Bolivian President Carlos Mesa signed a decree last night on two key demands in hopes of ending weeks of violent protests.
Bolivians will go to the polls on October 16th to elect members for an assembly to rewrite the constitution with the aim of redistributing power in favour of the poor indigenous majority, Mr Mesa said.
On the same day, he said, Bolivians will vote on a referendum for greater autonomy for provinces from La Paz, a demand of the wealthy eastern provinces where most of Bolivia's gas and oil lies.
Mr Mesa announced his intervention after the fragmented Congress failed to reach a consensus for the third day in a row, while indigenous protests raged in the streets of La Paz and brought the capital to a standstill.
"I urge this country to return to calm," Mr Mesa said in a surprise televised announcement, 19 months after he took office when a bloody Indian revolt toppled his predecessor.
Mr Mesa, a political independent with little support in Congress, came to power promising to heal the social wounds of South America's poorest country and the indigenous majority of its 8.3 million people.
After a brief honeymoon, he was unable to cope with the growing political militancy of the indigenous groups, both on the streets and in Congress.
Mr Mesa said the constitution-rewriting assembly will be the "perfect" forum for re-evaluating the energy law passed two weeks ago that indigenous groups felt fell short on state control.
The protests of tens of thousands of Indians in the last two weeks centred on demands for nationalisation of Bolivia's vast natural gas reserves, the second-largest in Latin America.