The Liberal victory was also closely associated with a basic shift in the Altiplano mining economy. As the world silver market began to decline in the 1880s and early ’90s, mining operations began shifting to tin, which is found in association with silver, because tin was suddenly in demand by all the major industrialized countries. By 1900 tin completely superseded silver as Bolivia’s primary export, accounting for more than half of export earnings.

The shift to tin mining brought about a basic change within the Bolivian capitalist class. Whereas the silver-mining elite had been almost exclusively Bolivian, the new tin miners were far more cosmopolitan, including, in the early years, foreigners of all nationalities as well as some new Bolivian entrepreneurs. Tin mining itself absorbed far more capital and produced far more wealth than had the old silver-mining industry, and the new companies that emerged became complex international ventures directed by professional managers.

Given this new economic complexity and the political stability already achieved by the Conservatives and perpetuated by the Liberals, the tin-mining elite found it profitable to withdraw from direct involvement in national political life. Whereas Bolivian presidents under Conservative rule in the 19th century had been either silver magnates themselves (Gregorio Pacheco, 1884–88; Aniceto Arce, 1888–92) or closely associated with such magnates as partners or representatives (Mariano Baptista, 1892–96; Severo Fernández Alonso, 1896–99), the Liberals and subsequent 20th-century presidents were largely outside the mining elite. No tin magnate actively participated in leadership positions within the political system. Rather, they came to rely on a more effective system of pressure group politics.

Liberal rule, 1899–1920

The primary tasks of the Liberal politicians, who ruled Bolivia until 1920 under the leadership of Ismael Montes (twice president: in 1904–08 and 1913–17), were to settle Bolivia’s chronic border problems and to expand the communications network initiated by the Conservatives. In 1904 a definitive peace treaty was signed with Chile, accepting the loss of all Bolivia’s former coastal territories. Also, a dispute with Brazil known as the Acre problem was resolved: this had involved an unsuccessful attempt by the central government to crush an autonomist rebellion (1889–1903) in the rubber-boom territory of Acre on the Brazilian border. Brazil’s covert support of the rebels and the defeat of Bolivian forces finally convinced the Liberals to sell the territory to Brazil in the Treaty of Petrópolis (1903). As a result of the financial indemnities provided by both treaties, Bolivia was able to finance a great era of railroad construction. By 1920 most of the major cities were linked by rail, and La Paz was connected to the two Chilean Pacific ports of Antofagasta and Arica; new lines had been begun or completed to Lake Titicaca, and thus to the Peruvian border, and to Tarija and the Argentine frontier.

The period of Liberal rule under President Montes was also the calmest in Bolivian political history, and the Liberals’ success led to the total collapse of the Conservative Party. Not until 1914 was an effective two-party system again established, when many of those outside of politics, along with a large number of new and younger elements, finally organized the Republican Party. Like its predecessors, the Republican Party was a white, upper- and middle-class grouping, with a fundamental belief in liberal and positivist ideologies.

The Republican Party

The abrasive quality of the strong-willed Montes and the disintegration of the ruling Liberal Party finally permitted the Republicans to stage a successful coup d’état in 1920 and become the ruling party. Upon achieving political power, however, the new party immediately split into two warring sections based on a personality conflict between two Montes-style politicians—Juan Bautista Saavedra, a La Paz lawyer who captured control of the Republican Party’s junta in 1920 and was national president from 1921 to 1925, and Daniel Salamanca, a Cochabamba landowner who took his following into a separate party, the so-called Genuine Republican Party, which was often supported in its activities by the Liberals. The rivalry between these two men became the dominant theme in Bolivian politics for the next decade, until the Salamanca forces captured the presidency.

Below the surface of this political battle of personalities, the national economy in the 1920s was undergoing serious change. A brilliant post-World War I recovery in the Bolivian tin-mining industry in the early years of the decade led by 1929 to the industry’s highest production figures. This enormous output occurred, however, in a period of steady price decline (a trend that continued long after the Great Depression of the 1930s). By 1930 the international tin market was in serious crisis, and Bolivian production suffered. The year 1930 also marked the end of major new capital investment in Bolivian tin mining; thereafter production costs rose higher and lower-grade ores were more often produced.

The Chaco War and military rule

The Chaco War was a long and costly disaster for Bolivia. In three years of bitter fighting on its southeastern frontiers, Bolivia sustained some 57,000 deaths, and it lost far more territory than Paraguay had claimed even in its most extreme prewar demands. The fact that Bolivia had entered the war with a better equipped and supposedly far better trained army only aggravated the sense of frustration among the younger literate veterans—the so-called Chaco generation—at the total failure of Bolivian arms. Charging that the traditional politicians and the international oil companies had led Bolivia into its disastrous war, the returning veterans set up rival socialist and radical parties and challenged the traditional political system.

The initial result of this challenge was the overthrow of civilian rule and the first military government in Bolivia since 1880. In 1936 the younger army officers seized the government, and, under the leadership of Colonel David Toro in 1936–37 and Major Germán Busch in 1937–39, they tried to reform Bolivian society. During this so-called era of military socialism the Standard Oil Company holdings were confiscated, an important labor code was created, and an advanced, socially oriented constitution was written in 1938; yet little else was changed.

The rise of new political groups and the Bolivian National Revolution

Civilian dissident groups finally began to organize themselves into powerful national opposition parties in the 1940s. The two most important of these were the middle-class and initially fascist-oriented Nationalist Revolutionary Movement (Movimiento Nacionalista Revolucionario; MNR) and the Marxist and largely pro-Soviet Party of the Revolutionary Left (Partido de la Izquierda Revolucionaria; PIR). Both groups established important factions in the national congress of 1940–44. In 1943 the civilian president General Enrique Peñaranda was overthrown by a secret military group, Reason for the Fatherland (Razón de Patria; RADEPA). RADEPA allied itself with the MNR and tried to create a new-style government under Colonel Gualberto Villaroel (1943–46), but little was accomplished except for the MNR’s political mobilization of the Indian peasants. Opposed as fascist-oriented by the right and left, the Villaroel government was overthrown in 1946 in a bloody revolution in which Villaroel was hanged in front of the presidential palace.

During the next few years the PIR tried to rule in alliance with many of the older parties but failed. It was eventually dissolved and replaced in early 1950 by the more radical Bolivian Communist Party; meanwhile, the more conservative parties proved unable to tame their rivals. After the MNR won a plurality victory in the presidential elections of 1951, the military intervened directly and formed a junta government. The MNR’s disaster under Villaroel led the party to dissociate itself from its fascist wing; instead, it forged an alliance with a small Trotskyite party that had important mine-union support. The alliance brought the labor leader Juan Lechín into the MNR. After several unsuccessful revolts, each more violent than the preceding one, the MNR finally overthrew the military regime in April 1952. During this struggle armed workers, civilians, and peasants almost totally destroyed the army.

April 1952 thus marks the beginning of the so-called Bolivian National Revolution, which became one of Latin America’s most influential social upheavals. That year, universal suffrage was granted with the abolition of literacy requirements. Moreover, the MNR and its mine-worker and peasant supporters were pledged to a fundamental attack on the tin-mining elite and its allied political supporters. In October 1952 the three largest tin-mining companies were nationalized, and one of the most far-reaching land-reform decrees ever enacted in the Western Hemisphere came into effect in August 1953. Not only were Indians granted land, freed from servile labor obligations, and granted the right to vote, but they were also given large supplies of arms. From that point on, the Indian peasants of Bolivia became a powerful, if largely passive, political force upon which all subsequent governments based their strength.