Bolivia The Aftermath of Colonization

1
Bolivia The Aftermath of Colonization

• ECE 510 EDGE
• Bruno Zbinden

2

• BACKGROUND
• Currently, Bolivia is the second poorest country
  in South America, with a GPD pf 25.6 billion
  compared to 12.6 trillion for U.S.A. and a GDP
  per capita of 2,817 compared to 41,399 for
  U.S.A
• INDEPENDENCE
• The Independence from Spanish rule movement in
  South America begun in 1806.
• Simon Bolivar born into a wealthy family in
  Caracas, Venezuela became on of the most
  prominent figures in this movement, leading the
  independence movement in Venezuela, Colombia,
  Ecuador, Peru and Bolivia (1825).

• Inspired by the American-Revolution, Bolivars
  goal was to create a federation between all of
  the newly liberated republics, with a government
  set-up to recognize and uphold individuals
  rights.
• He wrote the Bolivian Constitution, and was a
  believer of the models of Limited Government,
  Separation of Powers, Freedom of Religion,
  Property Rights, and the Rule of Law Government
  authority is exercised only in accordance with
  written and publicly disclosed laws
• This model was met with opposition by particular
  interests throughout the region with no interests
  in liberal principles, and an assassination
  attempt against Bolivar failed in September 1828.
• He died from Tuberculosis in 1830 while leaving
  South America for exile in Europe.

3

• BOLIVIAN GAS WAR
• Bolivia has the second largest supply of natural
  gas in South America (After Venezuela). It is
  estimated that Bolivian gas reserves are between
  48 and 52 Trillion Cubic-Feet, with 26.7 TCF
  proven.
• During the late 1990s under the neoliberal
  government of Gonzalo Sanchez de Lozada (Goni,
  educated in the U.S.A.), contracts were awarded
  to 26 foreign countries for the exploitation and
  export of natural gas from Bolivia. These awards
  were done without the approval of congress as
  required by the Constitution.
• In 1994 a private contract was signed to build
  the Bolivia-Brazil gas pipe, which was completed
  in 1999 at a cost of US2.2 billion.
• Under this contract, natural gas was sold to
  Brazil at an estimated US3.15 to US3.60 per
  thousand BTU, as compared to the market price in
  the USA between 5.85 and 7.90 (estimated in May
  of 2006) and at a rate of 27 million cubic meters
  per day.
• In 1996 the state-owned gas company (YPFB) was
  privatized to a consortium comprised of British
  (BP), Spanish (YPF), and Brazils Petrobras
  companies.
• In 2002 a plan to construct a pipeline to the
  Pacific Ocean, in order to export raw natural gas
  to Mexico and the US (California) was proposed.
  This was the beginning of a series of revolts,
  protests and bloodshed within the unrepresented
  (yet with the majority of the population) and
  poverty stricken indigenous community, leading
  to the resignation and fleeing of President
  Sanchez de Lozada in October of 2003.

4

• BOLIVIAN GAS WAR(CONTINUED)
• Following the riots that lead to the resignation
  of both president Gonzalo Sanchez de Lozada and a
  few months later the vice-president Carlos Mesa
  Gibert, congress passed an energy law that added
  a 32 tax to the existing 18 on hydrocarbon
  exports from Bolivia.
• October 22nd Minister for Planning and
  Development of Bolivia, Carlos Villegas, accused
  international companies from cheating Bolivia
  in their contracts to export natural gas. He
  stated that companies sold gas at 1.09/MBTU as
  opposed to the set price of 3.35, worth an
  estimated 20 to 40 million.
• Petrobras is a Brazilian government owned
  company. As of October 23 negotiations were still
  underway between Petrobras and the Bolivian
  government to reach an agreement for a new
  contract. The deadline set by the hydrocarbons
  nationalization law passed on May 1st, is October
  28th.
• The minister of Mines and Energy for Brazil
  stated that even though an agreement seems to be
  close, that if not reached to satisfy both sides,
  Petrobras will withdraw operations from Bolivia
  and further will seek to be paid back by the
  Bolivian government for the investments made in
  the region.
• The new law requires that the state retains 50
  of the profits made by international companies
  and also retains control over how, to whom and at
  what price Bolivian gas is sold.

5

• BOLIVIAN GAS (CONTINUED)
• In contrast under the 1996 hydrocarbons law that
  privatized the industry, private companies had
  virtually complete control over the production
  and sale of gas, and paid only 18 royalties and
  no taxes.
• Companies affected by the new nationalization of
  hydrocarbons law threatened to sue Bolivia not
  only for the estimated 3.5 billion of invested
  money in the industry, but also for the loss of
  expected losses, which could total tens of
  billions of dollars.
• The state of Santa Cruz, where the countrys
  right-wing movement, and wealthiest population is
  concentrated, as well as where the energy and
  agricultural exports businesses are based, has
  very little support for the new administration
  and has encouraged movements of autonomy from
  Bolivia.
• Oct. 30th Bolivian government and foreign oil
  firms signed last-minute contracts to comply with
  the nationalization of the hydrocarbon resources
  in the country.
• The new contracts will bring revenues of 1.3
  billion a year, out of which 1 billion will be
  royalties and taxes and about 300 million in
  payments directly to YPFB.
• French energy firm Total SA, and the U.S oil firm
  Vintage Petroleum signed a deal on Friday, while
  Brazils Petrobras and Spanish-Argentine
  Repsol-YPF signed on Saturday night.
• Little detail from the contract with Total and
  Repsol were known as of Monday, but Repsol
  released a stated that the deal guarantees its
  future in the country and the return of the 1.2
  billion invested.

6

• BOLIVIAN GAS (CONTINUED)
• The contract with Petrobras excludes a deal on
  gas prices and on what will happen to two
  refineries owned by Petrobras in Bolivia.
• The contracts are based on the size of the field
  being exploded. For mega-fields the companies
  will pay 50 royalty and tax, and from the
  remaining 50 companies will have to meet
  production and investment costs, and the
  remainder profit will be divided between the
  foreign firms and YPFB, therefore including this
  payment to YPFB, Bolivias take on the
  mega-field will be about 80

7

• EVO MORALES
• The platform under which Morales run for
  presidency included
• The nationalization of strategic industries.
• Price reduction and a price freeze on household
  goods.
• Provision of basic services for all.
• Increases taxes for the rich.
• Redistribution of land to those who work it.
• End to neo-liberal economic policies.
• Opposition to a flexible work force.

8

• COMPANIES AFFECTED
• PETROBRAS (Petroleo Brasileiro S.A.)
• Partially owned by Brazilian government.
• About half of the gas consumed by Brazil is
  supplied by Bolivia.
• Brazil is looking at buying more gas from Peru to
  reduce Bolivias share of their market, but this
  is dependent on more reserves being found in
  Perus giant Camisea Field.
• DEVON ENERGY CORPORATION
• Headquartered in Oklahoma City, USA.
• Fortune 500 company.
• One of the largest processors of natural gas and
  natural gas liquids in North America.
• Produces around 2.3 billion cubic feet of natural
  gas each day.
• REPSOL YPF SA
• Spains largest oil company (private company).
• Operates in Latin America, the Middle East, and
  North Africa.
• Firm owns YPF, Argentinas 1 oil company.
• One of the worlds ten largest oil enterprises.
• OTHER COMPANIES
• Currently Bolivia is trying to find other
  investors for the export of its natural gas.

9

• COCA LEAF ERADICATION
• The coca leaf has been used by the Quechua and
  Aymara people as a way to fight off hunger (they
  used it during the exploitation of silver mines
  during the colonial times, when indigenous people
  were slaved to mine the precious metal)
• The consumption of coca leaf and tea is part of
  daily life for Bolivias peasants, miners and
  workers.
• The US lead Plan Dignidad (Dignity Plan), which
  seeks to reduce coca production to zero, is seen
  as an attack on the peasants livelihoods and the
  indigenous peoples way of life.
• This US-financed plan involves US military
  advisers on the ground ordering Bolivian soldiers
  to attack, kill and displace peasants.
• This has resulted in resistance groups being
  formed, and in 2001, for the first time since
  coca eradication began, more police and soldiers
  were killed than peasants.
• Under US law, a refusal to continue the coca
  eradication campaign (whose objective is to
  completely eradicate ALL crops of coca leaf), the
  US would be required to vote against any Bolivian
  application for loans and grants from the World
  Bank, International Monetary Fund (IMF), or
  Inter-American Development Bank all critical to
  Bolivias ability to finance its debt and fuel
  its economy.

10

• NATIONALIZATION OF GAS RESERVES
• In May 2006, Evo Morales was the first indigenous
  president elected by an overwhelming majority
  (almost 54 of the vote).
• In May of 2006, he signed into law that all
  Bolivian natural gas reserves were to be
  nationalized, and that 76 contract signed by
  foreign firms were to be renegotiated.
• This step is expected to increase the national
  revenue from energy sources to 780 million in
  2007 (a six fold increase from the 2002 revenue)
• Unlike Venezuela, Bolivia lack the technological
  capacity to process and refine their own natural
  resources, even for their own use.
• This handicap represent a huge loss of leverage
  in the pressure that Bolivia can exert with its
  natural resources.
• An example of this is Brazils Petrobras refusal
  to renegotiate the contract for export of
  Bolivias natural gas, and has indicated that it
  will look for alternatives.
• If this is the case, 90 of Bolivias gas export
  would be lost, possibly plummeting the country
  into further recession and poverty.
• The move to regain national control of the
  countries natural resources falls in line with
  Venezuelas President Hug Chaves Bolivarian
  Revolution.
• In October 20, 2006 Argentinas leftist president
  Nestor Kirchner signed a deal to import
  17billion of Bolivias natural gas over the next
  20 years. This is a deal portrayed as part of a
  drive toward Latin American solidarity.

11

• BOLIVARIAN REVOLUTION
• Although sources vary, it is believed that Chaves
  originated the Bolivarian Revolution based on the
  ideology of Bolivarianism during his election as
  Venezuelas president in 1998.
• One of the main ideas of Bolivarianism is to
  promote the unification of Latin American
  countries, as was originally envisioned by Simon
  Bolivar.
• Venezuelas president Hugo Chaves has called for
  a Bolivarian Revolution, based on this
  Bolivarianism ideology, even though it can be
  seen as contradictory since Simon Bolivar
  believed in free-markets and liberal rights.
  Therefore Chaves version is a neo-Marxist version
  also referred to as Chavism.
• The central points of Chaves Bolivarianism are
• Venezuelan economic and political sovereignty
• Economically self-sufficient (in food, consumer
  durables, etc.)
• Equitable distribution of Venezuelas vast oil
  reserves.
• Eliminating corruption
• One of the movements that Chaves is promoting is
  the mutual support amongst countries holding key
  reserves of hydrocarbon resources to stop the
  dependency on international investors for the
  export of these resources. Bolivia is currently a
  key player in this movement.
• Oil is the basis of Chaves power in this
  revolution, as the worlds fifth-larges crude oil
  exporter. Selling 60 of its output to the USA
  and accounting for 15 the USAs petroleum
  imports.

12

• BOLIVARIAN REVOLUTION (CONTINUED)
• If Chavezs Bolivarian Revolution is to be
  successful, Venezuela must keep pumping enough
  oil to finance it. The country has the largest
  proven oil reserves in the Western hemisphere (78
  million barrels) and the largest in the world
  (300 million barrels) if the crude in the Orinoco
  tar belt is included.
• Venezuelas advantage over other countries is
  that it also owns significant refining and
  distribution assets through Houston-based CITGO.
• Profits from energy-based resources are estimated
  at US6.5 billion 2004, with 5 billion being
  invested in further exploration and development
  with the goal of bringing production from the
  current 3.2 million barrels per day (MBPD) to 4.9
  (MBPD) by 2010.
• It is estimated that from these profits, Chaves
  is diverting 4 billion a year to finance the
  Bolivarian Revolution. Leading to a possible
  investment shortfall that can only be made up by
  foreign investors.
• Currently Venezuela is moving towards
  diversification of investment sources for its oil
  industry, signing agreements with Beijing,
  Brasilia and negotiating with New Delhi.
• Chavezs plan is to deal government-to-government
  rather than with private firms and to make
  Venezuela less dependent on exports to the U.S.
  and therefore an example to other Latin American
  countries

13

• CONCLUSION
• The future of Chavezs Bolivarian Revolution is
  yet to be seen, no matter how it is cut, it is
  based on a non-renewable resource, and Venezuela,
  along with the other hydrocarbon producing (and
  yet poor) countries in Latin America need to move
  towards the development of new technologies that
  will support and guarantee their economical
  development and sustainability.
• The idea of a unified and self-supporting Latin
  America is currently gaining momentum, but can
  this movement overcome nationalism? Or will it be
  lost in the always turbulent differences set upon
  by borders drawn up two centuries ago as a the
  aftermath of colonization?
• 
  
• This past weekend, Evo Morales has achieved
  something that few politicians ever do, and that
  is to deliver on what he promised. He has been
  able to regain control of the natural resources
  of Bolivia, while still maintaining international
  investors in the country.
• But is The party really over for international
  companies in Bolivia? or are these mostly
  symbolic contract signed with no real
  specifications as to the details? (the devil is
  in the details)