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Jim Shultz: Gas Issue Ignites Bolivia Once Again

The Democracy Center On-Line
Volume 64 - May 12, 2005


Bolivia is, once again, in a state of political turmoil and uncertainty. At the center of the crisis is a fierce national debate over how the country will deal with foreign oil companies as the nation develops its vast gas and oil reserves. For our readers interested in Bolivian events, here is how things stand at the end of the day Thursday. The situation is changing quickly and to keep readers up to date I will be adding news as it develops on our "Blog from Bolivia" at:

- Jim Shultz, The Democracy Center

The President has gone on television, warning that country is on the verge of dissolving. A popular uprising on the edge of the nation's capital is threatening to shut down the government on Monday. That same day thousands of others will begin a march on the capital from cities around the country. Foreign oil companies are threatening to stop investment and production. In private, social movement leaders use terms such as "civil war" and "presidential coups" when they ponder the possibilities of the days and weeks ahead.

This is the situation tonight as Bolivia arrives at the political endgame in the long-simmering battle over how it will develop its huge reserves of oil and gas.

A Political Crisis Years in the Making

For more than two years Bolivia has been engaged in a fierce national debate over how it will develop its gas and oil for export and especially over what role foreign oil companies will play in that exportation. In October 2003, Bolivia's last President, Gonzalo Sánchez de Lozada, was ousted from office when he ordered soldiers to fire on crowds protesting his plan to export gas to California via Chile. His successor, President Carlos Mesa, has sought to address the gas issue through a political process that has included a national voter referendum and negotiations with Congress. Now, as the debate boils to its conclusion, the government finds itself caught between the same irreconcilable pressures present since the start - from social movements, corporations such as British Petroleum, the International Monetary Fund, and regional interests demanding control over gas revenue.

Last week, after months of negotiation, Congress passed a gas bill that came under attack immediately by both foreign oil companies (who don't want to pay 50%) and social movements (who want the country, not the corporations, to control of the nation's gas and oil reserves). In an address to the nation Tuesday night, President Mesa called for a summit of all interests to hammer out a new version of the legislation. Translated, this means that Mesa is hoping wildly that another round of high level negotiations will somehow produce a national consensus that has been impossible to achieve for two years. It is also the case under Bolivian law that the Congress now has the power to implement the law without Mesa's approval, a situation the President apparently wants to avoid.

Until the late 1990s, Bolivia controlled its oil and gas and split revenues 50/50 with the foreign oil companies that brought those resources to the international market. Then, under direct pressure from the International Monetary Fund (IMF), Bolivia privatized its petroleum industry. IMF officials told Bolivia that by cutting the country's share down to 18%, it would give the corporations an incentive to ramp up production and make Bolivia more money. In fact, gas revenues plummeted by $40 million.

The two biggest issues in the debate over the gas bill have been the demand to raise taxes on the companies back to a 50/50 split and returning basic control of the petroleum reserves back to the Bolivian people. The bill passed by the Congress did include a version of a return to 50/50 but left control of the gas and oil in foreign corporate hands. This means that, among other things, the corporations control the volume of production, the market price and other essential decisions.

The IMF Fans the Flames of Violence - Once Again

Why has President Mesa been so intractably in favor of the oil corporations in the face of such staunch opposition from his own people? To be sure, some part of it is the threats by the companies to reduce their investment in Bolivia if the gas law isn't to their liking. It is a fact that foreign investment in the country has plummeted in recent years. One UN report cited by the NY Times claimed that foreign direct investment in Bolivia fell from $1 billion in 1999 to $134 million last year.

But the more direct pressure on the Bolivian government may be coming, once again, from the leaders of the IMF a hemisphere away in Washington DC.

Publicly, IMF officials claim that the matter is for Bolivia to decide and the Fund is applying no pressure. "This is an issue fundamentally for Bolivia through their political process to resolve," an IMF official told reporters in Washington this morning. However, the Bolivian daily, La Razon, reported this week that in March, in the run-up to the IMF approving Bolivia's annual loan package, the IMF sought and secured a promise from the President that the government would not seek to renegotiate any of the contracts with the oil corporations.

This game of "say one thing publicly and do another privately" is exactly the IMF formula that sent Bolivia into political crisis in February 2003, when protests against an IMF-forced tax increase left 34 people dead. President Mesa told me personally, following that violence, that the government had warned Fund officials about the crisis the IMF was provoking but that they refused to listen. Once again, the IMF, driven by economic ideology, is pushing Bolivia to the brink of violence.

What Next?

This afternoon, Oscar Olivera, the well-known leader of the Bolivian Water Revolt, told me that he thinks the country is being pushed toward an all out conflict. "Our deepest worry is that the country is moving toward violent division, even civil war." It is a situation he says, "brought on by the foreign oil companies, who want to divide the country in order to keep control of our oil and gas."

Social movement leaders are split on whether to participate in the national summit called by President Mesa on Monday, criticizing it for being top-heavy with politicians allied with IMF/British Petroleum economic policies. Indigenous and community organizations in El Alto have announced that they will boycott the meeting. Other groups are meeting over the weekend to determine if they will go. Whichever Bolivian leaders meet in the city of Sucre Monday in search of a last-ditch compromise, they will face enormous pressures coming at them from all sides - and a nation once again at the brink of unpredictable political conflict.

A note to readers: For more background on the role of the IMF in Bolivia's "Black February" see The Democracy Center's newly published report, Deadly Consequences at:

For updates on how the situation in Bolivia develops see our "Blog from Bolivia" at:


THE DEMOCRACY CENTER ON-LINE is an electronic publication of The Democracy Center, distributed on an occasional basis to more than 2,000 nonprofit organizations, policy makers, journalists and others, throughout the US and worldwide. Please consider forwarding it along to those who might be interested. People can request to be added to the distribution list by sending an e-mail note to: Newspapers and periodicals interested in reprinting or excerpting material in the newsletter should contact The Democracy Center at "". Suggestions and comments are welcome. Past issues are available on The Democracy Center Web site.


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