[Marxism] Bolivia

Louis Proyect lnp3 at panix.com
Wed Nov 1 18:40:27 MST 2006


(This was just posted on LBO-Talk by Paul Altesman in reply to Marvin 
Gandall. Paul is an economist with an extensive background in 
developing countries.)


Marvin G. wrote:
 >(As anticipated, the apparent resolution of the gas crisis in Bolivia, with
 >Petrobras at the centre of the conflict, coincides with Lula's victory in
 >Brazil. Lula, in an effort to counter Brazilian nationalist pressures
 >whipped up by political opponents to his right, had aligned himself for
 >electoral purposes with Petrobras in the company's negotiations with the
 >Morales government. At issue has been Bolivia's right, through its
 >state-owned oil company, YPFB, to not only own and claim higher royalties on
 >the resources pumped by the multinationals, but also to price and market the
 >production downstream - in effect, reducing the foreign firms to (still
 >profitable) turnkey operators. The FT report below indicates the Morales
 >government succeeded, although the details have not yet been released. The
 >Bolivians are aiming to get better prices for their energy exports to to
 >neighbouring Brazil and Argentina.)

The Bolivian government has *still* given out few details (to me, this is
often not a good sign) but there have been a few developments in the last
couple of days.  The government's "spin" has been denied by some of the
companies and the government has "clarified" (i.e. cut back) some of the
very few specifics they did announce.  In addition, key parts of the
overall picture remain to be negotiated (the actual prices to be paid, the
price Bolivia will pay the companies for part of the stock in their local
subsidiaries, the status of that stock, and the ownership control of the
refineries that produce all of the Bolivian petroleum products).

Some specifics points to watch out for:

          a) ownership/control: The new government did not feel in a
position to demand a return to full national control (which is still
largely the norm in Lat America, almost universal in the Middle East and
was the situation in Bolivia before the big sellout).  The companies will
retain some degree of control through some sort of Production Sharing
Agreement (PSA) which in this era is the favored tool of privatization
(PSAs are likely to emerge in Iraq next month?).
          BUT the government has demanded the right to purchase a majority
share of stock in the local subsidiaries, so the minutiae of corporate
governance and the contracts will determine how much authority Bolivia
actually has within these boundaries, and so far the public does not know
those specifics (and may never know because of confidentiality clauses);

          b) Profit splits: Morales announced an 82% share for the
government which received headlines in the Bolivian and international
press.  The next day Total (France) and a few other companies denied this
and leaked they had signed over only 50%. The British financial media then
reported leaks that, in fact, there will be a sliding scale depending on
the gas field and the block.  The French financial media then quoted
unnamed "experts" that the average split would be 58%.  Yesterday Energy
Minister Carlos Villegas "clarified" that the average government share
would be about 70%.  And of course a lot will also depend on the accounting
definition of "profit".

          c)  Investment: The government announced that the agreement
compels the companies to large and specific investments.  But Petrobras
denies "any commitment to future investment apart from routine maintenance
spending for current operations", as does Total.

          d)  Legality: Bolivia's Constitution prohibits foreign ownership
of natural resources.  This was a major trump card for Morales in
threatening to cancel the previous agreements (the companies threatened to
take the government to court in Brazil and abroad their assets were
seized).  The new agreements sidestep the Constitutional requirement
through a PSA, so Bolivia gives up a major point of leverage even though a
big part the negotiations remain to be completed.

          e) Marketing: The government states that in the new agreement
marketing will be through the national company which could offer
significant national control in some areas.  However it is unlikely that
the new agreements don't also include some major "lock-in's" for the
production companies that would partly (or even almost entirely) negate
national marketing control.  The government has released nothing about this
issue.

Two points of context:

1)  Internationally, there has been a major push by the neo-liberal powers
to favor PSAs.  So far this been vociferously resisted - only about 10% of
world oil is now handled this way - but it is felt the balance is teetering
with several key "close calls"  (Russia, other FSU states, Venezuela) and
several new cases about to come up, especially Iraq.

          A part of the argument for PSAs is that the nation can do just as
well or better by leasing arrangements.  Bolivia does bring out one point:
in these arrangements power shifts from popular movements to closed rooms
and once-and-for-all unknown agreements that usually have confidentiality
clauses.  Unlike a corrupt government, a bad 50 year agreement (if it holds
up under international law) can not be readily cleaned up.


2)      The PSAs, along with creditor cartels, trade agreements, etc were
designed precisely to constrain alleged "popularism" like the Bolivian
movement and they are indeed each a formidable problem for Morales in these
negotiations often in indirect strategic ways that we might not think
of.  OTOH, IMO, the critical pieces of support (besides the mass support of
his movement) have been Venezuela's threat to provide alternative finance,
the split within neo-liberal countries (his main opponents came from
Brazil, Argentina, France and Spain), and the Constitutional legacy left to
him by the 1952 Bolivian Revolution.

          Whichever way it turns out, Bolivia is likely to become an
important case study in the limits and hopes of the Latin American Red Tide.

Paul





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