The question of what to do with gas deposits has plunged the country into a political battle that is polarising the population along its old fault lines - rich and poor, Indian and European, socialist and capitalist, plus old nationalist and anti-"gringo" instincts.

The country's natural gas wealth is worth $800bn while 80% of Bolivia's population of nine million currently live on less than $2 a day.

More than 80 people were killed and 400 wounded in the "gas war" riots last October. President Gonzalo Sanchez de Lozada fled by helicopter after barely six months in office in the midst of a burning city and was replaced by vice-president Carlos Mesa last year.

Mesa, though, was left in no doubt that his unelected mandate would be limited should he fail to turn against the sell-off plan.

The groups opposed to the privatisation say the five referendum questions do not include the key one: Do you want the nationalisation of natural gas?

According to a 6000-strong opinion poll done by Erbol, an association of Catholic churches, a whopping 83% of Bolivians would have said yes.

Call to abstain

The organisations that spearheaded the October revolt have held a series of strikes and roadblocks in the run-up to the 18 July referendum. In escalating political tensions, a Bolivian mayor was burnt to death and hung from a lamppost in a small town near La Paz last month.

Gas industry workers protesting
against the 18 July referendum

Security personnel have been deployed around the capital La Paz.

Felipe Quispe, an Aymara Indian who resigned from the cabinet last month in protest against the referendum, is the leader of the indigenous people's party, MIP, which together with Bolivia's main trade union federation, COB, is calling for abstention and civil disobedience.

Warning that ballot boxes will burn, he has declared a "state of siege".

In response, Interior Minister Alfonso Ferrufino said: "We have taken all of the precautions. I am sure that these declarations of war and threats are from a minority."

President Mesa added: "After the extreme violence that occurred in October, it would be crazy to think we could re-establish order through violence."

But just in case, the US has issued travel warnings and will not issue non-essential visas for visitors from Bolivia. In fact, Washington has clubbed Bolivia with Venezuela and Haiti as a nation in a "critical" condition.

Indigenous power

No other country in the Latin American region has such large numbers of indigenous peoples - more than 60% of the population. Compare that with its neighbours: 0.4% in Brazil, 2.6% in Argentina, 1.8% in Paraguay.

Yet Bolivia has never had a leader from its natural majority. Indigenous leader Evo Morales failed to win the presidency from Gonzalo Sanchez de Lozada by just one per cent in 2002.

"We don't want to be
a beggar country sitting on a golden throne - people exiled in our
own land. We must protest against the transnational pirates"

Evo Morales, indigenous leader and ex-presidential candidate

"We don't want to be a beggar country sitting on a golden throne - people exiled in our own land. We must protest against the transnational pirates," said Morales who, however, is supporting the referendum.

President Mesa takes a different view of the issue of gas exports. "Time is moving quickly and the world is not waiting for Bolivia," he says.

"The problem is that the past has been a very dark period for our people. Many riches have been taken out of the country and the people haven't received any benefit. People have to understand what private investment means. But the investors must understand that a poor country is waiting for these benefits to reach people's pockets and improve their lives."

Whatever the outcome, the Bolivian president is clear: "The concept of property rights doesn't mean nationalisation. We don't believe in closing the door to investors."

No alternatives

Alain Deletroz, director of the Brussels-based International Crisis Group, says Mesa is popular at the moment, but if he takes one wrong step, particularly on the sale of natural gas, he could be ousted by street protests as his predecessor was.

"Unless the government can forge a new consensus through the natural gas referendum, even the country's continued unity will be in doubt."

For Mesa the referendum is a
vote of trust in his leadership

Deletroz adds: "Indigenous movements are gaining strength throughout the Andes. Animated and angry, they are clear about what they oppose but are not offering practical alternatives."

But indigenous leader Quispe contends it is the transnational companies that have not learned the lessons of the Bolivian uprising, alluding to foreign energy giants that own the rights to Bolivia's gas and have their concessions safeguarded for another 36 years.

"What happened here in Bolivia last October was a rehearsal for our organisations and our preparations," Quispe said.

"It is necessary that we 'internationalise' indigenous peoples. For this, we are working with international organisations from Alaska to Patagonia. We have indigenous tactics which have seen generations [of development]."

Whether Sunday's referendum will resolve or intensify the dispute over what to do with Bolivia's gas reserves is the big question.