A country of statistical extremes, landlocked Bolivia is the highest and most isolated country in South America.
It has the largest proportion of indigenous people, who make up around two-thirds of the population, and is the world’s largest second producer of tin.
Though rich in mineral and energy resources, Bolivia is one of South America’s poorest countries. Wealthy urban elites, who are mostly of Spanish ancestry, have traditionally dominated political and economic life, whereas most Bolivians are low-income subsistence farmers, miners, small traders or artisans.

The country has the second-largest reserves of natural gas in South America, but there have been long-running tensions over the exploitation and export of the resource. Indigenous groups say the country should not relinquish control of the reserves, which they see as Bolivia’s sole remaining natural resource.

Before President Evo Morales came to power the political fallout from the issue had helped to topple two presidents and had led to calls for regional autonomy, including in prosperous, oil-producing Santa Cruz.
In May 2006 President Morales delighted his supporters but sent shockwaves through the energy world when he put the energy industry under state control. Foreign energy firms were given six months to sell at least 51% of their holding to the state and negotiate new contracts or leave the country.

In the 1980s Bolivia went into a deep economic recession. The tin market collapsed, with the loss of about 21,000 jobs, inflation was rampant and the national currency was in severe crisis.

While strict austerity measures, the introduction of a new currency and tax reform succeeded in curbing inflation and restoring foreign confidence, these policies also widened the already huge wealth gap and generated great social unrest.
Bolivia is one of the world’s largest producers of coca, the raw material for cocaine. A crop-eradication programme, though easing the flow of conditional US aid, has incensed many of Bolivia’s poorest farmers for whom coca is often the only source of income.

Socialist leader Evo Morales, a figurehead for Bolivia’s coca farmers, won presidential elections in December 2005, the first indigenous Bolivian to do so. He described himself as the candidate “of the most disdained and discriminated against”.

His victory was decisive; he surpassed the figure needed to take office without the need for a vote in Congress. Much of his support came from Bolivia’s indigenous majority.

A few months later, in June 2006, he claimed victory in elections for a new assembly which will rewrite the constitution. He has campaigned for a new constitution to enshrine the party’s nationalisation and land redistribution programme.

Unofficial results showed that his party – the Movement towards Socialism – won most of the seats, but not the two-thirds majority needed to draw up the constitution on its own.

The president inherited a political tinderbox; street protests over the control of energy reserves had unseated two of his predecessors since 2003. He said he wanted to bring the benefits of the nation’s resources to the people.

Mr Morales pledged to increase state control over the natural gas industry, but said he would not expropriate the property of energy firms.
In placing the energy industry under state control in May 2006, he declared that “the pillage of our natural resources by foreign companies is over”.

His policies in other areas too look set to inflame opinion. In particular, a promise to relax restrictions on growing coca, the raw material for cocaine, could make him a thorn in the side of the US, which has bankrolled the fight against drugs in the country.

Mr Morales defends the traditional uses of the coca leaf among the indigenous population. His government wants to exploit commercial and medicinal uses for the leaves.

Born in 1959, Evo Morales is an Aymara Indian from an impoverished family. In his youth he was a llama herder and a trumpet player. The former coca grower lost the 2002 presidential election to the conservative, Gonzalo Sanchez de Lozada.

He is an admirer of two Latin American populist firebrands – Cuba’s Fidel Castro and Venezuela’s Hugo Chavez.

He succeeded caretaker leader Eduardo Rodriguez, who took office in June 2005 when President Carlos Mesa resigned amid mass protests demanding the nationalisation of the energy sector.