Bolivia's gas 'nationalisation'

Mark Goudkamp

To be in La Paz on May Day was electrifying. First we participated in a 15,000-strong march of the city's branch of the trade union centre (COD), which was consciously independent from the mass rally organised by Evo Morales’ Movement Towards Socialism (MAS).

The latter took place in Plaza Murillo, overlooked by the Presidential Palace and parliament buildings, and which for decades had been the domain of dictators and corrupt neo-liberals. After some traditional music, and a smoke ceremony, Vice President Álvaro Garcia Linera suddenly announced that President Evo Morales had flown to the huge San Alberto gas field in the south of the country to officially 'nationalise' Bolivia's hydrocarbon reserves. The crowd was at first stunned, then ecstatic. History was now being made in Plaza Murillo, which was now host to an increasingly confident indigenous majority. [1]

Under Supreme Decree 28701, which had been kept secret from all but a few in Evo's cabinet until 5am that morning, the tax on profits reaped from the huge San Alberto and San Antonio gas fields are to be lifted from 50 to 82% (smaller gas fields will continue to operate at 50/50 for the company/state). The extra money will go to the rejuvenated state oil company, YPFB. Álvaro told the crowd that would boost Bolivia's earnings by some US$320 million a year. However, this figure also depends on whether it can negotiate a price increase for its gas exports to Brazil and Argentina, its two major buyers. [2]

As the military was sent in to guard the country’s numerous gas plants and three refineries, Morales also decreed that YPFB was buying up 51 percent of the companies Andino, Chaco, Transredes, PBR and CLHB, giving it administrative control over the refinery, transportation, storage, distribution and industrialisation of Bolivia’s vital resource, which already accounts for 50% of its exports. YBFB will receive technical and financial support from Venezuela's PDVSA.

The decree has given foreign energy companies 180 days to renegotiate their contracts in Bolivia so that they comply with the new rules. They have invested more than $3.5 billion since 1996, when US-backed President, “Goni” Lozada Sanchez "capitalised" (privatised) hydrocarbons. Brazil's government-owned Petrobras accounts for more than $1.5 billion, while Repsol from Spain/Argentina invested $1.2 billion. Lesser but still significant investment comes from Total (France), BP, Shell and Enron (the latter two in the Transredes pipeline company).

In the evening, Morales returned to Plaza Murillo where we promised 1000s of waiting MAS supporters that he would also tackle the big landowners in the country's eastern lowlands, based around Santa Cruz, and hand a fifth of Bolivia's territory to poor farmers. "We are starting with the hydrocarbons, tomorrow it will be the mines, the forests, all our natural resources. We have a bunch of decrees to take back the land for Bolivians.” [3] Following his speech, a folk concert and a university choir's rendition of the Internationalé kept the crowd's spirits flying high late into the night.

Since Spanish conquest in the 16th century, wave after wave of Bolivia’s lucrative natural resources has been exploited by outsiders, with very little benefit to the people of what remains the hemisphere's poorest nation after Haiti. The silver of Potosí, the “richest” city in the world in the 17th century, went to the Spanish. Then it was rubber, quinine and phosphates, while existing industries like textiles in Cochabamba were destroyed by British imports. The 20th century was dominated by a reliance on tin mining, and although home grown capitalists like Simon Patiño struck it rich, he invested much of his profits offshore.

This time around, however, there is a real sense that Bolivia's mass social movements, which have taken centre stage in the country's political changes, are the active agents, not the victims of history. The past six years have seen the largest scale mobilisations since the 1952 revolution. [4]

In 2000, the US multinational Bechtel’s deal with the central government of former dictator Hugo Banzer to buy the water supply of Cochabamba was defeated by months of determined mass action. After this victory, the nationalisation of Bolivia’s huge gas reserves—second only to Venezuela in Latin America—became the central demand of the mass movement. “The gas war” of October 2003, centred on El Alto, the mushrooming sprawl that overlooks La Paz, resulted in at least 67 people being killed on Goni's orders.

Goni was forced to resign, fleeing to the US, which continues to ignore appeals from the victims' families and MAS for his extradition. Goni's replacement, Carlos Mesa was also shown the exit in mid-2005 by an increasingly confident people when it became clear that he was only prepared to increase taxes on the energy companies to 50 percent. [5]

It was precisely a continuation of mass democratic pressure from below that propelled Morales to make his May Day announcement. After three months in power, the government's supporters were growing restless at the MAS government's slow pace of change. There had already been conflict between MAS and health workers, teachers, and, most dramatically, the army had been sent in against striking LAB airline workers.

As a result of being at the cutting edge of IMF-inspired neo-liberalism in the 1980s, today 64% of the population lives in poverty, with a majority barely surviving on less than $2 per day. [6] A March 2006 report by the Center for Economic and Policy Research which uses the IMF's own data, shows that Bolivia's real per-capita GDP today is lower than 27 years ago.

The hydrocarbon decree was at least partly designed to shore up the poor’s support for MAS in the Constituent Assembly elections. The decree also managed to overshadow union criticisms MAS’s other May Day announcement -- a miserable13.63% increase to the minimum wage, well short of earlier promises of 100%, which had then fallen to 50% and 20%.

While the gas decree falls short of the demand of Bolivia's social movements and leftwing union federations like COB (Bolivian Workers' Central) for 100% nationalisation under workers' control, Morales' measure is seen to be a fulfillment of his election promises. By late May, an opinion poll showed that support for Evo Morales had bounced back to 81%, after dipping to 62% in late April. [7]

Many Bolivians, including the COB feel that the decree amounts to ‘nationalisation light’. In second week of May, when I was in Cochabamba, there were forums held every night by different social movements to debate what the decree meant. Opinions ranged from “MAS are trying to trick us. We need to keep struggling for 100 percent nationalisation”, to “It’s not what we have been demanding, but it’s an important advance for Bolivia gaining sovereignty over its resources”.

One panelist at a meeting of 200 people in Cochabamba's Sociology Auditorium stressed that "the decree allows for the coexistence of public and private sectors and isn't about nationalisation. Its character is transitional, and its implementation will be subject to pressures, both internal and external."

While in Europe, Morales certainly sought to reassure foreign companies that he is "neither expropriating nor expelling" them, and that they are welcome to stay if they adhere to country’s new regulations. It's also evident that the Brazilian and Spanish governments, and the companies they represent, have toned down their initial fury. Evo’s version of ‘nationalisation’ is so limited that even former President Carlos Mesa has endorsed it, and has claimed credit for it.

This dynamic highlights the danger of the six month renegotiation period, which gives the corporations time and space to dilute even the limited nationalisation contained in the decree. There are fears that if the struggle on the streets doesn't continue, nationalisation may again be undermined—as it was in 1937 against Standard Oil and in 1969 against Gulf Oil. The IMF has called for the renegotiation of contracts to "be done in a careful way" that it leads "to mutually agreeable arrangements that provide for a continued inflow of critically needed foreign capital". The fact that the decree is less about “nationalising” hydrocarbons, and more about such negotiations was shown, for example, by MAS deputy Javier Zavaleta, who said recently, “The decree will give us an advantage to negotiate”.

Overwhelmingly though, one gets the feeling from visiting Bolivia that the people will continue their long hard struggle, whether Evo manages to stay at the head of the movement or not. Despite MAS leaders like Álvaro saying that humanised and interventionist "Andean-Amazonian capitalism" is all that it possible in the present political climate, the trajectory of Bolivia's inspiring struggle could well move towards socialism! [8] Bolivia has shown the possibility of genuine workers' control. Of even moving beyond state ownership, which on so many occasions has derailed workers' vision of a socialist society.

2. MAS’s concessions to the oligarchs risk more bloodshed

Along with the suspicion felt by the social movements towards the government’s ‘nationalisation light’, is their criticism of how MAS has managed to undermine their long held demand for a Constituent Assembly. Added to this is anger at Evo’s capitulation to demands from the elite in Santa Cruz and Tarija for a referendum on regional autonomy.

The demand for a Constituent Assembly dates back to the 1990 Indigenous March for Territory and Dignity, led by the indigenous peoples in the Northern Amazon. It was then taken up by the Coordinadora during the Cochabamba 'water war' in 2000, and the 2003 and 2005 gas wars. It was widely seen as a way to "decolonise" the Bolivian state, challenge liberal democratic forms of representation, and transform the country's economic and social foundations.

It was to be a permanent mass grassroots organisation. In the words of Oscar Olivera, a leader of the 'water war':
“The Constituent Assembly thus should be understood as a great sovereign meeting of citizen representatives elected by their neighbourhood organizations, their urban or rural associations, their unions, their communes. These citizen representatives would bring with them ideas and projects concerning how to organize the political life of the country... Let us be clear: Neither the executive branch nor the legislative branch, not even the political parties, can convoke the Constituent Assembly. These institutions and their members all stand discredited for having plunged the country into disaster."

Yet under pressure from the Santa Cruz elite, MAS steered it to be another party-based vote, its role limited to constitutional reform. There had been talk by some social movements and unions to hold a "Parallel Assembly", but this didn’t go anywhere, partly because MAS had co-opted some movement leaders into its own ranks. [9]

As a result, enthusiasm for voting in the July 2 vote dimmed, and MAS fell 30 seats short of gaining two-thirds needed to control the Assembly. MAS will need to negotiate with sections of the right for its “overhaul” of the constitution.
The Assembly will start sitting in early August. With the economic and political demands of the mass movement to be sacrificed, or at best diluted, mass action from below is again crucial. As Olivera told the crowd at Marxism 06 in London in July, “The only way the movements will be able to achieve our demands is again to mobilise from the outside.”

In the referendum on autonomy, four resource rich departments (provinces) including Santa Cruz, Tarija and Beni predictably voted for it, while the rest of the country rejected it. This tragic concession to the conservative elite, which partied hard after the referendum, has set the scene for further waves of class conflict. The ruling class in these areas of gas and agricultural wealth are mobilising to protect their interests, and will no doubt gain a sympathetic ear in Washington.

With MAS compromised, it will be the job of the masses to ensure that Bolivia’s wealth doesn’t again become the perserve of the few. “Although we don’t want any more blood”, said Oscar, “the struggle for justice will go on”.

3. The impact in Latin America, and beyond

The political impact of Morales’ decree outside Bolivia has been enormous, as has the level of support and solidarity. Days after May 1, a solidarity protest occurred in Madrid demanding that Repsol respect Bolivia’s stance.
Bolivia's announcement gave the Ecuadorian government the confidence to take up the demand of the movements there to cancel the contract of US oil company, Occidental, which had been operating illegally. The US said it was canceling negotiations for a Free Trade Agreement (TLC), and Ecuador's President Alfredo Palacio responded by saying he would join the alternative "Trade Agreement of the People" (TCP) signed by Bolivia, Venezuela and Cuba in Havana in late April. Morales has called the TCP "the axis of the good”. [10]

The western media repeatedly claims that Morales' is marching to the beat of Hugo Chávez. Yet it was the latter who was seen to follow Bolivia on May 7 when he announced Venezuela would increase taxes on companies operating in the Orinoco region from 34 to 50%.

The decree has also impacted heavily on politics in Argentina and Brazil, the two largest buyers of Bolivian gas and which both have centre-left governments. While Presidents Kirschner and Lula are resisting Bolivia’s attempt to increase the price they pay for Bolivia's gas, currently a fraction of market rate, May 1 has radicalised their populations.

In Argentina, there have been protests, not only in support of Bolivia, but for the re-nationalisation of its oil company, sold off to Spain's Repsol by Carlos Menem during his neo-liberal rule in the 1990s. According to an opinion poll in left of centre Pagina 12, 74% "strongly agreed" that President Kirschner should follow Morales' example and nationalise Argentina's energy sector. Kirschner is enough of a populist to understand it is politically beneficial to have posters of himself with Morales and Chávez plastered across Buenos Aires. Yet Kirschner, who supported Menem's privatisation in the 1990s from his position of regional governor, responded: "We simply can't nationalise hydrocarbons in the way Evo did. If we cancelled the concessions, the property would revert to the provinces, not the nation."

Joao Pedro Stedile, whose MST landless workers’ movement has organised half a million Brazilians in land occupations, told the final rally of the alternative social movement summit to the official EU-Latin American summit in Vienna in mid-May that “the Brazilian people support the nationalisation of oil and gas”. He was speaking alongside Morales and Chávez, who were given a rapturous applause.

Stedile added that Bolivia's agrarian reform should “start by expropriating the big Brazilian landowners” concentrated in the rich and increasingly separatist Eastern provinces such as Santa Cruz. He added that “instead of sending troops to occupy the land, call us and we will send thousands of landless workers".

However, Lula is far from impressed that Morales excluded Brazilian company EBX from bidding for the mining and processing of the massive Mutun iron deposit. He had earlier calling EBX "a mafia that's illegally exploiting our natural resources" for violating environmental law. [11]

Over gas, Lula backed threats of legal action by Petrobras against Bolivia, despite Brazil's economy being 80 times bigger than that of its neighbour. Soon after May 1, Lula contacted Chávez saying that Morales' attitude was crazy, and the latter apparently called on his Bolivian ally to tone down his declarations.

In Brazil itself, a splinter from the MST occupied Congress in early June over the Lula government's stalled land reform and its failure to find homes for 400,000 families by 2006. Deepening links between the MST in Bolivia and Brazil show the potential to take on the landowning elite.

4. US relatively powerless

The western media was predictably hysterical in its response to Bolivia's decree. The Wall Street Journal lamented that “abrogation of contracts” had become the latest “Latin craze.” The Los Angeles Times went further: “Morales put his head in an oven this week and turned on the natural gas. There are only two likely outcomes: an explosion that ends his political career—or a slow suffocation for his people.” And New York's Newsday grouped Bolivia with Cuba and Venezuela in an “Axis of Idiocy” and asserted that “nationalization of major industries has proved to be a road to economic ruin in an era of globalization.” [12]

More recently, the Bush administration recently broke its silence on Bolivia that it had kept following Morales' inauguration in January. Responding to a question about his strategy regarding 'unfriendly' oil-producing countries like Venezuela and Bolivia, Bush, said "Let me just put it bluntly, I'm concerned about the erosion of democracy in the countries you mentioned". But unlike Bush, whose victory in Florida in 2000 was dubious at best, Morales won in a landslide last December—on a platform of nationalising hydrocarbons and setting up a Constituent Assembly to transform Bolivia’s constitution. Bolivian foreign minister David Choquehuanca responded: “We are creating a participatory democracy and the world knows it. I don’t understand how the United States can say democracy is eroding...”

Condoleezza Rice has called for a front to resist the rise of "demagoguery" in South America. During a visit to the coca growing region of Chapare, Hugo Chávez, the target of a US-inspired coup in April 2002, warned Morales to be ready for a similar treatment. [13] Yet, bogged down in Iraq, the US for once seems powerless in South America, despite having troops in Colombia bordering Venezuela, and in Paraguay next to Bolivia. It is immensely relieved that more US-friendly candidates won recent elections in Colombia and Peru. But with almost every other nation being broadly "left", US strategy now must centre on trying to pull the “reasonable left” away from Chávez, Morales and Castro.

Yet even moderate social democrats won't necessarily bow to Washington in the current climate. Despite bitter exchanges with Chávez during Peru's election campaign, new President Alan Garcia has already said he will revisit the bilateral Free Trade Agreement with the US signed by his predecessor.

And Chilé’s new President Michelle Bachelet says she thinks Bolivia’s nationalisation could be beneficial to the continent. Just after May 1, she said: "What we have witnessed in these countries (Bolivia and Venezuela) is that they are looking for governments and leaders that will work to eradicate poverty and eliminate inequality.” Returning the compliment, Chávez described her as “an extraordinary human being, an extraordinary friend. Woman, socialist, ‘allendista.’ We are with her. I am a ‘michellista’”.

This is not to imply that Chávez and Morales are leading the continent towards socialism. Nevertheless, their frequent radical statements and occasional radical acts open up the space for such a trajectory to develop.

4. Solidarity with Bolivia

A group of western activists living in Bolivia has set up a Bolivian Solidarity Network and works with the social movements inside the country. At their national meeting on May 5-7, they began planning an international day of action in support of nationalisation for 17 October to coincide with the 3rd anniversary of Goni’s gas war killings. Visit their website at or subscribe to their e-list:

An edited version of this appeared in the September 2006 edition of Solidarity magazine.


1) In Bolivia, 62% of people self-identify as indigenous.

2) Currently Bolivia sells gas to Brazil and Argentina for US$3.60 per million British Thermal Units (BTUs), less than a quarters of the price on the international market. Morales wants to raise this by US$2, a move opposed by Petrobras (Brazil) and Repsol (Spain/Argentina). Following May 1, there was a hastily convened conference between Presidents Morales, Chávez, Lula (from Brazil) and Kirchner (from Argentina) at Puerto Iguazu, Argentinean. The tension was slightly lessened when they came to an agreement on building the Gasoducto del Sur, where Venezuela and Bolivia will supply gas to the Southern Cone and Brazil by 2015.

3) Indeed, in Santa Cruz one month later, Morales announced he would give more than 30,000 square km of state-owned land to indigenous peasant communities as the first step of agrarian reform. The landowners federation had earlier walked out of talks over land reform. They are forming vigilante groups to ‘defend’ their huge estates. It's estimated that a handful of families own 90 percent of all farmland, while 3 million indigenous peasant farmers share the rest. The next step will be to redistribute idle private land. However, large landholders deemed to be "productive" will be untouched by MAS.

4) Jeff Webber warns that "We should remember that the far more radical reforms initiated by the Movimiento Nacionalista Revolucionario (Revolutionary Nationalist Movement, MNR) following the 1952 Revolution were nonetheless overturned by the far Right in a military coup in 1964, in part because the revolution never evolved from Left-populist to genuinely socialist and indigenous-liberationist", Webber J. "The First 100 Days of Evo Morales: Image and Reality in Bolivia"

5) The role of MAS in the struggle is an interersting one. Once a party of struggle, they moderated their image after Evo Morales came from nowhere to narrowly lose to Goni in the 2002 elections. This led them to be largely absent from the 2003 struggles, and in 2005 backed the position of 50% taxes on transnationals rather than the demand for full nationalisation without compensation that was demanded by the movements on the streets.

6) At the end of March, Bolivia announced it would not solicit any new loans from the International Monetary Fund. However, it is a mistake to imagine neo-liberalism has been completely dumped. For example, Morales has been unwilling to take back control of financial policy from the 'neutral' Banco Central de Bolivia and remains commited to macroeconomic austerity.

7) “El respaldo del eje troncal a Evo Morales baja de 80 a 62%,” La Razón, 29 de Abril 2006. Some of Morales’ popular decisions have been: to purge the military of some of its high-ranking officers; to require every public official to take an almost 50% pay cut (including himself); and to stipulate that no bureaucrat can earn more than US$22,000 a year.

8) Alvarro is MAS's leading theoretician. He is known for saying socialism is not possible in the next 50-100 years, that Bolivia must first build a capitalist base, a stagist approach adopted by communist parties around the world for much of the 20th century.

9) MAS organised the EMP (The Peoples’ High Command) to co-opt, negotiate, and/or intimidate would be Leftist opponents of the MAS within civil society. Some movement leaders were appointed as ministers in the MAS government. However, Oscar Olivera refused the position of Minister of Labour. Webber (ibid) concludes: "There is almost no effective opposition to the Left of the MAS at the moment".

10) The United States is trying to sign individual TLCs as fallback to the collapse of the Free Trade of the Americas Agreement (FTAA). It has done so with Colombia and Peru, which led broke the thirty-seven year old Andean Community of Nations, a trade pact that included Venezuela and Ecuador as well as Bolivia. The US-Colombian TLC harms Bolivia, as 60% of Bolivia's major agricultural export, soy beans, currently go to Colombia and subsidised US grains will drive out Bolivian soy production. Venezuela has said it will buy Bolivian soy under the alternative TCP. The TCP has faced opposition from Bolivian doctors, who struck against the presence of Cuban-Bolivian ophthalmological medical centres, with the capacity to treat over 100,000 patients free of charge each year.

11) Bolivia has since awarded the US$2.3billion investment to India's Jindal Steel and Power. Unlike EBX, Jindal has agreed to use Bolivia's gas, rather than coal, in the refining process. However, this is a far cry from MAS's election promise to renationalise mining.

12) By contrast, support for Bolivia's nationalisation has come from some unusual quarters, including French President Jacques Chirac. Also, Joseph Stiglitz, Nobel-prize winning economist and former chief economist at the World Bank, met with Morales on May 17. After the meeting, he argued that Bolivia “felt all the pains [of neo-liberalism] but has experienced no gains—it's clear that it must have a change in its economic model.” He added that the sale of Bolivian hydrocarbons to private interests had been illegal, since it was never approved by the country's Congress. “When a person was robbed of a painting and then it is given back to him,” Stiglitz argued, “we don't call it re-nationalization, but return of a property that was his to begin with.”

13) Morales took Chavez on a visit to Chapare, the semi-tropical region where he rose to prominence as the leader of the coca growers’ confederation. There they announced their intention to build a factory to process coca leafs for herbal teas, medicinal products, and cosmetics, which will not go unnoticed by the US, which for years has persued a policy of forced eradication in the Chapare. Ironically, many of the cocaleros are ex-tin miners, who lost their jobs as a result of the privatisation of their industry in 1985.

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