Bolivia suffered the strongest economic and social crisis of the last 30 years. The country could not refund the foreign debt, the GDP fell of 10%, the inflation reached a maximum (annual rate went up to 25,000%). The left wing government of president Siles Zuazo, which was divided between social promises and austerity measures needed to cleanse the economy, hardly managed to change the situation of the country. The USA and European countries re-started their collaboration programmes as Suazo gave his words to get rid of thousands of acres of coca fields.

In 1983, the former Nazi criminal Klaus Barbie (also known as "the butcher of Lyon"), who became Bolivian citizen in 1957 under the name of Klaus Altmann and who brought his services to the Bolivian and Peruvian dictators, was arrested and extradited towards France. There, he was condemned to life imrisonment and died of cancer in 1991.

In 1985, general strikes forced Zuazo to resign. President Paz Estenssoro came back at the head of the country.


The government of Paz Estenssoro took action to stabilize and revive the economy of the country. Under the pressure of International Monetary Fund, Bolivia had to fight against the tax deficit, and applied the decree 21.060 (known as the capitalization law) which liberalized the country towards a model of market economy. It gave a dominating role to the private sector while reforming the state institutions which were considered to be too heavy and unproductive (e.g.: public companies like the COMIBOL were dismantled). Paz Estenssoro's combat against drug traffic gave to him an increased economic support of the USA.

In 1986, the tin value went down on the world market. Many mines closed and 20,000 minors remained unemployed. The mines which belonged to the state were redistributed to private cooperatives. Consequently there was a massive exodus of the unemployed minors and their family who left the principal mining towns of Oruro and Potosi. Some minors took refuge in the tropical valleys (Chapare and Yungas) and started to find new activities in coca farming, but the poorest ones fled to La Paz and finally piled up in the poor districts of El Alto.

In 1989, President Jaime Paz Zamora was re-elected after his political party MIR offered an alliance with ADN of general Banzer.