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Bolivia: The mouse that roared
By
Gustavo
Coronel
Bolivia
has nationalized the hydrocarbons industry three times: from
1916 to 1920; from 1936 to 1989; and now, in May 2006. In Bolivia
these nationalizations have really meant State, government control,
rather than true national ownership. The Bolivian nationals
have remained poor and without access to the benefits derived
from the use of those resources. In fact, it is during the intervening
years of privatization that the Bolivian hydrocarbons industry
has made significant progress and has given stable financial
benefits to the nation. The reason for this is that the management
of the industry by the Bolivian government has always been inefficient
and, often, very corrupt. Foreign investment has been responsible
for the growth of the gas reserves during the last 20 years,
a growth that has allowed Bolivia to export significant volumes
of natural gas to Brazil and Argentina. When under government
control the Bolivian hydrocarbons industry has been managed
by Yacimientos Petroliferos Fiscales Bolivianos, YPFB, a typical
Latin American state-owned company, this is, badly managed,
over staffed and politicized. In 1968, for example, while YPFB
produced 6000 barrels per day with 4,200 employees, foreign
operator Gulf produced 33,000 barrels per day from other Bolivian
fields with only some 200 employees.
Government control of the hydrocarbons has never been a successful
commercial alternative for Bolivia but remains as an attractive
political battle cry. The step taken by Evo Morales two weeks
ago has been received with enthusiasm by large sectors of the
population that believe that the act will mean instant wealth
for the poor of Bolivia. They do not realize that the hydrocarbons
industry requires capital investment, technology and sound management
that cannot be provided by the state-owned company.
The problem with Latin American “nationalizations”
of the hydrocarbons sector is that, most of the time, they are
politically inspired, not commercially driven, and take place
as a show of “sovereignty” by governments against
the foreign enterprises active in the country. The most frequent
reason given to justify the act is that these companies obtain
exorbitant benefits and keep the country in poverty.
In fact, the truth is that corrupt and inefficient governments
are most often to blame. They are not true nationalizations
since Governments usurp the place of the nation and use the
income derived from the exploitation of the hydrocarbons to
enrich the ruling clique, while little of this income reaches
the majority of the population. Poverty is the result of the
ineptness and corruption of governments rather than the result
of foreign presence in the country. This has been the case in
Bolivia where previous “nationalizations” only served
to make the social and economic problems of the country more
acute. Now it will be no different. After the popular euphoria
about the act of “sovereignty” subsides, the Bolivian
people will realize that they are not better off than before
and, in fact, they might be much worse off.
What took place in Bolivia is a clear case of the use of oil
as a political weapon. Evo Morales has fallen under the influence
of Hugo Chavez, who has pretensions of becoming a hemispheric
leader in an all-out fight against the United States. In trying
to fulfill this objective Chavez has only been modestly successful,
although he has already spent or promised no less than $16 billion
to Latin American and Caribbean countries in his efforts to
gain their political loyalties. Kirchner in Argentina has limited
himself to receive about $3 billion of Venezuelan money without
clearly siding with him. Lula of Brazil has already realized
that Chavez is a major nuisance. Morales, the Bolivian president,
is the only piece of chess Chavez has been able to acquire.
Morales is little more than a pawn but is well placed to attack
the two white rooks, Brazil and Argentina, countries that largely
depend on the natural gas produced by Bolivia. The way Morales
has acted to “nationalize” the hydrocarbons sector
has been largely inspired by the arrogant and rude manners of
Hugo Chavez. Morales has said “the foreign companies will
not be able to steal from Bolivia any longer”. The case
of REPSOL is illustrative. This company has been accused by
Morales of tax evasion and of smuggling hydrocarbons out of
Bolivia.
The two main managers of the company were briefly put in prison.
The offices were raided by the armed forces. Paradoxically,
Morales recently visited Spain and said “Spanish investments
were crucial for Bolivia”. PETROBRAS has also been the
victim of Morales aggressive rhetoric, when he labeled this
company as being in Bolivia illegally, in spite of the fact
that Lula has been one of his closest friends.
The decree of “nationalization” is a classic example
of pompous underdevelopment: “the historic struggle of
the Bolivian people, at the cost of their blood, has given them
the right to control the hydrocarbons wealth”, and so
on and so forth. The income split for the future would be 82%
for the Bolivian government and 18% for the foreign operators,
until a new form of contract is established. The decree is not
clear about the compensation due to the nationalized companies
for their assets. If anything, it includes a de-nationalization
clause, through which the shares owned by Bolivian national
in two companies, Chaco and Transredes, are taken over by the
government. It also includes a clause establishing that YPFB
will be a “transparent, efficient corporation with social
control”. This is a mission impossible for a company that
lacks competent management and a professional attitude. A company
under “social control” cannot be efficient since
the main objective of a corporation is to optimize profits,
not to be a welfare institute. This confusion of roles condemned
many petroleum state-owned companies to failure in the past:
YPFB, Yacimientos Petroliferos Fiscales of Argentina, Petroperu,
PEMEX and PERTAMINA of Indonesia. It is also ruining the current
Petroleos de Venezuela, PDVSA, a company that used to be transparent
and has now become a black box and the personal bank of Hugo
Chavez.
In Bolivia the mouse has roared. Given the indignant reaction
in Brazil, Argentina and Spain, the three countries most affected
by this act, the strange roar of the mouse could also become
Morales political swan song.
Gustavo
Coronel is
a 28 years oil industry veteran, a member of the first board
of directors (1975-1979) of Petroleos de Venezuela (PDVSA),
author of several books. At the present Coronel is an advisor
on the opinion and editorial content of Petroleumworld en Español.
Petroleumworld not necessarily share these views.
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Petroleumworld
News 05/13/06
Copyright©2006
Gustavo Coronel. All rights reserved
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