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Analysis: Bolivian gas at crossroads

By CARMEN GENTILE, UPI ENERGY CORRESPONDENT   |   June 25, 2008 at 10:51 AM   |   Comments

MIAMI, June 25 (UPI) -- One eastern Bolivian province took another step toward self-governance this week, as voters overwhelmingly supported greater autonomy from the central government, drawing a further divide in a poor South American country over the gas issue.

About 80 percent of voters in Tarija were in favor of more autonomy and therefore greater control over its lucrative gas deposits, which in large part fuel the Bolivian economy.

So far four eastern provinces have voted "yes" on the autonomy issue, with votes expected in the other five provinces in the coming year.

However, officials in the central government in La Paz have denounced the autonomy votes as illegal, saying no such move can be made without first amending the country's constitution.

"A new Bolivia must be created based on autonomy," said Tarija Gov. Mario Cossio earlier this week. "Centralism has left a bad legacy."

Bolivia's gas sector has been the center of controversy in the poor South American nation for decades.

Earlier this year, three other eastern provinces, all with large gas deposits, voted in favor of greater autonomy from the central government, noting how their profits go largely to pay for Bolivian social programs that benefit the largest indigenous population in the west.

Bolivian President Evo Morales denounced the vote, calling it illegal and vowing it would not be recognized by his government. He also called on governors from other provinces in eastern Bolivia to sit down to talks before carrying out their own autonomy votes.

However, Morales now faces a political challenge closer to home with a recall referendum on his remaining time in office scheduled for August. His term is set to expire in 2011.

In the meantime, leaders in the eastern provinces have expressed displeasure with Morales and his nationalization efforts, saying the country's wealthy are unfairly taxed to pay for his social programs.

More than 80 percent of Santa Cruz residents voted for more autonomy for the province.

Morales is not the only Bolivian leader to feel the wrath of his country's citizenry over the handling of the gas industry.

In 2003 President Gonzalo Sanchez de Lozada was forced from office during widespread violence that left dozens dead after he suggested Bolivia sell natural gas to its long-standing rival and neighbor Chile, to whom his country lost its coastline during a 19th-century war.

The gas issue was eventually the undoing of Carlos Mesa as well. In June 2005, the Bolivian leader faced a round of violent protests over how the gas revenue was being spent. Mesa eventually stepped down, opening the door for Morales' eventual victory and decision to nationalize the gas industry.

Hoping to avoid the same pitfalls, Morales in May demanded that foreign companies increase their investment in petroleum production or face the possibility of being taken over by the state, as they must be able to boost production capacity to meet growing domestic and foreign demand.

"I want to warn those companies that sabotage the investments, I have ordered my ministers to prepare a decree with an ultimatum to those companies that don't invest," said an angry Morales earlier this month.

The Bolivian president said companies that don't invest in improving their output in Bolivia would have their projects taken over by Bolivian state-run energy company Yacimientos Petroliferos Fiscales Bolivianos, or YPFB.

While Morales' call for greater investment could prompt some foreign firms to pony up extra money toward increasing output in Bolivia, some say his heavy-handed approach to increasing output in fact could send some companies packing.

"It's certainly an unorthodox way to work with the private sector to increase exports," Eric Farnsworth, vice president of the Council of Americas, told United Press International.

Farnsworth noted since the nationalization of Bolivia's gas sector on May 1, 2006, foreign investment in the sector has dropped off considerably, based on concerns that Morales could wrest further control of the industry and further diminish its already reduced profit margins.

Topics: Evo Morales
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