COMIBOL

Sam Pawlett rsp at SPAMuniserve.com
Sun Oct 17 19:06:34 MDT 1999



The Rise and Fall of Comibol.
The Political Economy of Bolivian Tin.


The Founding of Comibol.

    The national revolution of 1952 was one of the most important events
in Bolivian history. It was led primarily by the  militant, armed miners
who after the revolution pressured the government into nationalization
and other reforms. The first revolutionary government of Victor Paz
Estenssoro signed the decree nationalizing the
mines
     Comibol, the Spanish acronym for, Corporacion Minera de Bolivia, is
the Bolivian state-owned mining company. Comibol was formed in 1952
after the national revolution. Before 1952, control of Bolivia's tin
mining industry was controlled by a group of local capitalists known
collectively as the 'tin barons' or the Rosca. The three main members of
the Rosca were the Patino,Hochschild and Aramayo with the Patino family
being the largest holder of mining assets. At the turn of the century
demand for tin grew with the expansion of the armaments industry and the
invention of the tin can. Bolivia accounted for 11% of world production
in 1900, 26% in 1921 and rose to its all time high of 48% in 1945.

     The mining estates of the Rosca came to be known as the Gran
Mineria. At the the time of the revolution in 1952, exportation of
minerals accounted for 97% of foreign exchange with 71% of this
originating from the Gran Mineria. All of the capital goods required to
operate the mines, process the minerals and transport them to ports had
to be imported. The foreign exchange was very important given the open
nature of the Bolivian economy at the time. These facts highlight the
importance Comibol  would play in the structure of the Bolivian economy
as well as the collective power of its workers.

   However, during the same pre-revolutionary period, mining never
produced more than 10% of GDP and never accounted for more than 5% of
the labor force with the majority of the Bolivian labor force employed
in agriculture. The mining industry traditionally paid low wages and the
miners had to work in horrendous conditions. This did little to
stimulate the demand side of the economy.

The World Tin Market.

     The world tin market is unique in commodity markets in that the
world is dependent on less developed or third world countries for most
of its supply. Currently, the third world produces 85% while the first
world produces around 10% of the world's tin. Most of the demand for tin
is in the first world nations which account for 60% of world
consumption. The major use for tin is tinplate.solder and cans. A small
number of third world nations sell tin to the industrialized countries
with the traditional producers of tin being Malaysia, Bolivia, Nigeria,
and Thailand. Recently Brazil has captured large market share as it is
now the low-cost producer. Brazil is now the fifth largest consumer of
tin as well.

     World tin consumption has been falling for the last twenty years.
The consumption peak of tin was 1973-77. The fall in consumption is due
to the appearance of technical substitutes like aluminum. Because
aluminum is a technical substitute for tin in the production of cans,
the demand for tin will be in part a function of the price of aluminum.
A fall in the costs of aluminum cans will lead to a decrease in the
demand for tin. Alternatively, an increase in aluminum prices might lead
to more use of tin. Moreover, aluminum is easier to recycle which adds
to its attractiveness. The widespread use of refrigerators and freezers
has diminished the demand for canned food and hence the demand for tin.
Aluminum producers also argue that that both aluminum production and
consumption have ecological advantages.

     By the 1970's, tin was considered to be in short supply and in 1982
was declared a semi-rare metal which has influenced its price, causing a
rising price from the 1950's to 1985. During this period, the price of
tin rose faster in relation to other minerals. IN October 1985, the
price of tin on the London Metal exchange fell more than 50% from $US
5.40 to $US 2.50 a pound. The effects of this crash on those employed in
the tin industry were harsh and will be discussed later. Where the 1980
pricen October 31 1952. Comibol had already been formed and the state
took possession of all the holdings of the Rosca totaling 163 mines with
production of 27,000 tonnes of tin and a workforce of 29,000. $US 27
million was paid in compensation-2/3 of the country's foreign exchange
holdings at the time. A system of control obrero or worker control was
introduced were workers could participate in management decisions
through having union representatives sit on the board of Comibol. There
was rank and file pressure from below for more substantial forms of
worker control

   Though tin has had a history of being subjected to free-market
competition more than other metals, it has in recent history been
governed by the International Tin Agreement. Until 1985, the Tin
Agreement was regarded as a fairly successful example attempt at
intervention in the commodity markets. The International Tin Agreement
was signed in 1931 by Malay, Nigeria, Bolivia and the Netherlands East
Indies. Together these countries formed the International Tin Council.
The agreement was signed in response to the price collapse during the
great depression and the concomitant problems that arose because of
this. Between 1931 and 1985, six agreements existed until the collapse
of the agreement in 1985. The Tin Council disbanded in 1990.The goal of
the agreement was to set a price floor and a price ceiling to stabilize
the price at an acceptable level to the producer nations. This was done
through the creation of a stockpile or buffer stock which could be used
to buy or sell tin to stabilize the market. Export controls were also
used when the buffer stock exceeded a certain quota.

     Also of significant influence on the world tin market has been the
US stockpile which began during the second world war and reached a high
of 350,000 tonnes in 1957. The US used this stockpile on occasion to
weaken and even break the ITA. The ITC arose in the climate of the calls
for a New International Economic Order by the third world countries. It
gave emphasis to maintaining a stable price for tin in accordance with
the national development needs of the producing countries and not just
the price the consuming nations were willing to pay.

   The ITC had many problems which arose out of the conflicts between
the producing and the consuming nations. These conflicts could be
described as an instance of the conflicts or even contradictions between
the rich and the poor nations. Part of the neo-liberal war on inflation
that began in the early 1980's focused on low commodity prices. These
conservative governments, following neo-liberal ideology, have been
opposed to using commodity agreements(or any other method) of
transferring wealth from the rich to the poor countries. The ITC has
been criticized for maintaining artificially high prices, which in turn
led to the substitution out of tin. The full story is more complicated
as the huge fall in tin prices only led to a very modest increase in
demand suggesting a low demand elasticity for tin.

    There were many reasons for the collapse of the price of Tin and the
collapse of the ITA. The arrival of Brazil as the low cost producer,
collapsing demand due to the destruction of the economies of the USSR
and the Eastern block who hitherto had been large importers of tin and
considerable resistance of the consuming countries to the continual high
price of tin. The main reason, however, was wild exchange rate
fluctuations. In short, the ITC ran out of cash and credit and was
forced to default. The effects of the price collapse were profound. In
Bolivia alon some 50,000 miners lost their jobs breaking the back of the
left and the organized workers movement.

    After the nationalization, Comibol's position in world markets
worsened. Close to 200 technicians lefts the company leaving it bereft
of geologists and other skilled workers. Much capital was repatriated as
there was a five month lapse between the announcement of the
nationalization and its implementation. Tin prices fell from $US 1.20 to
$US.80 within three months. The 1958 earnings of Comibol were less than
half of those in 1952. The bolivian economy was isolated internationally
as the US was going through a period of extreme political
reaction(McCarthyism,the Korean War.)  All foreign aid and assistance
was cut off. Comibol's labor force grew from 29,000 in 1953 to 36,000 in
1957. The growth of the labor force was in the office and not in the
pits. The percentage of interior workers had fallen from 82% in 1952 to
52% in 1959. BY 1967, one third of Comibol's employees worked at desk
jobs with only 7,500 employees working at the face.

   However, the real wage for the miners fell 43% between 1950 and 1955
contributing to the drop in Comibol's labor costs from 38% in 1952 to
25% in 1958 which rose only when the power of the unions was curtailed.
Comibol's labor costs per worker fell from $US86 per month in 1952
dropping to $US42 in 1956 and did not rise again to $US70 until 1970.
The fall in wages was due to undercapitalisationa nd underinvestment
which, in turn were, responsible for the large drops in productivity.
Productivity fell from 27,000 tonnes in 1952 to just over 15,00 in 1960
with labor productivity falling 60% by 1959. Over the 1950's Comibol had
losses of close to US$10 million per annum.

     In 1961, Comibol underwent what was called the triangular plan, an
effort to completely restructure Comibol and thus lower its costs. The
plan was financed by the US and West German governments as well as the
Inter-American Development bank. This was initiated in response to the
US$20 million debt that Comibol had run up by 1961. The plan granted US$
38 million in soft loans and required the dismissal of 20% of the
workers and the closure of a number of unspecified mines. IN response to
the plan, the miners mobilized a series of general strikes culminating
in the 1963 military occupation of the mines and the mining communities.
After continuous resistance by  the miners, there was a military coup in
November 1964 which was able to force through the last stages of the
plan including the 50% wage cut.

     The triangular pan did little to  resuscitate Comibol  as most of
the  money went to the purchase of short-term supplies rather than
long-term investment. Comibol's production increased in the 1970's
because of a devaluation and labor peace. Comibol was also a beneficiary
of the easy credit of the 1970's. From 1971 to 1977, Comibol earned a
before tax profit in part because of high tin prices and the devalued
bolivian peso. The recovery of the 1970's only masked the continual
problems that the company  had, which will be discussed later.

   The high mineral prices,  growing Bolivian oil exports  and cheap
credit caused the Banzer government to borrow heavily abroad resulting
in a massive run up of the debt. The debt crisis of 1982 hit Bolivian
and the tin sector hard as imports were cut making it difficult to
obtain spare parts and machinery for the mines. One of the main reasons
for production stoppages during this period was the failure of the
mine's ancient equipment.

    Comibol once again fell into acute crisis during the 1980's. Total
investment in Comibol fell to US$5 million dollars per annum between
1980 and 1984. Comibol was forced to convert its earnings using the
overvalued official exchange rate resulting in large distortions in its
books. The various economic restructuring packages of the early 1980's
were resisted fiercely by the miners resulting in strikes and work
stoppages. The result of the above factors was a drop in output of 35%,
and a US$165 million debt. Further, foreign exchange earning had dropped
in half from US$592 million or 70% of total to US$264 million or 45% of
total.

    In October 1985, the price of tin on the London metals exchange was
US$2  per pound compared to Comibol's production costs ofUS$ 6.50 per
pound.

    IN 1985, the Bolivian government introduced the New Economic Policy,
a radical IMF shock treatment, program designed to change Comibol and
the whole Bolivian economy. Comibol was still an important part of the
economy as it still produced 35% of the nations foreign exchange. Under
the new policy, all of the unprofitable mines were closed resulting in
the firing of 20,000 workers out of a total of 27,000. The workers
received little or no compensation. Some have been able to form
co-operatives in the closed mines. However, many have had to migrate to
the cities to work in the informal economy and to the lowlands to work
in the cocaine industry. Moreover, under the policy, Comibol was
relieved of its responsibility of providing food subsidies and social
infrastructure.

   In 1990, new measures were introduced leaving Comibol a holding
company. The measures were designed to introduce foreign investment,
joint ventures and outright privatization of Comibol's holdings. A joint
venture was introduced with Paranapanema, the largest Brazilian tin
mining company. to work one of Comibol's largest tail deposits. The
miners resisted the 1985 measures with a general strike as well as an
underground hunger strike.  What's left of the miner's union continues
strong opposition to the introduction of the private sector into the
mines. The union continues to defend national production, worker's
control and non-payment of Comibol's debt. The union and the strength of
the miner's has been decimated by the mass layoffs and mine closures.

    From 1964 to 1982, Bolivia was dominated by a series of military
governments whose main purpose was to crush the organizational strength
of the miners i.e. their unions. The conflict(class struggle) between
the military and the miners has been a constant throughout Bolivia's
history. The military tried many methods for weakening the miners
including 'yellow' or 'scab' parallel unions, placing the mines and
mining communities under military control, jailing,exiling and torturing
union and political leaders and even at times resorted to massacres in
the mining communities. The latter was the favorite method of the the
vicious Pinochet style government of General Luis Garcis Meza (1980-82)
which, in 1980, murdered some 900 people in the mining community of
Caracoles. The various regimes have at time managed to silence the union
but have not succeeded in destroying it or preventing long political
strikes in the mines.

    The strength and resistance of the miners is due to their strategic
place in the structure of the economy.  Any work stoppage of Comibol has
a drastic effect on foreign exchange earnings and government income. It
is the knowledge of their economic importance that enables them to fight
against insuperable odds. The solidarity in the mining community
contributes to the collective strength of the miners. The miner's
leaders have also been difficult to co-opt despite their often erratic
behavior. The strategic place of the miners in the economy is the reason
for the rise of Trotskyism as a hegemonic ideology in the pits. The
miners are the ‘vanguard' of the Bolivian proletariat and peasantry and
lead all the class struggles in that country.

The Fall of Comibol.

     Why was Comibol such a failure throughout its history? The Bolivian
economy was a monoculture; it depended on the export of a single
commodity. Since Comibol was controlled by the state it was run
according to the state's and hence the whole economies needs rather than
as a single firm. This resulted  in the maximizing production in order
to generate income for the government. The result was a lack of funds
for reinvestment in the mines. Without reinvestment, the mines could not
technologically innovate, resulting in the breakdown and obsolescence of
equipment and the decline in productivity. Declining and low
productivity were the main problem in Comibol. Comibol was governed by a
short-term perspective because of its need to earn income and foreign
exchange for the government. Introduction of new technology would
disrupt production and hence the income stream to the government.
Exploration was never consistently funded and was undertaken in an ad
hoc manner. Further, no new methods of ore extraction were introduced,
leading to the decline of the higher grade ores. Consequently, more and
more labor was required to extract the ore resulting in lower labor
productivity. The result was that Comibol produced more and more yet
produced it more and more inefficiently. In 1975, the generation of tin
was 51% of 1950 levels and 66% of 1955 levels; by 1985 it was less than
7% of 1950 levels and 10% of those of 1955. As Comibol's income fell,
there was less and less to give over to the miner's in their demands.
Without investment, production fell and the company was forced to cut
back on the miners benefits and wages, which would be enough to get the
miners to return to work but would not make the necessary investment in
productive capacity to ensure growing income streams in the future.
Falling tin prices played a large role as well. As prices fell, income
declined and wages fell leading to more strikes. Because of the strength
of the miners Comibol had to shift its potential funds for investment
into satisfying their demands.

     The failure of Comibol,then, was its short-term perspective which
maximized short-term production to finance the government's attempts at
getting the economy to grow as a whole. It ignored production costs as a
political commitment to providing employment where there are few other
opportunities for employment. This led to the failure to introduce new,
more efficient equipment and the opportunity for exploration. The result
was that Comibol's costs were more than its income resulting in its
being a drain on government reserves and its inability to respond to the
1985 crash in tin prices. For Comibol to recover, new investment is
requires to increase production and more intensive exploration.









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