President Morales replaced head of state petroleum company 23 March following discovery of 44 flawed contracts with foreign energy companies. Errors delayed May 2006 nationalisation process; new head is fourth to serve in 14 months. Morales promised elections as early as 2008 once new constitution adopted, subject to national referendum to be held earliest December 2007. Constituent Assembly still to agree on many controversial issues including regional autonomy, decentralisation and new territorial entities. National emergency declared after heavy flooding in eastern lowlands likely to delay implementation of agrarian reform law.

6-month standoff in Constituent Assembly over procedural rules ended 17 February after parties settled on two-thirds majority for passage of articles for new constitution; draft due by 25 July. 20,000 independent miners protested in La Paz 7-8 February over President Morales’ proposed tax increases on mining industry; Morales withdrew plan and promised new investment. Nationalisation of natural resources continues; landmark gas deal signed with Brasilia promising increased revenues.

More violence sparked by moves for autonomy in east; at least 2 killed in new clashes in Cochabamba between supporters of President Morales and autonomistas, prompted by Cochabamba governor’s call for autonomy referendum by mid-February. Government proposed compromise on voting rules standoff in Constituent Assembly but no agreement reached with opposition. members since 1 January. 4 gang members killed in clashes 24 January; peacekeepers took control of building they plan to use as new operations centre. President René Préval in annual address to parliament cited drug trafficking as primary cause of instability; accused U.S. and other “drug-consuming” states of failing to tackle drug trade.

Political divisions deepened between President Evo Morales and pro-autonomy opposition and showed signs of fostering violence. Hundreds of thousands marched on capitals of 4 of Bolivia’s 9 departments 15 December, demanding greater respect for regional autonomy provisions passed in 2 July referendum and change in voting rules for Constituent Assembly to reflect original law establishing body. Santa Cruz saw largest protest, where 50 reported injured in clashes between protesters and government supporters, while raids on ruling MAS party headquarters and government buildings were recorded throughout month.

President Evo Morales’s reforms met increased opposition, notably in Santa Cruz and eastern provinces. Despite opposition pledges to boycott discussion of agrarian reform bill, Morales’s MAS party steamrolled bill through senate, while 6 of 9 regional governors cut relations with Morales, and thousands marched 21 November in protest organised by civic groups and agro-businesses in Santa Cruz. Morales spoke of popular “revolt” and threatened disbanding of Senate to push through reforms, accusing opposition of injuring Bolivian democracy. MAS party also forced through controversial rules of procedure for Constituent Assembly after 3-month standoff, allowing constitutional changes by simple majority, although final document will require two-thirds’ vote.

Boost for President Morales’s hydrocarbon nationalisation efforts as main investors agreed to hand over greater control to state and pay up to 82 per cent in tax. But crisis in mining industry showed fragility of political situation: violent clashes between independent and state-affiliated miners over control of tin mine in Huanuni killed 20 and injured dozens. Morales blamed for allowing dispute to escalate; independent miners withdrew support. Venezuelan President Chávez raised regional alarm when he promised to intervene in any coup against Morales. Constituent Assembly still stalled after 3 months over adoption of internal rules.

Potential for significant unrest as President Morales’ reforms hit stumbling blocks and rifts emerged in Constituent Assembly. Santa Cruz and regional allies walked out of Assembly 1 September after Morales’ MAS party imposed simple majority instead of two-thirds vote as threshold for making changes. Further evidence of regional divide 22 September: farmers and trade unionists in Santa Cruz, angered by opposition to land reform program, blocked roads. VP Garcia raised stakes in speech to country’s peasants that included veritable call to arms in defense of “revolutionary government”. Full nationalisation of hydrocarbons industry continued to stall: minister in charge resigned after crisis in relations with Brazil prompted by granting state-owned YPFB control over 2 refineries owned by Brazilian gas giant Petrobras; new minister expected to take more conciliatory tone.

President Morales convened inaugural session of constituent assembly 6 August, designed to give more power to indigenous population. Nationalisation of hydrocarbons hit snags as state energy company YPFB ran short of funds to expand control over gas sector and YPFB head resigned, while Morales spoke of “conspiracy” raising obstacles to nationalisation. Troops sent to Argentine border 29 August after protests by Guarani Indians briefly halted gas exports; leaders threatened further protests at gas fields over investors’ failure to realise promised local development.

President Morales’ MAS party gained 137 of 255 seats in new constitutional reform assembly in 2 July elections, less than two-thirds needed for full control. In simultaneous referendum, 4 of Bolivia’s 9 regions voted in favour of greater autonomy. VP Linera led delegation to Washington to improve relations with U.S.

Tense build-up to 2 July referendum on regional autonomy and election of constitutional reform assembly, as opposition accused Venezuela of supporting President Morales’s MAS party, and mass rally held in Santa Cruz in favour of decentralisation. Morales pressed ahead with agrarian reform, giving peasant farmers 2.2 million hectares of public land despite breakdown in talks with landowners. 1 killed during police operation to evict illegal occupants from private land.