Tuesday, January 24, 2006

A showcase U.S. aid package for Bolivia worth nearly $600 million could be in jeopardy if new leftist President Evo Morales follows through on some of his campaign promises, a senior U.S. aid official announced this week.

“We will consider the situation in Bolivia very, very carefully,” said John Danilovich, chairman of the quasi-independent Millennium Challenge Corp. (MCC), President Bush’s signature new program to target U.S. foreign aid to countries with strong records of social, economic and political reforms.

“The evolution of policy in Bolivia under President Morales remains to be seen,” Mr. Danilovich told a forum sponsored by the American Enterprise Institute on Monday.

Mr. Morales, a former coca grower and close ally of populist Venezuelan leader Hugo Chavez, has said his election would be a “nightmare” for the Bush administration.

He has vowed to boost state control of Bolivia’s sizable oil and gas reserves and denounced the hard-line U.S. approach to curbing Bolivia’s cocaine trade. Despite U.S. economic and military aid that has averaged $145 million annually since 1998, Mr. Morales has denounced what he called U.S.-style “neoliberalism” and his country’s heavy dependence on foreign aid.

While moderating some of his anti-U.S. and anti-market rhetoric in his Sunday inaugural remarks, Mr. Morales named a Cabinet this week heavy with radical leftist figures, including a new energy minister who has been fiercely critical of foreign investors.

Bush administration officials have taken a wait-and-see approach to the new Bolivian leader, but the Millennium Challenge aid package may be a critical first test of bilateral relations.

Conceived by Mr. Bush as a way to use foreign aid to promote lasting pro-market and political reforms in low-income countries, the MCC uses 16 indicators ranging from corruption and civil rights to the percentage of girls completing primary education in evaluating which countries qualify for assistance.

Just six weeks before Mr. Morales’ Dec. 18 election, the agency announced that Bolivia had qualified to apply for MCC funds. The $598 million Bolivian proposal — for a major road-improvement program and new financial instruments to boost local exporters — would be the largest single grant in the MCC’s two-year history.

Mr. Danilovich, who took over the top job at the MCC in November, said the agency was prepared to suspend or kill grant programs if the recipient country fails to meet its goals or backslides on reforms, and had already done so with applications from Yemen and Armenia.

With Mr. Morales trying to balance the demands of his radical supporters, a parliament in which conservative forces are still strong, and foreign-aid and business groups, even some conservative analysts say the Bush administration should not be too quick to write off La Paz.

According to Heritage Foundation researcher Stephen Johnson, Mr. Morales “shows every sign of becoming a Castro puppet and plunging Bolivia into civil conflict. But no one should say the United States pushed him in that direction.”

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