Almost 10 years ago, Bolivia suffered one of the worst social confrontations in its recent history, the conflict which was named as "Guerra del Gas" (the Gas War) revolved around several problems and demands from a diverse group of political and social actors
Today I was surprised to find out that gas prices are in its peak historically (see video below). Bolivia has the second largest gas reservoirs in the world, the logical consequence of such setting would be to question how Bolivia is benefiting of this. After all, the development of countires such as Saudi Arabia, Norway, UAE or even Venezuela can be attributed to the explosion in oil prices. Sadly the benefit is minimum, I would dare to say non existent. This is the tale of el Lamento Boliviano (Bolivia's Lament)
Highest gas prices in history (video from CNN)
On the lines below I will introduce you with a general perspective of what was the Gas Wars and how.. almost 10 years after that Bolivia is still with the same disappointment and lack of development, despite sitting on top of one of the largest reservoirs of gas in the world
The Gas War (La Guerra del Gas)
The trigger for the most intense confrontations was the protest from some parts of the population regarding the way Bolivia would manage the sale from yet another natural resource blessing: its gas reserves.
The issue centered in Bolivia's large natural gas reserves and the
prospect for their future sale and use. The Bolivian gas reserves are
the second-largest in South America, after Venezuela, and exploration after the privatization of the national oil company YPFB showed that proven natural gas reserves were 600 percent higher than previously known.
A consortium called Pacific LNG was formed to exploit the newly discovered reserves. The consortium comprised the British companies BG Group and BP, and Spain's Repsol YPF.
The ministers and policymakers under the governments of Hugo Banzer Suarez, Jorge Quiroga and Gonzalo Sanchez de Lozada designed a plan costing US$6 billion to build a pipeline to the Pacific coast, where the gas would be processed and liquefied before being shipped to Mexico and the United States (Baja California and California), through a port either in Chile or Peru.
Policymakers at that time hoped to use the gas profits to bolster the sagging Bolivian economy
and claimed the money would be invested exclusively in health and
education. Opponents argued that under the current law, the exportation
of the gas as a raw material would give Bolivia only 18% of the future
profits, or US$40 million to US$70 million per year. They further argued
that exporting the gas so cheaply would be the latest case of foreign
exploitation of Bolivia's natural resources, starting with its silver and gold from the 17th century.
On top of that, the government of Gonzalo Sanchez de Lozada (president at that time) lacked of a popular acceptance. Sanchez de Lozada had gained less than 30% of the vote in the last elections and he came to power trough a series of pacts and coalitions with other political parties (at that time Bolivia's electoral vote was widely dispersed among four political parties: Evo Morale's MAS, de Lozada's MNR, former president Paz Zamora's MIR and Cochabamba's past-major Manfred Reyes Villa's NFR).
At that time Bolivia's fiscal deficit was considerable, and an attempt of a tax raise on Feb 2003 damaged even more the acceptance of de Lozada's government.
Additionally, the new discovery of the gas reservoirs exacerbated the regional demands of Bolivia's departments (political administrative divisions equivalent to states). In the past the regions of Potosi and Oruro (which once were the main beneficiaries of Bolivia's golden age of mining) had not seen a real development product of the exploitation of minerals such as silver and tin; and were demanding an equal share of income and development for the newly discovered reservoirs. On the other hand the regions of Tarija and Santa Cruz demanded a bigger share of the income from the sale of the gas arguing -logically- that the reservoirs were in their respective administrative regions. These demands were only proof of the highly centralized system that Bolivia had until that time with only three cities (La Paz, Santa Cruz and Cochabamba) being the main beneficiaries of government policies.
The issue of the pipeline and the export port
The proposed plan for the industrialization of the gas required the Bolivian government to select a port to export the industrialized gas, since Bolivia is a landlocked country.
The dispute arose in early 2002, when the administration of President Jorge Quiroga proposed building the pipeline through neighboring Chile to the port of Mejillones, the most direct route to the Pacific Ocean.
However, antagonism towards Chile runs deep in Bolivia because of the loss of Bolivia's Pacific coastline to Chile in the War of the Pacific (1879–1884). There were some proponents of an alternative of the Ilo port in Peru given this antagonism
President Jorge Quiroga postponed the decision shortly before leaving
office in July 2002 and left this highly contentious issue to his
successor.
After winning the 2002 presidential election Gonzalo Sanchez de Lozada
expressed his preference for the Mejillones option but made no
"official" decision. The Gas War led to his resignation in October 2003.
The long road
After Sanchez de Lozada's resignation in october 2003, all the plans for the gas industrialization were completely stopped and a "soap opera" between the then opposition party of Evo Morales (MAS) (backed up by Venezuela and Cuba) and the leftovers of Sanchez de Lozada's government (among them his former Vice President Carlos Mesa G., who assumed the presidency) begun
.
President Mesa called for a Referendum on 2005 to solve the gas crisis by a popular vote, which ameliorated momentarily the pressure from opposing parties, however Mesa was forced to resign, and after an interim government of the Supreme Court Chief Justice (Gonzalo Rodriguez Veltze) who implemented a new Hidrocarbon's law (closely related to the demands of 2003) and a new tax system to equalize the benefits of the potential gas sale among the different Bolivian regions, a general election was called
.
Evo's government, the nationalization and tons of corruption
Evo Morales won the 2006 elections and as of May 1, 2006 signed a decree stating that all gas reserves were to be nationalized. This ended definitely any chances of foreign investors on the plan of the gas industrialization. Moreover it put all the responsibility on the Bolivian government for the industrialization of the gas and other natural resources (lithium, minerals and others)
To date, Bolivia exports gas to Brazil and Argentina (projects that were developed before Evo's government) and these two projects constitute the main income source for Bolivia's national aparatus.
Additionally, several cases of corruption were unveiled related to the newly nationalized Bolivian Gas and Petroleum Company. The most prominent case was the one of Santos Ramirez (former President of the Senate and personal friend of Evo Morales) who was found guilty of corruption and stealing more than US$ 45 million from the nationalized Gas and Petroleum Company (he was sentenced to 12 years in prison in January 2012)
What are the benefits for Bolivia today?
As stated above, the project to export gas to Mexico and the US never took place, instead Bolviia's policymakers focused on political agendas more than economic development.
The only income-generation projects (non-exploratory) projects that Bolivia has today regarding Gas are the pipelines to Argentina and Brazil. Both countries enjoy of a controlled capped price for the Bolivian Gas (thanks to the poorly managed negotiations and a "amigos" deal between former President Lula da Silva and Evo Morales, and former President Kishner and Evo).
Besides the politics, and to illustrate ever further Bolivia's lament below you will find a comparative chart between Bolivia, Argentina, Ecuador and Venezuela's GDP per capita (the data is from the IMF's International Financial Statistics, October 2010)
It would be silly to say that the only reason of the low economic development of Bolivia is only attributable to the failure of the Gas industrialization, but I suspect that the charts would look different if Bolivia had developed this project. (Even forgetting about the Saudi countries, Mongolia and its great recent development come to my mind) I expect to elaborate further on the economic analysis on this specific issue.
Well I hope this brings some ideas on why I call all this stage a Lamento Boliviano (Bolivia¡s Lament), I just hope that things change in the future...
