Crisis In Bolivia Over Foreign Control Of Nation's Oil

by Jim Shultz

(PNS) COCHABAMBA -- On a hilltop overlooking this Andean city of 600,000 sits the largest statue of Jesus in the world. The statue's outstretched left arm points down to one of the city's poorest neighborhoods, Valle Hermoso, and to the gray tanks and towers of the Brazilian-owned oil refinery belching smoke on the neighborhood's edge.

Protesters have threatened to march on the oil refinery and seize it. Two hundred miles away in La Paz, thousands of angry indigenous people, miners and workers have been marching on the nation's capital, threatening to seize the Congress.

Bolivia, once again, has exploded into conflict over the volatile issue of who owns its vast and lucrative gas and oil reserves.

South America's most destitute nation sits atop an estimated 53 trillion cubic feet of gas and oil, the second-largest reserves on the continent. For two years Bolivia has been engaged in a fierce national debate over how to develop those reserves for export, and especially over what role foreign oil companies will play.

In October 2003, Bolivia's then-president, Gonzalo Sanchez de Lozada, ignited massive protests with a plan to export the gas through Chile to California, a scheme that most people here believed would mainly enrich foreign oil companies and a handful of politicians with their fingers in the deal. When Sanchez de Lozada sent out the army to quell those protests, killing more than 50 people, public rage drove him from office.

His successor, President Carlos Mesa, turned the gas question over to public vote, sponsoring in July last year the country's first-ever national referendum. Voters were presented with the question, "Are you in agreement with regaining ownership of the petroleum for the Bolivian state?" Ninety-two percent of the country voted a resounding "yes."

Earlier this month, after nearly a year of debate, Bolivia's Congress approved a bill that would convert the public vote into law. The results pleased no one.

Under the new law, foreign oil companies will be required to boost their tax and royalty payments to the Bolivian treasury from 18 percent up to 50 percent of revenue. Fifty percent is what the companies used to pay Bolivia until the country privatized its oil and gas in the mid-1990s, under pressure from the International Monetary Fund and World Bank.

Critics charge that the new tax is riddled with loopholes that will let the corporations end up paying far less than 50 percent. Despite that, foreign oil companies such as British Petroleum and the Spanish giant, Repsol, unhappy at paying any new taxes, threaten to shut down facilities, quit the country and sue Bolivia for sums as vast as the reserves themselves.

The new law also leaves control of Bolivia's gas in foreign hands. That, more than the tax issue, is what has sparked the huge protests calling for re-nationalization.

Carmen Peredo, a leader of the national irrigators' union and major figure in the call for nationalization, explains that, in Bolivia, what nationalization really means is cutting out the middleman in exporting gas and oil abroad. Companies like Repsol, she says, use their Bolivian subsidiaries to sell the country's gas and oil to their parent companies at rock-bottom prices, cutting Bolivians out of the profits from soaring world oil prices.

In Venezuela, which nationalized its oil and gas industry in the mid-1970s, those soaring energy prices are producing millions of dollars in new public revenue, fueling the construction of health clinics, subsidized grocery stores, literacy programs and other projects to lift up the poor. Bolivians are reaping no such benefit.

"We want to sell our oil and gas directly, without Repsol and the others in the middle," Paredo says.

Foreign oil companies and other privatization boosters warn, however, that if Bolivia backs away from foreign ownership the country won't have the resources needed to bring its reserves to market. One foreign energy company consultant warned in the New York Times this week, "It is difficult to see how this sector will grow and develop."

Paredo and others argue that, in an energy-starved global economy, 53 trillion cubic feet of gas and oil will be a sought-after commodity. Recently, as foreign oil companies repeated their dire warnings and threatened to sue, China's ambassador to Bolivia put the Asian giant into the middle of the debate, announcing, "Chinese businesses are interested in negotiating with Bolivia about the future of gas and oil."

The week of May 23, Native groups, labor unions and miners in La Paz will launch an indefinite general strike aimed at shutting down the capital. Congress, fearful of the threats, is considering relocating temporarily to another city, Sucre.

Many Bolivians, while agreeing with the demands for a fair gas deal, oppose the tactics of national disruption. "We need to work," a cab driver named Milton told me as he listened to news reports over the radio. Protest leaders argue that in the face of the enormous power of foreign oil companies, the IMF and others, pouring into the streets is the only way they can make the government listen.