Bolivias president faces rocky road on nationalization

Bolivian President Evo Morales based his 2005 presidential candidacy on two promises: first, his government would nationalize natural resources, crucially natural gas and oil, and second, he would return the government to the country’s indigenous majority through a constituent assembly and new constitution.

Fifteen months into his presidency, his nationalization program, announced nearly a year go on May Day, is in trouble.

Morales’ 54 percent winning plurality testified to his support among the poor and indigenous populations. Both had been mobilized in earlier “oil wars.”

During his first term in office, from 1993-97, then President Gonzalo Sánchez de Lozada sold off components of the state petroleum company YPFB. As a consequence, the contribution of natural gas sales to government revenues fell from 40-60 percent of the state’s budget to well under 7 percent in 2002.

In 2003, during his second term, Sánchez de Lozada prepared to pipe gas to U.S. ships waiting in Chilean ports. Bolivians fought government troops in the streets to block the scheme. The protesters suffered 40 dead and hundreds wounded. Of several murdered children, El Alto resident Nestor Salinas said at the time, “They died to defend our oil and gas.”

Morales’ nationalization decree called for negotiations with foreign companies to be completed in six months. With time running out, 44 contracts were signed with 12 foreign companies on Oct. 28, 2006.

In essence, these contracts reflected a major renegotiation of terms, but not an expropriation. A Morales majority in Congress ratified them immediately. The Senate, in opposition hands, followed suit on Nov. 28 when all but three majority senators were absent.

Tax income from oil companies increased almost fourfold, yet today the contracts are on hold.

Energy Minister Andrés Soliz Rada resigned in September, charging the government with giving up too much to Petrobas of Brazil, purchaser of half of Bolivia’s gas exports. Two YPFB leaders also left amid corruption charges.

On Feb. 12 the government submitted an amendment to correct contract errors like incorrect company names, misplaced gas fields, and a secret agreement with Petrobas. Carlos Villegas, Soliz Rada’s replacement, resigned but later changed his mind. Blame fell upon inexperienced YPFB head Manuel Morales Olivera, who was fired on March 24.

Two days earlier Soliz Rada had joined opposition politicians in calling for a repeat pf contract negotiations. Right-wing forces claimed to be protecting national interests against incompetence, a notion reflecting the nation’s racial, geographic and class-based divisions. The eastern region, epicenter of opposition to President Morales, claims agricultural land and most of the nation’s gas and oil deposits. Foreign corporations operate there, the majority population is of European descent, and separatism is rampant.

Soliz Rada criticized the October agreements as granting foreign companies tax deductions for operating costs and relieving them of financial risk. He charged that negotiations took place behind closed doors, that U.S. advisers were involved and that YPFB directors were left out. The contracts call for Bolivia to sell gas cheaply to Brazil and Argentina to augment revenues, and to pay high international prices for hydrocarbon products sent back for domestic use.

Bolivia, he pointed out, signed shared-production contracts instead of so-called operating contracts. Under the latter, foreign companies take on financial risk. Shared-production contracts allow companies to include the value of Bolivia’s oil reserves in calculating assets. That maneuver improves both stock market status and borrowing capabilities. Bolivia, less creditworthy, will have difficulties building facilities for processing hydrocarbon products and buying back the refineries it lost.

Observers suggest that the Morales team may yet put hydrocarbon nationalization back on track. The president is adept at responding to changing circumstances His approval ratings are high, and his present term ends in 2011. But on March 23, Morales declared, “There’s only a short time left for me in government.”

As if to underscore his sense of urgency, last week Morales told congresspersons belonging to his Movement toward Socialism party that if in another week Congress did not approve the petroleum company contracts, he would begin a hunger strike.

The Constituent Assembly concludes its one-year session Aug. 6, 2007, and the nation will be voting on a new constitution in December. In a “refounded” state, said the president, “there has to be a new election for a new president.” A spokesperson told reporters that if social organizations nominated him, Morales would run for elections taking place in 2008.

The large Bolivian Central Workers organization has announced that a new party of its own would be presenting an opposition candidate. The Bolivian Social Democrat Party will meet soon to discuss election participation. Leaders have invited ex-Energy Minister Soliz Rada to join in their deliberations.