Bolivia defends sharp fuel increase after strikes

LA PAZ — Bolivian President Evo Morales defended an 83-percent hike on gasoline prices, saying previous subsidies were a "drain on the economy" after bus drivers announced an open-ended strike.

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 380 million dollars 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 to 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.

But Franklin Duran, the head of the Confederation of Drivers, which represents some 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 Monday, he added.

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 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 telephone service were also frozen.

The government is encouraging city buses to modify their vehicles to run on natural gas. But at the moment, fewer than three percent of public transportation vehicles have converted.

Residents rushed to fuel stations before the price increase went into effect at midday Sunday.

Finance Minister Luis Arce said prices should stabilize by mid-January.

But 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 six percent and this is going to drive up inflation even further for the next three to four months," he argued.

Economist Alberto Bonadona, another Catholic University professor, said the measure was hitting ordinary Bolivians the hardest.

"Not just transport but food prices are going to be going up. Then there will be pressure for wage hikes," he said.