Bolivia: Evo Morales’ action on oil and gas

When Bolivia’s President Evo Morales announced, on 1 May, a decree that ‘nationalised’ the oil and gas (the ‘hydrocarbons’) resources, he sent a shockwave around the world.

In dramatic fashion, the Bolivian army went into 56 facilities, hanging out the country’s flags and banners saying, "Nationalised – belongs to the Bolivians". While raising hopes amongst the poor masses of Bolivia, who have been fighting for nationalisation for years, shivers ran down the spines of the ruling elites. In neighbouring Brazil, which depends on Bolivia for over half of its consumption of natural gas, the media gave the impression that the taps would soon be turned off and that an energy crisis was imminent.

At the same time, there are many activists in Bolivia that are not satisfied – this is not the nationalisation that they fought for. The multinational giants are still there and have 180 days to ‘renegotiate’ their contracts. The ‘nationalisation’ stops halfway. The Supreme Decree 28 701 aims at founding joint ventures with the multinationals, where the state will control 50 % plus one share in the companies that were state owned until 1996. But activists want full nationalisation, not just a bigger share of the cake that will still be divided amongst foreign capitalists.

Nevertheless, the fact that Evo Morales announced this decree is due to the pressure of the masses on the issue of the oil and gas reserves, which, since 2003, toppled two presidents.

The fear amongst the ruling classes is that the history has now turned a corner. The reaction against neo-liberal policies, which dominated almost every Latin American country, for almost two decades, reached a new level. Chavez, with his populist policies, coupled with socialist rhetoric, is not an isolated phenomenon, anymore. In many countries candidates for presidential elections (like the supposedly left wing Lula, in Brazil), raised hopes amongst the masses. These hopes and all promises were betrayed after their election. The fact that Evo Morales kept his election promise, even if the ‘nationalisation’ measure has limitations, is a step forward and sets a dangerous example for the capitalist class around the world. They now fear that the left-nationalist presidential candidate in Peru, Humala, will win the second round contest, maybe followed by a comeback for the former Nicaraguan president, Sandinista-leader Daniel Ortega, in November – all with the backing of Hugo Chavez.

Ambiguous start

Many feared that Evo Morales, who won the presidential election in the first round, last December, would become a new Lula, or Gutierrez (who came to power in Ecuador after a mass movement, went to the right, and was ousted from office by a another mass movement, last year), following the same neo-liberal path, betraying the mass movement that swept him to power. On his first visits abroad, Morales did everything he could to calm governments in countries like Spain, Argentina and Brazil. Morales explained that his promised nationalisation of the hydrocarbons would not mean any expropriation or confiscation, that the private companies would have the right to profits, but that the country needed "partners, not bosses".

Promises of an increase in the minimum wage of 200 % were not fulfilled, small wage increases were given to teachers and health workers, and striking workers’ demanding the nationalisation of the bankrupt air company ‘Lloyd Aereo Boliviano’ were met with army intervention in the airports.

However, pressure from the mass movement compelled Morales to take some action, or risk the same fate as former Bovilian presidents, Lozada, in 2003, and Mesa, in 2005 – both forced to resign by huge struggles of the working class.

According to Kennedy Alencar, columnist for the Brazilian newspaper, Folha de São Paulo, when Lula spoke privately with Evo Morales at a meeting with Chavez, President of Venezuela, alongside President Kirchner, in Argentina, Lula complained at the way the nationalisation was carried out. He said there was not any notice given beforehand and the army was used. Kennedy Alencar said, "Evo Morales replied that he had to make a political gesture, to avoid early destabilisation – Bolivia has had four presidents in four years". Apparently, Morales also thanked Lula for his muted reaction and hinted at the possibility of not carrying out an increase in the price of gas until after the elections in Brazil, so as not to not rock the boat for Lula.

The halfway nationalisation

The decree 28 701 talks about being the third and "definite" nationalisation of the hydrocarbons, when the state "recovers the ownership of all hydrocarbons produced in the country". But, in fact, it does not go as far as previous nationalisations. In 1937, Standard Oil was nationalised, and, in 1969, Gulf Oil. The new decree says: "The state takes control and management over production, transport, refining, storing, distribution, selling and industrialisation of all hydrocarbons in the country". But, at the same time, it does not fully reverse the privatisation of 1996. The private companies are given 180 days to renegotiate the contracts. The decree states that the five companies which were sold, reducing the state oil and gas company, the YPFB (Yacimientos Petrolíferos Fiscales Bolivianos) to a rump, will be turned into joint-ventures. This means the state company will have a controlling stake of the shares (of 50 % plus one).

What will happen with the other companies is not clear. Much will depend on the audit that will be made during the period of transition, and on the negotiations with the multinationals. But it will also depend on the pressure of the masses. This process is incomplete and there is a possibility of forcing Evo Morales to go further than he planned.

The decree is based is based on big parts of ex-President Mesa’s "hydrocarbon law", which led to his downfall. One difference is that a new tax of 32% will be carried out, bringing the total taxes to 82 %, during the transitional period. But this only affects the biggest gas fields, like San Alberto, San Antonio (Petrobras) and Margarita (Repsol) – while the government’s TV-spots advertising the decree gives the impression that the new tax is on all oil and gas companies. The other companies will continue paying 50 % in taxes. The money from the new tax, which is estimated to provide a new income of $320 million (these figures are likely to be an exaggeration, as the new taxes are only on part of production, and are only guaranteed for six months) and is supposed to go to revitalizing the YPFB. Part of it will possibly go to pay for the 50 % of shares that the state wants in its hands. So, therefore, this money will go back to the multinationals!

The article in the decree which covers the return of 50 % of the shares, plus one, is different to the article covered by Mesa’s Hydrocarbon Law. But the Hydrocarbon Law already stated that the shares in the pensions funds created during privatisation will be transferred to the YPFB. For example, one of the five companies is Transredes (which runs pipelines). In that company, 50 % of the stocks are owned by Shell and Prisma Energy (Enron), 34 % by the pension funds, and 16% by others. So, only 17 % is needed do be added to the 34 % from the pension funds to guarantee a 51 % share for the YPFB. According to, government officials estimate that the share in the other companies that will be “nationalised” could be even smaller, down to 3 % of the shares.

The actual taxes paid by the oil and gas companies are lower than the 50 or 82% quoted by the government. According to the government’s most optimistic calculations, the tax income from the hydrocarbons will rise to about $750 million as a result of "nationalisation". But the total income of the oil and gas industry is $3,500 million dollars, according to

The most important difference between Mesa and Morales, is that Morales is seen as actually carrying out changes, even if it is only halfway. In fact, Morales’ measures are not a break with the capitalism. The measures are dressed in the cloth of ‘national sovereignty’, and are aimed at returning resources to the Bolivian state, which is still dominated by the country’s capitalist elite.

In Norway, for example, a total state monopoly of oil resources exists. Britain recently also raised taxes on the production of North Sea oil, from 40 to 50 %. Morales’ decree, even it is inspired by Chavez’s policies in Venezuela, brings Bolivia’s situation closer to what exists in Brazil (despite the process of privatisation followed by the Lula government).

But the imperialist powers are not prepared to accept even these limited measures. Condoleezza Rice, the US State Secretary, calls Evo Morales a "demagogue". The reason is not so much the immediate material resources at stake. The multinationals have only invested $3.5 – $4 billion in Bolivian gas and oil since privatisation. In reality, what imperialism fears are the political knock-on effects of Morales’ move, with the risk of "Chavez-ism" being exported to other Latin American countries.

Will the multinationals leave?

Despite having the second biggest reserves of natural gas in Latin America, Bolivia is quite a small producer and has even a smaller market. Most companies have a limited operation in Bolivia. For example, British Gas has only 2 % of its production, and 3 % of its reserves, there. The situation is different to Venezuela, which is the fifth biggest producer of oil in the world, and which has big reserves (some estimates says that if you include the reserves of extra heavy oil, which it is now possible to extract, Venezuela could now have the biggest reserves in the world). Multinational oil companies invested $17 billion (investments that now are worth $33 billion) in the Orinoco region of Venezuela, alone which makes up for a quarter of total production. So, Bolivia is not in the same position to dictate conditions as Chavez, who can use the huge reserves and high oil prices as bargaining chips.

However, Bolivia has been an extremely cheap country for production of oil and gas. Even with higher taxes, the cost of production is very low. The production costs of Repsol and Amoco in Bolivia are the lowest amongst 200 monitored companies in the world, according to ‘Global Upstream Performance Review 2003’. The cost equivalent for one barrel of oil for Repsol is only $1, and for Amoco, 97 cents, compared to a world average of $5.60. The cost of developing new wells is even lower. Repsol spends only 40 cents per barrel, compared with the world average of $8.58.

The situation is somewhat different for the Spanish Respol-YPF, which has invested $1.2 billion since 1997 and has 18 % of its reserves, and 11 % of its production, in Bolivia. The same is true for Petrobras and Brazil.

The state-owned Petrobras and the Cardoso government (Lula’s predecessor) in Brazil, made a strategic move into Bolivia, in 1996, to increase the supply of natural gas as a source of cheap fuel. Petrobras invested $1.5 billion since 1996, and is, by far, the most important company in Bolivia. Petrobras, alone, has a turnover in the country that amounts to 18 % of national GDP! Petrobras pays 24 % of all taxes and controls 35% of Bolivia’s total export! The company has control of 46 % of the gas resources, 95 % of the refining capacity, and 100 % of the gasoline sold in the country.

To guarantee a big share of the cheap gas, the company signed a very favourable contract, in which it paid for a fixed amount of gas for years, while importing less (in reality) to Brazil. Over a five year period, Petrobras imported 18 million cubic metres a day, but, in fact, paid for 25 million cubic metres. Of course, that was not done to be charitable to the Bolivians. The state only got 18 % of this, the rest went to Total (France), Repson (Spain), Amaco (USA), Enron (USA)… and Petrobras!

The result is that Brazil is now totally dependant on Bolivian gas, which represents at least 51 % of total consumption in Brazil. 75 % of Bolivia’s gas goes to Brazil. So, even if Petrobras is threatening to stop investing in Bolivia, it cannot simply abandon its commitments.

It is ironic that ex-President Lozada’s move to agreeing to a pipeline to Chile, which would open up the possibility of exporting liquefied gas to other countries, and make the country less dependent on Brazil, led to his downfall, and was stopped. The Chilean newspaper, ‘La Nación’, writes that Chile hopes to import more gas from Bolivia and that the country could pay twice the amount they do now.

Is it enough?

The nationalisation of hydrocarbons is widely perceived as the country’s last chance to end the poverty conditions that exist. Will Evo Morales’ nationalisation be enough to transform the situation for the poor masses? Unfortunately, the answer is no. Bolivia has far less reserves than Venezuela, and less of the more profitable oil. And not even Venezuela’s huge resources have been enough to transform the lives of the poor. Without breaking with capitalism, and carrying out a socialist plan of production, Chavez has been limited in what he can do, despite the important reforms he brought about. The big majority in Venezuela still live in poverty.

Even if the new 32 % tax would go completely towards state expenditure, and not to prop up YPFB, the state would still have a deficit. And to maintain production of oil and gas, large investment and technical know-how is needed. Chavez is prepared to help out, using the Venezuelan state-owned PDVSA, but even Venezuela is dependent on foreign investment.

To get more resources for social reforms, Evo Morales announced his intention of raising the price of exported gas by 61 %, which would give a welcome extra $600 million in revenue. Lula categorically said "There will be no price increase" – that the contract only gives the possibility to an adjustment of prices every five years. But he also says that "everything must be negotiated". Lula also said that if Bolivia increases the gas price, then Petrobras will bear the brunt, not the consumers.

Bolivian gas is cheap. In Folha de São Paulo, the columnist, Clóvis Rossi, gives the example that Californian gas is 6-7 times more expensive than Bolivian. Consumers in São Paulo actually pay less for the gas than Bolivia!

In the short term, Brazil does not have any alternatives. The country could import liquefied gas from other countries, but the price would be almost the same as gas from Bolivia, even with a price increase. To import from elsewhere would require building a facility to de-liquefy the gas, which would take time, and $300 – 400 million investment. Brazil has it own gas resources, but the new fields will only start production in 2008. And while Brazilian resources are quite substantial, the projected production from these fields will not be enough to meet demand. This is especially the case since many Brazilian companies use gas as fuel, most of the new power plants are run on gas, and Brazil also has the biggest number of cars running on natural gas in the world.

All this shows that there is no way out of social crisis for any single country, on a capitalist basis. The need for developing an integrated energy system in Latin America is urgent, but it must go beyond the logic of capitalism and the market.

In this situation it is vital that Brazilian socialists not only give support to the Bolivians’ right to nationalise, but also raise class issues and a socialist solution, that includes the Brazilian situation. The same applies to Venezuela.

PSOL (Party of Socialism and Liberty – the new broad socialist party that Socialismo Revolucionário, CWI in Brazil, is helping to build) must raise the need to reverse the privatisation process of Petrobras in Brazil. Cardoso privatised most of its shares. The Brazilian state (including the state-owned development bank) has only 39.8 % of the capital, despite having 57.6 % of the shares with the right to vote. The company is run on a capitalist basis, with big dividends going to its shareholders, and is listed on the New York Stock Exchange. Last year, Petrobras made a profit of 23.7 billion Reales ($10.1 billion) – an increase of 40 %. That means that Petrobras, alone, has a profit that is bigger than Bolivia’s GDP! Of that, almost a third (7 billion Reales) is distributed to the shareholders as dividends. That, alone, is double the total amount invested by Petrobras in Bolivia, since 1996!

Lula’s government did not reverse the privatisation, but even continued to auction the oilfields. There has been a huge propaganda campaign in Brazil by Petrobras and the government which boast that the country, for the first time, is self-sufficient in oil. But an increasing part of those riches go into the pockets of big-business.

True nationalisation requires workers’ control and management

Genuine nationalisation in Bolivia, or Venezuela or Brazil, for that matter, will only be possible when it is coupled with a socialist transformation of society. As long as there is capitalism, nationalisation will be partial, subjected to the market, and under threat of privatisation. Chavez’s plans of creating Petrosul, as an oil and gas company for the whole Latin America, or building 8,000 kilometre gas pipeline connecting Venezuela, Brazil, Bolivia and Argentina, should be linked to workers’ control and management, a socialist plan of production, and a socialist federation of Latin America. In that way, you could combine the resources of Petrobras, PDVSA and YPFB, giving the capacity to develop the production for the benefit of all working people, not profit. These companies must be completely nationalised, with compensation only the basis of proven need small savings. Workers’ control and management would mean that the boards of those companies should be composed of representatives of workers in the company, of the workers’ movement, in general, and also representative from a workers’ and peasants’ government. This would ensure that the opinions of different sections of the working class would be considered, expressing the need of jobs, development, safeguarding the environment etc.

Unfortunately, that is not what Chavez is carrying out in Venezuela, or what Evo Morales is doing. Evo Morales is only declaring nationalisation from the point of view of “national interests”. But what does this mean in a country that is still dominated by a corrupt elite, made up of capitalists and big landowners, who daily implement the wishes of the imperialist powers? In effect, Morales is adopting a nationalist approach, with no link to a socialist programme. He describes the 1996 privatisation decree as a "betrayal of the homeland"! This is linked to a "stagist" view of how to reach socialism in the long run. The Vice President of Bolivia, Álvaro Garcia Linera, a “theoretician” of the government, says that socialism is not viable in Bolivia for the next 50-100 years. In the meanwhile, what is necessary is to develop and "Andean-Amazonian capitalism".

The idea of a progressive "Andean-Amazonian" capitalist class in Bolivia is impossible to even imagine. The capitalist class in Bolivia is small, weak, and subjected to the will of the imperialist powers. Only by breaking with the capitalist system, and starting a real integration on a socialist basis in Latin America can a new future be opened up for the poor working masses of the continent. The struggle against neo-liberalism, in country after country, on the continent, is already a big source of inspiration for workers and youth around the world. A truly socialist government in one of these countries would electrify the situation in the whole continent and beyond.

Petrobras and Bolivia

Last year, Petrobras made a profit of 23,7 billion Reales ($10.1 billion) – an increase with 40 %. That means that Petrobras, alone, has a profit that is bigger than Bolivia’s GDP! Of that, almost a third, 7 billion Reales, is distributed to the shareholders as dividends. This is double the total amount invested by Petrobras in Bolivia, since 1996!

The need for a revolutionary party

Evo Morales represents the most moderate wing of the mass movements that have rocked Bolivia since 2003. In October 2003, when some 80 people were killed during mass protests that led to the fall of president Lozada, Morales was not even in the country. The movement was against Lozada’s plans to build a new pipeline to a port in Chile, where gas could be exported in a liquefied form (LNG) to the US and Mexico. The widespread feeling amongst the masses was that natural resources were, once more, plundered for the benefit of foreign capitalism, while two thirds of the country lived in poverty. The oil and gas sector was almost totally privatised in 1996, and taxes lowered from 50% to 18 %.

The movement raised the banner of nationalisation, demanding the expulsion of the multinationals, and the riches of the county to be used to lift the population out of poverty. While Evo Morales’ party, MAS (Movement Towards Socialism), played a minor role in the movement, he quickly gave support to the new president, Mesa (Lozada’s former vice-president).

When Mesa called a referendum, in July 2004, on the oil and gas resources, the more radical wing of the movement, such as the radical trade union federation, COB, called for a boycott, saying that referendum’s ambiguous questions were a way to derail the movement. Evo Morales supported the referendum, and was expelled from COB as a result. In the referendum, 95 % voted in favour a nationalisation, which lead to Mesa’s "hydrocarbon law", in May 2005. The law was seen as insufficient and that sparked a new movement that lead to Mesa’s resignation. The Constitutional Court ruled that all the 76 contracts made with the foreign oil and gas companies, since 1996, were illegal. For activists, this was proof that multinationals should be kicked out of the country, and the whole sector nationalised. Mesa’s law would give them a chance to rewrite and legalise their contracts, while raising the taxes back from 18 to 50 %. Evo Morales’ position vacillated, between just wanting a more rigid implementation of the 50 % tax (without the many exemptions proposed by Mesa), to raising the slogan of nationalisation because of the pressure of the masses.

Mistakes of the COB leadership

When the mass movement was at its height, and the authority of the Bolivian parliament was totally discredited, the COB leadership started raising the need for a workers’ and peasants’ government. COB and Fejuve (Federation of Neighbourhood Associations – that organises poor city dwellers in El Alto, La Paz’s poor neighbour) talked about setting up a "Popular Assembly", as an alternative to government and parliament, in a mass meeting with 400,000 participants, on 6 June 2005. But these ideas were not put into practice. Mesa resigned as a way to save the system, and once more, Morales and MAS gave support to an institutional and "safe" way out of the crisis.

The lack of a clear political alternative, in the form of a revolutionary party with mass backing amongst the workers’ and poor peasants’, and support for a socialist alternative, made it possible for the ruling class to re-establish control over the situation. The COB leadership played an important role in building the movement, but didn’t take steps in building such a party that could challenge MAS. They also lacked an understanding of the ebbs and flows of the movement, leading to important tactical mistakes. When the movement subsided in the second half of 2005, hopes were directed to the elections called for 18 December. Instead of standing with their own workers candidates in the elections, COB and other radical movements called for a boycott. But, with no alternative power structure, such as ‘popular assemblies’, most people did not want to lose the chance to have their say. Evo Morales was just 45,000 votes short of winning the presidential elections in 2002. Now there was a new chance to elect the first indigenous president of the country, if not in the whole continent. A clear expression that the boycott was a mistake was the fact that MAS got 88 % of the votes in El Alto, the main focus of the mass movement earlier that year. Evo Morales won a landslide victory, with 54 % in the presidential election, and a majority in the Congress.

COB and other movements gave the new government short notice – three months – to nationalise the hydrocarbons and threatened to restart the mass protests if this was not done. This was probably too short a timescale given the consciousness amongst the population. The COB leaders underestimated the impact made by the election of Evo Morales. The fact that the indigenous people, for the first time, had one of “their own” in the highest position in the country, more importantly a president who spoke of the need for a Constitutional Assembly that would “refound” the country, get rid of 500 years of colonialism, implementing popular, even if symbolic, measures, such as cutting the wages of the politicians by half and kicking out corrupt state bosses – all this had an important effect. People were ready to give Morales a chance. The COB leaders launched plans for an alternative Constituent Assembly and called a "general strike" on April 21st, but just a few turned out to a demonstration.

However, even if the COB leadership is temporarily weakened, this doesn’t mean the masses have forgotten the promises of about nationalisation. To secure a victory in the elections to the Constituent Assembly, in July, Evo Morales had to act.

He also announced also other measures. One of the neo-liberal labour laws, article 55 of decree 21 060, will be abolished. It gave bosses the right to sack workers without justification. But this will change the situation for very few. Only a fifth of all those who are employed have stable official jobs for which they pay taxes and social security. The minimum wage will be raised by 13.5%, from 440 to 500 Bolivianos. This is far less than the 1 500 Bolivianos that Evo Morales promised during the election campaign – a promise he has distanced himself from. And many won’t benefit even from this since (For example, 27 % in the urban areas earn less than the minimum wage).

Evo Morales also said that the nationalisation of the hydrocarbons is only the beginning. Nationalisation of the land, mines and forests will follow. But it is already clear that the “nationalisation” of the land is going to be limited. The big landowners are not going to be touched, only the "idle land" and illegal contracts. But this has still frightened Brazilian soya growers, who control 35 % of the soya produced in Bolivia, the country’s second biggest export commodity.

On the mines, Evo Morales has not suspended the bidding for the iron and magnesium resources in El Mutún, even if the corrupt Brazilian EBX company was expelled from the area. 70 per cent of the world magnesium resources are estimated to be in El Mutún.

The MAS leadership is using the situation to try to isolate and replace the most radical leaders of the movement with supporters of theirs. They succeeded in replacing Felipe Quispe, who was very critical of Evo Morales, as the leader of the federation of small farmers. Evo Morales tried to incorporate representatives from the Fejuve into the government, but they were forced to leave their posts in the movement because of this. The coming COB congress, which is postponed until May 25, will see a power struggle.

Morales’ target is to achieve a two-thirds majority in the elections to the Constituent Assembly, and like Chavez be able to rewrite the constitution alone. The conscious socialist and revolutionary wing of the movement must show the limitations of Morales’ measures, opening up a dialogue with those who have had illusions in the country’s new president. Standing their own candidates for the Constituent Assembly, representing the most fighting organisations, would be an important step in building a genuine revolutionary, socialist party, for the workers and poor peasants of Bolivia.

Liked this article? We need your support to improve our work. Please become a Patron! and support our work
Become a patron at Patreon!

Be the first to comment

Leave a Reply

Your email address will not be published.