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In 1994, as part of a global trend, Bolivia instituted an ambitious decentralization program that not only transferred funds and new responsibilities to municipal governments but also mandated participatory budgeting and oversight by local organizations. This article offers a preliminary assessment of the program, focusing on its effects on government efficiency, economic development, and political accountability. It finds that in some municipalities, with both strong grassroots organizations and nongovernmental organizations, a relatively democratic process of decentralization occurred although decentralization did not serve as an impetus for economic development. Inmanymunicipalities, however, the policy has resulted in the entrenchment of local elites, the strengthening of clientelistic relationships, and the “decentralization of corruption.”

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Since 1985, Bolivia has undergone three phases of the imposition of and popular resistance to neoliberal policies. This article charts the uneven course of neoliberal hegemony beginning with the structural adjustment program in the mid‐1980s through popular uprisings between 2000 and 2003 that ousted the national government. Even though the current administration may be unable to resist World Bank and IMF pressure to continue neoliberal policies, powerful and diverse popular movements will certainly continue to contest them. This article makes two contributions to discussions of neoliberalism as a hegemonic system: it identifies problems of scale in maintaining neoliberalism, and it reminds us of the importance of coercion in maintaining hegemony.