Are Bolivians Crazy?

This, in between the lines, is the question being put on the table in the international and domestic press coverage of Bolivia’s exploding political crisis over gas. As Bolivians take to the streets to demand ‘nationalization’ are they engaged in a national round of killing the golden goose, chasing away the very foreign investors they need to develop their oil and gas?

Today’s New York Times, for example, carries an article in which it notes that “gas investments have fallen precipitously, to less than $200 million last year from $608 million in 1998.” La Razon quotes an official of Spain’s oil giant, Repsol, saying that the country’s freshly minted gas law will "force us to abandon many gas fields." Let’s not even go into what they have to say about the calls for nationalization.

So, are Bolivians crazy?

First, once again, let’s peel away the rhetoric and see what facts lie below the surface. This afternoon I asked Carmen Peredo – a key leader of the irrigators’ union and major figure in the call for nationalization – what nationalization really means. What do they actually want? Here’s how she explained it.

Right now Repsol and other big foreign oil companies have a set of shadily negotiated contracts (they weren’t reviewed or approved by Congress and may well be illegal) that allow their Bolivian subsidiaries to pump the oil out of the ground and sell the gas at rock bottom prices to their international parent companies. Bolivia gets a meager cut of the profits, but that cut is based on the artificially low prices. With world oil prices soaring one would think that Bolivia would be raking in the cash. The fact that it isn’t has everything to do with the bogus contracts under which the government gave the gas away.

Carmen says that what nationalization means, in this instance, is really about cutting out the middleman. If Repsol, British Petroleum, Shell or any of the others want Bolivian gas Bolivia would still happily sell it to them, but not at bargain prices set by those companies’ own subsidiaries. What the movements are demanding is that Bolivia set the sale price and that Bolivia take the big profits that the companies are now reaping through the scam of being both buyer and seller.

But where is Bolivia going to get the investment capital to develop their gas fields and the other infrastructure needed? Carmen says that there are all kinds of potential suitors, from Japan, China and elsewhere, who would be interested in getting their hands in on a deal to develop South America’s second largest gas reserves. Bolivia’s social movements, she says, are willing to deal with international players but from a position of controlling their own gas not having negotiated it away behind closed doors.

Is there much more than this to the economics of Bolivian gas? Sure. Unfortunately, be it from the NY Times or the dispatches from the left, the actual economic questions seem to be getting glossed over. In the former we get sober warnings from analysts and corporate officials who happen to have a big money stake in their dour spin. On the other side we have romantic tales of a people on the march that don’t actually ask any of the hard economic questions involved and ignore the fact that there are a lot of Bolivians, including poor ones, not too keen on the protests that threaten to bring down the government.

All that said, Bolivians are not crazy to be demanding control of their huge gas reserves. The path that starts with getting back that control and ends with Bolivia developing a real income generator for development may be much harder and more complicated than some movement leaders here suggest. But they aren’t crazy to say that there is another way besides handing the golden egg over to a host of multi-national corporations.