Its Confirmed: Evo sacks his petroleum team

Translated from Econoticiasbolivia

La Paz, August 28, 2006.- Cornered by internal and external pressures, president Evo Morales officially dissolved his first petroleum team this afternoon, wracked by accusations of corruption, extreme inefficiency and the absence of positive results in the process of nationalisation" which has remained a simple slogan.

In the Government Palace, the president officially confirmed the removal of Jorge Alvarado, president of the state petroleum company YPFB, Victor Hugo Sainz, the superintendent of Hydrocarbons, and Julio Gomez, the vice minister of hydrocarbons, just as Econoticiasbolivia had anticipated two weeks ago.

They were replaced by: Juan Carlos Ortiz as new president of YPFB, Guillermo Arequipa as vice minister of hydrocarbons and Santiago Berrios as superintendent for the sector,

At the same time, Morales ratified Andres Soliz Rada’s position as minister of hydrocarbons, although with diminished responsibilities and powers, in order to hand over the direction of the process of nationalisation and negotiation of contracts to vice president Alvaro Garcia Linera and formed a team of five ministers (as opposed to only the one for hydrocarbons) to execute these actions.

The change of leadership team is part of the "change of path" regarding petroleum policy, moving away from the line of verbal confrontation defined by Soliz Rada and Alvarado, which was more suited to the electoral phase, but which now is putting in risk the agreements they want to sign with the petroleum companies before November 1, the date set by the "nationalisation" decree issued by Morales.

For them, the new line is "more to the right, more pragmatic and realist", in an attempt to enable the foreign petroleum companies, which operate illegally in Bolivia according to a ruling by the Constitutional Tribunal of the Republic, to legalise their situations with the signing of new contracts, adjusted to law 3058, paying a bit more in royalties and taxes to the state in return for continuing to exploit Bolivia's gas and petroleum reserves, valued at the moment at more than $200 billion.

Cause of the fall

The fall of the strong men of the petroleum scheme of Evo Morales is a product of, on one hand, the scandal unleashed over the issue of a hidden contract with a questioned private consortium, which violated the laws, the "nationalisation" decree and the hurt the state economy.

Other important factors for why the nucleus of men loyal to Morales have been replaced by vice president Linera are; 1) the evident stalling of the process of nationalisation which has not resulted in any benefits nor additional income for Bolivia and has remained a simple slogan, 2) the lack of viable actions and resources to strengthen YPFB, even at a minimal scale, leaving complete control of the productive chain to the transnationals, 3) the sterile confrontations with Petrobras and Repsol, with a internal media objective, but with negative consequences in the exterior and 4) the unproven accusations of fraud and contraband against a few petroleum companies, which put a break on the negotiation of new contracts.

All these factors contributed towards vice-president Garcia Linera, politically situated to the right of the president, publicly questioning the suitability and professional and technical capacity of the men loyal to Morales. Afterwards, in front of the worsening of the scandal due to the violation of legal norms and indications of corruption, the vice-president took over the responsibility of directing the process of "nationalisation" and negotiations with the petroleum companies, pushing Soliz Rada to the side.

Change of Path

In his first move as the new strategist for gas and "nationalisation", Garcia Linera last week went to Brazil in order to restore relations that had been broken by the policy of verbal confrontation that the polemical minister of hydrocarbons of Bolivia, Andres Soliz Rada, had carried out.

"The final word of the Bolivian government is that Petrobras is a fundamental strategic partner" for the Bolivian state said Garcia Linera at the conclusion of a 25 minute reunion with Lula, where he left clear that the Morales administration had begun a change of path in relation to the negotiations over gas.

The relationship of Bolivia with the Brazilian petroleum company Petrobras and the Lula government had deteriorated, to the point of rupture, after the unproven accusations by Soliz Rada that Petrobras was putting a break on the "nationalisation of gas and petroleum and that, together with the other transnationals, was financing the boycott of this process which until now has report no benefits for Bolivia and has not moved beyond being a slogan.

The minister also accused Petrobras and Repsol of developing contracts harmful to Bolivia, of anti-economic behaviour, swindles and breach of trust by signing an agreement that set the price of exportation of gas below the international level, which had lead to economic damage to the Bolivian state equivalent to $160 million.

All these accusations, just as the ones before over the contraband of hydrocarbons and other crimes, where not accompanied by their respective evidence of proof nor were they orientated towards achieving the expulsion of the transnationals as a just sanction against these supposed crimes, as the current law establishes. On the contrary, the strategy of Soliz Rada was to use these accusations to pressure the petroleum companies to reconcile themselves to immediately legalizing their contracts by November 1, as Morales' decree of "nationalization" establishes.

Nevertheless, the strategy of confrontation, which was very useful for uniting the social sectors behind the government and its policies, did not achieve the expected results with the petroleum companies, such as with Petrobras who put Soliz Rada and his team in the freezer, with the additional burden of internal accusations of corruption, violation of laws and of acting outside the current nationalisation decree.

Confronted with this, and the pressure of vice-president Garcia Linera, president Morales decided to relieve Soliz Rada of many of his responsibilities and powers, handing over the direction and managment of hydrocarbon policy to the vice president so as to push a less confrontational line, aimed towards dialogue and open to achieving immediate agreements with the foreign petroleum companies

On top of this, according to the information from the minister of Planning, Carlos Villegas, president Morales instructed four ministers, situated politically to the right of Soliz Rada, to form a team to make operational the new hydrocarbon policy, putting another break on the impetuses of the already devalued minister of Hydrocarbons

Villegas informed that due to the decision of the head of state, the ministers for the president (Juan Ramon Quintana), Housing (Luis Alberto Arce), Defense (Walker San Miguel) and Planning (Carlos Villegas) will work as of now together with the head of hydrocarbons in the process of “deepening the nationalization” to reach as quickly as possible satisfactory agreements with the petroleum companies.