Jeremy Jordan JEREMY JORDAN

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Revista de Humanidades y Ciencias Sociales (Santa Cruz de la Sierra)

Print version ISSN 1819-0545

Abstract

ROBLES, Gustavo A. Prado  and  KLEIN, Herbert S.. The National Revolution of 1952 and its impacts on the Central Bank of Bolivia.Translated byJeremy Jordan. Rev. humanid. cienc. soc. (St. Cruz Sierra) [online]. 2006, vol.2Selected edition, pp. 0-0. ISSN 1819-0545.

Gesualdo A. Constanzo, probably was not exaggerating when he wrote that the monetary experience of the Bolivian national revolution was "one of the most fascinating chapters of economic history in modern times"._ftn21 An account of the monetary and fiscal history of the revolutionary period suggests that it is not enough for the authorities to know what the most advisable policies to achieve economic stability are, nor that they have the firm purpose to adopt such policies; history insinuates that stability can only be achieved if the government is backed up by enough political, social and financial support to implement the appropriate measures. The dilemma between monetary stability and economic growth -one of the most polemic topics about Latin American development- conditioned the monetary and fiscal policies applied in those years and determined the institutional changes which were operated at the Central Bank of Bolivia [Banco Central de Bolivia (BCB)]. This essay, which is divided into four parts, starts with a discussion of the Law of reorganization of the Central Bank promulgated on December 20th of 1945, which was designed as a legal framework for fiscal austerity and restrictive credit policies undertaken by the government of Gualberto Villarroel in January of 1944. This background is crucial to understand the attitudes of key political actors and of the most important economic authorities in the decade of the 1950’s. In the second part, it is shown that the stabilizing intentions manifested by the economic authorities after the triumph of 1952, as well as the attempt to re-establish institutional independence of the Central Bank, had to be abandoned  in view of the impetus of the revolutionary agenda imposed by popular pressure. Financing of the growing fiscal deficit with inorganic issue of money, allied to a commotion of the productive system caused by reforms, generated a formidable inflationary outbreak which could not be restrained by the stabilizing attempts of May 1953 and July 1956. In the third part, the internal circumstances and the external forces that determined the establishment of the National Council of Monetary Stabilization [Consejo Nacional de Estabilización Monetaria - CNEM], in August 1956, and the consequent subordination of the Central Bank to the Council of Stabilization, are considered. This intervention uncovered political interference in which the Bank had been put down during the previous four years and unveiled administrative deficiencies and failures in accounting procedures. The exposition continues with an analysis of the gestation and application of the stabilization plan of December 1956, which was based upon a severe policy of fiscal austerity and entailed the adoption of free market rules referring to internal prices, foreign currency and external trade. In this section, a reform proposal for the Central Bank, which was discussed and approved at the Stabilization Council, but was not put into practice, is also analyzed. The third part concludes with an evaluation of political costs and economic effects of the stabilizing measures. In the last part, a brief recapitulation is attempted.

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