BOLIVIA'S POOR WILL EVENTUALLY SEE GREAT GAINS FROM GAS NATIONALIZATION

by Emad Mekay

(IPS) WASHINGTON -- Bolivian President Evo Morales' decision to nationalize his country's natural gas fields earlier this month will not being immediate economic benefits to the poor, but may dent poverty in the mid-term and check the sweeping power of foreign companies, analysts here say.

"The government in Bolivia will have more revenue and they are committed to poverty alleviation," said economist Mark Weisbrot, co-director of the Washington-based Center for Economic and Policy Research.

"They were elected on a number of promises and the main one was to try and alleviate poverty. All indications so far say they are committed to doing that."

When huge deposits of natural gas were discovered in the 1990s, international economists believed that the outlook for Bolivia, one of the world's poorest nations, had reason for optimism.

International financial institutions such as the World Bank and the International Monetary Fund, however, predicted that although Bolivia has Latin America's second-largest natural gas reserves after Venezuela, no large-scale benefits could be expected from natural gas production until the second half of this decade.

A nation of 9 million people who are mostly low-income subsistence farmers, miners and small traders, Bolivia is the poorest country in South America.

And for a nation whose average annual per capita income is only $900 -- or one-fortieth that of the United States -- any extra revenues from gas nationalization would be welcome. Still, the benefits are not expected to be immediate.

The "Nationalization Decree" provides a 180-day grace period for foreign companies to adapt to the new regime. It demands that such companies, which took control of the country's energy sources when they were privatized in the mid-1990s, renegotiate their contracts to give the people of Bolivia more royalties.

They include Brazil's Petrobras, the Spanish-Argentine company Repsol, France's Total, in which the U.S.-based ExxonMobil has a stake, and the British companies BP and British Gas Group.

Since the announcement on May 1, the government in La Paz has been wrangling with Petrobras and Repsol over the price at which they buy gas from Bolivia, a process that could become protracted if foreign governments intervene.

Bolivian officials say they aim to increase natural gas exports to Argentina, for example, by up to 65 percent, but insist that talks are still ongoing and a final price has not yet been reached.

Many foreign companies say they are disconcerted because of the coming increases from taxes and royalties and will try to minimize any future increases.

Until an agreement is reached, it is unclear how much more money will go into Bolivian coffers and how much will be used to help fight poverty.

But Weisbrot says that even if the new regime brings in only $300 million, it will amount to 3 percent of the country's Gross Domestic Product of $7.8 billion.

"It's an enormous amount of money. It's like the U.S. practically getting rid of the budget deficit," he said.

Doubts that the move will be of much good have come from many other analysts, mostly those whose views have helped shape the neo-liberal economic policies that dominated the economies of Latin America over the past 20 years, much to the disadvantage of millions of impoverished Bolivians.

Those economists argue that Morales would be better off collecting higher taxes from foreign energy companies, while keeping control and ownership in their hands. The main justification, as to be expected, is to continue to lure foreign investment.

"My advice to Mr. Morales: leave the extraction of gas to the private sector, fight hard to make sure the state is getting its fair share, and concentrate on how best to spend the proceeds," said Dennis de Tray, vice president of the Center for Global Development, and a former World Bank and IMF official, on his group's Web log.

This view has been bolstered by a decision from the Brazilian natural gas company Petrobras, which a few days after Morales' announcement said it will suspend all new investments in Bolivia and those relating to the Bolivia-Brazil gas pipeline (Gasbol).

But this analysis discounts the deterioration of the economic situation in Bolivia despite years of opening up for foreign investors and liberalizing the economy under the programs urged by Washington via the World Bank and the IMF.

Other analysts counter that fears that the Morales decision will scare off investors are grossly exaggerated.

William Powers, author of the forthcoming "Whispering in the Giant's Ear: A Frontline Chronicle from Bolivia's War on Globalization" and a long-time watcher of Bolivia, noted in an op-ed in the New York Times on Tuesday that Brazil's Petrobras, Spain's Repsol and Britain's BG Group are not about to pull up stakes.

Under the nationalization plan, the companies will still be allowed to operate in Bolivia -- just with a smaller piece of the profits.

He reported from La Paz that Shell, which owns 25 percent of an oil and gas pipeline company in the country, has already signaled that it is still willing to participate in Bolivia's hydrocarbon sector.

Morales has called for foreign companies to be "partners, not owners" of the country's significant natural gas resources. When he made the announcement, the socialist leader declared "the pillage of our natural resources by foreign companies is over."

And many believe it is exactly this format that will set the balance straight and bring the poor of Bolivia back to the table.

"The context is in place for agreements which, perhaps for the first time in the recent history of that country, will benefit both sides without exploiting the side that is economically weaker," said a statement from several social movements and groups from Latin America.