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Vying Claims on Bolivia's Energy

Author: Lee Hudson Teslik
Updated May 15, 2006

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Evo Morales, a former coca farmer who rose to Bolivia's presidency in December 2005 on a socialist, anti-American platform, has fulfilled a much-publicized campaign promise by nationalizing the country's oil and gas operations (Bloomberg). During a summit between Latin American and EU leaders in Vienna, Morales said that other nations' "pillaging" of Bolivia would come to an end (Reuters). He has swatted away international criticism from European governments with corporate interests in Bolivia's gas resources, which are the second most abundant in the region. Companies from Spain, France, and England have invested more than $3 billion (Der Spiegel) in Bolivia over the last decade, but their assets were seized by the country's army on May 1, Morales' hundredth day in office.

Some of Bolivia's Latin American neighbors, which also have significant interests in the country's energy resources, have shied away from condemning Morales. Following talks with Bolivian leaders, Presidents Luiz Inacio Lula da Silva of Brazil and Nestor Kirchner of Argentina promised to respect Morales' decision (BusinessWeek). Despite being the biggest economy in Latin America, Brazil found itself reacting to an agenda set by Bolivia (FT), the region's poorest nation, during the economic summit in Vienna. Nationalization will likely mean a hike in the price of Brazil's gas imports from Bolivia, where Brazil has some $1.5 billion in assets; the complicated relationship between the countries is examined in this new CFR Background Q&A. There are also concerns that Bolivia will impose restrictions so severe that foreign energy companies, miffed as they are with Morales, will simply leave Bolivia to manage its own energy facilities, which the country hasn't done in years. This could have devastating economic consequences (WSJ) for the Andean nation. But Morales has announced that he and Venezuela's populist President Hugo ChŠvez will meet May 18 in Chapare, Bolivia's coca-growing region, to potentially sign accords between the two country's state-owned gas companies (MarketWatch) so that Venezuela may assist Bolivia to industrialize its resources.

More broadly, the nationalization debate takes place in a region struggling for its political identity. This is a year of elections in Latin America (BBC), and in many countries the political pendulum seems to be swinging away from conservative elites. But experts warn against the simple characterization of a "left-leaning" region. In this month's Foreign Affairs, Jorge CastaŮeda, Mexico's former foreign minister, distinguishes between strains of "modern" socialism and "old-fashioned, strident" populism, both of which he sees as emergent. Nor are all countries in the region leaning left. The next major elections in the region are in Colombia, where the conservative incumbent Alvaro Uribe holds a commanding lead.

Still, the fallout from Bolivia's energy nationalization will be closely watched for signs of broader impact. It is not the first move toward nationalization in the region. ChŠvez has steadily expanded state ownership of foreign-run oil fields (CSMonitor), and one of two contenders in a runoff for Peru's presidency, Ollanta Humala, is campaigning on a nationalist, populist ticket. Experts credit resurgent nationalism and protectionism not to ideology so much as to the failure of traditional institutions to meet basic needs of the people. This 2005 World Bank report confirms that poverty remains rampant, particularly in the Andean countries, despite an influx of foreign investment. Until these structural problems are resolved, agitation for change is likely to persist.

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