ECUADOR: PROTESTERS WIN; OXY GETS THE BOOT

from Weekly News Update on the Americas

Some 5,000 people marched in Quito on May 9 to demand that the government cancel its contract with the US oil company Occidental Petroleum (Oxy) within 15 days, and end all negotiations on the Andean Free Trade Agreement which the US is promoting with Ecuador, Colombia and Peru. Most of the marchers came from Ecuador’s Amazon region and were also demanding approval of a law that would increase oil revenues to the six Amazon provinces by $0.50 per barrel. A group of about 100 protesters broke through police lines at the Carondelet presidential palace and tried to sing the national anthem in front of Independence Monument. But 300 riot police agents attacked the group, shoving journalists and spraying several protesters with some kind of colored liquid tear gas. (El Diario- La Prensa, NY, May 10 from EFE; Altercom, May 9)

On May 10, Eduardo Delgado of the Common People Movement and Luis Macas of the Confederation of Indigenous Nationalities of Ecuador (CONAIE) filed a lawsuit against Energy Minister Ivan Rodriguez Ramos for illegitimate omission of public authority for having failed to cancel Oxy’s contract. (Altercom, May 10)

According to Britain’s Financial Times, Petroecuador, the state oil company, sought to revoke Oxy’s operating contract because the US company improperly transferred a 40% interest in its fields to EnCana of Canada in 2000. In March of this year, the Ecuadoran government rebuffed Oxy’s offer to settle for a package worth more than $1 billion in back taxes, social programs, investments and extra revenues in return for a seven-year extension in its operating contract. Occidental is now thought to have upped the offer to $1.7 billion. On May 8, Energy Ministry Rodriguez gave Petroecuador until May 22 to negotiate an agreement. (FT, May 10)

On Sept. 13 of last year, EnCana announced it had reached an agreement to sell all of its interests in Ecuador for approximately $1.42 billion. (EnCana News Release, Oct. 26, 2005)

Government negotiator Manuel Chiriboga said on May 13 that Ecuador’s talks with the US government over the Andean Free Trade Agreement (AFTA, or TLC in Spanish)—suspended at the end of March—were unlikely to resume. Uncertainty over the legal battle with Oxy and attempts to reform Ecuador’s hydrocarbons law have been stumbling blocks in the negotiations, said Chiriboga. Chiriboga also said the US has engaged in sneaky tricks; in the case of Colombia, the final text of the treaty differed from what Colombian negotiators had agreed on. (Prensa Latina, May 13)

From Weekly News Update on the Americas, May 14

On May 15, Energy Minister Rodriguez announced that Petroecuador was canceling its contract Oxy. The decision to cancel the contract–and reject an offer from Oxy to settle the case—was based on the fact that Oxy had violated the terms of its contract by transferring 40% of its shares in Block 15 in the Ecuadoran Amazon to EnCana on Nov. 1, 2000. Cancellation of the contract means Oxy must immediately return to Petroecuador all the areas under its control, as well as hand over without cost and in good condition all equipment, machinery, installations and transportation etc. used in its oil operations in Ecuador.

Humberto Cholango, leader of Confederation of the Peoples of Kichua Nationality of Ecuador (ECUARUNARI) called the decision a triumph of the indigenous and social movements. The next step is the nationalization of Ecuador’s oil, said Cholango. Before Oxy leaves Ecuador, the company should be investigated for environmental damages in the regions where it operated, warned Esperanza Martinez of the grassroots environmental group Accion Ecologica.

The US Embassy was said to be pressuring hard behind the scenes for a settlement that would allow Oxy to stay; the cancellation of Oxy’s contract is expected to further chill negotiations between Ecuador and the US over the Andean Free Trade Treaty, stalled since March. Rejection of the trade pact is another major demand of Ecuador’s grassroots movements. (Servicio Informativo “Alai-amlatina,” May 16) In a statement on May 16, the Office of the US Trade Representative (USTR) said it was “very disappointed with Ecuador’s decision” to cancel Oxy’s contract. USTR spokesperson Neena Moorjani told CNN: “At this time we don’t foresee new conversations” with Ecuador over the trade pact. Moorjani said the administration of US president George W. Bush would ask Ecuadoran president Alfredo Palacio for “immediate explanations” and details about how Oxy would be compensated. (El Barlovento, Mexico, May 16, quotes retranslated from Spanish)

On May 18, Petroecuador assumed 100% control of Oxy’s oil fields in Ecuador. Oxy reported the previous night that it had transferred all its Block 15 operations to Petroecuador, and that on May 18 a technical unit would take over operations of the Limoncocha wells in Sucumbios province. Oxy has meanwhile filed an international trade suit against the Ecuadoran government with the World Bank’s International Center for Settlement of Investment Disputes in Washington. (El Barlovento, May 18)

From Weekly News Update on the Americas, May 21

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Weekly News Update on the Americas
http://home.earthlink.net/~nicadlw/wnuhome.html

See also WW4 REPORT #121
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“Ecuador Boots Oxy,” May 24
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Reprinted by WORLD WAR 4 REPORT, June 1, 2006
Reprinting permissible with attribution

BOLIVIA: OIL AND GAS NATIONALIZED

from Weekly News Update on the Americas

On May 1, in a ceremony at the San Alberto oilfield in Carapari, Tarija department, Bolivian president Evo Morales Ayma signed supreme decree 28.701, ordering the nationalization of the country’s hydrocarbons resources. “The looting is over,” Morales announced as he ordered the armed forces to seize control of all the oil and gas fields. With the decree, the Bolivian state “recovers the property, possession and total and absolute control of these resources,” said Morales. Foreign companies now have six months to renegotiate their oil and gas contracts with the government; in the meantime they must give up control of their facilities and channel all sales through the newly refounded state oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB). Morales also ordered the confiscation of the shares necessary to guarantee more than 50% state control of the oil companies operating in Bolivia. (Resumen Latinoamericano, May 1; New York Times, May 2)

“If the negotiations do not go well, we could go to the next step, expropriation,” said energy minister Andres Soliz Rada. He said companies would be compensated. But the first step, said Soliz, is an audit of foreign company documents. “It’s time to open the black boxes of the petroleum companies.” (NYT, May 4)

Nationalization of Bolivia’s resources, especially gas and oil, had become the main consensus demand of the country’s grassroots movements following the popular protests that ousted ex-president Gonzalo Sanchez de Lozada. Sanchez was responsible for selling off the country’s hydrocarbons to transnational corporations at extremely unfavorable rates for Bolivia. The contracts were never ratified by Congress, as the Constitution requires, making their legality questionable. (Resumen Latinoamericano, May 1)

At a May 4 summit in the northeastern Argentine province of Misiones, the presidents of Argentina, Bolivia, Brazil and Venezuela confirmed their interest in moving together towards regional energy integration. The meeting was called to discuss the impact of the Bolivian nationalization. After a three-hour meeting, the four presidents held a joint press conference in the Casino Hotel in the town of Puerto Iguazu. Argentine president Nestor Kirchner said it was “one of the best meetings” he has taken part in as president.

The gathering was called by Brazilian president Luiz Inacio Lula da Silva; Brazil’s Petrobras is the largest foreign investor in Bolivia’s natural gas industry. A full 67% of the gas consumed by industry in Sao Paulo, Brazil’s industrial and financial center, comes from Bolivia. Before the nationalization, Petrobras had control of Bolivia’s two refineries, its biggest gas fields, a chain of gas stations and a pipeline running from Bolivia to Brazil. Petrobras will now have to negotiate a new contract, at a higher price. Although the presidents did not discuss prices, they acknowledged that they had agreed that gas supplies would be guaranteed. (Inter Press Service, May 4 via CorpWatch)

From Weekly News Update on the Americas, May 14

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Weekly News Update on the Americas
http://home.earthlink.net/~nicadlw/wnuhome.html

See also WW4 REPORT #117
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“Bolivia hosts hemispheric indigenous conference,” April 9
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Reprinted by WORLD WAR 4 REPORT, June 1, 2006
Reprinting permissible with attribution

THE POLITICS OF THE FARC INDICTMENT

A “Secret Formula” Against Colombia’s Guerillas?

by Paul Wolf

The US State Department has developed the secret formula to dismantle the armed groups of Colombia’s war. Or so it believes. It is believed that the demobilization of 28,000 members of the paramilitary United Self-Defense Forces of Colombia (AUC) was the result of threatening its leaders—notably Salvadore Mancuso and Don Berna—with extradition to the US.

Fear of extradition, accompanied by promises of amnesty, convinced large numbers of paramilitaries to lay down their arms, confess their crimes, and put their faith in the government to restore order in Colombia.

Now, the same strategy is being tried on the Revolutionary Armed Forces of Colombia (FARC), an insurgency with roots in Colombia’s civil conflict of the 1940s (“La Violencia”) and greatly influenced by the Cuban revolution. The FARC has grown over the decades, despite concerted efforts by the Colombian and US governments to destroy it, including the use of death squads, forced displacement of its supporters, and the most modern technologies of surveillance and counter-terrorism.

Top 50 FARC Leaders Indicted

On March 29, US Attorney General Alberto Gonzales announced the indictment in the US of the top 50 leaders of the FARC on drug charges. According to the indictment, the FARC not only taxes Colombian coca growers, but also operates cocaine processing laboratories, and enforces a monopoly on the purchase of the drug in areas it controls. According to Gonzales, and to Justice Department press releases, the FARC is responsible for 50% of the world’s cocaine, worth more than US $25 billion.

This staggering figure cannot represent the true income of the FARC, however. The FARC has an estimated 18,000 fighters—this would be more than one million dollars per guerrilla. That’s a lot of money for people who live in the jungle, sleep in hammocks, and live on a diet of yucca, rice and chicharón (pork fat).

A different estimate was made by the Information and Financial Analysis Unit of the Colombian government’s Ministry of Land, which it is said that the FARC receive about 30% of their income from drugs: 8.5 million US dollars per year in “tribute” from coca farmers, and about 3 million from the sale of cocaine.

Even multiplying this figure by the ten years the US says the FARC have been in the cocaine business, the US estimate exceeds that of Colombia by a factor of 200. The US government has offered $75 million in rewards for information leading to the capture of FARC leaders.

Same Evidence, Different Defendants

The FARC indictment supercedes the 2002 indictment of “Negro Acacio”, a case that has languished in DC District Court for the last four years. The new evidence apparently implicating the Estado Mayor (central command) of the FARC, consists of captured documents, witness testimony, and intercepted radio transmissions which allegedly show the complicity of the FARC leadership in the production and trafficking of vast quantities of coca paste and cocaine. The physical evidence, however, is the same “five or more kilograms of a substance containing a detectable amount of cocaine” in the original indictment of 2002.

In addition to Negro Acacio, several other FARC members are already on trial in the US for drugs and terrorism, including Carlos Bolas, Simon Trinidad, and Omaira Rojas (“Sonia”). According to the DEA, three others await extradition at Combita prison: Jorge Enrique Rodriguez Mendieta (“Ivan Vargas”), Erminso Cuevas Cabrera (“Mincho”), and Juan Jose Martinez Vega (“Gentil Alvis Patino”). These three are accused of having significant personal involvement in the production and trafficking of thousands of kilograms of cocaine.

While one might assume that Colombia would agree to their extradition, Colombia does not recognize the 1982 extradition treaty with the US, and has the discretion to either extradite or not. Colombia might try to use the threat of extradition to put pressure on the FARC to demobilize. At Gonzales’ press conference in March, the first thing said by Colombian Ambassador Andres Pastrana was that “[t]he indictment of 50 leaders of the FARC guerrillas is a decision taken by the Department of Justice of the United States.” This appears to leave the door open for Colombia to negotiate this point, if the FARC have any interest in it.

The belief that the FARC leaders fear extradition, and can be convinced to demobilize, is held by the US, but not the Colombian government. This is clearly Washington’s policy, and not Bogota’s. Nevertheless, Colombia is likely to go along with it, since its own policy is to defeat the insurgency through pressure and force of arms.

The indictment describes the FARC as being substantially in control of most of the cocaine production in Colombia. While it has been acknowledged for many years that the FARC tax the coca trade, and fight with the AUC to control rural parts of Colombia, the indictment accuses the FARC of operating cocaine laboratories, as well as killing coca growers who sell to anyone other than themselves. It does not, however, accuse the FARC of trafficking drugs outside of Colombia, although guns-for-drugs transactions have allegedly occurred on the Colombia-Brazil border.

All of these prosecutions will have to overcome a serious hurdle; that is, in order for any extradition to be valid, there must be some connection between the crime and the United States. In the case of drug trafficking, the defendants must intend that the drugs are shipped to the US. Even if it is true that the defendants have produced hundreds of thousands of kilograms of cocaine, as the indictment alleges, if they didn’t know, or didn’t care where the drugs went, then they would not have had the intent to send the drugs to the US, and could not be extradited here.

If there is no intentional connection with the United States, no US law would have been violated. In this respect, the threat of extradition may be an empty one. On the other hand, the threats of being held in solitary confinement for many years, and of inadequate legal representation in the face of a government with unlimited prosecutorial resources, are very real. Even the well-known FARC guerrillas Simon Trinidad and Sonia have been represented by public defenders with limited resources. For example, in Sonia’s case, the defendants were provided with over 100 compact disks of intercepted communications to review themselves in prison, to prepare their own defense, and more than 10,000 documents that the prosecution might use in the trial. In the Trinidad case, between 20-25 witnesses will be flown up from Colombia to testify in the drug trafficking trial alone.

The Prosecution of Simon Trinidad

Simon Trinidad, the well-known negotiator for the FARC during the peace process of the Pastrana administration, was captured in Ecuador two years ago, and extradited to the US on charges of drug trafficking, kidnapping, and providing material support to a terrorist organization. The case has attracted the attention of the Latin American press, but none whatsoever in the US, despite the fact that the case will test numerous traditional legal principles as applied in the new paradigm of the “war on terror.” It also appears that Trinidad will be the first of the FARC members to be prosecuted in the new program announced by Gonzales, although nowhere in the FARC indictment does Trinidad appear in the leadership of the FARC organization.

The first case against Trinidad stems from the crash or shoot-down of a surveillance plane operated by California Microwave, a US military contractor. After a firefight at the crash site, three North Americans were taken captive by the FARC, who are still holding them. To date, the prosecution has not tried to show that Simon Trinidad gave the order to shoot down the plane. Neither is there any evidence that Trinidad was involved in the decision to take the North Americans as prisoners. It appears that Trinidad’s only involvement in the incident was to travel to Ecuador to try to arrange their release, supposedly in concert with the UN.

It would be hard to find Simon Trinidad guilty under these facts. Any crime, even one involving a conspiracy, requires that the defendant have the necessary mental state to commit the crime. The intent to commit one crime, such as rebellion against the government, cannot be substituted for the intent to commit another, nor can the commission of one crime be the basis of guilt for another crime requiring a different intent merely because the harm flowed from the first crime. In other words, if Simon Trinidad was not involved in taking the North Americans captive, his efforts to negotiate their release should not make him criminally liable for their capture.

A second argument, already made by Trinidad’s public defenders, is that the incident occurred in the context of an armed conflict. Taking prisoners in a war is not a war crime. Ironically, the prosecution has emphasized the fact that Trinidad is seen in various photos wearing a FARC uniform, as evidence of his membership in the group. The US contractors, accused by columnist Robert Novak of working for the US Central Intelligence Agency (CIA), did not wear uniforms, and their surveillance of the FARC could be considered as espionage. As a lawful combatant in uniform, Trinidad would be entitled to the protection of the Geneva Conventions, while the US contractors, as spies, would not.

Judge Thomas Hogan, who is hearing the case, however, has ruled that because the United States is not at war with the FARC, Trinidad is not entitled to combatant immunity.

One interesting development in the case will be whether the defense is able to learn, from the court-ordered production of US government documents, what exactly the contractors were doing flying over the Colombian jungle. Was the surveillance plane looking for coca plants, or intercepting FARC radio transmissions and reporting on FARC positions? If the latter is the case, then the defense will have the opportunity to prove at trial that the US was participating in the war between the Colombian government and the FARC.

Of course, these arguments do not apply to the drug trafficking charge against Trinidad. Drug trafficking is still a crime during a war. Trinidad’s drug trafficking trial will begin shortly after his kidnapping trial ends, sometime around January of 2007.

Disregarding the Defendant’s Human Rights

Simon Trinidad is being held incommunicado, and without access to his lawyer, in Washington, DC. As these hearings progress, numerous other legal cases against Trinidad are proceeding in Colombia, where he is being tried in absentia. This is in clear contravention of his basic rights, guaranteed by the International Convenant on Civil and Political Rights (ICCPR).

Article 14(3)(e) of the Covenant guarantees the right to “be present in the proceeding and to defend personally or to be assisted by counsel of his choice.” Nevertheless, Judge Hogan has said that under the US Constitution, the rights to be present in a criminal proceeding, and to have effective legal representation, do not apply to proceedings outside of the US. Hogan has failed to consider that international treaties like the ICCPR have the force of law in US courts, regardless of whether provisions of the US Constitution apply.

The public defenders assigned to Trinidad’s case had to sign agreements with the US government, called Special Administrative Measures, promising not to communicate any information between their client and the outside world. These measures clearly violate the defendant’s right to counsel. One might ask whether attorneys agreeing to these conditions are a part of the problem, particularly when Trinidad’s chosen lawyer, Oscar Silva, is not permitted to meet with him unless an FBI agent is present.

The case is full of problems with evidence, the jurisdiction of the court, and the political nature of the charges. But most important are the fundamental rights of the defendant. Trinidad has the right to be present for the cases against him in Colombia, and to have an attorney of his choice where he is judged.

Mistake to Ignore These Cases

Although the FARC may benefit from boycotting Colombian elections, or from enforcing a “paro armado” (armed blockade) in concert with union strikes, it makes an error if it ignores the trials of its own members. The FARC should defend them in court. Regardless of the fairness or political nature of the trials, they do provide a forum for the FARC to explain its policies and make the case that it is an insurgent group rather than merely a drug trafficking organization. If the FARC doesn’t make these arguments, no one will. The trials will proceed with or without the participation of the FARC, and even the most liberal observers will have little to say as FARC members are minimally defended by overworked attorneys paid by the US government. It seems unlikely that the FARC will be intimidated by the new extradition program, or that any demobilization will be forthcoming, but this doesn’t mean the FARC should simply ignore what is happening.

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Paul Wolf is an attorney in Washington, and may be contacted at paulwolf@icdc.com.

SOURCES:

Report of the Unit of Financial Information and Analysis (Uiaf) of the Treasury Department, cited in “El Transito de las Farc al narcotrafico” (The Passing of the FARC to Drug Trafficking), Colprensa, March 25, 2006

“United States Charges 50 Leaders of Narco-Terrorist FARC In Colombia With Supplying More Than Half Of The World’s Cocaine,” US DEA press release, March 22, 2006.

See also:

“COLOMBIA QUAGMIRE DEEPENS
FARC Indictments Spell Escalation in Andean Oil War”
by Peter Gorman
WW4 REPORT #121, April 2006
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Reprinted by WORLD WAR 4 REPORT, June 1, 2006
Reprinting permissible with attribution

THE WEALTH UNDERGROUND:

Bolivian Gas in State and Corporate Hands

by Benjamin Dangl

Years before the arrival of the Spanish, Bolivia’s indigenous people used “magic water” to cure wounds and keep fires going. With the invention of the automobile in the 1880s this black liquid took on a new importance. Since then, the oil and gas has been more of a curse than a blessing for the Bolivian people. On May 1 of this year, the history of these resources entered a new phase.

Bolivian President Evo Morales announced that the oil and gas will be nationalized and put into the hands of the state-run oil and gas company, Yacimientos Petrolíferos Fiscales Bolivianos, (YPFB). Though what this nationalization plan truly entails may not be known for weeks, the move raises the question: will state control of resources be more beneficial to the Bolivian people than corporate control?

“Property of the Bolivian People”

“The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of its natural resources,” Morales said in a speech from the San Alberto petroleum field, wearing a white helmet from YPFB. Nearby a banner hung that said, “Nationalized: Property of the Bolivian people.” The day the announcement was made thousands converged to celebrate the nationalization in La Paz’s central Plaza Murillo.

The decree bumps up Bolivia’s share of profits coming from two major gas fields, San Alberto and San Antonio, from roughly 50% to 82%. These fields, which represent 70% of Bolivia’s natural gas, are currently owned and operated by Brazil’s Petrobras, Spain and Argentina’s Repsol and France’s Total. Smaller fields will continue with the same tax arrangement which allots 50% to the government. Within 60 days, YPFB is to control oil and gas production, exploration, and distribution. Within 180 days, foreign companies are obliged to sign renegotiated contracts which give more control to the state. If they refuse to renegotiate, they have to leave the country. The new decree does not call for the total expropriation of foreign assets. It does involve a mandatory sale of most assets in the oil and gas industry to the government. The state will seize the assets of those companies which refuse to renegotiate contracts. Bolivian Vice President Alvaro Garcia Linera said that by 2007, these changes will increase the government’s annual income by $320 million.

In order to establish the new terms of operations and tax rates, the decree includes an audit of all oil and gas companies working in Bolivia. The state will recover 51% of shares from five companies which were carved out of the privatization of YPFB in 1996, when many of the current contracts were drawn up. Bolivian officials contend that these contracts are unconstitutional because they were not ratified by congress, which is required by Bolivian law. In this light, the nationalization is a return to constitutionality.

From September to October in 2003 massive protests took place against a plan to export Bolivia’s gas to the US for a meager price. Government repression against the mobilizations resulted in an estimated 80 deaths and hundreds of injuries. In the end, the protests forced President Gonzalo Sanchez de Lozada to resign. The current nationalization plan is in part a response to pressure from this grassroots movement.

“We are moved because the nationalization of hydrocarbons has been one of the fundamental demands of the mobilizations of October 2003 and May and June 2005. For us, it’s homage to the fallen of October,” Edgar Patana, the executive secretary of the Regional Workers’ Central of El Alto told ZNet journalist Jeffrey Webber. “It’s an historic act that, hopefully, in the following months, will bring the country more revenue, to relieve unemployment, and make more jobs available.”

Morales, along with other newly elected left-leaning leaders in Latin America, came to power on a platform which promised a change from the structural adjustments pushed by the International Monetary Fund and free market economic policies which favored the interests of foreign corporations over the welfare of the people. Instead of bringing about the promised development and progress, thirty years of such policies has plunged the region into the worst economic crisis since the Great Depression. By following an unconventional path, Venezuela and Argentina have become the fastest growing economies in the region in recent years. Morales’ nationalization may produce similar results. As Bolivians know, business as usual has had a devastating effect on their country, which is the poorest in South America.

The Case for Nationalization of Oil and Gas in Bolivia

History illustrates that an oil and gas industry run by YPFB is a feasible and lucrative option. In 1937, during the government of David Toro, the state-run company was created. From then until 1940, YPFB produced 882,000 barrels of oil which was more than Standard Oil had produced in 15 years of operations in Bolivia. In 1953, the company produced enough to take care of the national consumption of oil. For over 60 years, YPFB generated enormous funding for the government. It explored, exploited, built ducts, refining plants. From 1985-1995, YPFB was the main source of economic support for the state. The highest amount YPFB exported was 55.7% of total exportation in 1985. Through YPFB, the technology and expertise was developed to sustain an infrastructure which is still intact to this day. The success and experience of the company contributed to the population’s recurring demands for nationalization of oil and gas.

“People have the hope that after all of this history of misery, exploitation of the natural resources, the gas could be the basis for a modernization of the economy. Not just to be utilized as energy, but also a basis for a future of industrialization,” Carlos Arze of Bolivia’s Center for Labor and Agricultural Development (CEDLA) explained in an interview in his office in La Paz, where large windows looked over the city. The key element to this industrialization is the rising cost of oil and gas.

As the amount of global gas reserves decrease, the demand will increase, putting Bolivia in a good position to financially gain from the business if the state takes advantage of its position as a major gas producer. According to Gregorio Iriarte in his book El Gas: Exportar o Industrializar?, in 2020, the US will demand 50% more gas than it uses currently. Meanwhile, the gas reserves in Argentina will end in 17 years and Chile depends primarily on Argentina for their gas. Brazil is hugely dependent on Bolivian gas. Over time, there will be more interest in Bolivia as a gas producer. Studies have shown that in 1997 the amount of gas in Bolivia was estimated to be 5.7 trillion cubic feet. In 2003, that figure rose to 54.9 trillion. It’s likely that more gas will be discovered in the coming years.

There is a general feeling in Bolivia that to sell most of the gas to the exterior is a poor use of the resource. The gas and its derivatives could be better used by the impoverished Bolivian population. Before it is processed, natural gas has methane, propane, ethane, butane and other gases in it. It can also be used to produce fertilizers, explosives, plastics, heat and electricity. The resource could be used in industries, kitchens and energy plants. Even if all of the houses and kitchens in Bolivia had access to gas, it wouldn’t use even 1.5% of the reserves.

For decades, gold, rubber, tin and other raw materials from Bolivia were sold for a low price. Foreign companies profited from the industrialization of these raw materials and sold them abroad for a much higher price, while Bolivia remained impoverished. This took place, Iriarte explained, under the argument that “Bolivia requires investments and work” and that “those who oppose the sale of the gas, oppose development…. In practice, the biggest benefits of the sale are the transnational companies that transport, liquidize and commercialize the gas.” He argues that the gas needs to be industrialized in order to use it in Bolivia and to export it for a higher price. He suggests the price of gas to private companies needs to be raised so it can stimulate the Bolivian economy.

Arze explained that there were various demands in the gas conflicts of 2003, all of which revolved around the slogan, “recuperate the gas to industrialize it.” People wanted to improve their own access to the resource:

“Whereas there are 6-7 barrels of oil [used] per capita in Argentina, Chile—in Bolivia we have around two, and we have a large reserve of energy. Natural gas, which is the most important hydrocarbon in our reserves, only arrives to 1.5-2% of the population, of the families of Bolivia. There is not a network of consumption. More than 90% of the gas is exported. And of the 10% that is left, a very small amount enters the network of domestic use. Most of this goes to the thermo-electric plants, where they generate electricity with this. The electricity is also in private hands, in Spanish hands. And the electricity is very expensive. It doesn’t arrive to most of the population, especially to rural areas. In rural areas there is very small amount of people who have access to electricity, and even less to gas. They are still living as if in medieval times…so the people are far from the benefits of this use of energy [that we have]. People want access to the gas in order to improve their standard of living.

People also want cheaper access to gas-related products, such as diesel for tractors and agriculture. In Bolivia, more than half of the diesel used is imported from abroad. Diesel could be produced from natural gas in Bolivia, and offered at a lower price to farmers.

State vs. Corporate Ownership

In Morales’ nationalization plan, the management of the oil and gas goes to YPFB. This leaves the question: how will the industry operate without foreign investments? Arze explained that foreign corporate investment is not needed to expand the gas industry in Bolivia. In fact, he argues, corporate control and investment of the resources has so far has had the opposite effect. As for transportation, foreign companies have mainly created gas ducts to other countries for exportation, and there are no new gas ducts for international users. For example, the biggest gas duct to Brazil is 40 times bigger than the one that goes to La Paz. The older ducts created by YPFB are in disrepair and cause regular environmental problems. When the Brazilian oil and gas company Petrobras bought three of the state refineries, they didn’t invest anything into them.

Foreign investors have placed more emphasis on making money by selling to external markets than developing the infrastructure in Bolivia for national use and industrialization. The technology needed for industrialization has not been provided, and what infrastructure that does exist is in poor condition. The result is that the country with one of the largest gas reserves in the region has some of the worst distribution and industrialization methods for its own citizens.

Arze emphasizes the role of the state in what infrastructure Bolivia does have. “The areas with the most reserves were discovered by YPFB more than 15 years ago.” However, at the time, YPFB lacked enough funding from the government to utilize the discovery, and it went into the hands of foreign corporations. “The state created an infrastructure that up to today continues, and created many technical experts that are currently working for private companies. The state did this with a small amount of financial resources.” This business was given up to foreign companies, and the government, in a sense, turned its back on the highest priced market in the world.

Says Arze: “Now we develop something like 20 times more gas than before. Is it possible to find [financial] resources? Is it possible to improve the terms of our negotiation with other companies and countries? I think so. Right now the world market is good for us because of the high price of oil; the gas market is becoming more important. There is also an energy crisis in the region. Chile, Brazil, Uruguay, Paraguay and Argentina need gas. And who has the gas? Bolivia. So Bolivia could negotiate for better conditions. Now, the state, in the immediate moment, probably doesn’t have sufficient capital [for industrialization]. But if the business of gas and oil is the best in the world, something which has caused invasions, could one find better negotiations for the country? I think so.”

By renegotiating with companies, raising the taxes and royalties which companies pay, Arze believes the Bolivian government could significantly increase the money it makes from the oil and gas industry. It could then use that funding to recuperate YPFB, which had operated well years earlier which a much smaller budget.

The new nationalization plan could, as Morales has promised, end up being the “solution to the economic and social problems of the country.” However, much still depends on how the corporations and the Bolivian people respond once the dust settles.

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Benjamin Dangl is the author of The Price of Fire: Resource Wars and Social Movements in Bolivia (forthcoming from AK Press, 2007). He edits UpsideDownWorld.org, a website uncovering activism and politics in Latin America, and TowardFreedom.com, a progressive perspective on world events.

This story originally appeared in Upside Down World, May 7
http://upsidedownworld.org/main/content/view/282/1/

See also:

“THE PROGRESSIVE MANDATE IN LATIN AMERICA
Bolivia, Evo Morales and A Continent’s Left Turn”
by Benjamin Dangl & Mark Engler
WW4 REPORT #121, May 2006
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Reprinted by WORLD WAR 4 REPORT, June 1, 2006
Reprinting permissible with attribution

EVO SEIZES THE GAS

Bolivia’s Nationalization by Decree

by Gretchen Gordon

The smell of gas hangs strongly in the air as a crowd of flag-waving Bolivians celebrate outside the Petrobras Gualberto Villaroel oil and gas refinery. A state worker clad in a tan work suit and hardhat props a wooden ladder against the front wall of the refinery just beneath the blue metal letters that read PETROBRAS, and ascends the ladder as the crowd looks on.

He carries a laminated banner with the name “Yacimientos Petroliferos Fiscales Bolivianos,” or YPFB, Bolivia’s former state oil and gas company, essentially privatized in the mid-1990s through a process called “capitalization.”

“Take down the placard!” someone yells from the crowd. “Throw it in the trash!” someone else shouts, making a rhyme with the Spanish words. (¡Saque el letrero!, ¡Que lo pone en el basurero!)

As the worker struggles a bit to secure the banner over the blue letters, someone in the crowd observes, “No, they’re not going to take it down, just cover it over.”

As the banner is secured, someone calls out, “¡Que viva Bolivia! ¡Que Viva la nacionalizacion!”

“¡Que viva!” the crowd erupts in response.

It’s Monday, May 1, not coincidentally International Workers Day, and the Bolivian government has just declared the nationalization of oil and gas by presidential decree.

Though the “nationalization” and “recovery” of Bolivia’s oil and gas resources has been the main political issue in the country for the last several years, the Supreme Decree 28701 read publicly by president Evo Morales on Mayday came as a surprise to Bolivians and foreign investors alike. During the government’s first 100 days, several policy options have been floated regarding the restructuring of the oil and gas sector; however no clear comprehensive policy has been put forward until now.

Nationalization by Decree

Under the main goal of recovering “the property, possession, and total and absolute control” of oil and gas resources for the state, Decree 28701 contains five principal measures:

* Declaration of the state as the agent empowered to commercialize, set conditions, volumes and prices for internal consumption, export, and industrialization, and to take “control and direction” of all aspects of oil and gas production and distribution.

* Establishment of a 180-day time period for the re-negotiation of contracts to bring them in line with the oil and gas law 3058 passed last year.

* Recovery of 51% of the shares of five capitalized companies, carved out of the state company in 1996.

* Increase of the tax and royalty level from 50% to 82% for companies operating in Bolivia’s two largest gas fields (Petrobras, Repsol and Total).

* An audit of investments and earnings for all other oil and gas companies operating in Bolivia to determine their future tax rate and terms of operation.

While the discourse of the day is powerful—punctuated by the imagery of the securing of the country’s 56 oil and gas fields and two refineries by the Bolivian military—the real extent and impact of the government’s policy are not yet clear.

The recent oil and gas debate in Bolivia has shown that the term “nationalization” is open to definition and interpretation. Since Morales’ landslide electoral victory and “democratic revolution” last December, the government has consistently maintained that their “nationalization” does not involve expropriation, as traditionally understood by the term. The decree in fact does not confiscate private infrastructure or expel foreign companies as some in Bolivia have demanded. The plan to recover 51% shareholding of the capitalized oil and gas firms is seen by some as insufficient, due to the fact that the holdings of these companies were under 100% YPFB control prior to the privatization of the mid-1990s. Others criticize that the new restructuring is too similar to the oil and gas law passed during the Carlos Mesa administration, rejected by social movements as inadequate. Jaime Solares, the leader of Bolivia’s Labor Federation, has criticized the decree as a “partial” nationalization and renewed the demand for the state to take “absolute control” through confiscation without compensation.

At the same time, many see the government’s plan as the key to much-needed economic development and as a means of recovering state sovereignty in a country that historically has been managed in the interests of foreign capital. “The recovery of the oil and gas resources is what Bolivia is counting on to be able to develop,” explains Roberto Delis, an YPFB employee participating in the refinery “takeover.” “Now those resources are going to be returned so that they serve Bolivia.”

The potential increase in government revenues through the elevation of tax and royalty rates from 50% to 82% will be very significant for this impoverished nation, but is an unexpected move by a government which previously was exploring more cautious options. The figure of 82% is also highly symbolic in that it is the inverse of the 18% tax rate put in place during the privatization process in 1996. What the companies were putting in their pockets as recent as a year ago, will now be what Bolivia keeps for itself.

Many aspects of the decree, however, remain to be determined and its true impact will depend on the details of its implementation over the coming months. The mechanism for the recovery of majority shares in the capitalized companies remains unspecified, as does the treatment of the 54 fields not impacted by the tax rate increase. The government calls the decree “flexible and consensual.” However, they have made it clear that those companies unwilling to play by the new rules of the game will not be allowed to remain in Bolivia.

Domestic business interests have reacted with concern, though without marshalling a strong challenge. Many support the concept of recovering greater state control, but fear economic instability and warn against the possibility of costly international litigation by transnational companies. The response by foreign investors has been strong, though still not completely bellicose. Brazilian President Lula called the move “unfriendly,” while Spain’s Zapatero expressed his “profound preoccupation.” Brazilian Petrobras and Spanish Repsol are two of Bolivia’s largest foreign investors. Many companies, however, are keeping their comments reserved.

Government Takeover?

From La Paz’s main plaza, in a skillfully orchestrated event weaving together the nationalistic historical memory of Bolivia’s previous two oil nationalizations (1937 and 1969) with the class themes of International Workers Day, President Morales addresses a crowd of thousands urging Bolivians to come together to defend this new endeavor.

Meanwhile, back at the Gualberto Villaroel refinery outside Cochabamba, Saul Escalera, the director of Industrialization for YPFB, addresses the crowd from the bed of a red pickup truck. Announces Escalera:

“We will now engage in a symbolic entrance of YPFB technicians in which we will give official notification [to Petrobras] that as of this moment this refinery will be administered by YPFB.”

Escalera asks the crowd to refrain from trying to enter the refinery, warning that such an action could jeopardize the nationalization process. As the group of around fifteen technicians and representatives pass through the front gates of the plant, a military band strikes up the national anthem as the crowd sings. Young soldiers proceed through the gates carrying a giant Bolivian flag.

Returning back through the front gates after several minutes, with little fanfare, Escalera notifies the crowd, “We have now recovered this refinery…You may now all return home.”

With the waning notes of a brass band, Bolivia’s “nationalization without expropriation” advances, as has Morales’ broader “democratic revolution,” without violence or disruption, and to the great surprise of most onlookers.

The question which remains is how much will a profound change for Bolivia require the old system to be dismantled, and how much, like refinery placards, can more pragmatically be covered over with something new.

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Gretchen Gordon is a research associate with the Democracy Center in Cochabamba, Bolivia.

This story originally appeared May 2 in Upside Down World
http://upsidedownworld.org/main/content/view/274/1/

See related story, this issue:

“THE WEALTH UNDERGROUND: Bolivian Gas in State and Corporate Hands,”
by Benjamin Dangl
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Reprinted by WORLD WAR 4 REPORT, June 1, 2006
Reprinting permissible with attribution