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BOLIVIA: Oil Companies Decide to Stay – on Morales’ Terms

Franz Chávez

LA PAZ, Oct 30 2006 (IPS) - Under a five-metre tall portrait of Bolivian President Evo Morales in traditional indigenous dress, representatives of the foreign oil companies active in this South American country ceded control over their operations here, and agreed to pay a higher proportion in royalties and taxes.

Over the last two days, the oil companies sent their top negotiators to La Paz to discuss the new contracts with the Bolivian government, as part of the nationalisation of the country’s vast natural gas reserves decreed by Morales, Bolivia’s first-ever indigenous president, on May 1.

Just after midnight Saturday – the deadline set by Morales for negotiating new deals – the executives signed new contracts and greeted the president, who thus turned the public’s demand for the recovery of state control over the country’s energy reserves into reality.

Eight companies signed during the ceremony: Brazil’s Petrobras Energy and Petrobras Bolivia; Pluspetrol from Argentina; the British Gas Bolivia Corporation; British Petroleum-Amoco’s subsidiary Chaco; the Spanish-Argentine Repsol-YPF and its local subsidiary Andina; and the Miami-based Matpetrol

The French company Total and the U.S.-based Vintage Petroleum had already signed Friday.

That brings to 10 the total number of foreign oil firms that have agreed to remain in Bolivia under the new conditions, in which the state-run company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) owns the country’s energy resources and will market the companies’ output.

The word “nationalisation” was stamped in red above each company logo on the new contracts, underscoring the drastic nature of the overhaul of the privatisations that were also announced in the Palacio de Comunicaciones by former president Gonzalo Sánchez de Lozada (1993-1997 and 2002-2003).

In 1996, he privatised Bolivia’s energy reserves, in exchange for 18 percent royalties and no taxes. (That proportion was raised to 50 percent in 2005).

During a month-long social uprising in October 2003 over plans to export natural gas to North America through a Chilean port, at least 60 demonstrators were killed when Sánchez de Lozada called out the army to put down the protests. A few days later the president resigned. His successor, Carlos Mesa, was also forced to step down amid protests over the government’s energy policy.

Finally, Bolivians awarded Morales, one of the leaders of the 2003 protests, an unprecedented first-round victory in the December 2005 elections.

The current renationalisation of Bolivia’s natural gas reserves – the second-largest in South America, after Venezuela’s – has its own peculiar characteristics. As his critics point out, and Morales has acknowledged, it has been implemented “without expelling anyone, without confiscating property, and without paying compensation.”

When the clock struck midnight Saturday, marking the end of the 180-day period set by Morales for the foreign oil companies that wished to continue operating in Bolivia to agree to new contracts, high-end European sedans with tinted windows hastily rolled into the grounds of the Palacio de Comunicaciones, carrying top-level officials and executives.

As they filed into the auditorium, many of them showed signs of exhaustion, as a result of the lengthy last-minute negotiations.

With a gallery packed with members of the governing Movement to Socialism (MAS) carrying signs with images of legendary Argentine-Cuban revolutionary Ernesto “Che” Guevara and chanting slogans in favour of nationalisation, the ceremony turned into a triumphal demonstration, while the executives seated below shook their heads in disapproval.

The companies that had won 40-year concessions from Sánchez de Lozada now signed new deals with an average duration of 30 years, involving investments of more than two billion dollars over the next few years, YPFB president Juan Carlos Ortiz told IPS.

The oil companies maintain that they have invested a total of 3.5 billion dollars in Bolivia since 1996, in activities ranging from exploration to final sales.

Despite the enormous changes in the terms of operation and tax rates, “not a single company decided to leave,” Energy Minister Carlos Villegas told IPS.

The president of YPFB said the state company now wants to acquire a controlling stake in the refineries owned by Petrobras, that are geared towards the domestic market.

In the last few months, there have been shortages in the supplies of diesel fuel to the transport and agricultural sectors and of natural gas to industries in western Bolivia, and the government hopes to ensure a steady flow of fuels.

Petrobras, the single biggest foreign investor in Bolivia, put up the toughest fight in the negotiations of new contracts.

Bolivia’s prime minister, Juan Ramón Quintana, said the new agreements show that Bolivia is not isolating itself from the international community, because it has signed new contracts that respect investments, while making decent living standards and dignity possible for Bolivians.

Morales noted that prior to the reforms of the country’s energy laws, the state coffers took in 250 million dollars a year in revenues from the energy industry, amounting to just one-third of public spending.

The new contracts should bring that total up to one billion dollars, equivalent to one-ninth of the country’s gross domestic product (GDP), estimated at 9.3 billion dollars.

The president added that the agreement to export natural gas to Argentina, signed on Oct. 19, together with the new oil company contracts, will bring total annual revenues to two billion dollars – an amount that should climb to four billion by 2010.

“Now that is making good use of our natural resources,” said Morales in his speech at the midnight ceremony.

Villegas described the negotiations as “spectacular,” because in just a few short months, the government ordered the nationalisation of the country’s energy resources and signed new contracts that grant legal security for investors, in a country where only 11 percent of the energy potential has been explored.

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