Andean Group - December 2005 (ISSN 1741-4466)

President Eduardo Rodrí­guez asked congress, on 15 November, to clarify a paragraph in the controversial hydrocarbons law. Rodrí­guez criticised the drafting of Article Five, which compels international oil companies to convert their agreements into new ones, set out by the government, within 180 days of the law being passed. The law was passed on 19 May, so the deadline expired on 15 November.

There has, however, been no agreement with the oil companies, though they are paying taxes and royalties according to the new law. The oil companies immediately seized on the president's comments to call for another six months to draw up new terms. Eight of them have also notified the government that they will call on the International Center for the Settlement of Investment Disputes to uphold their rights, under the previous contracts, under Bilateral Investment Treaties.

The hydrocarbons law is important because Bolivia has the second biggest reserves of natural gas in the western hemisphere: over 50 trillion cubic feet. The opinion poll front runner, Evo Morales, from the Movimiento al Socialismo, would like to tear up both the new hydrocarbons law and the previous one, under which the foreign companies made the investments that discovered the huge natural gas fields in Tarija. The new hydrocarbons law has transformed the country's fiscal position. It has increased fiscal revenues by US$417m. The extra money has allowed the government to maintain its spending without increasing its deficit. The deficit, in terms of GDP, is likely to fall from 5.2% in 2004 to 3.5% in 2005.