Economy & Trade, Headlines, Latin America & the Caribbean

ENERGY-BOLIVIA: Morales Plays Hardball

Franz Chávez

LA PAZ, May 2 2006 (IPS) - Passersby continued to gawk with surprise Tuesday at signs tacked up at the petrol stations run by Brazilian oil giant Petrobras in Bolivia. The signs read “nationalised” and bore the logo of the badly weakened Bolivian state-owned oil company YPFB.

Under the signs, which state that the petrol stations are now “the property of Bolivians,” stood armed soldiers, who drivers fuelling up stared at with expressions ranging from consternation to mistrust.

These were the most visible signs of the nationalisation of Bolivia’s natural gas fields that leftist President Evo Morales announced Monday, as a “gift on International Labour Day.”

Petrobras is a symbol of foreign influence over Bolivia’s main natural resource – its 53 trillion cubic feet of natural gas reserves, which are the second-largest in South America after Venezuela’s and are worth an estimated 100 billion dollars.

The Brazilian company has invested 1.5 billion dollars in Bolivia, and is the only firm that participates heavily in the entire oil and natural gas production chain, from drilling to refining, transport and sales. Petrobras has 64 petrol stations in Bolivia’s big cities.

In addition, the gas pipeline built and administered by Petrobras subsidiaries transports to Brazil 27 cubic metres of natural gas a day, 67 percent of the gas consumed in that country.

Natural gas is thus a key issue in relations between the two countries.

Brazil’s reaction was immediate. A spokesman from Brazil’s Ministry of Mines and Energy said the nationalisation was “not a friendly gesture, one that could be understood as a rupture in our understandings with Bolivia.”

And a communiqué by Spain’s Ministry of Foreign Affairs, in defence of the Spanish-Argentine oil company Repsol-YPF, which is among the main foreign companies operating in Bolivia’s natural gas industry, along with British Gas, British Petroleum and France’s Total, expressed “deep concern.”

The administration of Prime Minister José Luis Rodríguez Zapatero also called for “a process of real negotiations and dialogue in which the interests of all parties are respected.”

The first article of decree 28701, made public by Morales on Monday, states that the Bolivian state is asserting control over the country’s energy resources, and that YPBF will take control of the entire chain of production, and will set prices for the domestic market and exports.

Although the natural gas industry brought in 250 million dollars in taxes for the state coffers last year, the Bolivian economy has a deficit of 400 million dollars, which is covered by foreign credit and development aid.

According to the latest figures published by the National Institute of Statistics, 67 percent of the country’s 9.2 million people live below the poverty line in Bolivia, South America’s poorest country.

Morales announced the nationalisation of Bolivia’s energy resources in the southern gas field of San Alberto, near the town of Yacuiba, close to the Argentine border. After the president spoke, a military officer unfurled a Bolivian flag on the top of the natural gas installations, the country’s biggest, which were under Petrobras control until Monday.

Army engineers and soldiers, meanwhile, took over the rest of the gas fields as well as the pipelines and petrol stations run by Petrobras.

The move marked the start of a revision of the privatisation process launched in 1996, Morales told a huge crowd Monday night outside the seat of government, after a busy day in which he flew 2,500 km from La Paz to Yacuiba, on to the tropical central region of Carrasco (in the province of Cochabamba), and back to La Paz, to hold symbolic ceremonies marking the nationalisation of the country’s gas fields at each stop.

“It is time to put an end to the auctioneers and to recover our natural resources. Today we are nationalising our energy resources, 10 years after they were privatised,” said Morales, the first indigenous president in the history of Bolivia.

The energy legislation passed during the first term of president Gonzalo Sánchez de Lozada (1993-1997 and 2002-2003) put Bolivia’s natural gas and oil, once it was pumped, into the hands of the foreign companies that replaced YPFB (Yacimientos Petrolíferos Fiscales Bolivianos).

Between 1996 and 2005, the private companies paid an 18 percent royalty on oil and gas production.

But after a Jul. 18, 2004 referendum, in which voters approved the recuperation of state control over the country’s energy resources, social movements began to hold massive demonstrations around the country, until successfully pressuring Congress to increase the royalties and taxes to be paid by the foreign oil companies to 50 percent.

“This is an irresponsible nationalisation,” said Samuel Doria Medina, a former planning minister who is the head of the centre-left National Union party.

Doria Medina told IPS that in his view, the highly publicised move was a political one, adopted in response to the drop in Morales’ popularity ratings, from 80 to 63 percent. He also said the resolution was vague and incoherent, and left many unanswered questions.

The current nationalisation process is the third undertaken in Bolivia. The first took place in 1937 under the nationalist administration of General David Toro, who cancelled the Standard Oil Company’s oil contracts and seized the U.S. company’s holdings in exchange for a 1.7 million dollar indemnification.

And in 1969, then Minister of Mines and Petroleum Marcelo Quiroga Santa Cruz nationalised the assets and concessions of another U.S. firm, the Gulf Oil Company, under the administration of General Alfredo Ovando Candia (1969-1970).

Quiroga Santa Cruz, a socialist, was assassinated on Jul. 17, 1980 by the dictatorship of Luis García Meza.

In the central province of Cochabamba, David Herrera – a leader of the coca farmers and provincial official – applauded Morales’ move, which he said was an initiative of the country’s impoverished indigenous people, who comprise a majority in Bolivia.

“Bolivia suffers from poverty and subjection to foreign capital,” he told IPS. “It is time for the benefits to reach everyone and not just the business community.”

Morales warned the foreign oil companies that they have six months to sign new contracts granting the Bolivian state majority control over the entire chain of production. If they refuse to accept the new conditions, he said, “they cannot continue to operate in the country.”

The president said the oil companies that were not interested in investing under those conditions could leave, but that the companies that submitted to the will of the Bolivian people, and to Bolivia’s laws and the nationalisation decree, were welcome to stay.

No mention has been made of the possibility of compensation for the foreign companies, which have invested around 3.5 billion dollars in the country since Bolivia’s oil and natural gas industry was privatised.

Former president Carlos Mesa (2003-2005) resisted the pressure to nationalise the industry because he estimated that compensating the foreign companies would cost around eight billion dollars – just 800 million dollars less than the country’s entire GDP.

Under the nationalisation decree, large gas fields that produced at least 100 million cubic feet of gas a day last year will pay the state 82 percent of the total production value. Smaller fields will continue to be governed by the energy legislation in effect until the decree was handed down.

YPFB will become a partner of the foreign oil companies by taking control of the shares that belong to Bolivian citizens and are currently administered by private pension funds.

The Bolivian oil company’s dearth of funds for investing, the absence of a plan for generating employment, and the inevitably touchy relations with Brazil, the biggest client for Bolivia’s natural gas, in the wake of the measure taken against Petrobras present immediate problems, said Doria Medina.

For his part, Herrera said trade unions had decided to take to the streets if Morales calls on them to do so, in the event of a “conspiracy” or “sabotage” by the foreign oil companies.

 
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