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.



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