Boiling point in Bolivia

While America's foreign-policy debate centers on the Middle East and Russia, unrest is mounting in South America. Bolivia is teetering on the brink of conflict, threatening to destabilize a region much closer to home and further damage our troubled economy.

The crisis represents what the United States might increasingly face: waning power and rabid anti-Americanism, limiting Washington's options in trouble spots. In this case, the best the US can do is help support efforts led by Brazil and other South American states.

Bolivia is synonymous with political and social strife. Long known for its deep social inequities and political turmoil, this country of 9 million people has increasingly been divided geographically, economically, and even culturally. Two groups now fight for control of the state: those in the lowlands, mostly capitalist mestizos (people of mixed European ancestry) who support globalization and benefit from Brazil's booming economy, versus the indigenous groups in the Andes, the anti-American Aymara and Quechua, who prefer state control of the economy.

Bolivia's mineral resources complicate this picture. Not only are the country's abundant hydrocarbon reserves concentrated in the four wealthier lowland provinces but centuries of elite exploitation have left indigenous groups deeply distrustful of any scheme that might deprive them of these riches.

President Evo Morales has exacerbated these divisions since coming to power in 2005. Although rightly concerned that his indigenous supporters would not benefit from the state's growing gas revenue, he's alienated his opponents by trying to centralize authority, confiscate property, and illegally ram through a new constitution.

The risk of civil war has markedly increased in recent weeks. The Army has occupied an opposition province, declaring martial law there and imprisoning the governor on charges of "genocide." Fighting has killed some 30 people. Anti-Morales protesters have occupied central government offices in Santa Cruz, the country's business capital, and interrupted natural-gas deliveries to Brazil.

Morales has attempted to blame Washington for Bolivia's troubles, expelling the US ambassador on the spurious grounds of fomenting rebellion. He behaves like his close ally, Venezuela's Hugo Chávez, who also expelled his country's US ambassador to distract attention from his own problems.

The US government should support the initiative launched last month by the nascent Union of South American States. Just four months old and untested, UNASUR agreed to organize commissions to investigate killings and seek a compromise between the Bolivian government and its opponents.

Washington should also persuade Brazil to play a greater role in the conflict, and use its foreign aid or trade policies to support reconciliation efforts. Brazil is easily Bolivia's most important foreign investor, and its president, Luiz Inácio Lula da Silva, is the only prominent international leader trusted by both of the country's warring parties. Brazil has the most at risk in continued turmoil.

If either UNASUR or Lula can get Morales to back off from his hard-line positions, a workable agreement should be possible. Both sides could claim victory if a new constitution gives more authority to individual provinces and transfers more of the hydrocarbon revenue to poorer areas.

This compromise would allow the lowland business elite to safeguard its economic model and property rights. Morales could be satisfied that he delivered more money for his supporters, while introducing reforms favoring indigenous groups in the highland provinces.

Washington needs to carefully calibrate its policies to encourage this result. While actively persuading Lula to mediate the crisis, it should link the accord with the $100 million in annual foreign assistance that Washington gives Bolivia, as well as continued participation in the Andean Trade Promotion and Drug Eradication Act. (Tens of thousands of Bolivian manufacturing jobs depend on access to US markets, which this act provides.) At the same time, Millennium Challenge Account money could be offered as an incentive. Bolivia is eligible for $598 million, which could be disbursed after an agreement is fully implemented. Offering to replace the US ambassador could be a sign of goodwill.

Washington has a delicate role to play in a country where past grievances – whether real or imaginary – color any act today. But at the least it should not be giving a blank check to a regime that has both repeatedly insulted the US and has worked assiduously to overturn democracy.

• Seth Kaplan is a business consultant to companies in developing countries and a foreign-policy analyst. He's the author of "Fixing Fragile States: A New Paradigm for Development." His website is sethkaplan.org.