Soliz Rada "Many of the things that were carried out were done so against a sector of the government who did not want them to be done"

Speech by ex-Minister of Hydrocarbons and Energy, Andres Soliz Rada at the hand over of the office to current minister, Carlos Villegas September 18, 2006

The nationalization decree is a type of mandate from the Bolivian people to recuperate national dignity and state control the hydrocarbon production chain. It is a decree that has enormous virtues, but from my point of view some gaps. The pro-government newspaper, as I consider it, El Juguete Rabioso, has revealed that I had put forward that the 50% plus 1 of the shares of the companies Transredes, Andina and Chaco, be placed into the hands of the state from the first day of nationalization; this was possible from my point of view. It was a question of opening an account with the BCB [Central Bank of Bolivia] which says payment for indemnifications, payment for expropriation of the shares that would allow us to reach the 50% plus 1.

The fever of this May just gone, was so great that there were no problems and some could say, in this case the Minister for Housing, who opposes many costs, they would have asked: where did we get the money for this expropriation. I said that we need to put in the decree that the nationalizations are paid before conciliation and we need to see conciliation with Transredes, Chaco and Andina and all the other companies from the point of view of what they owe the country in terms of contraband and fraud. This would have allowed us to enter immediately as majorities on the directorates. That was one of the issues that was not possible to carry out.

I must also say that it was not possible to conform a coherent team inside the Ministry, because in many cases, in the highest levels the vice ministers were not named with the approval of the minister and this obviously brings with it its difficulties. Nevertheless, we should also recognize that in these six and a half months of administration we were able to pull together a coherent team at the level of directors, of judicial team.

The ministry has done things that were planned in such a way so that they would not be done. Or at least, so that they were not done effectively. On the issue of the audits: how can a ministry that is so new, without money, carry out an audit of 10 oil companies? Nevertheless, it was able to do so, and there is still pressure to try and make sure that the results of these audits do not get to the negotiation team, it has been done in such a way that one of our tasks is to make sure that these auditing teams are not dismantled, which are being lead by a 90 year old general, the engineer Enrique Mariaca, who participated in the Chaco War as a combatant and continues today combating in defense of natural resources.

Many of the things that were carried out were done so against a sector of the government who did not want them to be done. We had to battle very hard so that the shares of the AFPs were handed over to YPFB [the state oil company]. They said that this was not possible, that the law impeded this, nevertheless, we found the key person to help us, Dr Jose Luis Roca, who at this moment is working very closely with the engineer Juan Carlos Ortiz. In the same way as in issue of the AFP, Dr Loria Alarcon is doing so, under the leadership of Cecilia Rocabado.

They also did not want YFPB to have its representative in the directorates of the capitalized [privatized] companies. The necessary transactions are not being carried out. They did not want to make way for Dr Roca so that he could organize the directorates and which form participation on the directorates of the capitalized companies takes. He was told that YPFB could not contact him, that there was no item, I don’t know what else.

We contracted Dr Roca for a month with the commitment that he would not receive a salary, because he was receiving his pension. Dr Roca stopped the negotiations and we named the directors and then a person appeared, a person who has been heavily questioned – amongst the directors – and they accuse him of all things. I am sure that there are many honest people in Santa Cruz, and this person was accused of everything, but why do they accuse him, because when he came onboard the directorate of the Andina company [subsidiary of Repsol], he look at the paperwork and there was a contract that was called EXCEDIM, it is worth pointing out that it was a secret contract between Petrobras and Andina through which these companies commercialized the price of Bolivian oil at an inferior price to rip off the country.

And this Mr Harnan Camacho took the issue to the office of public prosecutor and now the a case against aggravated fraud is being processes. But like all those who denounce things here, this mister is also the object of a tremendous discreditation campaign, maybe over some things he did commit. I will not put my hands in the fire for him, but that he had a valiant attitude, he did. Just as Dr Roca had, when as one of the directors of Transredes, he said that it could not be that they made me sign a contract for $300 thousand from a intermediary that had provide insurance for Transredes. And who is the intermediary, Mr Gonzalo Bedoya [president of AFP Futuros]. So the directors, although they were not able to enter as a majority, have already achieved an important presence in order to know what happens in this capitalized companies.

Another element is the issue of complexity, that it is not possible to do anything in this country because it might anger the oil companies. And this caught my attention, that Enron was being put on trial in 46 parts of the world, 46 countries across the world but not in Bolivia. Juan Carlos Virrerira denounced this and there was not a trial, Juan Carlos Virrerira had initiated it, but due to the fact that there were ministers, including the president of the republic, involved in the case it had to be taken to the Supreme Court. And we presented the case against Enron, and within Transredes they said to us: very well there is nothing to talk about her, because Transredes is made up by two companies - Prisma and Shell. But it turns out that Prisma said they had bought the shares off Enron and it had nothing to do with them. When we asked Prisma to talk they said: “you are going to pressure us”. But, why would we pressure them if they are two different companies, or is it that they are not two different companies, but rather Enron continues to operate in Bolivia. That is the issue that needs to be clarified and it appears to me to be of very important value.

The other great issue is that many found the nationalization decree to be almost perfect, with some limitations like the ones I pointed out. But they put one condition on saying that the nationalization decree is good and that condition is that it not be carried out. If it is not carried out, the nationalization decree is excellent.

It has been a permanent battle to apply this nationalization decree, and that is why they say to us that the nationalization decree will be carried out after the 180 days, after the nationalization of the contracts, which is were a great dilemma comes in.

How do we negotiate with the oil companies? We have been conquering ground, conquering trenches in order to negotiate with the oil companies and discuss new contracts from a position of strength or do we just subordinate ourselves to all their demands without touching anything. At the moment they were saying to us that, to put it simply, Petrobras was not going to accept complying with article 4 of the nationalization decree that states that they have to pay 32% in additional taxes – 82% all up – Petrobras was going to send us to hell. And to the surprise of these people they began to deposit into the accounts of YPFB, that is to say that it was possible.

So, the nationalization decree in article 2, in the second paragraph, is a very clear mandate, and so the ministry team elaborated a ministerial resolution indicating that crude petroleum that entered into the refineries is ours, by mandate of the decree. If it enters the refinery, the products that come out of the refinery also belong to Bolivia, for the simply reason that the decree talks of this, that we have recuperated the property and the comercialisation along the whole chain, establishing volumes and prices.

And from Brazil, we hear echoes of a false accusation; they say “the ministry of hydrocarbons has confiscated the refineries”. No misters, we have not confiscated the refineries. We will reconquer the refineries when we pay Petrobras the 50% plus one. It is like as if in our case we bake bread and after making the dough we take it to the oven and we say to the owner of the oven, mister, please bake this dough to make bread. I take him the dough, the bread is mine and I am not confiscating the oven, I am saying to the owners of the oven; how much are you going to charge for having carried out the work of baking the dough.

And that is what we wanted to do, that is what resolution 207 was about, which was elaborated by the ministry, and I have not seen any extraordinary reaction from Brazil, at least like the one that presented itself in the first moment. The letter of response from Petrobras says: Petrobras is displeased by this measure, but they will not oppose themselves to it.

But in a manner – which according to me was too quick – the resolution was annulled. And here there is another curious fact. The structure of Bolivia and in other parts of the world, within what they call the Kelsen pyramid, has a political constitution of the state, laws, decrees, supreme resolutions, bi-ministerial resolutions and below all of them is a ministerial resolution. The only problem is that this ministerial resolution through which Bolivia would recuperate the property rights of the liquids, which is what the nationalization decree says, needs to be abrogated by another ministerial resolution. That is to say, a law or a supreme decree can not abrogate this ministerial resolution. This ministerial resolution needs to be abrogated by another ministerial resolution and according to my consciousness, at the bottom of my consciousness, I said to myself, a thousand apologies, but I cannot sign this ministerial resolution and this is the issue that I have not talked about until now, but that is the reason for my resignation, because I could not sign that resolution.

In regards to this issue of the resolution, someone could also argue; well, minister why wasn’t this done before, why wasn’t this resolution issued earlier, in the first few months, the first three or four months of nationalization. It is because here there was a problem, a problem of money. Because the IDH [Direct Hydrocarbon Income], the taxes, the royalties, have to be paid in advance and if we took out this ministerial resolution before, what would we have paid the regions with? And the regions would have launched themselves against us. The nationalization would have served for the state stopping the payments of royalties and the government would have been destabilized. But because we had made it so that the oil companies, above all Petrobras, pay the $32 million [per month] and they have already paid 2 months worth, there is already in YPFB’s safe $62 million. We said now we have the money, and as a consequence, given that we have the money we can now pay the regions and if we can pay the regions we can begin to take control of the crude that enters the refinery. That is the process that was followed.

And what does it mean for us that we can have control of the products that come out of the refinery? It would signify $10 million monthly for the commercialization of recon, of reconstituted petroleum, and around $200 million for the trade that non-regulated derivates counts for, because out of the refineries also comes greases, oils, natural gases all of which Bolivia could commercialise for its benefit.

From here we are dealing with having to capitalize YPFB so that it ceases being a residual company, so as to generate the beginning of its recuperation. With the monthly $32 million payments we are widening its economic base so that it can enter into new contracts. Within this process I believe that there has been a very important achievement and I request in a special way of Carlos Villegas, as well as Juan Carlos Ortiz [the new president of the state oil company], we have to look after one thing with Argentine, which is they are permanently questioning us on.

We have achieved including a clause that says that the moment where Bolivia expands its exportations from 7,6 MMcd to 27,7, at that moment that exportation begins, at that moment a liquid separation plant needs to have been constructed. That is to say, ethanol, propane, butane, methanol etc are now going to come from Bolivia. And there has been and still is some strong resistance from Argentina.

Firstly they said why is the plant going to be in Bolivian territory, it can be in the cleared zones of Rosario. No? Why is the property of the liquid separation plant going to be in Bolivia? That is what they said first, and then that it could stay in Bolivia but that we could be equal partners in this measure, or they would give us a percentage and we stayed firm. No, the plant has to be in Bolivia and be the exclusive property of Bolivia.

And the Argentine government continued saying, give us a percentage in the commercialization, and we said, no. The commercialization is only for Bolivia and with this plant in Yacuiba we are going to have exclusive property rights, of the commercialization, and its location in Bolivian territory. And there are still pressures to ensure that before signing the contract that this is modified, but from my point of view we can not go back on this.

Hopefully Juan Carlos Ortiz will have the capacity, has the capacity, has the firmness to ensure that they do not put a price on us in Argentina, that they be so firm that in a short time the small price that Brazil pays, will be readjusted even above that of Argentina. I believe that we have to have a bit of patience, Argentina needs the gas, we can still resist without signing this contract, but on the condition that it be done on terms good to us.

There is another issue that the hydrocarbon team needs to take into account, what are the real intentions of Brazil? Brazil is interested in the issue of refineries, more so due to the issue of image in regards to Lula’s election, but the strategic interest of Brazil is to obtain new volumes of gas sales. That is the issue.

If we sell 30, they at one stage said that they need an additional 36MMcd. It is not that they don’t have it in their territory, they “bluff” us saying that Venezuela is going to sell it to them at $1, that the Santos basin, that the biomass, that bio-diesel. All this is true, but on top of all this, they still need our gas. That is why at the moment of offerings the Brazilians from Petrobras are “champions of the world”, they offer a chemicals plant, they are going to do who knows what, and then afterwards they say that students can come study in the universities of San Pablo and other symbolic tokens, but the issue of the price and volumes is a very important thing. We ourselves have to also keep an eye on the fact that the portions of gas that go to Brazil has its counterweigh of important volumes in Bolivia for our industrialization.

Remember dear minister Villegas that they said that the gas that leaves for Brail near El Mutun [iron ore mine], we could not use for El Mutun, because they were volumes already committed over to Brazil, but also that this gas needed to be transported by Transredes and Transredes did not want to. Nationalisation needs to be useful so that this gas that leaves for Brazil, a part of it goes to Mutun for the industrialization of iron, a problem which minister Villegas has worked long and hard on.

The other great problem is the issue of the contracts. The country needs to know what is it that the oil companies are demanding in order to sign new contracts, what dimension of demands are we being confronted with. They ask, in the first place, that in order to sign new contracts there be no subsidy for the internal market, that the price of gas, that the price of diesel, of LPG, be set at the international prices; that is one of the demands they put forward.

Another of the terrible demands they put forward is the right to record the reserves that their are in Bolivia as if they were reserves belonging to the companies, they want to record the value of the reserves in the New York Stock Exchange. It is worth pointing out this struggle that we have carried out - we have denounced to the international community that these reserves belong to Bolivia, and that the oil companies want to record them as theirs.

They are also questioning the right to commercialise gas. It is worth saying that this thing that we are trying to initiate, they say to us: they are our markets, we have the contracts in the exterior, you don’t have them, and as a consequence, the oil companies have to carry out their own proper commercialization.

They want acceptable levels of profit. When one sees the word acceptable, there is a great desire to put them in inverted commas, because for them “acceptable” signifies the minimum possible income for Bolivia. Operational freedom. Deep down they want the process of nationalization to just remain on paper and not be carried out, this is their fundamental objective.

They threaten us with investments. “Don’t you see that there are no investments, we have to develop the gas fields”, this is another false argument. Why, what is the reason for why we need to immediately develop these gas fields? To attend to the necessities of San Pablo, that great pole of development can not be paralyzed. And who is the most interested in ensuring that this pole not be paralyzed - Petrobras. So Petrobras has to invest to develop the gas fields. And here it is a question of maintaining this firm policy, equally with Argentina. In this sense, the Minster, Julio de Vido was very honest when he said: ENARSA [Argentine state gas company], that is to say the Argentine state, will go to Bolivia to develop the gas fields, because Argentina also needs this, this proves that the story that there is no investment and we are going to die as a result of lack of it is not true.

To move forward in these tasks, internally need a lot of coherence, a lot of internal unity. I have not tired of saying that in the sector of hydrocarbons we occupy different positions, but we are in the same team and that is what has been missing.

We have not acted coherently from the superintendents office, from the ministry, from YPFB, this team has a head which is called the Ministry of Hydrocarbons and Energy and under its responsibility is to take forward this task with the greatest deal of honesty, and it has always tried to reflect the problems of the country, telling them the truth.

I want to finally say on the morning of today, it is with intimate satisfaction for me that this position is being occupied by Carlos Villegas, an academic, a man that has experience in negotiations, these have improved greatly in the ministry of planning. And above all a great honesty, where I believe together we can say that all the money of the oil companies will not be enough to buy our conscious. It is with this certainty and tranquility that I have that I am leaving this office in the hands of this brother, friend and comrade Carlos Villegas

Thanks a lot.

Translated from Econoticiasbolivia