As news broke that Hugo Chávez had failed to win a referendum on constitutional reform, Bolivian politician César Navarro shook his head and pulled a face.

The Venezuelan president had lost by 51% to 49%, the narrowest of margins and an indication of the depth of the political divisions in Venezuela.

Navarro, the leader of Evo Morales's ruling Movement for Socialism Party (MAS) in Bolivia's chamber of deputies and a firm supporter of Chávez, seemed relatively phlegmatic about the outcome.

Perhaps he didn't know that just a few days later Morales would call a referendum on whether he and the country's nine regional governors should stay in office. Or perhaps he did.

The closeness of the vote in Venezuela could come to mirror Bolivia's own struggle over constitutional reforms which have already led to unrest and bloodshed – mostly recently in Sucre, the country's constitutional capital and home of its supreme court.

Two thirds of Bolivia's population is indigenous – most of them extremely poor. Until Morales, its governments were widely seen as ruling for the benefit of the post-colonialists and others of European descent.

Enthusiasts for the direction MAS is taking argue constitutional reforms will give poorer Bolivians more of a say in the running of their country as well as enshrining the nationalisation of gas and oil resources. Opponents say too much power will transfer to the government.

Navarro says the changes are the most important part of the MAS agenda because they are “fundamentally anti-colonial” and recognise the different indigenous nations that exist within Bolivia's boundaries.

“This doesn't mean the division of the country, it means recognising the indigenous nations in the interior of Bolivia have the right to self-govern without negating the national government, without having a separate constitution,” he says.

“We are talking about broadening rights which means taking away privileges from some sections of society.”

But, of course, the richer segments of Bolivian society have a great capacity to organise – through the privately owned media, through the regional prefectures and in some towns and cities.

“The confrontation is therefore not just going to be at a level of parliamentary and political debate – it's going to be among the social classes, with the indigenous nations and between regions,” he says.

“Bolivia is a long way from a civil war – there won't be a civil war. But you don't discount in some moments there could be a level of confrontation between some social groups and that will be a critical moment for the government.”

Navarro represents Potosí – which bankrolled much of the Spanish empire with its mountain of silver and around which grew what is said to be the highest city in the world.

It's a bleak place, as I found out when I visited in 2004, and there are signs of terrible poverty. Late at night on a Sunday we saw several women fetching their incapably drunk husbands home from bars. Life expectancy among the miners is desperately low – typically they die at around 40.

“Mining in Bolivia operates today much as it did in colonial times,” says Navarro. “There's no reinvestment. Today we can see a lot of mining activity in Potosi – lead, silver and zinc – and they keep on exploiting raw materials but still it remains poor.

“There's a few rich people but the wealth is concentrated in other parts of the country or abroad.”

Navarro says the MAS goal is to create a situation where the local economies don't just depend on one product and its current market value.

“This is a long term vision and if we don't start now a decade down the line we are going to regret it – and we won't be able to blame the capitalists and colonialists, because it will be our fault.”

Of course Morales also runs risks from another direction – the impatience of his own supporters.

“In Bolivia there is much expectation for change but Bolivia, as a state, has great economic limitations.

“For example, we've got a programme for social housing which has generated a lot of expectation at a national level but has the capacity this year to reach just 5% of the population. Expectation mustn't exceed reality!”

So where will the Morales revolution be in 10 year's time?

“All revolutionary processes either impose themselves or they are brought down,” says Navarro.

“You can go for the Nelson Mandela route and have symbolic power leaving the economic muscle where it always was - in the hands of the rich.

“In Bolivia we are trying to create constitutional and judicial power to implement our policies.

“Our success will depend not just on internal factors but also on our neighbours in South America and other countries in the world. So, for example, if a right wing government was to come to power in Brazil they maybe wouldn't want to buy petrol from Bolivia and that would hit our economy.

“There should be collaboration without subordination and that's the message we want to leave – respect for the self-determination of each country.”