Econ-atrocity: Bolivia

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Bolivia: The Battle Over Natural Gas
By Noah Enelow

You would think the discovery of massive natural gas deposits in the heart
of a developing country would present itself as an enormous windfall. All
this country would have to do is find a source of financing, extract and
refine the gas, sell part of it on the world market, and keep the rest,
along with the profits, for domestic development.

Unfortunately, in Bolivia it hasn't worked out quite so rosily. The battle
over natural gas has exacerbated the country's class and ethnic tensions to
the point of warfare. Dozens of people have been killed in massive street
protests; the president has resigned; the country is in chaos. What happened?

Upon first glance at the problem, there appear to be two root causes. The
first issue was that the gas would have had to be exported through Chile, a
longtime rival of Bolivia, which usurped Bolivia's only seaport over a
hundred years ago. The deal would thus enrich Chilean export companies at
the expense of the Bolivians. The second issue was that the extraction and
refining of the gas were to be undertaken entirely by a multinational
company, Repsol-YPF. Their contract, signed long before the latest and
largest gas deposits were discovered, was to provide the Bolivian public
sector with 18% of the profits from sales. The rest would leave the country
- a typical pattern for extractive industries in underdeveloped countries.

But those two issues are the just the tip of the iceberg. The peasants who
make up the bulk of the protesters have good reason to believe they'd never
see a dime of even those meager profits. Over the last two centuries,
numerous raw materials have been extracted from Bolivia: silver, rubber,
guano, and tin. The result? Underdevelopment, poverty, and disease. The
leading cash crop of Bolivia, coca leaf, has been targeted for eradication
by both the domestic government and the United States, as part of the "War
on Drugs".

Furthermore, as Bolivia has become increasingly beholden to the IMF's
structural adjustment program, life has steadily grown worse for the poor.
In the last 3 years, the poorest 10% of the people have seen their incomes
decline 15%, as the wealthiest 10% have seen their incomes increase 16%.
Social services have been slashed while taxes have increased, to pay off
the country's high debt. How far can one expect a country to tighten its
belt when its poverty rate is 70%?

Finally, the entire conflict is rife with ethnic and class tensions. The
Bolivian elites are overwhelmingly of Spanish descent, while the poor are
overwhelmingly indigenous. As a group, the former have proven
untrustworthy, unaccountable, and corrupt; the latter grow more irate by
the day.

The resignation of the U.S.-endorsed president, Gonzalo Sanchez de Lozada,
who supported the gas plan, thus represents a victory for the poor. But the
struggle is not over. The primary representative of the indigenous people,
the self-described socialist and coca grower Evo Morales, in a recent
speech declared the West a "culture of death"; meanwhile, in Sanchez's
resignation speech, he referred to Morales as a "narco-syndicalist" and
warned of the power of the coca growers.

Is an agreement possible? A broad, highly organized coalition of labor and
indigenous groups, the National Coalition in Defense of our Gas, has drawn
up a list of demands. These include the formation of a constituent assembly
to ensure greater popular participation in government, and the
re-nationalization of Bolivia's gas resources. The coalition has given the
new president, Carlos Mesa, a 90-day truce to allow him to implement their
demands. Will the two sides of Bolivia forge a new social contract, or will
the country's exports continue to enrich the few while leaving the many
impoverished? Stay tuned.

References:
The Americas.org website contains a fantastic wealth of information about
Bolivia. Numerous alternative sources and viewpoints are present alongside
updates from the BBC and mainstream media.
http://www.americas.org/country/country.asp?country=Bolivia

Laura Carlsen. "Resources War: Lessons From Bolivia":
http://www.americaspolicy.org/columns/amprog/2003/0311bolivia.html

Newton Garver, "Bolivia in Turmoil", Counterpunch 10/17/03
http://www.counterpunch.org/garver10172003.html

Keith Slack, "Poor Vs. Profit in Bolivian Revolt,"
http://www.commondreams.org/views03/1019-03.htm

© 2003 Center for Popular Economics

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