Bolivia in turmoil as President quits in bid to stop strike

Bolivia was in crisis last night after its besieged President, Carlos Mesa, stepped down in response to protests over the exploitation of natural resources that has brought Latin America's poorest country to a virtual standstill.

Mr Mesa's exit raises fears of a repeat of the bloodshed and unrest that forced his predecessor to flee the country two years ago. With Bolivia's coca leaf cultivation soaring, the heavy-handed tactics of the US-led war on drugs has fuelled increasing social unrest. Tension between the urban elite, seen as handmaidens of the US and foreign multinationals, and the impoverished indigenous Indians, reliant on income from the illicit cocaine trade, have turned the country into a tinderbox.

Faced with a national strike aimed at forcing international energy companies to pay much higher taxes, Mr Mesa made what was seen as last-ditch effort to get his opponents to back down.

In a letter read out on national television by cabinet colleague Jose Galindo, the President said he could not "continue to govern besieged by blockades". Analysts expressed the hope that opposition lawmakers in Congress would reject his offer at today's session.

The former historian pointed the finger of blame for the crisis at Evo Morales, a coca farmer and leader of the populist Movement to Socialism (MAS), who he accused of turning the landlocked nation of 8 million into a "country of ultimatums".

Mr Morales has led calls for a blockade stretching to every corner of the remote and isolated Andean country unless the government raises taxes on foreign energy companies exporting oil and gas to 50 per cent. The President has rejected the demand, saying foreign multinationals would take Bolivia to court, with disastrous consequences.

"They roll up some sticks of dynamite and insist that you do anything they say. I won't go down that road any longer," said Mr Mesa.

The opposition MAS, which earned 19 per cent of the vote at the last elections, countered saying that Mr Mesa was "blackmailing the country".

Bolivia is heavily reliant on foreign aid and hopes for an economic turnaround are pinned on developing vast gas reserves, thought to be the second largest in Latin America.

The one-time television commentator, Mr Mesa, took office in 2003 after violent protests against plans to export gas through traditional foe Chile - the "gas war" - saw 67 people killed and prompted Gonzalo Sanchez de Lozado to flee.

A regional analyst, Mark Schneider, from the International Crisis Group, said Bolivia was facing its "greatest crisis" in years. "The current issue may be drugs, gas or pipelines but the core is [respective] governments' failure to incorporate the majority of people into political life and it is coming back to haunt them," he said.

Rival protests yesterday in La Paz and El Alto, an Indian-dominated city on the outskirts of the capital, provided a snapshot of the divisions between the urban middle class, mainly of European descent, and indigenous Indians, who make up 70 per cent of the population and for the most part live in abject poverty. In El Alto, predominantly Aymara Indians blocked the road to the capital; while in La Paz hundreds gathered to show their support for Mr Mesa and urge him to stay on.

With the two sides polarised, Mr Schneider said Bolivia, divided between a discredited traditional political elite and radicalised indigenous movements, faced a "zero sum gain".

The tensions have been dangerously heightened by the US-led war on drugs.

Bolivia, along with Peru, has emerged as the second pole to Colombia in global cocaine production and Washington's insistence on coca eradication programmes has devastated peasant farmers who harvest the leaf for traditional consumption.

Critics point out that eradication has failed to have an impact on cocaine supplies to the US and European markets and stoked resentment in impoverished growing countries.