Sunday, April 29, 2007

Nationalization's Growing Pains

After months of negotiations, the Bolivian government’s successful settlement of oil and gas contracts has been overshadowed by citizen protests in different departments of the country. In April, citizen disputes erupted over the spoils of two of Bolivia’s greatest exports - gas and tin - but each with mixed results.

Most recently in the Chuquisaca department, about 4,000 Huanuni miners stormed the Constituent Court building located in the city of Sucre. The cooperative miners are dissatisfied with government decree 28901 that gives Bolivia’s state-owned mining corporation, COMIBOL, exclusive control of the Posokoni tin deposits in Huanuni.

Miners claim that the law is unconstitutional and attacked the building after judges refused to discuss the government’s nationalization plan with mining leaders. It is the first major situation for new Mining Minister Luis Alberto Echazú. Two police officers were wounded, but the protests mostly resulted in property damage. It illustrated the fragility of a truce between the Morales government and certain elements of the mining sector that ensued after
violent clashes left 17 dead in October 2006.

Just one week earlier, days of protests at gas installations in southern Bolivia, left one dead and 11 injured as thousands of protesters blocked natural gas installations in the Bolivian border town of Yacuiba on April 17.

The government sent hundreds of troops to the scene to retake control of a natural gas pipeline to Argentina run by Transredes - the Bolivian subsidiary of Royal Dutch Shell. The army removed dozens of protesters while hundreds of other protestors gathered 30 miles away outside the San Alberto natural gas field, run by Brazil's Petrobras. After a demonstrator was shot and killed, 47 police officers were held hostage in Yacuiba municipal offices for more than 20 hours before their release was negotiated.
The Permanent Assembly for Human Rights of Bolivia (APDHB) was called in to mediate the dispute as the government appealed for calm and invited protesters to a meeting in La Paz. APDGB's Víctor Farfán told IPS: "The gas field in dispute belongs to Bolivia and should not trigger clashes between brothers and sisters." President Morales urged the people in the region not to fight over money.
The activities in Bolivia‘s southeastern state of Tarija stem from a three-year boundary dispute between two neighboring provinces of Gran Chaco and O’Connor. Both districts are wrestling for a share of state revenue from one of the country's largest natural gas fields. The Margarita field is not yet operational but is believed to contain 20 per cent of Bolivia's proven and probable natural gas reserves - holding some 10.5 trillion cubic feet of natural gas. Each district is seeking control over Margarita, whose future royalties could generate some $100 million a year in taxes.

Repsol YPF holds a majority stake in the Margarita field, while Britain’s BG Group and Argentina’s Pan American Energy each have a minority interest. They all operate in partnership with the state-owned YPFB and have not been fully taken over even after Morales' efforts to nationalize the hydrocarbon sector.

Gas-rich southern Tarija, which is located on the border with Argentina, is home to 85 percent of the country's natural gas reserves, and Spain's Repsol YPF and France's Total also operate natural gas fields there. Brazil imports about 26 million cubic meters of natural gas from Gran Chaco every day.

Despite the protests, the flow of natural gas exports was not cut but needed to be slowed in order to correct technical problems. According to the Bolivian government it was necessary to reduce its natural gas exports to Argentina by about 75 percent and decrease shipments to the Brazilian cities of Sao Paulo and Santos by 10 percent. It is estimated that the protests cost the country $1 million a day in revenue.

The government blamed Tarija’s governor, Mario Cossío, for provoking the situation. Tarija is one of the four autonomist departments and Cossío - a member of the opposition Nationalist Revolutionary Movement - accused the government of exploiting the conflict to undermine his position.

In a meeting held in La Paz on April 23 with Vice-President Alvaro García Linera, Cossio as well as mayors, legislators and civic committee members from both provinces signed a document pledging to abide by the eventual legal ruling on the border. A second meeting is scheduled for May 18.

The events in Chuquisaca and Tarija are just the latest citizen actions that have occurred since Morales assumed the presidency almost 15 months ago. In the past, Bolivians have demonstrated a willingness to confront the government over the exploitation of the country’s natural resources. Morales was elected on a platform of wide-spread re-nationalization, but the process is easier said than done.

It was almost a year ago that President Morales nationalized the hydrocarbon sector on May 1, 2006. Yet, the government's oil and gas contracts with foreign multinationals were still unresolved until April 19th of this year.

Previously marked by irregularities, lawmakers unanimously approved 44 new contracts that the government originally signed in October with multinational oil companies including Repsol, Petrobras, Total, BP, British Gas, and ExxonMobil. Finally Bolivia has majority control of its energy sector.

Social and labor movements have demonstrated that the art of citizen protest is alive and well in Bolivia. Natural resources and the right to benefit from their use are at the root of several citizen demonstrations, from regional autonomy to the most recent conflicts over tin and gas. The passionate protectionism that Bolivians feel for their resources can not be quelled easily - even with the popular election of an indigenous, labor leader.


Thursday, April 05, 2007

Economic Matters for Better or Worse

The decision to nationalize Bolivia’s oil and gas reserves increased government revenue by more than $340 million in 2006.

Amidst severe criticism from local and international businesses, President Morales nationalized Bolivia’s hydrocarbon sector in May of last year. Under the nationalization plan, the government renegotiated lucrative contracts with foreign energy companies, requiring 82 percent of their oil and gas revenue to be paid to the Bolivian government.

Although the government’s hydrocarbon revenue doubled in 2006, the central government’s share amounted to only $131 million more than in 2005. The greatest share of the country's energy income went to departmental provinces.

Despite the hydrocarbon sector success, the Bolivian Senate is currently conducting an investigation into the renegotiated contracts - which have been deemed flawed and could potentially cost Bolivia significant amounts of future revenue.

In more positive economic indicators, according to Vice President Alvaro Garcia Linera, Bolivia’s per capita income increased by 8 percent last year. Unemployment has remained the same at 8 percent.

The government continues to approve and support social programs such as literacy, health care and land reform. Health care is being expanded to Bolivian children and individuals over 60. The Bolivian government has also approved a program of free reproductive health services for women. Clinics are being built in rural areas - many to be serviced by the thousands of doctors sent from Cuba.

In the most ambitious land reform since 1952, Morales has distributed more than 5 million acres of previously state-owned land. Overall the government’s land policy aims to redistribute an area the size of Nebraska.

Meanwhile, the central government has been under increased pressure to provide assistance to hundreds of thousands affected by months of heavy rains and large-scale flooding. More than 400,000 people have been affected in eight of the country’s nine departments. Most greatly impacted is the eastern province of Santa Cruz, which serves as the country’s agricultural center. At least 40 people have been reported dead in the worst floods to hit the country in 25 years. Thousands of homes have been destroyed, crops and animals have been lost, and, flooded areas are experiencing outbreaks of acute respiratory infections, diarrhea, and dengue fever. According to government officials, the floods are expected to cost the country one percentage point in economic growth this fiscal year.

There are also reports that a sizeable segment of the Bolivian population – in particular the middle class - has immigrated to Spain in search of economic opportunities. The Spanish Embassy in La Paz, estimates that between 200,000 and 300,000 Bolivians currently reside in Spain - many undocumented.

President Morales cited globalization and vast economic disparity among nations as the cause. On the heels of a new European Union policy that requires travel visas from Bolivians, Morales criticized the new requirement, stating that centuries ago, native people initially welcomed European foreigners without barriers. Thousands of Bolivians are said to have left for Spain prior to the law taking effect on April 1st.

In 2006, Bolivia witnessed violent clashes over regional autonomy, mining rights, and corrupt departmental officials.

However, according to a poll by Apoyo, Opinión y Mercado, 67 per cent of respondents approve of President Morales’ performance - up two points since February. And up 8 points from January of this year.

Morales' support overall has fallen by 10 percentage points from this time last year, and analysts say most of that decline comes from the middle class.

In a nation where more than two-thirds of the population lives in poverty, Bolivia’s middle class may provide crucial support in the nation’s urban areas, but Morales’ base is witnessing the drafting of a new constitution,
re-nationalization of the gas industry, and land reform - all demands that came directly from a majority of Bolivia’s people.