor, Third World countries who borrowed heavily to finance development in the last 10 years only to see poorly planned projects disintegrate while international debts mounted.
In the early 1970s, as international lending agencies and banks weighted with OPEC dollars looked for good investment prospects, Bolivia, with its mountains and jungled lowlands covering an area the size of Texas and California combined, was considered a potential boom land. Foreign bankers and Bolivian officials alike dreamed of converting the country from the poorest in South America to another consumer-rich Venezuela by developing mineral deposits and what were suspected to be large, untapped oil fields.
For most of the 1970s Bolivia enjoyed one of the strongest rates of economic growth in Latin America. But the rich oil fields were never found, and much of the development loans was spent on huge agricultural and mineral projects that soon withered.
The low return on hundreds of millions in foreign loans would have put a great strain on any developing country's economy and social structure. But in Bolivia, the problem was multiplied by government corruption and overspending.
When Gen. Luis Garcia Meza took power in the bloody 1980 coup, the government quickly abandoned an International Monetary Fund stabilization program. It embarked instead on a course that led to vast growth of the country's already burgeoning cocaine trade, allegedly under the military's direct control.
By the beginning of last year, a black market had grown up in La Paz specializing in sales of "cocadollars" and smuggled consumer goods. Cocaine revenues exceeded those of the country's other exports and fueled an inflation rate that doubled in a year.
Meanwhile, as postponed foreign debts came due and prices for the country's mineral exports fell on international markets, Garcia Meza's ministers were sytematically plundering the country's central bank of its dollar reserves through extra-budgetary "credits" for military offices, foreign trips and dozens of transport planes reportedly used in contraband trade. In one year, the deficit of government revenues in relation to spending nearly doubled in this way, according to central bank figures.
Torrelio, who became president after a rebellion by reformist officers against Garcia Meza, has taken tentative steps against the cocaine economy and corruption and has pledged to rebuild Bolivia's economy.
But opposition economists point out that Torrelio has taken no concrete steps to organize a long-term economic program and that the military government has shown no signs of cutting overspending or of trying to stimulate the country's withered export industries.
Even if Bolivia is bailed out by foreign lenders over the next few months, these analysts say, the economy will continue to disintegrate.
"The only way to solve Bolivia's problems is to develop a serious, coherent plan for development," said a Bolivian bank executive here. "And the military will not do that. They don't understand economics, and even when they want to plan, they don't know how to act."