Econ-Atrocity: Bolivia–The Battle Over Natural Gas

By Noah Enelow

You would think the discovery of massive natural gas deposits in the heart of a developing country would present itself as an enormous windfall. All this country would have to do is find a source of financing, extract and refine the gas, sell part of it on the world market, and keep the rest, along with the profits, for domestic development.

Unfortunately, in Bolivia it hasn’t worked out quite so rosily. The battle over natural gas has exacerbated the country’s class and ethnic tensions to the point of warfare. Dozens of people have been killed in massive street protests; the president has resigned; the country is in chaos. What happened?

Upon first glance at the problem, there appear to be two root causes. The first issue was that the gas would have had to be exported through Chile, a longtime rival of Bolivia, which usurped Bolivia’s only seaport over a hundred years ago. The deal would thus enrich Chilean export companies at the expense of the Bolivians. The second issue was that the extraction and refining of the gas were to be undertaken entirely by a multinational company, Repsol-YPF. Their contract, signed long before the latest and largest gas deposits were discovered, was to provide the Bolivian public sector with 18% of the profits from sales. The rest would leave the country – a typical pattern for extractive industries in underdeveloped countries.

But those two issues are the just the tip of the iceberg. The peasants who make up the bulk of the protesters have good reason to believe they’d never see a dime of even those meager profits. Over the last two centuries, numerous raw materials have been extracted from Bolivia: silver, rubber, guano, and tin. The result? Underdevelopment, poverty, and disease. The leading cash crop of Bolivia, coca leaf, has been targeted for eradication by both the domestic government and the United States, as part of the “War on Drugs”.

Furthermore, as Bolivia has become increasingly beholden to the IMF’s structural adjustment program, life has steadily grown worse for the poor. In the last 3 years, the poorest 10% of the people have seen their incomes decline 15%, as the wealthiest 10% have seen their incomes increase 16%. Social services have been slashed while taxes have increased, to pay off the country’s high debt. How far can one expect a country to tighten its belt when its poverty rate is 70%?

Finally, the entire conflict is rife with ethnic and class tensions. The Bolivian elites are overwhelmingly of Spanish descent, while the poor are overwhelmingly indigenous. As a group, the former have proven untrustworthy, unaccountable, and corrupt; the latter grow more irate by the day.

The resignation of the U.S.-endorsed president, Gonzalo Sanchez de Lozada, who supported the gas plan, thus represents a victory for the poor. But the struggle is not over. The primary representative of the indigenous people, the self-described socialist and coca grower Evo Morales, in a recent speech declared the West a “culture of death”; meanwhile, in Sanchez’s resignation speech, he referred to Morales as a “narco-syndicalist” and warned of the power of the coca growers.

Is an agreement possible? A broad, highly organized coalition of labor and indigenous groups, the National Coalition in Defense of our Gas, has drawn up a list of demands. These include the formation of a constituent assembly to ensure greater popular participation in government, and the re-nationalization of Bolivia’s gas resources. The coalition has given the new president, Carlos Mesa, a 90-day truce to allow him to implement their demands. Will the two sides of Bolivia forge a new social contract, or will the country’s exports continue to enrich the few while leaving the many impoverished? Stay tuned.

References:

The Americas.org website contains a fantastic wealth of information about Bolivia. Numerous alternative sources and viewpoints are present alongside updates from the BBC and mainstream media.

Laura Carlsen. “Resources War: Lessons From Bolivia.”

Newton Garver, “Bolivia in Turmoil“, Counterpunch 10/17/03.

Keith Slack, “Poor Vs. Profit in Bolivian Revolt.”

(c) 2003 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.