A Talk With Sanchez De Lozada

Gonzalo Sanchez de Lozada grew up in Chicago. Now, he is President of Bolivia, pushing economic and social reforms. In La Paz's colonial presidential palace, dressed in a hounds-tooth blazer for a working Saturday, he discussed his plans on May 20 with BUSINESS WEEK Assistant Managing Editor Robert J. Dowling and So Paulo correspondent Ian Katz.

Q: What's delaying your program to "capitalize" state-run companies?

A: You have to set up a complex process. You're not inviting people to buy the companies--[the investors] bring in real assets. If I had that money coming into the budget, I could be very popular doing a lot of public works. In Argentina, Chile, Peru, Mexico, they sell the stuff off, balance their budget, do wonderful things, and get reelected. But we decided that what we wanted was jobs and good partners. And we wanted the Bolivian people not to feel excluded. After all, they paid for these crazy state-owned companies in taxes and inflation.

Q: Wouldn't it have been easier to just privatize the companies?

A: It's always tough to be a pioneer. Being a successful businessman and having an American accent, I was sort of dubious for a lot of people. I spent a lot of time [before the 1993 election] walking around the countryside, listening to people. All Bolivians realize these companies have to get new capital, but they want to be part of it. I hope that someday this will be seen as really clairvoyant--getting Bolivians to read BUSINESS WEEK and not Karl Marx.

Q: What caused the recent violence?

A: Bolivian education had been in the hands of the unions for 40 years. They had the veto over the naming of anyone in public education. Teachers got used to doing strikes. Now, we're refusing to pay them for days not worked. [Under the constitution], you are permitted in certain cases to confine people for 90 days to the capitals of provinces. So we send them off to faraway tropical paradises, and it keeps them out of trouble.

Bolivians have realized that only educated countries become rich. And they feel that Bolivian education has gotten intolerably bad. So we're talking about big salary improvements [for teachers] but in exchange for more hours of work and more exams. We're saying [to teachers], we're going to have exams for the kids, and we're going to have exams for you guys every five years.

Q: Do you see Bolivia as a regional hub?

A: You've got to have infrastructure. For the first time, we've got paved roads being built to Chile and Peru. And we need to get these railroads capitalized. Remember, parts of Brazil are much closer to the Pacific than to the Atlantic.

Q: Is coca important to Bolivia's economy?

A: A lot less than it was a decade ago. A hectare of coca used to produce about $25,000 for a peasant farmer. Now, it produces about $2,500. The increase in production in other countries has meant it's worth less. We're close to finding other crops for these farms. But right now, it's tough to compete against a hectare of coca.

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