Valentín Mejillones Akharapi was held with his son and a Colombian couple after a raid by anti-drugs police on his home in the slum-city of El Alto, on the high Andean plain above the capital, La Paz.
Investigators say they found a cocaine laboratory as well as drugs valued at €184,000.
Mr Mejillones denied drug trafficking, and claimed he had been tricked by the Colombian couple.
An Aymara amauta , or spiritual guide, Mr Mejillones presided over the January 2006 ceremony at the ruins of the pre-Inca civilisation of Tiwanaku at which Mr Morales was installed as Appu Mallku – supreme leader – of Bolivia’s indigenous peoples, a day before being sworn in as president.
Álvaro García Linera, Bolivia’s vice-president, said Mr Mejillones would have to “answer for his actions before the courts” and that no one in government “could answer for his behaviour” since the ceremony at Tiwanaku.
Mr Morales won a landslide victory in the December 2005 presidential election on a promise to hand more power to Bolivia’s indigenous majority.
He first rose to prominence as a leader of the country’s main coca-growers’ union, fighting US-backed attempts to curtail the cultivation of the main ingredient in cocaine.
Coca is favoured by many Bolivian peasants as a cash crop, as drug traffickers are ready buyers in remote regions where poor infrastructure means farmers face huge difficulties in getting other produce to markets.
In a 1991 interview, Mr Morales told an Argentine newspaper: “We produce our coca, we bring it to the main markets, we sell it and that’s where our responsibility ends.”
Since becoming president he has expelled the US Drug Enforcement Agency from the country, and a recent UN report said coca production had doubled in Bolivia in the last decade, making it the world’s third biggest producer of cocaine.
Mr Morales has acknowledged Bolivia’s drug trafficking problem.
Launching a UN-backed voluntary eradication scheme this week, he noted drug traffickers have “more technology than the national police; more modern equipment than the armed forces”.
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