Nationalization Blues in Bolivia, Rock and Roll in Venezuela

Written by April Howard, Tuesday, 13 February 2007

Evo Morales was arguably elected on the platform of nationalization. A country-wide protest deposed president Gonzalo Sanchez de Losada in 2003, and then kicked former vice-president Carlos Mesa out of the Presidential Palace in 2005. Protesters demanded the nationalization of the 48 trillion cubic feet of natural gas estimated to be in Bolivian reserves, the second largest reserves in South America after Venezuela's. However, the road since Morales’ presidential upset last January, 2006 has been anything but smooth. Morales supposedly "nationalized" Bolivian gas in a highly dramatized ceremony on May 1, 2006, but the process has been slow and complicated, and has left many citizens unsatisfied. Under the new policy, the state energy company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) would pay foreign companies for their services, offering near 50 percent of the value of production in smaller fields, and 18 percent in the largest fields. Social sector leaders complain that this plan is not a true nationalization, though the state company has little funding of its own with which to develop infrastructure. The renegotiation of contracts with companies was left until the 12th hour, and did not show much organization or finesse on the part of the Morales administration. Two energy ministers have resigned since the "nationalization," and now the renegotiated contracts have been suspended indefinitely in the face of lack of funds and infrastructure in YPFB. The first weeks of February have seen continued drama in Bolivia’s struggle over the nationalization of natural resources in the mining and gas sectors. Beginning in the last days of January, protesters blockaded the main highway and took control of a gas pumping plant outside Camiri, a city 520 Km south-east of the capitol city of La Paz, forcing pipeline operating Transredes employees to shut off gas flow to Bolivia’s largest cities of La Paz and Santa Cruz. Protesters demanded that President Evo Morales expand nationalization of the country’s petroleum reserves and expand state petroleum operations in the south. Specifically, protesters demanded that YPFB build a local headquarters in their town. The project was in the planning stages before Morales took office, but was cancelled as the administration reorganized the state company. Protesters also pressured Morales to expropriate two Brazilian-owned Petrobras refineries, as he announced he would do last September, but retracted due to international criticism. On February 6, the eighth day of the protest, after 12 demonstrators were injured in clashes with security forces and $500,000 in losses to fuel suppliers, a government commission and the Civic Committee of Camiri came to an agreement to open a new YPFB headquarters and a gas separation plant in the town, as well as expand nationalization in southern regions. The next day, February 7, Morales was forced to meet with representatives of mining cooperatives (private ventures which sell to the state company COMIBOL, as well as other companies) who demanded the repeal of a new mining tax proposed by the government. Conflicts between cooperative (private) and state miners lead to 16 deaths last October in the mining town of Huanuni. The concept of nationalization is complicated in the mining sector, where cooperatives resulting from the collapse of the state industry have gained power and numbers in the last 20 years. Mining is dangerous and often terminal work in both cooperative and state ventures, and when talk of nationalization comes up, it has set miners against each other rather than empowering either sector. In this case, the cooperative miners marched into La Paz, tossing dynamite - as is usual in mining protests. According to the miners, the new tax would have created increases of between 50 and 160 percent to miners’ costs, without figuring in the different circumstances of small undertakings and large mining companies, nor another tax that cooperative miners pay. The agreement made with Morales stated that the new tax would not be applied to cooperatives and that the government would grant 10 million dollars in funds to the 536 Bolivian mining cooperatives (which contain 55,000 independent miners). Also, the cooperatives will be given a third of the six seats on the board of directors of the state mining company, COMIBOL. The week wasn’t over, however. On February 9, Morales sent 200 soldiers to occupy the Swiss-owned Vinto Smelting complex. Morales signed a decree to nationalize the smelting complex, with no plans in the near future to compensate the company. "The Vinto Metallurgical Complex returns to the control of the Bolivian state with all its current shares, allowing the [state] Vinto Metallurgical Company to assume immediate administrative, technical, legal and financial control," the decree read. Glencore International AG, the former owners of the smelter, purchased the smelter from former Bolivian president Gonzalo Sánchez de Lozada to Compañía Minera del Sur (COMSUR) for a value of $100 million. Morales’ plans are counting on $10 million from Venezuela in order to create infrastructure in COMIBOL. Nationalization has caught the news in Venezuela too, as president Hugo Chavez has directed a smoother nationalization of Venezuela's largest private electric company by buying a controlling stake in Electricidad de Caracas (EDC) on February 8. The EDC stake was bought from US-based owner, AES Corp., for $USD 739 million. Possibly up for future nationalization shifts are smaller companies in the electrical sector, oil projects (think Chevron and Exxon Mobil), as well as the country's largest telephone company, CA Nacional Telefonos de Venezuela, CANTV, 28.5 percent-owned by New York-based Verizon Communications Incorporated. While these countries struggle to renegotiate the meaning of "nationalization," often with limited resources as a result of years of pillaging by foreign companies, Washington's opinion of these projects is expressed by Secretary of State Condoleezza Rice, who accused Chavez of "destroying his own country'' economically and politically. Chavez is operating from a situation of wealthy and developed industries, which might account for his more successful nationalization projects. Meanwhile, Bolivian gas and mining industries suffer from a historic lack of infrastructure and investment. Morales can be criticized for his lack of expertise in nationalization projects, but with so few successful precedents, and a consistently conflictive social situation, he can be recognized for efforts so far. Of course, he well knows what happened to the last president who refused to fully nationalize. April Howard is an editor at UpsideDownWorld.org, a website uncovering activism and politics in Latin America. She can be contacted at April.m.Howard (at) gmail.com First published at Upside Down World