Louis Proyect lnp3 at panix.com
Wed Nov 5 10:34:55 MST 2003

NY Times, November 5, 2003
Grievances That Can Bring Globalization to Grief

LA PAZ, Bolivia — A natural resource coveted on the international market 
was sitting in the ground, and the Bolivian government wanted to exploit 
it with the help of foreign capital. But after widespread public 
protests over the terms of the deal, the president was forced to drop it.

A confrontation over Bolivia's vast natural gas deposits led to the 
resignation here of President Gonzalo Sánchez de Lozada on Oct. 17, 
barely a year into his second term in office. But the same sequence of 
events also describes what happened a decade ago to a plan to enrich the 
coffers of a desperately poor government by mining the country's ample 
reserves of lithium, a metallic element used in various alloys, ceramics 
and even thermonuclear weapons.

In Bolivia, history tends to repeat itself, as governments come and go 
in dizzying succession. Yet many of those who helped kill the earlier 
project now say they wish they had acted differently.

"We are in a deep and prolonged economic crisis, and we recognize that 
we would be in a different stage of development if the lithium plan had 
gone through," said Mario Rengifo, president of the Potosí Civic 
Committee, a community group that campaigned against the proposal. "If 
we ever get another opportunity, we will welcome it with open arms."

The lithium plan fell victim to the same social divisions that have just 
scuttled the gas export proposal, and exposed what is fast becoming the 
Achilles' heel of globalization, in parts of Latin America at least. 
Though political authority may have finally been democratized here after 
the end of military rule 20 years ago, economic power remains in the 
hands of a small Europeanized elite that the impoverished Indian 
majority does not trust.

"Part of the democratic process is assuring that people are going to get 
a piece of the cake, and that has been lacking in Bolivia," said Marta 
Lagos, a pollster and political analyst from Chile whose firm, 
Latinobarimetro, has done opinion surveys here. "Bolivians are 
suspicious of whoever is making the deal because they think, 'The elite 
always puts money in its own pockets, and we are left on the streets 
with nothing to eat.' "

The 1992 lithium dispute is a case in point. Opposition to the project 
was focused in Potosí, which has valid historical reasons for its 
suspicion of outsiders who want to exploit its resources. Known as the 
"treasure house of the Spanish Empire," because it had the richest 
silver mine in the world in colonial times, Potosí was also the center 
of Bolivia's tin industry until prices on the world market collapsed in 
the 1980's, state-owned mines were closed and thousands of miners lost 
their jobs.

But Mr. Sánchez de Lozada himself helped lead the campaign against the 
deal. A millionaire executive with extensive mining holdings, he was 
reportedly frustrated at having been had been left out of the project. 
So in the months before an election that he would eventually win, he 
capitalized on nationalist sentiment and helped scuttle the plan.

"A lot of petty politicking went on, and he was right in the middle of 
it," said Álvaro Rejas, who was minister of mines and energy at the 
time. "By the time they were finished interfering, it was like trying to 
resuscitate the dead, and the whole country had lost an opportunity to 
create the nucleus of a basic chemical industry."

As Mr. Rejas, now a mining consultant, recalled it, the lithium project 
would have resulted in improved roads and railways and the installation 
of electricity in an area known as Salar de Uyumi, where even now they 
hardly exist. It would also have offered the opportunity to process and 
export additional substances like borax, magnesium, potassium and other 
components of fertilizer for a hungry market next door in Brazil.

Over all, the project would have required the winning bidder, an 
American company called Lithco, to invest $100 million in the region. 
The contract also called for royalties of up to $43 million a year over 
40 years, with the bulk going to Potosí and the remainder to the federal 
treasury. In the end, the project went to Argentina, which also has 
large deposits of lithium and was asking less in the way of concessions 
and royalties.

As a result, contemporary Potosí, whose capital city of the same name 
was in its heyday as big and wealthy as London, remains the poorest of 
the nine provinces of Bolivia, which in turn is the poorest country in 
all of South America. With jobs still especially scarce there, 
emigration from the region to neighboring Argentina and Chile, more 
prosperous countries that have embraced foreign investment, has 
accelerated over the last decade.

Until the mines of Potosí ceased to be sufficiently profitable and the 
government pulled out, its tin provided the Bolivian government with 
most of its revenues. At that time, the people of Potosí wanted 
political autonomy, which would have given them more control over the 
income from tin and how it was spent, but the country's poorer provinces 

Today, it is provinces like Tarija, where more than 80 percent of the 
natural gas deposits are located, and Santa Cruz, enjoying a soybean 
export boom, that are demanding autonomy. On Oct. 21, thousands of 
people marched in Tarija to oppose the new government's promise of a 
nationwide referendum on the gas export plan, which is expected to 
result in a negative vote. But to people like Mr. Rengifo, the Potosí 
community leader, the shouts have a hollow ring. "The paradox of our 
situation is that we have gone from being the richest to the poorest," 
he said.

"We want the natives of Potosí to be able to return home from abroad and 
from other parts of the country. But that can't happen without making 
Potosí prosperous and productive, and to get that growth we need the 
kind of investment and technology that aren't available in Bolivia and 
can only come from abroad."


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