Friday, July 25, 2008

It’s All about the Gas Revenues

by Franz Chávez for Inter Press Service

LA PAZ, Jul 24 (IPS) - Revenues from Bolivia’s sales of natural gas, which have ballooned in the last few years, are now at the center of the tense political polarization threatening to tear the country apart and are a main motivation in the opposition’s attempt to undermine the left-wing government of Evo Morales.

Gas revenues soared from $188 million in late 2001 to $1.57 billion in 2007, after the Morales administration forced foreign oil companies to renegotiate the terms of their contracts, thus increasing the royalties and taxes paid by the companies.

The revenues now represent one-seventh of Bolivia’s gross domestic product (GDP) of $11 billion, and have become the main source of income for the governments of the country’s nine provinces.

In 2007, the government distributed $737 million in natural gas taxes to the nine provinces, according to figures provided to IPS by the Energy Ministry. That figure was $446 million dollars higher than the first distribution of the new Direct Hydrocarbons Tax (IDH), in 2005, when the then government of interim president Eduardo Rodríguez created the tax aimed at transferring money to the provincial governments.

Today the pie to be carved up is enormous. Senator Fernando Rodríguez of the right-wing opposition PODEMOS coalition told IPS that the total gas revenues taken in by the state will easily reach $4 billion this year, based on natural gas exports to Brazil and Argentina and domestic fuel sales.

The seemingly unstoppable rise in the international price of oil has also boosted the country’s gas income, despite the fact that gas sales to Brazil and Argentina have declined due to growing domestic demand for gas in Bolivia. This country has the largest natural gas reserves in South America -- 47 trillion cubic feet -- after Venezuela’s.

Rodríguez said that under the current law on the distribution of natural gas revenues, $440 million should go to the gas-producing regions of Santa Cruz, Tarija, Chuquisaca and Tarija, and $160 million to the remaining five provinces.

But the huge windfall profits prompted Morales to divert a substantial portion of the transfers to the provinces into a universal pension fund for people over 60, which expanded the number of eligible elderly people from 489,000 to 676,000, providing them with the equivalent of $27 a month.

A source with the provincial government of Tarija, the country’s most natural gas-rich province, told IPS that this year, the transfers to the provincial governments will be $260 million less than in 2007, as a result of the pension program.

José Antonio Aruquipa of PODEMOS, a member of the Constituent Assembly that is rewriting Bolivia’s constitution, told IPS that the movement for autonomy in the provinces of Santa Cruz, Beni, Pando and Tarija is fuelled by the aim of gaining greater provincial control over gas revenues.

"Without the IDH, autonomy is a vehicle without gasoline," he said.

Bolivia, South America’s poorest country, is basically divided between the western highlands, home to the impoverished indigenous majority, and the much wealthier eastern provinces, which account for most of the country's natural gas production, industry, agribusiness and GDP.

The population of eastern Bolivia tends to be of more European (mainly Spanish) and mixed-race descent.

The right-wing opposition argues that the national government only needs $200 million, rather than the $260 million that it currently retains from the natural gas revenues for the pension for the elderly.

When the new pension, known as the Renta Dignidad, went into effect in January this year, Morales argued that the country’s natural gas income should benefit the entire population.

For most of the recipients, the Renta Dignidad is the only pension income that they receive, as they worked in the informal sector of the economy and are not eligible for social security. Nearly 60 percent of elderly people in Bolivia live on less than one dollar a day.

The provinces that have passed autonomy statutes that run counter to the constitution have designed a political strategy, backed by PODEMOS, aimed at recuperating the natural gas income that they accuse Morales of "confiscating" -- even though many of the elderly benefited by the universal pension live in those provinces.

In the eastern city of Santa Cruz, the radical right-wing president of the Santa Cruz Civic Committee, Branko Marinkovic, announced street marches and hunger strikes in the pro-autonomy provinces to demand the return of the funds collected by means of the IDH.

The new political battle is being waged just ahead of an August 10 recall referendum for Morales, Vice President Álvaro García Linera and the country’s provincial governors. The polls indicate that both the president and vice president stand a good chance of being confirmed in office.

However, a top judge, Constitutional Court magistrate Silvia Salame, recently ordered the suspension of the recall referendum.

In the tussle over natural gas revenues, Morales announced that the pension scheme would be put to a public referendum, so that voters could decide whether a portion of the IDH transfers to the provinces should go towards the universal monthly pension for the elderly.

In the coca-growing region of Chapare in the central province of Cochabamba, rural union leader Julio Salazar questioned the credentials of the right-wing opposition governors in their defense of keeping the IDH gas revenues entirely for the provinces.

He pointed out to IPS that most of them were allies of president Gonzalo Sánchez de Lozada (1993-1997 and 2002-2003), who was overthrown in his second term by a popular uprising against a plan for foreign oil companies to export natural gas at low prices to the United States and Mexico.

Salazar accused the governors of promoting the 1990's privatization of natural gas, overturned since May 2006 by Morales’ renationalization process, which has generated much greater resources for the state.

"The social movements are seeking dignity for the country, so we can stop being beggars," said the rural leader.

Tarija Senator Roberto Ruiz of Podemos is demanding compliance with the hydrocarbons law that was amended in 2005, and which earmarks 14 percent of natural gas revenues for the provinces.

He complained to IPS that as a result of decrees, which have less authority than national laws, the share of revenues taken in by the provinces has decreased. Ruiz also criticised the government’s failure to live up to the terms of the agreement for exporting natural gas to Argentina.

According to government figures, the growth in domestic demand for natural gas has brought exports to Argentina down to one million cubic metres a day, instead of the 7.7 million agreed in a deal between the two countries. Brazil, meanwhile, purchases 32 million cubic metres a day of gas from Bolivia.






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