Global Development: Views from the Center

I couldn't agree more. Here is my take as published in Canada's Globe and Mail:

Playing the gas fields

Nationalizing Bolivia's energy sector is a costly political ploy, says Latin
America specialist ANNETTE HESTER

Globe and Mail - Print Edition - 04/05/06

Bolivian President Evo Morales celebrated May Day -- that international
workers holiday -- by nationalizing the country's oil and gas industry. The
move was meant to fulfill a promise to keep more energy profits in the
country, though it likely also was intended to revive his flagging
popularity. Will it succeed in reducing the brutal poverty of most
Bolivians? Will it pay off politically? Mr. Morales made his move with much
fanfare as befits his roots as a coca growers union leader -- standing
amidst workers and supporters, loudspeaker in hand, in one of Bolivia's
largest gas fields, San Antonio. He then proceeded to send the army to all
oil and gas installations to ensure no documents were destroyed or removed
from the premises.

You might see this as just the latest Latin American populist leader
rallying the troops in the name of national sovereignty against the evil
empire of George W. Bush. There's just one problem with this scenario:
Bolivia's largest integrated oil and gas company is Petrobras, controlled by
the government of his "brother in arms," Brazilian President Luiz Inacio
"Lula" da Silva. Moreover, the other major foreign companies operating in
Bolivia are Spanish Repsol-YPF, French Total, Dutch Shell, Argentinean
Pluspetrol, and the lonely American, Prisma. Clearly, traditional political
assumptions are not helpful in understanding this situation.

Instead, thanks to globalization, citizens of poor countries have become
aware of the benefits of development and are impatient to enjoy them.
Leaders in Latin America are under notice -- deliver or you will be tossed
out -- regardless of whether you are from the left or the right.

Bolivia is one of the poorest countries in South America. Its history is
just as sad as huayno, its traditional music. The country's silver riches
were pillaged by Spain, its access to the sea lost in battle, its national
art treasures are now the property of the finest European museums, and the
people suffered decades of government control by a string of dictators who
cared nothing for them.

Ten years ago, during the first government of Gonzalo Sanchez de Lozada, the
picture began to change. He implemented a series of economic reforms and
modernized the country's energy sector. As well as implementing legislation
that maintained the government's ownership of the resources (underground)
but gave domestic and foreign operators the right to explore, produce,
refine, and transport oil and gas, he reorganized the national oil company,
Yacimientos Petroliferos Fiscales Bolivianos (YPFB).

He also sold portions of YPFB to private interests and issued shares for the
remainder. These shares, in turn, were issued to all Bolivian citizens and
administered by a special pension fund. The idea was to create both an
efficient market through privatization and to develop a stock market by
instantly increasing private savings.

Unfortunately, the results were mixed. While the newly privatized industry
took off -- from 1997 to 2005, proven oil reserves went from 116 million
barrels to 440 million barrels, and proven natural gas reserves increased a
staggering 600 per cent -- the stock market idea bombed. It was easy for
governments to manipulate impoverished campesinos, and most, to this day are
not even aware of their holdings. In spite of his talk of looking after his
people, now Morales has reclaimed these stocks for YPFB, with no mention of
compensation.

Ultimately, Bolivians continued to be as poor as ever -- in 2004, the
country's GDP per capita of $2,600 (U.S.) was the lowest in South America.

Fast forward to today.

Mr. Morales won the election last December after having orchestrated popular
uprisings that led to the fall of two previous governments. The main issue
for both those previous governments was the administration of the gas
sector. To him was left the implementation of a 2004 referendum that
mandated an increase in the government's take and the nationalization of the
oil and gas sectors.

And so Mr. Morales -- shaken by a recent drop in his popularity, facing
increased opposition from gas-producing provinces that are threatening
secession, and boosted by a new friendship with Fidel Castro and Venezuela's
Hugo Chavez -- is gambling that he can force companies to hand over assets
and pay exorbitant premiums without severe repercussions.

The gist of Decree 28701, the new nationalization law signed Monday is: The
Bolivian state regains control of all aspects of the industry; the
government's take increases to 82 per cent from 50 per cent for most gas
fields; YPFB will control 51 per cent of all companies operating in the
country; the government will name all senior management, and companies have
180 days to comply or they will be thrown out of Bolivia.

Mr. Morales knows he has a captive market in the short term. Brazil is
dependent on Bolivian gas and consumes more than half of the 42 million
cubic metres a day the country produces. That means Mr. Morales will add
approximately US$300-million a year to his government's coffers (as well as
a number of high-paying jobs to dole out to supporters). That is no small
coin for a country the size of Bolivia and it should buy him some time. The
repercussions, however, might prove to be disastrous. Many Brazilians are
furious with their government for miscalculating in its dealings with Mr.
Morales and, consequently, Brazil will actively pursue a gas policy that
will allow for a variety of suppliers.

That Bolivians will end up owning all the gas is a given. And yes, Mr.
Morales will save his skin, at least for now. What is uncertain is whether
the nationalization will pay off, or whether, in the long run, the gas will
stay in the ground leaving Bolivians just as poor as they are now.

Annette Hester is a senior associate at the Washington-based Center for
Strategic and International Studies and a research fellow at the Centre for
International Governance Innovation in Waterloo, Ont.

Reminds me of the nationalisations in Africa and Asia that occured in 50s through to the 70s, as manifestations of independence from colonial rule. Now its the turn of indegenous people of South America, after 400 years of misrule by the Iberian blanco parasites (white trash) and 150 years of Yanqui colonialism.

Up to the Bush regimes, the US was able to suppress all these anti-colonial movements under the guise of fighting Russian communism (!). Now the US empire is biting the dust in the sands of Iraq, Israel has taken over the DoD and the cheap redneck crooks and drug peddlers have grabbed the CIA, so let freedom bloom south of the border!

Widening inequality, political apathy and indifference and large armies of people with no education or irrelevant education in developing countries may see a ray of hope in this strategy of Mr.Morales as memories are short and young generation may forget what happened before the fall of the Berlin Wall.