BOLIVIA: Export Boom Amidst Social Unrest

By Franz Chávez Reprint | | Print |

Franz Chavez

LA PAZ, Jul 6 2004 (IPS) - This year the main international highways in western Bolivia have been constantly blocked by indigenous and peasant farmer associations mounting protests.

But that will not stop this land-locked South American country from reaching a record two billion dollars in exports this year, 500 million more than in 2003.

It might seem odd that in a country convulsed by social unrest and about to hold a referendum on the government’s natural gas policy, the export sector would enjoy the best prospects for growth.

The La Paz-Desaguadero highway, which runs from the administrative capital to neighbouring Peru, and the La Paz-Tambo Quemado international highway that runs to the port cities in western Chile have been frequently blocked since February by militant organisations of small farmers opposed to President Carlos Mesa’s economic and energy policies.

The roadblocks have been compounded by snowstorms in the western part of the Andes mountains, which have cut off highways leading to the Pacific ocean in the past few weeks.

The highways are used to transport Bolivia’s chief exports, soy beans and minerals. But the pipelines connecting the areas where Bolivia’s huge natural gas reserves have been found – the biggest in South America, after Venezuela – with Brazil and Argentina have become the best allies of the country’s exports this year.

According to the National Statistics Institute, 207.7 million dollars worth of natural gas was exported through the pipelines from January to April, out of total exports of 621.4 million dollars in that period – a figure that is 41.3 percent up from the same period last year.

Bolivia sells Brazil some 13 million cubic metres of natural gas a day. In addition, a temporary arrangement to export six million cubic metres of gas a day to Argentina got underway in May, to help cover that country’s gas deficit during the southern hemisphere winter.

Foreign trade expert Vicent Gomez-Garcia attributed the sharp rise in exports to gas sales to Brazil, and projected a steady increase until 2006, due to demand from industry in Brazil.

January to May exports of hydrocarbons and minerals were 41.5 percent up from the same period last year, according to the Trade Ministry.

In addition, Asian demand for tin drove the international price of the mineral above 4.25 dollars a pound. That high price has pulled Bolivia’s mining industry out of the lethargy into which it had plunged since the 1985 collapse of prices.

In the mining areas of the southwestern departments of Oruro and Potosi, the few workers skilled in drilling and other aspects of mining have been quickly snatched up, and many miners who had lost their jobs in the industry are now returning to those remote regions.

If the optimistic projections play out, Bolivia’s exports could be equivalent to 25 percent of Gross Domestic Product (GDP) – estimated at 8.5 billion dollars – this year.

But strong international demand for commodities, mainly driven by China in the case of soy beans and minerals, will not last, and demand could fall to 2002 levels, Gomez-Garcia told IPS.

Economist Rolando Morales Anaya predicted that commodity prices would remain strong for around three years, although he did not rule out possible modifications of the international scenario.

He said, for example, that the United States will attempt to cover the huge fiscal deficit caused by the war on Iraq, launched in March 2003, by seeking around 400 billion dollars on the international financial market.

That need for money will bring a rise in interest rates, which already began to be seen in June, and that in turn will lead to a drop in commodity prices, Morales Anaya told IPS.

But the growth of exports of commodities like soy beans, minerals and natural gas is not sufficient to put the economy of Bolivia, South America’s poorest country, on a solid footing, said the economist.

”These are products that do not bring taxes to the state,” said Morales Anaya, who criticised former president Gonzalo Sanchez de Lozada (2002-2003) for eliminating taxes on soy beans and mining products, because the population thus is not benefiting from the current ”export boom.”

In addition, the foreign companies that exploit Bolivia’s natural gas only pay 18 percent in taxes to the state, he added.

On Jul. 18, some four million voters will be invited to take part in a referendum to decide on Bolivia’s natural gas policy and exports.

The referendum was one of the central demands voiced by the October 2003 protests that forced President Sanchez de Lozada to resign. The harsh crackdown on the popular uprising left at least 70 dead.

Bolivia has a long history of combative social movements and protests by the trade unions representing the country’s miners and other sectors, and the indigenous majority are becoming increasingly organised.

In the referendum, Bolivia’s voters will decide whether the current law on hydrocarbons should be revoked; whether the country’s natural gas should be exported; whether the state should re-nationalise the country’s natural gas deposits, which have been granted in concession to transnational companies; whether to strengthen the state-run oil company; and whether they support Mesa’s proposed policy of using the country’s natural gas wealth to pressure Chile for an outlet to the sea.

Bolivia lost its Pacific ocean coastline to Chile in the 1879-1884 War of the Pacific.

But the referendum is facing resistance. Indigenous and rural movements in western Bolivia are threatening to boycott it, while agribusiness interests in the east – the most developed part of the country – are pushing for the vote to be annulled.

”We must take advantage of these favourable external conditions, which may not last long, and avoid conflicts that could affect the normal functioning of the economy and the financial system,” warned the Central Bank in a study on foreign trade.

Gomez-Garcia and Morales Anaya believe that in the long-term, the conflicts will hurt private investment and the country’s trade performance.