On 21 February, Bolivian voters narrowly rejected a government-sponsored amendment to the 2009 constitution that would have allowed President Evo Morales to seek another re-election in 2019. The rebuke to the governing MAS party (Movimiento al Socialismo) comes amid challenging economic times for Bolivia, as low commodity prices have put pressure on fiscal and external accounts. That is unsurprising in light of the fact that until 2014, hydrocarbons made up around a third of public revenue, while natural gas and mineral exports respectively represented some 40% and 25% of foreign exchange earnings. The adverse evolution of terms of trade is moreover weighing on economic activity. While GDP growth averaged 5.0% over the past decade, the forecast for the years ahead is 3.5%.

Impact on country risk

Though the 'no' campaign won by a slim majority of 51.3% to 48.7%, the lost referendum marks a significant turn of fate for President Morales. For the first time, it shows that increasing weariness with the MAS government (as evidenced by poor party performance in regional elections in March 2015 and referendums on regional autonomy statutes in October 2015) is also affecting Morales’ personal popularity (as recent as late 2014, he won re-election by a landslide). The evolution may indicate that while Morales remains popular among the rural poor, chiefly owing to significant poverty reduction during his year in office, his government is struggling to cater for demands of the growing urban middle class. That being said, immediate effects of the referendum result are likely to be limited. The next election is still a few years off and for now, the MAS’ two-third majority in the legislature and Morales’ leadership are expected to safeguard political stability. Furthermore, opposition prospects for the 2019 election may not be as rosy as the won referendum suggests, because its unity remains to be tested. Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com