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  HOME | Bolivia

Morales faces important decisions
La Paz – Evo Morales, the Socialist who will become Bolivia’s first Indian president on Sunday, faces the difficult task of fulfilling his campaign vow to nationalize the country’s huge reserves of natural gas while at the same time assuaging fears of foreign capitalists who discover and extract the vital resource.


Morales says his conception of nationalization does not mean confiscating or expropriating oil company assets. But he insists on national “ownership” of the country’s mineral wealth as a means of overcoming the crushing poverty that afflicts 63 percent of Bolivia’s 9.4 million people.

On his recent tour of 10 nations on four continents, the president-elect reaffirmed his plan to carry out what would be the third nationalization of the petroleum sector in Bolivian history, while telling foreign firms that they “have nothing to fear.”
During stops in Madrid, Brussels and Paris, Morales was urged by his interlocutors – including Spanish, French and European Union officials – to preserve legal guarantees for foreign investment and to rely on negotiations to resolve Bolivia’s quarrels with the multinationals.


The Socialist, who says that Bolivia “wants partners and not bosses,” will soon have to explain how he means to go about nationalizing the Andean nation’s petroleum resources without scaring off investors.

The Bolivian Hydrocarbons Chamber, which represents the local affiliates of the foreign oil and gas companies doing business in the country, has refrained from public comment since Morales won the Dec. 18 election, preferring to wait for details about his plans.

One energy-sector businessman, commenting on condition of anonymity, told EFE that “there is message pointing toward moderation of the positions,” but added, “regrettably, they are so ambiguous and contradictory that it’s difficult to know what will happen.”

The future government also speaks of making further adjustments to the schedule of taxes and royalties applied to gas and oil production.

Under a law enacted in spring 2005, Bolivia’s levies on firms rose from some of the lowest in the world to a cumulative 50 percent, and Morales’ team wants to apply an even higher rate to companies that have already fully recouped their initial investment.

The Socialists also want significant revisions to the contracts the multinationals signed with the conservative Bolivian government that privatized the sector in the 1990s, and they want the state to take an active role in developing a domestic industry to process natural gas into products with bigger margins, such as clean-burning diesel fuel.

In addition, Vice President-elect Alvaro García Linera, a college professor and former leftist guerrilla, has promised government takeovers of firms engaged in abuses.

The first company likely to face that threat is Chaco, half-owned by global giant BP and accused by Morales’ party of smuggling fuel.

Chaco denies the charge, but did pay a fine of just over $1 million to avoid an audit by customs officials.

The Socialists say their agenda will not lead to capital flight, insisting that Bolivia is and will remain a country where foreign capitalists can make money. But uncertainty about the future rules of the game is already having an impact.

Preliminary figures show that Bolivia received only $130 million in foreign direct investment last year, compared with $608 million in 1998, at the height of the privatization process.

Bolivia has an estimated 48 trillion cubic feet of natural gas, giving it the second-largest reserves in South America after Venezuela.

This nation’s two previous experiences with nationalization came under markedly different circumstances. On both of those occasions, Bolivia’s natural gas was under the control of a single foreign company, whereas now, nearly a dozen firms are extracting the country’s hydrocarbons.

In 1937, in the first action of its kind in South America, La Paz booted out Standard Oil, then the world’s most powerful oil company, while the 1969 nationalization affected the Gulf Oil Company.

Some radical groups in Bolivia look back with nostalgia on the expulsions of those giant foreign concerns and would like to see the same thing done to the multinationals that now dominate the energy sector. EFE
 

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