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POLITICS-BOLIVIA: Gas Could Be Next Target of Opposition Boycott

Diana Cariboni

LA PAZ, Nov 24 2006 (IPS) - The most important challenge faced by the Bolivian government of Evo Morales, to carry out a successful process of nationalisation of the country’s energy resources, could be blocked in the Senate if the opposition and the governing party fail to find a way to negotiate their differences.

It’s just another day in La Paz. Street vendors march down a side street to the historical Murillo Plaza, protesting that they have not been given permission to set up their stalls to sell their holiday season goods. One block before they reach the square, the police cut them off, and they end up outside the elegant city hall.

Earlier in the morning on this sunny day, pensioners cut off traffic on another street, demanding improved medical attention – “it takes up to four months to get an appointment to see a specialist,” says one – and the lack of medicines.

Indigenous campesinos (peasant farmers) march towards the seat of government in a show of support for Morales’ projected land reform plan, which would modify the 1996 law that created the National Institute for Agrarian Reform.

Another demonstration is held to oppose the president’s plan, in the eastern city of Santa Cruz, an area where the country’s large landowners are concentrated.

Meanwhile, the main opposition force, the rightwing Poder Democrático y Social (Podemos) coalition, announced Tuesday that it would not allow a quorum (the minimum number of legislators needed to begin conducting official business) to be reached in the Senate, in order to block the land reform law.

The governing Movement to Socialism (MAS) party has a majority in the lower house, but not in the Senate.

Podemos plans to use the same strategy to force the ruling party to modify the rules regulating the constituent assembly that is rewriting the constitution.

On Nov. 17 the MAS assembly members and their allies decided that only a simple majority of votes would be needed to approve constitutional reforms. In other words, the votes of only 129 of the assembly’s 255 members would be needed to pass a proposal – even less than the 137 seats that the MAS holds in the assembly.

The opposition parties wanted proposals to be approved by a special majority of two-thirds of the assembly members, which would have forced the governing party to strike deals and make concessions to other political forces, thus curbing the reach of the transformations sought by the Morales administration.

More than 100 members of National Unity, another opposition party, led by their leader, cement and Burger King magnate Samuel Doria Medina, have declared a hunger strike to protest the ruling party’s decision in the Constituent Assembly, which runs counter to the law that created the assembly. Some are protesting outside the doorways of public buildings, and there have been skirmishes with the police.

Another government bill, which would strengthen the central administration’s oversight and control of provincial governors, is opposed by the governors, especially those fighting for greater autonomy for Bolivia’s wealthier eastern regions, who would like instead to strengthen oversight of the president.

In this polarised climate, it would appear to be quite an achievement that the 17 members of the Chamber of Deputies’ Economic Development Commission have already approved the 44 contracts signed by the government in late October with 10 foreign oil companies, in which they ceded control over their operations to the government and agreed to pay higher royalties and taxes.

Morales, Bolivia’s first-ever indigenous president, had given the companies six months to negotiate new contracts, under the nationalisation process decreed by the government on May 1.

On Nov. 22, governing party Deputy Jorge Silva Trujillo, chairman of the Economic Development Commission, submitted the contracts to the Chamber of Deputies, which must now vote on them. He also announced that suggested modifications to the appendices would be presented.

The government says that under the new contracts, the state coffers will take in four billion dollars over the next three years in royalties, taxes and other payments from the foreign oil companies, which will now allow the state-run Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) to market their entire production of natural gas.

The leftist Morales administration would like to see the contracts approved before Congress goes into recess on Dec. 15, Silva Trujillo told IPS.

A majority of the members of the Commission belong to the MAS, “so we could have approved the contracts in one or two days. But we see a debate on technical aspects as important. There is a climate of consensus with the opposition,” according to the legislator – in both the Commission and the Chamber of Deputies as a whole.

But the situation is different in the Senate, which will not even be able to conduct official business as a result of the announced boycott by the Podemos legislators.

“It would be a disgrace to our people” for the senators to block the natural gas contracts, said Silva Trujillo, who has a degree in business administration and represents the association of craftspeople and the group of Aymara indigenous people who have prospered in a district of La Paz thanks to informal trade and certain trades like Trujillo’s – making wooden crafts.

But there are other problems as well in the re-nationalisation of Bolivia’s vast natural gas reserves – 53 trillion cubic feet, the second-biggest reserves in South America after Venezuela’s – which were privatised in 1996 in exchange for 18 percent royalties and no taxes.

Former energy minister Andrés Soliz Rada sent a letter to Congress on Nov. 14 warning that Brazil’s state-run Petrobras company, the foreign firm with the biggest stake in Bolivia’s energy sector, had told the Brazilian public that the contracts allowed it to keep Bolivia’s reserves on its books.

Soliz Rada warned that the contracts that are approved should contain no loopholes or vague clauses, given that the country’s natural gas reserves are worth more than 200 billion dollars.

Congress, he said, should also draw up an additional clause in the contracts specifically prohibiting companies from registering Bolivia’s reserves on stock exchanges, since the natural gas is property of the state.

However, the fourth clause of the contracts “already clearly establishes that the companies do not own the reserves” and “safeguards the interests of the state,” said Silva Trujillo.

Clause 4.3, which is identical in all of the contracts, to which IPS had access, specifically states that the energy resources do not belong to the contract-holder, but are and will continue to be the property of the state.

“There are many people who argue that nothing was actually nationalised here. But we are nationalising in accordance with what voters decided in the July 2004 referendum: gas at the wellhead and in the subsoil – not the pipelines or pipes,” said the legislator.

Nationalising the companies’ assets “would have been a counterproductive measure for the state, because it would have implied expropriation and thus indemnification, something the state could not do because of a lack of funds. That would have put us at risk of being hauled before an international arbitration tribunal. Besides, YPFB would have had to take control of everything, and it had neither the technical nor the financial capacity to do so,” he added.

“Within just a few weeks, there would have been fuel and energy shortages,” Silva Trujillo maintained.

While the government accuses the opposition of dealing a “blow to democracy” by walking out of the Senate, and has not ruled out the option of governing by decree, some are looking above and beyond the contracts, which will be in force for between 20 and 35 years, to ask how the energy resources can best be used to finally get South America’s poorest country on its feet.

This month, the government set up a 32 million dollar fund to distribute the “Juancito Pinto” stipend, a cash payment of 200 bolivianos (25 dollars) a month for each child in primary school to the families of 1.2 million children.

Some suggest that the energy industry profits be distributed directly to the population through an Alaska-style scheme, or something along the lines of the oil fund in the Netherlands, which is used to cover pensions, health care and development aid.

Others say the funds must be used to promote development in the broadest sense in this country of 9.2 million people, 67 percent of whom live in poverty, according to official statistics.

“Bolivia’s problem is that it has no cushion in the face of swings and drops in export prices. The domestic market must be developed,” economy Professor Alexis Pérez told IPS.

“My country is still an agricultural country. The government is wrong to continue the free-market policies that subsidise povertyàThe state should intervene and distribute income. The demagoguery is unnecessary,” he said.

But if the opposition’s boycott in the Senate drags on, this debate will be left hanging. Until the new natural gas contracts are approved, the companies will continue operating under the existing conditions, and profiting from Bolivia’s gas on the world’s stock markets.