Soliz Rada “Bolivia should not lose control over its reserves”

Open letter from Bolivia’s ex-Minister of Hydrocarbons, Andres Soliz Rada, regarding the contracts with the petroleum companies.

In my condition as ex-Minister of Hydrocarbons and Energy for President Evo Morales and co-participant in the Decree of Nationalisation of Gas and Petroleum, issued last May 1, I would like to make known my opinions on the petroleum contracts signed last October 28 and 29, which will last for 30 years, and which the Congress of the Republic will authorize and approve in the next few days. My opinions, accompanied by additional thoughts, are the following:

First – Whilst Petrobras, in a report to the Brazilian people last October 31, sustained that the contracts authorized it to count as its own the reserves that it will continue to exploit in Bolivia, spokespeople from the Bolivian government have affirmed that these reserves, complying with the constitution, the binding July 18, 2004 referendum, Law 3058 of May 17, 2005 and the Decree of Nationalisation, are property of the national state.

Because we are dealing with an issue that affects the totality of reserves of current hydrocarbons and the future of the country, and whose value, noted down on the stock exchange (whether as shares or bonds) has increased to more than 200 thousand million dollars, this cannot remain subject to any doubt or uncertainty.

For this reason, I suggest that Congress draft an article where the companies are prohibited to note down our reserves as theirs on the stock exchange, given that they are the direct, inalienable and imprescriptible property of the state. By decision of the parliament, YPFB should include this clause in the petroleum contracts, without which they can not be executed, because we are dealing precisely with operation contracts, as the Bolivian authorities have informed us. The reserves, as the absolute domain of the state, should serve so that the rebuilt YPFB can emit bonds, recognized by the stock exchanges, which would allow it to have the capital required to, in an effective way, control the productive chain and to enter into projects for the industrialization of gas, as signaled by the Decree of Nationalisation. Without this being clearly defined, and also included in the project of the law of refoundation of YPFB, elaborated by the Ministry during my time and which is currently in the parliament for its respective treatment, the industrialization of hydrocarbons will remain simply a statement.

Second – The National Congress can not sign definitive contracts whilst there are still issues pending. If provisional clauses relating to amounts of investment and depreciation (Annex “G”) exist in the contracts, the authorization and approval of those contracts should also be provisional, until this numbers are known with exactness, because for three decades, they will influence the formulas used for calculating the income for the country. Such numbers should be publicly contrasted with the audits which are being carried out, field by field, in compliance with the Decree of Nationalisation and executed by auditing companies contracted by the Ministry of Hydrocarbons and Energy.

In petroleum matters, the difference in cents can translate into benefits or costs which will enormously affect the national interest.

Third – The signing of contracts on the small fields, in which, according to official announcements, YPFB will subsidise companies by $10 million annually, cannot be justified. It is preferable that the companies carry out their threat of abandoning those fields, with the aim that YPFB exploit them via operation contracts with PDVSA, an entity that, with a Bolivarian spirit, has backed this nationalization in a decisive way and has announced its decision to participate in the tasks of exploration and exploitation in this country. The gas and petroleum in those fields could be immediately directed towards industrialization, together with the Venezuelan state company. On the other hand, it is worrying that in signing these contracts, YPFB would not have reserved important areas to explore and exploit in a direct way.

Fourth – The contracts should not conceal the crimes of contraband, tax evasion and aggravated theft committed by companies such as Andina, Chaco, Repsol and Petrobras and which are being put on trial in the justice system. The trials against those responsible for the entry of ENRON into the country, initiated by Juan Carlos Virreyra and broadened out during my ministerial term, must continue. During that same term, the Supreme Decree that declared a national priority the construction of the Bolivian Gas Duct in the West (GABO), was push forward, which, by articulating the mega fields with the west of Bolivia, will impulse the industrialization of the producing departments firstly, and the entirety of the national territory.

Fifth – Inside the country, a false debate has been unleashed, regarding whether the May 1, 2006, Decree implies the nationalization of hydrocarbons or not. Each nationalization is different and has its own characteristics. If the mentioned Decree wanted Bolivia to recuperate ownership over gas and petroleum, the control and participation of YPFB in the hydrocarbon chain and the monopoly over commercialization, it has achieved its objective.

The third nationalization was carried out within a democratic process, with the rules of liberal democracy, inexistent when Standard Oil and Gulf were expelled in 1937, and 1969, respectively. We are dealing with the first nationalization executed in the third world, in the framework of the brutal economic globalization imposed on the semi-colonial countries, with the powerful backing of the Washington Consensus. It is undeniable, at the same time, that the nationalization has recuperated the dignity and self-esteem of our people. To consider that nationalizations only occur if the oppressed countries are suffering embargoes, blockades and military interventions is a limitation on analysis.

President Morales is being advised badly when he is told that the nationalization will be completed without expropriations or compensation. The country is obliged to expropriate and compensate for the shares of Transredes, Chaco and Andina, if the authorities demonstrate that they have complied with their commitments of investment and tax obligations. The same is occurring with the refineries of Petrobras, and the oil pipelines belonging to the Germany-Peruvian company CLHD, with the aim of controlling 50% plus 1 of the shares, as the Decree of Nationalisation calls for. Expropriation with compensation is a right of the state that cannot be renounced, as recognized by article 22, paragraph 2 of the Political Constitution of the State.

The nationalization was adopted in a very unfavorable international context, having to confront the aggression of George W Bush and his allies in Western Europe, united in blind defense of its petroleum companies. Amongst our neighbours, it was not possible to find determined support (although their was some indirect backing) from the government of Michelle Bachellet, a privileged ally of the centers of global power; from Kirchner, shackled by the transnationals based in Argentina; nor the Lula regime, conditioned by Petrobras, a company that has sold off 62% of its shares to petroleum transnationals. It should be taken into consideration that US troops exist in Peru and Paraguay, with all the geopolitical risk that implies.

Sixth – The Decree was dictated in the midst of risks of national disintegration. Remember that Mike Falcoff, the advisor to the US vice president, assured that the country would soon be wiped off the map; that the ex-Minister of Defense in Argentina, Jorge Pampuro said that Bolivia had become “Lebanonised”; and that the IMF advised that the country would only be viable if it maintained the policies of Sanchez de Lozada. All this was accompanied by proclamations to found the Nacion Camba, the Republica Aymara, or designations of governors in Santa Cruz and Tarija, via open meetings, with financial help from the petroleum companies. On this matter, the intervention of Transredes (Enron-Shell) became impossible to conceal.

Its passing was produced thanks to the strong support that President Evo Morales has amongst indigenous and campesinos sectors, and workers, as well as in the armed forces and impoverished middle classes. Nevertheless, and paradoxically, as opposed to what occurred in the past, important sectors of the mining proletariat, once the vanguard of the working class, have announced that they will defend with arms and dynamite the mine deposits controlled by the transnationals, which, in turn, have the support of various co-operatives in the sector.

Although the overwhelming triumph of Evo Morales in the December 18, 2005 election put a break on the separatist tendencies, they have not disappeared. They will once again present themselves if the government of MAS abandons the defense of national sovereignty, the policy of recuperation of natural resources, the struggle against corruption, the industrialization of the country and the generation of jobs.

There is no coordination between the Central Bank reserves and the Economic Development Plan of the current government. To classify our monetary reserves as “sacrosanct” signifies to maintain unacceptable neoliberal conceptions. In my ministerial term, we succeeded in forcing Petrobras to pay, despite reticence amongst sectors from within the government, the first US$160 million coming from the additional taxes on the mega fields, as specified in the Decree of Nationalisation. Unhappily, a large part of the income from the hydrocarbons has not been harmonized with the cited Plan, with the risk of causing them to disappear into charity works.

Seventh – The scenario created by the Decree of Nationalisation is a battle site in which those that want apply it with integrity are confronting those who are attempting to put a break on it, derail it and paralyze it, as occurred with Ministerial Resolution 207, which, in applying the Decree I dictated with the aim that YPFB control the production and commercialization of crude petroleum, assuring additional income for YPFB in terms of more than US$10 million monthly and correcting distortions in the payment to Petrobras for the refinement of petroleum destined for the internal market and that, inexplicably, they still persist in hurting the Bolivian consumer. YPFB can maintain its tradition of the last few years as a “residual” entity, bureaucratized, inefficient and corrupt or convert itself into the promoter of the industrialization of gas and the conductor of the hydrocarbon chain in this country.

It is hard stomach how halting policies in regards to natural resources utilize indigenist and radical poses, invoking the legitimate defense of our cultures, which instead should be pushing forward within the framework of national unity, the major premise of the Constituent Assembly

La Paz, November 14, 2006

Andrés Soliz Rada, ex-Minister of Hydrocarbons and Energy