Taking control

Evo Morales with Argentinian President Nestor Kirchner, Brazilian President Luiz Inacio Lula da Silva and Venezuelan President Hugo Chavez at a meeting in Iguazu, Argentina, to discuss the Bolvian decision. - ENRIQUE MARCARIAN/REUTERS

Bolivia takes major steps towards reclaiming its natural resources by nationalising its hydrocarbon sector.

PRESIDENT Evo Morales of Bolivia chose May Day to make a dramatic announcement. Wearing an oil worker's "hard-hat" and surrounded by soldiers at a gas plant, he announced that the country's hydrocarbon sector was being nationalised. "The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources. The looting by foreign companies has ended," declared Morales. The Bolivian President had just returned from Havana where he had signed a "peoples' trade agreement" with Cuban President Fidel Castro and Venezuelan President Hugo Chavez. He formally joined the Bolivarian Alternative for Latin America and the Carribbean (ALBA), an alternative to the United States-backed Free Trade Area of the Americas (FTAA). The grouping is inspired by the South American liberator Simon Bolivar.

The architects of ALBA are the Presidents of Cuba and Venezuela. Bolivia is the latest country to join ALBA. Castro, Chavez and Morales have described their alliance as the "axis of the good". Daniel Ortega, who is tipped to regain the presidency in Nicaragua when elections are held at the end of this year, has said that his country would also join ALBA if the Sandinistas come to power.

The Brazilian, Spanish and British companies that have a big stake in Bolivia's hydrocarbon sector as well as groupings like the European Union claim they are surprised by the government's move. But they should have seen the writing on the wall. Firstly, Evo Morales campaigned on the issue of bringing the country's energy resources under the control of the people and won the elections in December last year with a massive mandate. Secondly, in a binding referendum on July 18, 2004, "the [Bolivian] people decided in a sovereign manner that the national state shall regain the ownership of all the hydrocarbons produced in this country." The referendum stressed that the Bolivian people "have gained at the cost of their blood, the right to return our hydrocarbon-related wealth to the hands of the nation and ensure it is utilised for the country's benefit." Ninety-two per cent of the electorate backed the referendum. So the Supreme Decree No. 28701 of May 1 read out by Morales did not come as a surprise to the people of Bolivia.

Under the new law, transnationals operating in Bolivia, which produce 100 million cubic feet or more of natural gas, will retain only 18 per cent of their production revenues with the state receiving the rest. This is the reverse of the terms of the 1996 contract, which allowed petroleum giants operating in the country to keep 82 per cent of their revenues, leaving 18 per cent for the government. Under this deal foreign companies can still generate 20-25 per cent profits. The Bolivian government has given foreign companies six months to relinquish control and market gas through a state-owned company.

Bolivia has the second largest gas reserves in Latin America after Venezuela. Despite this, Bolivia's per capita gross domestic product (GDP) in 2004 was $2,600, the lowest in the region. The government was in desperate need of cash to meet the expenses in the social sector. In February this year, President Morales announced the start of the campaign to rebuild Bolivia. A new constituent assembly is due to be elected in July this year whose objective, according to Morales, will be to free the country from neoliberalism, eliminate discrimination, recover Bolivia's natural resources and rectify the country's history of discrimination, plunder and submission to foreign forces.

The biggest customer of Bolivia's gas is its neighbour Brazil. The Brazilian state-owned company, Petrobras, has invested more than $1 billion in Bolivia since 1994, making it the single largest investor. Over 50 per cent of Brazil's gas imports come from Bolivia. In the short-run, the Brazilian economy may be adversely impacted if there is a shortfall in gas supply from Bolivia. Brazil's government and business interests initially expressed their unhappiness with the Bolivian move. However, Brazilian President Luiz Inacio Lula da Silva was quick to accept the decision in principle. He said that the controversy generated by the decision relating to "the new gas prices will be discussed in the most democratic way possible. We recognise that this is a difficult situation for Bolivia and its President Evo Morales. We recognise Bolivia's sovereignty over its resources."

The Venezuelan President, who was in the Bolivian capital, La Paz in the first week of May, described the Bolivian decision as historic. Chavez announced that the Venezuelan state-owned oil company PDVSA (Petroleos de Venezuela S.A) would help the Bolivian Yacimientos Petroliferos Fiscales Bolivianos (YPFB) with exploration technology. Around 700 technicians and hydrocarbon experts from Venezuela are in the country to help restructure Bolivia's energy sector.

Many of the large foreign companies facing nationalisation are threatening to walk out. Bolivia still lacks expertise in exploration and mining technology.

In the first week of May, an emergency "energy summit" was held in the Argentinian border city of Puerto Iguazu to discuss Bolivia's nationalisation. Those present were Lula, Morales, Chavez and the President of Argentina, Nestor Kirchner. Argentina is also a big customer of Bolivian gas and as in Brazil Argentinian business sectors and sections of the establishment have protested. However Kirchner also seems to have accepted Bolivia's decision.

After talks in Brasilia, Bolivia gave a commitment to keep supplying gas to Argentina and Brazil. The question of pricing, the leaders said, would be resolved after discussing the issue bilaterally. President Morales expressed his gratitude for the "solidarity" the most developed Latin American countries showed as Bolivia tried to solve the problems posed by centuries of underdevelopment and exploitation. The four countries also agreed to go ahead with their plans to build a "Great Southern Gas Pipeline" that would run from Venezuela to Argentina. The length of the proposed pipeline will be more than 13,000 km and the cost is estimated at $25 billion.The nationalisation of the hydrocarbon sector is not the only achievement of the new government in Bolivia. As Morales promised on the campaign trail, radical land reforms are being instituted. A nationwide literacy campaign is also under way. The Bolivian government has tapped Cuban expertise in the field of literacy. Special programmes have been introduced for the benefit of poor Bolivians who cannot afford basic health care. Cuba has also opened its hospitals for the treatment of the poor and the elderly from Bolivia. On the campaign trail Morales had promised to be "Washington's nightmare". Before Morales took office, Chinese-made surface to air missiles belonging to the Bolivian army were clandestinely transferred to the U.S. As soon as he was elected, Washington put his administration on the watch list and visas were denied to legislators from his Movement Towards Socialism party.

The decision to nationalise Bolivia's hydrocarbon sector is another diplomatic and political setback for Washington in Latin America.