This chapter uses a ‘political ‘poverty trap’ model, incorporating measures of institutional weakness and local political militancy, to explain the persistence of high levels of poverty in Bolivia from the early 1990s until 2006, in spite of the application of pro-poor policies by both government and aid donors. The conscientious application of these economic policies deflected the attention of the ruling coalition from the fact that the low-income Aymara/Quechua majority saw these pro-poor policies as essentially cosmetic and incapable of coming to grips with the country’s fundamental social and political inequalities. Since 2006, a democratically elected Aymara president has ruled the country, and poverty, especially severe poverty, has at last begun to fall. Exactly how this has occurred is still being debated, but it is likely that much of the credit rests, as in Argentina, with export taxes on the country’s natural resource wealth linked to social protection, and also with constitutional reforms aimed at fundamental change in perceptions of social justice.
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