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Evo Morales' Complete Victory Over Big Oil

The Progress in Bolivia


I have previously argued that Evo Morales might best be described as a genius rather than put into any of the ready-made political categories that so regularly distort both news and policy. One main reason for this is his combination of principle and pragmatism, leading him into confrontations in which he does not attack opposing persons or institutions but instead invites them to join him in a struggle for justice. The media regularly associate Morales with Chavez, but Chavez is more bully than genius, and it is impossible to imagine Morales denouncing Bush as a devil, as Chavez did at the United Nations. The other main reason is his extraordinary ability to exploit the moment, as he did after his election with his famous striped alpaca sweater and late this past summer by waving a coca leaf during his speech at the United Nations. Another example, cited in my previous article, was his use of troops in the nationalization of oil and gas reserves on May 1, 2006, which of course garnered world-wide press attention, even though he knew full well that there was no opposing armed force and that the nationalization could as well have been accomplished by signing decrees in his office in La Paz.

At the time of the nationalization there was a near-consensus among analysts that the nationalization would fail. There were two reasons for this belief. One was that the opposing parties were the Brazilian government and very powerful and well-connected international cartels, who had plenty of other assets and were powerful enough to just leave Bolivia rather than renegotiate contracts that would give the lion’s share of revenues to a desperately country that had few alternatives. The other reason was that neither the Bolivian ministry of mines nor the national petroleum company, YPFB, had the expertise required to run the operation that the renegotiated contracts envisaged. Both reasons were based on solid knowledge of the details of the industry, so the skepticism was well founded.

The decree of May 1 gave the parties exploiting the hydrocarbon resources of Bolivia six months in which to renegotiate contracts with the government, after which they would have to leave and their property would be subject to confiscation. Bolivia’s position in the negotiation was that a return on investment of 15% to 18% would be fair and just for the drilling and exporting companies, and that the balance of profits and revenues should revert to the Bolivian people through the Bolivian government. At the time of the decree and the announcement of this demand, the popular cry was that the looting must end, and Morales himself referred to the process by which mineral resources of Bolivia had been extracted and exported for the previous four hundred years as "looting." The slogan was very popular, especially among the indigenous people of Bolivia. Thus populism and a call for justice were added to the power play of nationalization and the threat of confiscation. The stakes were high and the outcome uncertain.

Negotiations proceed slowly over the summer, and intransigent statements from Brazil darkened the prospects for a favorable outcome. This sentiment encouraged the opposition to the government of Evo Morales, which seemed likely to suffer a setback in its most significant initiative.

Other challenges faced the government toward the end of the summer. In September there was a clash at the tin mines near Oruro, leaving twenty miners dead. The clash occurred between the government employees who now operate the mines and a union of former miners who insist on being allowed access now that the price of tin has risen. The roots of the dispute go back a quarter century, when the price of tin collapsed on the world market and thousands of miners were thrown out of work. (Many of them migrated to the Chapare region to grow coca.) Now that the price of tin has risen again, many of those who lost their jobs want an opportunity to share in the good fortune, but the skeletal force kept on in the mines did not want to share the bonanza. It was a conflict easily amenable to negotiation and compromise, since the pie that needed to be split was growing, but the ministry did nothing. After the bloodshed Morales himself intervened, dismissing both the minister and another top administrator, and more miners now have access to jobs at the tin mines. That the armed conflict led to many deaths was a black mark for the government, but the decisive steps taken to get matters back on track showed its competence.

In October the city of La Paz was shut down by the union of drivers of buses and taxis. At first they simply called a one-day strike to protest changes in some bus routes and to demand, quite unreasonably, that a pedestrian area that for a decade has been the place of business for 400 street vendors be reopened to vehicles. During the day the strike was extended to be indefinite, and drivers parked their vehicles so as to block the main streets of the capital. Although Morales has his base of support in the unions of miners and coca growers, this union supported an opposing candidate, making the dispute less amenable to mediation. But there was not popular support for the shut-down, and it and the strike were ended after the government made minor concessions.

The main challenge to the government remained the gas and oil contracts. November 1, the end of the six-month period, was a make-or-break day for the government. The first hint of a solution came early in October, when Argentina signed an agreement to buy natural gas on terms much more favorable to Bolivia, and in much greater quantity than before. But Argentina is not among the producers or explorers. The result was finally known at the very end of October, and it was a complete victory for the government. Petrobras of Brazil, the largest explorer/producer in Bolivia, broke the news, and the agreement of all the others was nearly simultaneous. The new contracts give Bolivia between 50% and 82% of the net revenues, they commit Brazil to investing $1.5 billion in new infrastructure and exploration, and they require that a portion of the profits of the international consortiums be invested in other industries in Bolivia.

So Evo Morales achieved what most of the analysts thought would be impossible, a complete victory in his struggle against the foreign companies exploiting Bolivia’s natural resources. In his remarks hailing the agreements Morales stressed that this is a favorable outcome for everyone and noted that it had been achieved without the expropriation of the property or assets of the foreign companies. He looks forward to years of continued cooperation.

Having achieved what seemed to many impossible, Evo Morales now enjoys greater political strength and credibility with which to proceed with other steps on his agenda. The three most pressing and exciting are nationalization of the mining industry on terms similar to those of the petroleum industry, an agreement with Chile, and redistribution to peasants of huge tracts of land in the Amazonian provinces of Santa Cruz and Beni. All of them involve technical and legal difficulties as well as overcoming entrenched opposition. Nationalization of mining will probably occur first, but agreement with Chile is most exciting and received most emphasis in the President’s remarks following the agreements about gas.

Bolivia originally had twice the area of the present state, large chunks having been taken by each of its five neighbors. The piece that Bolivia most wants to get back, and whose loss still arouses most popular resentment, is the access to the Pacific Ocean that was lost to Chile at the end of the nineteenth century. The economic asset lost at the time was the guano, which Chile has since sold as fertilizer. This area in the northen part of Chile now has little economic value, so far as its resources are concerned, but it is a source of national pride to many Chileans. On the other hand Chile has a rapidly growing economy that depends to a large and growing extent on imported fuel. Chile’s plans to expand its own supply of power through hydroelectric projects in its southern mountains and valleys are controversial and would in any case be inadequate to meet currently foreseen needs. So these agreements that stabilize the production of natural gas in Bolivia suggest an answer to one of Chile’s most pressing needs: import energy from Bolivia. Can it be arranged?

At the present time Chile is the only immediate neighbor of Bolivia with which Bolivia does not have good working commercial relations, the reason being resentment over the loss of access to the sea. Technically supplying gas to Chile would be easy, and the same pipeline that delivers the gas to Chile could also bring gas to a port from which to could be shipped to Mexico and California. The problem is political. The same popular movement that brought Evo Morales to the presidency has been adamant that any gas sold to Mexico or California be shipped through Peru rather than through Chile, because of Chile’s continued occupation of what had been Bolivia’s only coastline.

Evo Morales has set as one of his goals to arrange a politically acceptable commercial agreement to supply Chile with gas on a long-term basis in return for Chile ceding Bolivia sovereign access to the sea. Morales attended President Bachelet’s inauguration, the first Bolivian President ever to attend such an event. Both Bachelet and Morales are socialists and both have risen to their high office from outside the traditional ruling class. Evo Morales is, as usual, approaching the matter with a combination of principle and pragmatism: it is only just that Chile should return to Bolivia what was taken by force of arms, and it is only reasonable that Chile should have a material reward for doing so. Since the nationalization of hydrocarbons means that Bolivia owns and controls the gas that is extracted, it is now in a position to supply Chile with those rewards.

The new natural gas contracts are an enormous achievement for Morales, for they strengthen him both domestically and internationally. It will be interesting to see what happens next. Morales continues to impress, and to make his little nation fascinating to watch.

NEWTON GARVER is SUNY Distinguished Service Professor Emeritus at University at Buffalo. Eleven of his essays on war, power, ethics, truth and justice in the US during the Bush years, and the recent struggle for human rights and political decency in Bolivia, were recently published in Limits of Power: Some Friendly Reminders.