Leftist coca farmer presides over economic upswing in Bolivia

EL ALTO, Bolivia (Reuters) - A chaotic sprawl high in the Andes, the Bolivian city of El Alto has a fearsome reputation for altitude sickness, poverty and violent uprisings that topple governments. No wonder many businesses stayed away.

But years of economic growth and relative stability are changing attitudes as well as fortunes in one of Latin America's poorest and most volatile nations. Entrepreneurs are even waking up to El Alto's potential.

Its first supermarkets, shopping centers and cinemas are planned -- multimillion-dollar private sector investments that would have been unthinkable almost anywhere in Bolivia a decade ago.

Banks and pizza delivery stores have set up shop in the city's stark, traffic-choked streets and its bare brick buildings are climbing higher into the thin air as local commerce thrives 4,050 meters (13,300 feet) above sea level.

"People hardly bought anything in the past. With this government there's business," said Alicia Villalba, 33, selling Brazilian-made aluminum pans at a twice-weekly market where everything from livestock to second-hand cars is on sale.

"I just hope the economy keeps on growing so I'm able to look after my family," she said as a woman wearing the traditional dress of a wide pleated skirt and bowler hat bought a full set of pots.

About $2 million changes hands at the market every day.

SIGNS OF CHANGE

Seven years since they helped elect leftist coca farmer Evo Morales as Bolivia's first president of indigenous descent, there are subtle signs of change among El Alto's mainly Aymara Indian population too.

"El Alto was always where conflicts kicked off. Why? Because people had nothing to lose. That's not the case today," said Alejandro Yaffar, a prominent businessman who owns a new fast-food court in El Alto and has two more retail projects planned.

"People have opened their eyes to a new way of life," he said in his office in the adjoining city of La Paz, Bolivia's administrative capital.

Much remains to be done, however. Heaps of garbage and packs of stray dogs blight the bleak urban landscape. Water and drainage are inadequate, and local businesses complain about rising crime and scant policing.

Public infrastructure projects have struggled to meet the fast-growing city's needs or the expectations of residents and some are disappointed with Morales and the pace of change.

"Here in El Alto we all voted for him, myself included," said Nora Villeros, 65, her long braids streaked with gray, as she sat in front of her busy store selling colorful bathroom tiles and fittings.

"He promised us miracles but the first couple of years went by and then he forgot about us," she said, complaining that Morales had favored members of his Movement Toward Socialism party (MAS).

Many of El Alto's residents are self-employed and resist efforts by authorities to increase tax revenue by cracking down on contraband goods. That means protests and roadblocks are still a regular occurrence.

'MORE WORK, MORE MONEY'

El Alto is not the only place that is changing in Bolivia, a landlocked country of about 10 million that sits on South America's second-biggest natural gas reserves and rich deposits of silver, tin, zinc and other metals.

In La Paz, which lies in a crater-like valley below El Alto, low unemployment and affordable credit are fueling a construction boom and consumers feel unusually well off.

"There's more work and more money around. I think people are living better than they were six years ago," said Marco Arkaza, 33, a bank employee as he strolled in one of two new cinema and shopping complexes in La Paz.

"People have greater purchasing power. Young people and the middle class have enough money to come to places likes this now," he said.

After seven years of economic growth averaging 4.7 percent a year, Bolivia joined the World Bank's list of lower middle-income countries in 2010. The ranking allows more credit access.

Government officials say up to a million Bolivians have entered middle-class ranks under Morales. They credit policies such as welfare payments for school children and pensioners for lifting almost a million more out of extreme poverty.

In 2006, 38 percent of Bolivians lived in extreme poverty, data from the state-run INE national statistics shows. That has fallen to about 25 percent though nearly half of Bolivians are still poor, according to the United Nations.

Some sectors have done better than others. Critics say a disproportionate amount of public money has been poured into the steamy Chapare region that is home to much of Bolivia's illegal coca crops and a stronghold of Morales support.

Mining cooperatives have won significant political concessions from Morales and a few have grown rich due to soaring global metals prices.

In mining cities like Oruro and Potosi, famous for the Cerro Rico (Rich Mountain) of colonial times, newspapers carry stories of miners-turned-millionaires and fantastic earnings luring fortune seekers from other parts of the country.

While most of the cooperative miners scrape a living working in dangerous and precarious conditions, a few have become wealthy enough to buy expensive cars and invest in real estate.

"This amazing mining boom has helped develop markets in places no one ever would have imagined," said Christian Eduardo, president of the CADECO construction industry chamber in La Paz.

Construction activity has been growing at an average of about 10 percent per year since 2007, forcing the over-stretched local cement industry to meet demand with Peruvian imports.

FISCAL CONSERVATIVE

To the surprise of his detractors, Morales -- an ally of Venezuela's Hugo Chavez who shares his penchant for fiery leftist rhetoric -- has proved a fiscal conservative. The country is expected to register its seventh-straight annual fiscal surplus in 2012.

Morales, 53, has nationalized areas of the economy from the vital natural gas industry to telecommunications companies and tin smelters, but he has also let the central bank's foreign reserves swell to record levels and warded off the scourge of high inflation that battered Bolivia in the 1980s.

The economy is expected to grow more quickly than many of its wealthier neighbors this year and should maintain a healthy 5 percent expansion in 2013, according to the latest International Monetary Fund (IMF) estimates.

"Bolivia is no longer a country with a weak economy," Economy Minister Luis Arce said last month after the nation sold its first global bonds in almost a century.

Most analysts said the interest rate of less than 5 percent was low considering Morales' record of nationalizing companies, often without prior notice or paying compensation, and it has proved an unlikely public relations success for him.

"The interesting thing is that Bolivia sold the bonds at half the rate paid by Venezuela. That's an important message to the world," said Horst Grebe, director of La Paz-based research institute, Prisma.

"The problem is that Bolivia's biggest growth is in its macroeconomic numbers. What we're not seeing is a transformation of the productive economy that is sustainable in the long term."

Bolivia remains acutely dependent on exports of non-renewable raw materials. Natural gas and metals accounted for 87 percent of last year's record $9.1 billion export earnings, said Gary Rodriguez of the Bolivian Foreign Trade Institute (IBCE).

'DRUNK ON POWER'

But as Wall Street economists laud Morales' macroeconomic policies as prudent, critics at home say he betrayed supporters by watering down policy pledges and pandering to big business.

"Since the Spanish arrived 500 years ago we'd never had an Indian president. It was the people's dream and we thought things would be different. But six years on, he's dishonored us," said long-time indigenous activist Felipe Quispe, known as El Mallku, the "Condor" or "authority" in Aymara.

With six years and 10 months in the job, Morales has held Bolivia's presidency for the longest unbroken period of any elected leader. An opinion poll conducted last month by Ipsos Bolivia put his approval rating at 53 percent in urban areas and 69 percent in the countryside.

But despite his continuing domination of the political scene, Morales has lost his initial aura of invincibility since some allies turned against him over an Amazon highway plan and a fuel price hike two years ago.

Government critics from the left and the right would like to see strong challengers emerge in time for a 2014 presidential election in which Morales has hinted he may seek a third term.

"The government's made a lot of mistakes ... they've got drunk on power," Quispe said, accusing Morales of seeking to stifle media criticism and control the judiciary.

In El Alto, several large state infrastructure projects, such as a $234 million cable car system and a double-lane highway to Oruro, should be ready in time for the election. They are unlikely to satisfy growing expectations, however.

"There's been a lot of investment in the city but it hasn't been enough yet," said Javier Ajno, president of the powerful FEJUVE neighborhood federation.

FEJUVE was a protagonist in the so-called Gas War that led to the ouster of former President Gonzalo Sanchez de Lozada in 2003 and the protests that drove Carlos Mesa from office two years later.

Ajno said El Alto's rebellious spirit was still very much alive, but that for now there is broad support for Morales.

"El Alto has been the cradle of this process of change ... we've carried an Indian to the presidency and people still believe in this process," he said. "We've definitely still got a long way to go, but in five or 10 years this will be the city of the future."