Tuesday, August 29, 2006

Another New Gas and Oil Brief: "What They Are Saying"

Dear Readers,

Since the Bolivian government's May 1 decree seeking to recover public control over the country's gas and oil reserves (and even before the decree) The Democracy Center gas and oil research team – Aaron Luoma and Gretchen Gordon – have prepared a series of briefing papers to help citizens and journalists worldwide understand the confusing dance of Bolivian gas and oil politics.

So far this has included:

Oil and Gas Policy in Bolivia - Post Election Update, April 6, 2006
Review of the May 1 Gas Decree – A policy analysis of the decree
Review of Foreign Media Coverage of the Decree - A look at what the press had to say

Today we add a new briefing paper to the series, A Summary of Initial Commentary on the May 1st Decree, which looks at what a wide variety of actors have had to say about Bolivia's new oil and gas policy – the Bolivian government, its domestic political opposition, think tanks from all sides, foreign governments, the oil companies and others. Looking at these comments together provides a real sense of the debate at hand, not just in Bolivia but also around the globe, as poor nations seek to get a fair cut of the barrel.

The index to all the briefing papers can be found here, including links to new Spanish translations of the policy analysis of the decree and the media coverage brief.

As always, we look forward to your comments.

Monday, August 28, 2006

Repsol Rattles a Saber

Here's an event that watchers of Bolivian oil and gas politics have been keeping their eye on – the threat of legal action by one or more of the foreign oil companies doing business here, as a result of the May 1 decree seeking to recover control of the nation's oil and gas.

Yesterday Repsol, the Madrid-based oil giant and one of the key corporate players here, went public with such a threat. Here's a link to today's article in Los Tiempos.

The provocation for the company's threat is not the decree itself, but related action by the Bolivian government, investigating Repsol for fraud in connection with a contract by which it sells Bolivian gas and oil to a Brazilian firm at suspiciously low prices. Repsol says the deal is legal. Bolivian authorities aren't convinced and on Friday undertook a search of the company's local subsidiary, Andina.

Repsol, whose Bolivian heads have also personally been the subject of legal investigation, issued a statement from its Madrid headquarters: "These repeated and unjustified actions obligates Repsol to take legal action in all of the forums of independent justice, national and international, in defense of its rights and those of its employees."

The threat of international legal action hangs like a Sword of Damocles over Bolivia's head, not just in oil and gas cases but in potential cases over mining and water privatization as well. The Repsol threat raises the same two questions that all the other possible cases do – How afraid should Bolivia be? Is the threat so dangerous that the new government should trim back its plans?

There are three important points to make here:

1. While the Bolivian government clearly needs to take note of the threat, it also needs to recognize that companies are going to threaten to take legal action even if they haven't decided to actually do so. "We are going to sue!" is in the same camp as, "We are going to leave the country and stop doing business here!" Sometimes if I tell my kids I am going to ground them I really am about to and other times I am just trying to get their attention. Bolivia, like adolescents, needs to get good at telling the difference.

2. While Repsol left unclear what specific legal forum they might resort to if they do, what is clear is that they have some options heavily weighted to their advantage. A favorite of multi-national corporations, for example, is the International Centre for Settlement of Investment Disputes (ICSID) based at the World Bank. Operating behind closed doors, in Washington, in English, and with both the media and citizens totally excluded from the process, ICSID was designed for global corporations and it works for them well in legal disputes with countries like Bolivia.

3. If Repsol does take legal action against Bolivia, whether for investigating corruption or for the government's plan to recover control of its energy resources, the Spanish company had better be ready for a battle that goes well beyond paying its lawyers. If it wants a preview, Repsol need look no farther than the experience of Bechtel and what happened when it sought to sue Cochabambinos after the April 2000 water revolt that kicked out the company. Bechtel's legal demand ($50 million after making investments of less than $1 million) became such a huge media and political albatross around its neck that the California mega-corporation finally tossed in the towel for a token payment of two shiny new 1 Boliviano coins last January.

The Democracy Center helped lead that fight worldwide and we have already met with activists in Spain who are ready to take the fight to Repsol, in the same fashion, if need be.

Thursday, August 24, 2006

Bloomberg Continues its Misreporting

On August 13 we posted an analysis on this Blog, written by one of our gas and oil researchers, Gretchen Gordon, pointing out that the Bloomberg news service was misreporting the Bolivia gas and oil story in a way that was so fundamental and so consistent that it seemed to be intentional.

We noted that in report after report, over a period of a month, Bloomberg kept declaring that the Bolivian government had "seized the assets" of foreign energy companies operating in Bolivia. In our post on August 13th we pointed out that the government had never seized any asset of any company and noted that we were sending a letter to the Bloomberg reporters involved, asking them to provide "the documentation of exactly which company assets were seized and when." We also offered Bloomberg equal space in which they could share their response on the Blog with our readers.

It has now been almost two weeks since that posting and our communication back from Bloomberg has been limited to a short note saying that our letter was passed on to their Latin American editor.

Today the news agency filed a report, once again, that includes the reference: "…after the government reversed a decision to seize the country's oil and gas fields."

Once again, we call on Bloomberg to provide the documentation of exactly which company assets were seized and when. They owe their readers accuracy, especially on an issue of such major importance both in Bolivia and abroad.

For readers interested in contacting the reporters and editor at Bloomberg directly, we are posting their names and emails below. We will also be sending a copy of this post to each. A full report on Bloomberg's errant Bolivia coverage, including links to their articles, can be found here.

Bloomberg Latin America Editor:

Laura Zelenko: lzelenko@bloomberg.net

Bloomberg Reporters:

Jeb Blount: jblount@bloomberg.net
Tom Cahill: tcahill@bloomberg.net
Alex Emery: aemery1@bloomberg.net
Ben Miller: bmiller29@bloomberg.net
Sarah Thompson: sthompson17@bloomberg.net

In the Battle Over Bolivia's State Gas Company, Evo Opts for Political War

The political battle over charges of corruption and/or incompetence in Bolivia's revamped state energy industry has heated up considerably in the last 24 hours. Opponents of the MAS government have finally found an issue which has given them some political traction and President Morales has opted to respond with ramped up rhetoric and a move toward a political war with his opponents in Congress.

As we have written about earlier here on the Blog, serious charges have been leveled against both Bolivia's Energy Minister and the head of the state-owned gas and oil company (YPFB) that the officials violated the law with their approval of a June contract with a Brazilian energy firm, Iberoamérica Trading SRL.

Yesterday in Bolivia's national Senate the two key opposition parties (which together control a one-seat majority) voted to formally censure Energy Minister Andres Soliz, a move that triggered his resignation, with a combative letter charging that MAS opponents were seeking "to return Bolivia to its condition as a semi-colony for the world's centers of power…"

Soon afterwards Morales weighed in, refusing to accept the resignation, and publicly declaring that backers of the censure in the Senate were, "sellouts of the nation, assassins and perpetrators of massacres." MAS backers believe that the censure move is part of a manipulation by foreign oil companies and their Bolivian allies to thwart the reassertion of government control of the nation's gas and oil resources. Good coverage of these events can be found in today's La Paz daily, La Razon.

On the one hand, I haven't seen the actual government audit upon which these charges are based and everyone, even government officials are entitled to be presumed innocent of wrongdoing until proven guilty of it. However, the original source of these charges, Bolivia's Superintendent of Hydrocarbons, Victor Hugo Sainz, is a credible source and it seems unlikely that the whole scandal is just made from thin air.

As I wrote on this Blog a few days ago, Morales and MAS have a political choice to make. If the evidence really does demonstrate incompetence, corruption, or some mix of the two, Morales needs to decide if political loyalty outweighs his commitment to honest and effective government.

It is easy in politics to get caught up in the warfare of it, especially in the charged environment of Bolivia where a nation is seeking to work out deep historic conflicts in the unfamiliar arena of government – as opposed to the streets. It is easy to follow that voice inside that says, "These bastards are not going to get us, they are not going to win." The problem is that sometimes, even if their own intentions are politics of their own, the so-called "bastards" actually have a point. Pretending that they don't only makes things worse.

There is an old rule of politics, familiar to anyone who has had experience in politics dealing with the media. If you have a bad story on your hands, just get it out all at once. Do NOT make it an ongoing story that just stays on the front pages day in and day out. If I were PODEMOS, UN or some other political opponent of the MAS government, looking at this scenario from a purely political standpoint, I would hope and pray that Evo would do exactly what he is doing – giving political shelter to an ally charged with corruption; defending his actions with rhetoric instead of facts; and keeping the best darn attack they have against MAS alive and well, day in and day out.

Tuesday, August 22, 2006

It's Just a Government

It happened again yesterday. A group of young documentary filmmakers from abroad came into our office seeking help as they set out to make a film about the Bolivian political revolution. They are coming in droves to Bolivia these days – filmmakers, journalists, academics, dreamers of thesis topics, freelancers, seekers.

They are coming because they have heard that in Bolivia something truly original is underway – indigenous rule, a political revolution from the ground up, the "new socialism."

And I said to the young filmmakers yesterday as I say to all those who visit these days: Sorry to disappoint you folks, but really it is just a government.

To be sure, it is a government that is different than most, both in symbolism and substance. Much is made of the Minister of Justice, Cassimira Rodriguez, who used to be a maid (leaving out the less colorful fact that she has also been an effective union leader for a decade). What visiting journalist has not taken note of a President who doesn't own a tie? And yes, the new government is filled with many indigenous people among its ranks; it is seeking to reverse twenty years of foreign-imposed economic policy; and it has convened a constituent assembly to re-write the nation's constitution.

But, again, it is just a government, behaving the way that governments do.

Take the famed constituent assembly, for example. The vision for that gathering that drove the demand for it for decades was that it would sidestep the discredited instruments of political parties and build its members from bases like indigenous communities, labor unions, and the like. But MAS cut a deal with PODEMOS and the other parties to effectively exclude anyone but parties from the election for the Assembly. It reminded me greatly of the way lawmakers in California used to redraw election district boundaries – swapping Democrats in one district for Republicans in another until both parties walked away with "safe seats" in which, really, there weren't elections anymore.

Yes, my idealistic friends, political parties look out first for how to maintain and expand their own power and MAS is no different.

Take the even more famed May 1 Morales decree "nationalizing" Bolivia's gas and oil. Yup, looking at the decree through the lens of media coverage, both in Bolivia and abroad, it looked like the new government was really playing tough with foreign energy companies. Morales even sent troops into the oil fields! But in fact, when it came down to the policy itself "Morales 2006" looked pretty much like a mixture of "Goni 1992" and "Mesa 2005" – negotiate a deal to end up 51% owner of companies co-owned by the multinationals and impose higher taxes. "Nationalization" it clearly was not.

Yes readers, politicians often try to make things look different than they really are, for political reasons, and Morales and MAS are no different.

And now we have the evolving story of the new head of the state gas company (YFPB), Jorge Alvarado, embroiled in a scandal that smacks of both corruption and incompetence. I am not especially surprised. Alvarado was an engineer with no political profile when he was tapped to take over the Cochabamba water company after residents of the city took it back from Bechtel in April 2000. His performance in that position was unremarkable at best, but in 2002 Evo went searching for someone tied to the Water Revolt to join the MAS ticket and, when Oscar Olivera said no, Alvarado went into politics and became a Congressman.

I worked with politicians in California for many years and once contemplated becoming one myself, so I recognize the professional affliction they suffer sometimes – becoming utterly phony.

Not long after Alvarado entered Congress I approached him to see if I could get his help to get the Bolivian government to step up efforts to help get orphaned children adopted. "Sure!" he said when I asked him to come with me to visit one of the orphanages in town. "Maybe my wife and I will adopt one." I thought to myself, "Wow, this guy has it bad. He really will say anything to anyone."

But up the ranks Alvarado went, being MAS' candidate for governor of the state of Cochabamba last year and after losing, being named to one of the most important posts in the new government. It would appear that he took his weaknesses as manager and took them into political prime time.

Yes friends, in the mix of officials that all new governments must put in positions of power, some of them are going to be incompetent or corrupt or both, and the new Bolivian government is no different.

Now, lest the Evo-haters take this as too much red meat to swallow in one bite, let's put this in perspective. It would be pretty hard to find anything that this government has done (or most others) that rivals the Bush administration taking the US to war on a lie and having no plan for what to do about a mistake that cost more than 3,000 Iraqi lives just in July, has sent thousands of flag-draped coffins home to the US, and is costing US taxpayers about $3,000 per man woman and child per year.

But just because the current government in Washington is in the middle of "the mother of all political screw ups" doesn't mean the government in La Paz doesn't need to clean up its act. The Alvarado case is a test for a Morales government that ran for office pledging to clean up the government of corruption and incompetence.

Yes, all governments are faced with decisions that place loyalty to friends up against the broader principles for which those governments supposedly stand.

How Morales deals with the Alvarado/YFPB scandal will be a clear measure of whether Bolivia's new government is just talking the talk of being different, or also walking the walk.

Friday, August 18, 2006

Got Missiles?

The Associated Press published an interesting report today on the ongoing political scandal over the US taking control of 28 Bolivian anti-aircraft missiles just prior to Evo Morales's election as president.

A move has been gaining steam in the Bolivian Congress and elsewhere to try former President Eduardo Rodriguez for having handed the missiles over to the US government during his brief tenure last year. With the US government letting Rodriguez hang out to dry, the ex-president is starting to sing.

According to AP, the missile handover was part of a Bush administration plan to strip Latin American countries (well, some of them) of weapons the administration feared might somehow fall into the hands of "terrorists." Rodriguez says the US offered Bolivia $400,000 to destroy the 28 hand-held rocket launchers and that they were outdated anyway. But Rodriguez says that he has no idea how the missiles got handed over to US authorities.

While the US refuses to make a formal comment about how they actually got the missiles, Rodriguez says the Bush administration was clear in private why it was in such a rush to get its hands on them last October. He claims that US Ambassador David Greenlee told him after Morales' election victory, "If we didn't get the missiles out when we did, we weren't going to get them out."

Here's a link to the AP story.

Thursday, August 17, 2006

A Review: An Article on Bolivia in the New York Review of Books

The New York Review of Books has a long, worth-reading, article on Bolivia in its current issue: A New Bolivia? by Mexican journalist Alma Guillermoprieto.

The article is one of many published in the US over the last few months that seeks to explain to readers in the north what the election of Evo Morales means in Bolivia, both as a matter of politics and as a matter of national culture. Guillermoprieto stops well short of actually evaluating the results of Morales' first six months in office and never claims to do otherwise.

The article basis itself largely in a close-up look at Sacarias Flores, the former tin miner who serves as the Vice-President of MAS, and from there walks with a musical flair through recent Bolivian history, pockets of Bolivian life, and the search for an explanation of what "radicalized" Bolivian politics.

What I liked most about Guillermoprieto's article was its vivid descriptions of Bolivia. She recalls for us that during the hyperinflation years of the mid-1980s some Bolivians wallpapered their bathrooms with worthless currency. She describes Bolivia's new Education Minister as, " a small, unsmiling, folded-in man who never seems to open out…" And she does a fine job of capturing the uniquely high-pitched singing voices of certain altiplano women, "…startling voices that sounded like nothing so much as the highly stylized mewing of kittens."

Her descriptions of Bolivian politics, while equally stylized, is often weaker, sometimes more caricature than insight. She mentions Bolivia's Justice Minister (Cassimira Rodriguez) briefly as, "a woman who until recently worked as a maid." In fact, Cassimira hasn't worked as a maid in many years. She spent the last decade helping organize both a national and international union of domestic workers (a fete, by the way, that might be a better leadership credential than Tuto Quiroga's work in sales for IBM).

Guillermoprieto confuses and mixes the roots of the separate February and October 2003 uprisings – the first was, as she notes, over Goni's proposed tax increase (to keep the IMF happy), and the second (which she does not note) was over a Goni gas export plan and then his killings of people protesting against it. She credits Morales and the cocaleros as the driving force behind Cochabamba's 2000 water revolt, when that label is better placed on the people of the city's poor southern neighborhoods. She also treats reform of Bolivia's gas sector as a done deal when it is far from it, "Having reorganized the nationalized gas industry so that Bolivia gets a fair share of the profits…"

Whatever one thinks of Evo Morales, the last six years of political upheaval in Bolivia, or the potential challenges ahead, there is no doubt that Bolivia has captured world attention in a way that contrasts wildly with the "Bolivia? Is that in Africa?" level of attention it had a decade ago. No author has a monopoly on adding to our understanding and Guillermoprieto's addition to the mix is worth a good look.

Tuesday, August 15, 2006

Enron/Shell and Hard Lives made Harder: A Front Line Account of an Environmental Disaster Imported from Abroad

Dear Readers:

Our main project at The Democracy Center in the coming months is wrapping up work on a new book, a series of stories looking at Bolivia's dance – sometimes hopeful, but more often tragic – with economic and political forces from abroad.

One of those stories is the tale of a massive Enron/Shell (Transredes) oil spill into the waters of the ancient Disaguadero River during the first month of the new millennium. It is a story that reveals in stark reality how foreign corporations manipulate the rules to get away with an economic disaster. To chronicle the story close-up, one of our young researchers, Christina Haglund, has not only reviewed all of the key scientific and legal documents in the case – for weeks at a time she disappears to go hike and bike the length of the river and to live in the communities and homes of the people affected.

Here is a preview of that investigation, Christina's account of her recent time spent with Doña Ignacia, an animal herder and farmer whose life was turned upside down by two of the world's largest corporations and their recklessness in Bolivia's highlands.

Jim Shultz


---------------------------------------

Enron/Shell and Hard Lives made Harder: A Front Line Account
of an Environmental Disaster Imported from Abroad


We both woke up with full bladders.

I unburied myself from the thick weight of llama wool blankets that she handmade and crawled over her smallness in the darkness, the cinnamon colored woman who refused to let me sleep alone in the Bolivian Alitplano.

She tickled me, knowing where I was going and we found our way into slip-on shoes. Three of my steps and five of hers got us out of the house and into the night. Why is it that women always go to the bathroom together? But this was no particular place, just outside.

Doña Ignacia knew how much longer the night would go on and explained to me how while we tried to keep our skirts dry. She pointed out the one star that she follows as her clock in the dark, and the one she still sees when she starts every new day.

It was so cold. We had barely been exposed to the elements five minutes and all I wanted was to retreat back to bed. Doña Ignacia didn’t seem to notice the cold that hummed all around us. The kind of cold that chaps cheeks dry and chaps the earth into dust to be found even in clean laundry. I want rough, resilient cheeks like hers, cheeks like most of the rural Aymara, Quechua, and Uru people acquire before they learn to speak Aymara, Quechua, or Uru.

We hustled back to the cluttered brick home, anxious to flee the cold. Doña Igancia reminded me of our plans for tomorrow, spending the day harvesting potatoes deep into the Andes with her 50-something sheep and half a dozen llamas. This is a relatively routine day for most of the rural women of the high flatlands, except Doña Ignacia owns more animals than most and potatoes are not harvested year round.

Most livestock must graze around 4 to 5 hours daily. And the women are the pastors. With children stumbling along side them or mummied to their backs in florescent colored cloths they cover the territory necessary to make their animals worth eating. Potatoes and bit of jerky are the sack lunch that is actually a tightly bundled knot of fabrics.

The Disaster the Coca Leaves Did Not Foresee

I woke up one morning earlier than I would have, to the whispers of Doña Ignacia, who was sitting upright in bed. Who is she talking to? – I wondered as I readjusted myself to see her better. She was reading coca leaves. Onto a tiny square fabric she dropped coca leaves one by one and spoke in hushed Aymara. I watched as she observed the landing of each coca leaf. Coca leaves are considered sacred and are read based on the position in which they fall.

The leaves will tell you if only you ask, she told me.

What did the leaves tell you when the river turned black six years ago? I asked her.

She did not reply.

I am certain that they did not tell her how much harder her life would become. I am certain that they did not tell her how six years later the once-lush forage along the riverside would still not have recuperated. I am certain they did not warn her about the fate awaiting her family's precious livestock, and that six of her sheep and two of her llamas would die.

Transredes, the privatized Enron/Shell subsidiary responsible for the transportation of hydrocarbons in Bolivia, could have seen this coming. Corporate leaders disregarded warnings about an old, eroded and rickety pipeline. A pipeline that crosses the largest source of water that faucets out of Lake Titicaca – The Desaguadero River. Instead they presided over an avoidable nightmare never fathomed by 30,000 rural folks of the Altiplano. The pipeline broke exactly where it crosses the Desaguadero River. It turned their water supply into poison.

The gush of Enron/Shell petroleum that poured into the shallow river was enough to fill more than two Olympic-sized swimming pools.

A Hard Life Made Harder Still

Doña Ignacia explained how lives cannot just be put on pause in the countryside. This is no office job, she told me, you don’t get Saturdays and Sundays off, animals have to eat every day. So Doña Ignacia had to choose between a bad thing and a bad thing. Either her animals would have to starve or they would have to consume contaminated water and grasses.

She made the choice that most people of the Altiplano would have, because their most valuable assets are their livestock. She chose to fill her animals’ bellies, so that her family’s bellies wouldn’t end up empty.

After an impossibly long day for me and a routine day for Doña Ignacia, all I wanted was to be horizontal. I am much too tall for the hoes we used all day harvesting potatoes, and not even coca could alleviate my day’s lost energy.

On my way into the house I noticed a practically illegible plaster plaque that read Desaguadero Project -- Transredes and C.A.R.E.

I had read about the compensation projects that came in the aftermath of the spill. Community leaders signed agreements with Transredes binding them to a compensation process determined by Transredes. The effected people along the river were compensated only for direct losses for which proof could be provided. And in an indigenous culture where paperwork is not a priority, that kind of proof was hard to come by. Based on that proof, CARE facilitated and distributed compensation in the form of "development" projects.

Empty Brick Houses for Families and a Fresh Supply of Cash for C.A.R.E.

Doña Ignacia laughed. I think we are one of the few families in our community who actually sleep in the house.

It was true. I discovered over a dozen brick homes scattered throughout the community. In the right sun I could catch the sparkle of distant aluminum roofs, on houses that were more often than not left empty. The frigid nights of winter are more warmly spent, I was told, within the traditional walls of adobe mud, on top of the earth floors, and below straw roofs.

Each community member who was evaluated as “effected” received bricks, concrete, a metal door, one window and aluminum roofing. The construction was left to the community members themselves.

Could you have opted for cash instead of the house if you wanted?

No, cash was not a choice.


C.A.R.E., on the other hand, opted for cash.

According to an investigation carried out by Fordham Law School, C.A.R.E. took in 68 cents for themselves on every dollar it received to supposedly make amends for the spill through projects (like the brick houses).

Doña Ignacia received the equivalent of about $175 for a house that doesn’t work as well as her old one.

I travel through the high flatlands along the river, seeking the human stories that I’ve not found in any report by Transredes. I find the stories that have been silenced. Stories that beg for the grass as it was before the spill. Stories that scream for the end of animal stillbirths. Stories of nostalgia that remember how much easier it was to find wild duck eggs with yolks more orange than the sun. Stories that weep with the resignation that nothing can be done.

They broke something without fixing it, Doña Ignacia told me without looking at me.

And now they have no choice but to live in what is broken.

Written by Christina Haglund

The Bolivian Government's India Mining Deal: Who Says Socialists Can't Be Smart Capitalists?

Watchers of the new government's economic maneuverings have been keeping an eye on this one – negotiations with the Indian mining giant, Jindal Steel and Power, over the joint development of one of the world's largest iron ore deposits at El Mutun. After weeks in which it looked like the deal might well fall through, yesterday the company and the government announced agreement on a final accord. Jindal will invest $2 billion over the course of the next 7 to 8 years and the two sides will split profits from the mine 50/50. Here is the coverage of the deal in today's Los Tiempos (Cochabamba daily).

The deal is important news for two reasons.

First it solidifies that the world of potential foreign investors in Bolivia has moved well beyond the traditional players from its South American neighbors, the US, and Europe. The Asian investment door is not a piece of election campaign rhetoric; it is real (though the dream deal to market Bolivian coca tea to China is probably a little more elusive).

Second, it shows that the Bolivian government is neither naïve nor crazy to deal hard with foreign investors. That is capitalism played the smart way and, as far as this deal is concerned, it showed that new-to-governing socialists are capable of playing that game a lot more ably than the foreign-educated supposed economic whiz kids under Goni, Banzer, and Quiroga who got rolled in similar negotiations. One need only compare MAS' Jindal deal with Goni's "18% is fine thank you" gas deals a decade ago.

Sunday, August 13, 2006

Bloomberg Spins the Bolivia Gas Story: A Good Example of Bad Journalism

Readers:

The Democracy Center has worked for a long time with many foreign journalists seeking to provide accurate coverage of events in Bolivia. The vast majority of them do an excellent and dedicated job. Anyone writing about Bolivia, including The Democracy Center, can also get a story wrong from time to time. But an occasional error is not the same as an ongoing, repetitive misstatement of the facts. That is something else.

Below is a posting by one of our gas and oil researchers, Gretchen Gordon, noting the ongoing effort by Bloomberg News to create a false public image that the Bolivian government has “seized the assets” of foreign energy companies through its May 1 “nationalization” decree. Bloomberg’s rhetoric makes great spin. It’s just happens to be false. Gretchen explains below.

We are sending this posting to the writers at Bloomberg inviting them to write a response that we will post. We look forward to their documentation of exactly which company assets were seized and when.

[A note: The Democracy Center’s detailed briefing papers on the gas decree and on media coverage of it can be found here.]

Jim Shultz


Bloomberg Spins the Bolivia Gas Story: A Good Example of Bad Journalism

Bloomberg news service posted a brief article yesterday on problems facing the Bolivian government’s oil and gas “nationalization” efforts. The article by Guillermo Parra-Bernal Bolivia Suspends Nationalization of Oil Fields, Razon Reports references a report in the La Paz-based newspaper La Razon which also ran yesterday.

While the subject of both articles is the same, the Bloomberg article paints an entirely different picture of Bolivia’s oil and gas nationalization.

Here’s La Razon’s reporting: "...the participation of [Bolivia’s state oil company] in the entire chain of production of the [oil and gas] sector 'is temporarily suspended, due to the lack of economic resources.'"

Now here’s what Bloomberg says la Razon says: "Bolivia temporarily suspended a plan to seize oil and natural gas fields controlled by foreign companies, saying the state oil company lacks the necessary funds to execute the process, La Razon reported."

Somehow in translation between La Razon and Bloomberg, Bolivia’s state company “participating” in the chain of production becomes the government “seizing” oilfields and assets.

The La Razon article, in fact, is devoted to laying out in detail just how little has changed since Bolivia’s “nationalization” decree. The Bloomberg article, however, goes on to tell how "Bolivian President Evo Morales seized the assets of Petrobras and other international oil companies on May 1."

While the “nationalization” involved a lot of flag-waving and fanfare, it didn’t involve any seizures - neither of assets nor refineries nor fields. Foreign companies are being forced to renegotiate their contracts, yes. Some are being forced to pay higher taxes. In the case of Petrobras, it is being forced to sell the government back a majority share in the two refineries it bought in a sweetheart deal during the dismantling of the state company in the mid-nineties. But it hasn’t yet because the government and Petrobras can’t agree on the price.

That is not seizure of assets or oilfields. Petrobras, Repsol, BP, Total and all the other oil and gas companies continue to operate as before, making both decisions and profits, while they laboriously haggle with the government over prices and contract terms. For more information please see The Democracy Center's analysis here.

Getting your facts wrong is one thing. But the fact that the Bloomberg article completely changed what is clearly and accurately explained in the La Razon article points to something more intentional.

In fact, a look at Bloomberg’s coverage over the last few weeks reveals that the “seizing assets and oilfields” line is not limited to this one article, but rather appears to be the Bloomberg agency line regardless of which journalist’s name is attached.

July 12th: “On May 1, Bolivian President Evo Morales seized the assets for foreign oil companies in the country.” (“Petrobras Won't Change Bolivia Gas Contract, CEO Says (Update1)by Jeb Blount and Ben Miller)

August 3rd: “Bolivia's government on May 1 seized Total's stakes in two natural gas fields…”(“Total Second-Quarter Profit Rises 15 Percent on High Oil Prices” by Tom Cahill)

August 3rd: “Oil and gas production fell because of shutdowns in Angola and the North Sea, violence in Nigeria, and government seizures of fields in Bolivia and Venezuela.” (“European Stocks Fall Before ECB Decision; Total, Unilever Drop” by Sarah Thompson)

August 9th: “The decision comes after President Evo Morales seized oil and gas fields May 1 to force companies to renegotiate contracts to pay higher royalties.” (“Bolivia Shelves $2.3 Billion Iron Ore Mine Contract (Update2)” by Alex Emery)

The job of a news agency is to report the facts- not to propagate a false version of reality. I invite Bloomberg’s news staff to provide an example of any gas fields in Bolivia that have been seized by the current government. Without such, Bloomberg’s readers deserve more honest reporting.

by Gretchen Gordon

The Art of Making Enemies

This week the people of the US were given a new reminder that there are organized groups out there aiming to attack the US and its allies in manners as horrid as the events of 9/11, and worse. As someone who just took an American Airlines flight out of Heathrow two weeks ago, the reminder was not lost on me.

In the midst of that, US Vice-President Dick Cheney offered a little Bush Administration insight about the nature of combat. Battles are fought on two fronts. One is conquering an opponent by force and the other, Cheney noted, is undermining your opponent’s will to fight. In Cheney’s case he tried to argue that the victory of an anti-Iraq War candidate in Connecticut was fearful evidence that anti-US terrorists are "betting on the proposition that ultimately they can break the will of the American people in terms of our ability to stay in the fight and complete the task."

It’s too bad Cheney and Bush only see that argument in one direction.

I think there is a consensus that countries threatened by terrorist attack ought to do reasonable things to protect themselves, and we can have a debate about what is reasonable. Flying without a water bottle is reasonable, as is trying to break up attack conspiracies. Jailing people at Guantanamo for two years without the burden of evidence probably isn’t.

But what is the US doing to undermine the hatred that so many people have toward the US and the will of terrorist groups to plan unimaginable attacks? Occupying a Middle Eastern nation with US troops for a period with no clear end – not a recipe for relieving hatred. US soldiers raping a 14 year old Iraqi girl and killing her family – not an effective way to discourage people from becoming suicide bombers. Sending signals down the chain of command that opened the door for setting attack dogs on naked prisoners in front of a camera lens – not a strong strategy for undermining an opponent’s will.

In fact, if one were going to cook up a recipe for making a lot of already angry people really angry at the US, the War Without End in Iraq would be about as on the mark as you could design.

A close friend of mine who once became the object of obsession by a lunatic neighbor in his Los Angeles apartment complex once gave me this advice. Try to avoid becoming the object of obsession by anyone who is crazy. Not bad advice. And to be clear, Cheney and Bush would argue, in different language – okay, but if you do become their object of obsession, kick their ass. Or, as the Administration has done in the absence of finding Al Qaeda, kick someone else’s ass and hope it scares the people you can’t find.

As the dead in Bali, Madrid, London and elsewhere might tell you if they could, the kicking someone’s ass strategy isn’t working so good as a deterrent.

It is a lesson US policy makers have a hard time grasping. Why is it that, despite oodles of US earthquake aid in the most populous Muslim nation on Earth, Indonesia, the US is still toxic in the Islamic world? Why is it that after financing everything from computers to health clinics in Bolivia, so many Bolivians still focus on that annoying US “war on drugs” and the thousands of innocents jailed in its name?

It’s human nature. If I hand you a ripe apple with one hand and punch you in the face with the other hand, it isn’t too hard to figure out which one you’ll remember most vividly and which will define your long-term opinion.

Cheney is right, in any battle, be it political jousting or combat, a part of the strategy has to be about weakening an opponent’s will to fight and to not embolden it. As long as the US remains an occupying force in Iraq, piling up Iraqi dead and igniting new horror tales of US human rights abuses – more and more young men are going to figure out ways to bring some deadly surprise onto a fleet of jumbo jets and sooner or later James Bond and Company won’t figure it out in time.

Thursday, August 10, 2006

Bolivia’s State Oil and Gas Company in Crisis

Readers:

The move by Bolivia’s new government to reassert public control of the nation’s gas and oil resources remains one of the most important, and most complicated, issues before the nation. Three months after President Evo Morales issued his executive decree “nationalizing” oil and gas and giving new life to the state-owned oil company (YPFB) the management of that company has become a major issue.

Below is an analysis of that situation from one of our researchers leading The Democracy Center’s investigative work on oil and gas, Aaron Luoma. For those interested in more information on Bolivia’s oil and gas reforms, you can read briefing papers by Aaron and our other gas and oil researcher, Gretchen Gordon, here. We look forward to your comments.

Jim Shultz


Bolivia’s State Oil and Gas Company in Crisis

Since President Evo Morales’s May 1st presidential decree that ‘nationalized’ Bolivia’s oil and gas, YPFB, Bolivia’s state oil and gas company, has begun to slowly assume its responsibilities mandated by the decree. In these past two weeks, however, YPFB finds itself embroiled in a corruption scandal that has also exposed its Achilles heel: whether it is competent to manage Bolivia’s oil and gas resources. At the center of the controversy is YPFB President Jorge Alvarado, who stands formally accused by the Superintendent of Hydrocarbons, Bolivia’s oil and gas regulatory agency, of signing a contract that was projected to cost the state $38.5 million in lost revenue while violating an article of the May 1st nationalization decree.

This sobering development has important implications for the Evo Morales administration as it attempts to breath life into the formerly dormant YPFB, whose operational capacity is crucial to the government’s overall economic development plan. Raising the stakes even further, just this past week Evo Morales declared his fight against government corruption as one of the principal achievements of his first six months in office. This growing controversy and the questions it raises, coupled with YPFB’s lack of economic resources, threatens to derail the ‘nationalization’ of Bolivia’s oil and gas. How this crisis plays out, and the ultimate fate of YPFB chief Jorge Alvarado, is giving President Evo Morales one of the biggest challenges of his nascent administration.

The ‘Super’ Makes His Case

According to a report issued on July 21st by the Superintendent of Hydrocarbons, Victor Hugo Sainz, YPFB President Alvarado signed a contract on June 8th that allowed an intermediary company to export crude oil to Brazil at a discounted price, with the refined diesel exported back to Bolivia by a Brazilian company. Complicating the issue even further, both companies involved are controlled by the same businessman, whose Brazilian operation has been under investigation by local authorities. The Superintendent’s report states that in addition to the loss of a potential $38.5 million for the state, the contract violates the May 1st decree that designates YPFB as the only entity authorized to sell Bolivia’s oil and gas. The Superintendent further stated that only private entities that had previously been accused of contraband and tax evasion would be benefiting from the contract.

YPFB President Alvarado and Hydrocarbons Minister Rada Respond

On July 26th Hydrocarbons Minister Andres Soliz Rada offered his support in a joint statement with President Alvarado asserting that the contract was “completely beneficial for the country” to ensure Bolivia’s supply of diesel, while insisting that the contract would have actually saved the state $4 million. Minister Rada defended the use of an intermediary company as a “transitory measure” because “Bolivia doesn’t produce sufficient diesel to supply the internal market and there was no other viable solution [for YPFB]"

In a press release YPFB said that the Superintendent of Hydrocarbons had “committed errors of interpretation and calculation” and questioned whether the report could be trusted. Alvarado added that it is not possible to increase Bolivia’s diesel production because the refineries in Bolivia are already operating at full capacity. Alvarado called the authorities at the regulatory agency irresponsible for blocking a contract that “benefits the country”.

The Office of the Superintendent Defends Its Actions

In the days that followed the release of the report, the Superintendent’s Director of Commercialization, Jorge Tallez, denounced what he described as government pressure to retract its report, saying the report was made “by professionals with high levels of experience, knowledge, and above all, honesty.” He went on to harshly rebuke the YPFB president, saying Alvarado “must fulfill his obligations as a public official, and not act out of ignorance or corruption. This is not only a damaging contract, but illegal as well.” Superintendent Sainz added that the conclusions reached in the report were “based on the data in the contract” in question.

The President and Vice President Speak Out

Under mounting pressure from opposition parties calling for the resignation of Alvarado, on July 31st President Morales ordered the Attorney General and Controller to investigate the case and issue a report by August 20th , adding that anyone found responsible for corruption would be fired. Vice President Alvaro Garcia-Linera also weighed in, noting “enormous technical deficiencies” in both Superintendent Sainz and YPFB President Alvarado, saying they were “perhaps not the most suitable [for their positions], as evidenced by their actions these past two weeks." However, critics disagreed with the Vice President saying that the Superintendent is a qualified professional in his field while Alvarado is a political appointee. Minister Rada also began to distance himself from the growing crisis, warning that if YPFB is not transparent it could face the “frustration of the Bolivian people, and the failure of the nationalization…”

Alvarado Says Superintendent of Hydrocarbons “Arm of Neo-liberal Model”

Just this past Monday, Jorge Alvarado, fighting for his political life, called for the elimination of the Office of Superintendent of Hydrocarbons, born of the privatization process in the mid 1990s, declaring it “an important arm of the neo-liberal economic model.” Alvarado said any regulatory or investigative oversight body should be part of each ministry, as it was before the privatization process. The eventual dispensing of the Superintendent regulatory bodies has long been policy of the Morales government, added Alvarado. On Tuesday, Minister Rada confirmed that the Superintendent agencies would be terminated as part of the Morales government plan, but the timing of the decision would have nothing to do with any current conflict involving YPFB, and would be accomplished via legislation proposed to Congress in the coming months. Superintendent Sáinz said he had not received any official communication from the government about the future of his regulatory body, but its elimination would be “a decision that must be taken by the President.”

Evo’s Challenge

This past weekend at the convocation of the Constitutional Assembly, President Morales reflected on his fight against corruption, calling it virtually “institutionalized” in the state apparatus. With opposition leaders in Congress calling for Alvarado’s resignation, the heat is clearly on Evo to take decisive action to demonstrate that malfeasance in any form will not be tolerated in his government. With YPFB’s operational capacity a key component of the government’s economic development plan, the administration faces a difficult, uphill task to assure the Bolivian people that YPFB is transparent and corruption-free, and fully capable of leading the development of Bolivia’s oil and gas resources.

Written by Aaron Luoma

Sunday, August 06, 2006

Happy Birthday Bolivia!

This Texas-sized patch of jungle, valleys and high plains in the Andes turns 181 year old today, as the nation celebrates the anniversary of its independence. Taxicabs are draped in green, red, and yellow flags. The cities are full of parades. Families are enjoying a day off together.

Bolivia is marking its birthday in all kinds of interesting ways. Here are a few:

· A national Constituent Assembly was convened this weekend in the historic capital of Sucre, where 255 men and women (dominated by MAS) will undertake the work of rewriting the Bolivian constitution.

· Last night a long file of students, state office workers, and the occasional float snaked through the streets of downtown, with the highlight being the hundreds of candles lit in the national colors. Well, that and the really cool inflatable slide in Plaza Colon.

· The Bolivian Air Force made a solid effort to interrupt a peaceful Sunday afternoon in Cochabamba, with three old green jets zooming in formation overhead.

· American Airlines and the Bolivian carrier Aerosur tried to make a little aviation noise as well. Both ran huge ads in the Sunday paper announcing new flights from Bolivia to Miami. One can smell the carcass of LAB's roulette air service to the US: as in buy a ticket, reserve a seat and maybe you'll go, maybe you won't; or maybe they'll call you in the middle of your trip and tell you they are just going to be a few days late getting you home.

· Finally, just as in the US, there are plenty of fireworks here for Independence Day. But instead of giant expositions in parks, the night sky here is streaked with small explosions here and there in the home-grown displays born of the pyromaniac dream come true that is the "you can buy anything" fireworks section of the marketplace.

As for me, the black dogs and I marked Dia de La Independencia with an early morning hike into the hills to confirm that there is still plenty of water in the river to play in.

Friday, August 04, 2006

Evo vs. the Catholic Church

Readers:

For weeks Bolivia has been embroiled in a war of words between the Morales government and the Catholic Church, over the issue of what role Catholic teachings should play in schools here – both public and private. I asked one of our Democracy Center volunteers, Caitlin Esch, who has been following the story, to give us a sense of what is going on. Her article is below.

Jim Shultz

Evo vs. the Catholic Church

It started off with a bang, a call by the Bolivian government to change the way religion is taught in Bolivian schools.

Splattered across the headlines of Bolivian newspapers over the past few weeks have been the controversial comments of President Evo Morales and his Minister of Education, Felix Patzi, comments that have combined “Catholic Church” and “hierarchy” with “indoctrination” and “liars.” These comments have inflamed archbishops and cardinals and sparked demonstrations of protest in La Paz, Santa Cruz, Sucre and Cochabamba.

Patzi reportedly criticized the church hierarchy and its role in schools, accusing it of “serving the oligarchy for the past 514 years since Spain colonized the country.” While Evo famously accused some members of the church of “acting like in times of the Inquisition.”

But President Morales has changed his tune in recent days. Gone is the talk of removing Catholic teachings from Bolivian schools (public, private and religious). Morales and Cardinal Julio Terrazas are friends again. The fiercely religious can exhale.

After meeting with the Cardinal last Sunday night, a statement was released on Monday, ambiguously stating that religious diversity would be respected and that Catholicism would remain in schools. Although the meaning of this statement is vague, clearly the president is backpedaling, a move in stark contrast to the language used by both Morales and Patzi, in recent weeks.

What sparked this controversial that the Evo administration seems to be quietly walking away from?

Does Catholicism equal Colonialism?

In a country where as many as 70% of the people consider themselves Catholic, it’s no wonder that Catholicism has been taught as the dominant religion in schools for much of the country’s history. However, as Patzi points out, it is a colonial religion brought to Bolivia on the imperial wings of Spanish conquistadors. A religion that quickly swallowed the indigenous religions that preceded it, and continues to do so today.

Bolivia has a long and tangled history with Catholicism, as well as the harbingers of Catholicism: missionaries. Sociologist Jose Luis Gareca elaborates, citing examples of early Spanish missionaries, such as Dominico Tomas Ortiz. Ortiz, an avid note-taker, wrote, “El indio es la peor lacra humana (The indian is the worst of human scars.)” Later sections of Ortiz’s notes accuse “Indians” of being “animals, brutes, dirty cowards.” This was Ortiz’s justification for the colonization and subsequent religious conversion of indigenous peoples.

According to June Nash in the book, We Eat the Mines and the Mines Eat Us, as late as 1977 in the Santa Cruz region the Summer Institute of Linguistics Missionaries, “rounded up the Indians living on the tract and assigned them to local farms where they worked without pay, living in abysmal conditions…where they cut cane on white settlements for 15 hours a day, except on Sunday when they worked for 13 hours.” Perhaps this is what Patzi refers to when he said that banning Catholicism as the sole religion taught in schools is a step towards the decolonization of Bolivia’s education system that has “marginalized indigenous people and religions for hundreds of years.”

What the Government Proposed

Despite earlier, stronger claims to the contrary, the Morales government isn’t looking to ban Catholicism from schools entirely, rather, it was (whether it still is remains to be seen) looking to teach Catholicism alongside other religions. According to ABI, the official government website, “Patzi indicated that a new curriculum will be made, not only for the Catholics, but with respect for the diversity of religions, taking into account the history and cosmology of the 36 original Bolivian peoples and the diversity of the spiritual world.” Patzi said last Thursday, “I believe the Church must understand that we are living in times of change, times of transformation and they must admit that things should be balanced. This doesn’t means that we are against the Church. They have the right to champion their faith in their own churches.”

Among conservative critics of the new Bolivian government, however, the move smacked of government designs to interfere in one of the areas many families hold most sacred, religious life. Comments could be heard such as, “See, Evo wants to do just what Castro did in Cuba, use the government to kick out the church.”

Evo the Catholic

If this language among Bolivians that sounds so deeply critical of religion shocks or offends, and you do not believe, as Patzi said, that Catholicism is the “imperial religion” that has “indoctrinated” and “monopolized” religious teachings since 1825, don’t fret: Evo is a Catholic. Yes, it’s true. In an attempt to quell the angry Catholic masses he admitted that his own beliefs are that of Catholic/indigenous fusion -- and that he prays everyday.

Yet, despite this harmony Evo professes to have achieved between conflicting religions, it remains to be seen whether the Bolivian body politic will attain a similar peace on the issue of religion and the new government.

Caitlin Esch