Stability comes first
Bolivians are voting on a referendum to re-nationalise the natural gas industry and international investors are running scared, Hisham El-Naggar reports
As Al-Ahram Weekly went to press, Bolivians were in the process of voting on a referendum which will be instrumental in defining the political future of the country and its president, Carlos Mesa.
Bolivia, a rather small country and one of the poorest in South America, has become an emblem of defiance against the hegemony of globalisation. The poorest area of the country, the western provinces which are mainly inhabited by indigenous Aimara people, was the scene of a violent revolt in October 2003 that sent then President Gonzalo Sànchez de Losada into exile in the United States. The immediate reason for the revolt? The extreme unpopularity of his plan to export natural gas to neighbouring Chile.
Resident foreign businessmen in Bolivia are confused by the strong resistance to the gas- export plan. Why should a country risk what The Wall Street Journal has described as "economic suicide" by rejecting the prospect of exporting gas from the continent's second largest reserve, a move that could improve the standard of living and decrease the budget deficit by an estimated eight per cent of GDP?
One of the reasons for Bolivia's refusal to export gas to its neighbour is historic in nature: Chile annexed a Bolivian Pacific port after the War of the Pacific approximately 150 years ago.
But no less important is the perception that foreign oil companies are making off with the country's only promising resource. Such foreign companies have, in the past, negotiated contracts with accommodating governments requiring them to pay a mere 18 per cent in royalties. No where is disgust at such plundering of national resources more pronounced than in impoverished western Bolivia, which is populated mostly by Native Americans.
The indigenous Aimaras have long harboured a grudge against a succession of governments which, they claim, have done nothing except foist corrupt mayors upon them who are beholden to the country's economic masters. Such resentment was violently illustrated by the killing of a local mayor by a furious mob two months ago.
The sharp division between the wealthier east and south, where the gas-rich province of Tarija is located, and the populous and destitute west constitutes a major challenge for President Mesa, who is all too aware that the power he inherited from the exiled Sànchez de Losada is hanging by a thread. As he put it during his first visit to Washington: if the "international community" is not more understanding of Bolivia's unique problems, his next visit to Washington will be to seek political asylum.
All the same, with a foreign debt representing 45 per cent of its GDP and foreign investment constituting 80 per cent of all investment in the country, Bolivia is even more vulnerable to international pressure than most of its Latin American neighbours.
What the "international community" wants -- as eloquently expressed by that country's urbane spokesman, The Wall Street Journal -- is for Bolivia to stop fussing and get on with the natural gas export programme so it can pay back some of what it owes.
Hence Mesa's desperation, which drove him to call a referendum to pre-empt the often violent opposition rife in the western provinces.
The referendum is polling the population on the issue of cancelling the law governing the natural gas sector and effectively re- nationalising the industry.
If Mesa does not succeed in mobilising Bolivians to vote for re-nationalising the gas industry, his authority will be gravely undermined. Though he has denied that he would automatically resign, such an outcome would make it impossible for the central government to re-assert control in the western provinces, where violent riots and roadblocks continue to challenge the authorities.
However, a vote to re-nationalise the gas industry would block any attempt to export gas, to Chile or elsewhere, effectively paralysing the government's efforts to use gas exports to pull Bolivia out of the doldrums.
In effect, Mesa has been required to get tough with international oil companies in order to quell the rage of the western provinces. If that is not enough to placate the opposition, nobody is betting that he will be able to hold on to power through the end of his term in 2007.
The "international community" is bewailing the threat to the "legal security" of the negotiated 18 per cent royalty rule that would have to give way to a tougher 50 per cent royalty, if the contracts to export gas are to be salvaged at all. Some have talked of "walking out", not a very convincing threat from those who have invested nearly $3 billion in the sector.
Polls suggest that Mesa's compromise has considerable support. Evo Morales, the bête noire of Sànchez de Losada and the US, has expressed support for the government's proposal. In the western provinces, however, much violence and instability remains. Many are calling for a boycott and a series of roadblocks to increase pressure on the government.
Whatever the outcome, this weekend Latin America will have learned that the interests of the "international community" must come second to maintaining the stability of a nation.