Viva La Revolucion

3 May 2006



Bolivia Nationalizes Gas Fields

President Evo Morales issued a decree on May Day requiring private energy companies to renegotiate their contracts with his government. The decree goes even farther, though, in requiring them to sell his nation a controlling interest in the natural gas fields. He ordered soldiers to take control of the fields to drive the point home. In doing so, he has fulfilled an election promise to the voters and annoyed businessmen and other governments in the extreme.

To put things in perspective, Bolivia has large reserves but when it comes to actual production, it is small potatoes in the global natural gas market. Moreover, because it is landlocked, there is no way for the nation to export it directly except to its neighbors, mainly Argentina and Brazil. That means that the monopoly of state power that President Morales acquired with his decree is offset with a duopsony; that is, Brazil and Argentina have the power to shut Bolivia’s natural gas out of world markets.

Needless to say, Brazilian President Luis Inacio Lula da Silva is upset with his Bolivian counterpart. An emergency cabinet meeting was all he could muster on such short notice, but Brazil’s state-owned energy company Petrobras will expect something to be done about its refinery that Bolivia’s soldiers seized in Santa Cruz, in eastern Bolivia. Petrobras has sunk $1 billion into Bolivian gas and controls 45% of the nation’s production. Moreover, the 10,000 kilometer pipeline linking Bolivia, Argentina, Brazil and Venezuela may now be scuttled.

Still, Mr. Morales has more of the rabble-rousing leftist in him than the pragmatic progressive. As a result, annoying Brazil’s president is a by-product of playing the “little Fidel” card as Venezuela’s Hugo Chavez has already done. Standing up to outsiders plays well in Latin American countries (and elsewhere). Somehow, though, the people never quite figure out that such populists have a miserable track record in helping their countries prosper.

President Morales declared, “The pillage of our natural resources by foreign companies is over.” Which suggests the pillage by Bolivian companies may continue. And he went farther, saying this was “just the beginning, because tomorrow it will be the mines, the forest resources and the land.” Ah, yes, the old formula that has done wonders for Cuba, the all powerful Soviet Union and North Korea. President Morales has correctly identified the right problem and has prescribed the wrong policy. George Santayana was right about repeating history.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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