Andean Group - November 2006 (ISSN 1741-4466)

The government of President Evo Morales was successful in its bid to persuade the ten foreign energy companies to migrate to new contracts by the deadline of 28 October set when Morales announced the nationalisation of the gas industry on 1 May.

It had looked unlikely that the government would get the Brazilian energy giant, Petrobras, which controls the two biggest gas fields in Bolivia -San Antonio and San Alberto - to sign up to new contracts before the deadline, not least because the Brazilian government was preoccupied with President Lula da Silva's run-off presidential contest a day later. This was a big boost to Morales. Morales says that by 2010 Bolivia will be earning US$4bn in annual revenue from gas. This is clearly a figure plucked out of the ether as it is not entirely clear under what terms the new companies will be operating. The government has different contracts with different companies. The contracts cover exploration and development; separate contracts covering transportation, or establishing export volumes, are still to be negotiated. 

The government will collect 50% of profits in taxes and royalties. What happens to the remaining 50% is not crystal clear but it will be split between the state-owned company Yacimientos Petrolí­feros Fiscales Bolivianos (YPFB) and the respective foreign energy companies depending on factors such as level of production and whether the company has recovered its investment. Arguably the biggest challenge however will be supplying YPFB with the requisite resources and qualified staff to take over the decision-making process at every level of production.

There are two major outstanding issues: 

* Settling on an export price for gas exports to Brazil

*Negotiating a buy-back of shares in the five refining and transportation companies

There is no deadline for resolving these issues, which means they could drag on for some time and prove pretty acrimonious. Lula made it very clear in September that he was not prepared to be dragooned into paying over the odds for Bolivian gas. He might be influenced by the magnanimity of his Argentine peer Néstor Kirchner, who not only agreed to pay the Bolivian asking price for gas, US$5 per m BTU, when he paid a visit to Santa Cruz on 19 October but also offered fulsome support for the efforts of Morales and the Bolivian people to "battle against entrenched old interests", adding that "we come, dear Evo, with open arms, to express our solidarity." He even promised that Argentina would step in if foreign investors, or "rogues" as he called them, failed to honour their commitments.

The government is now trying to ensure that the state-owned company YPFB gains control of the five companies nationalised in May: the mixed government-private producers Transredes, Chaco and Andina, in which YPFB has between a 34% and a 48% stake and the privately owned Petrobras-Refinación and Compañí­a Logí­stica de Hidrocarburos. The government claims they are prepared to pay the value of the shares required to give it a controlling stake of 51% in each of the refineries. Shortly after the deadline was met, the president of YPFB, Juan Carlos Ortiz, said he was confident the deals would be sewn up within the next month. Chaco is controlled by British Petroleum; Andina, by the Spanish-Argentine company Repsol YPF; Transredes by Shell and Ashmore; Petrobras-Refinación is a subsidiary of Petrobras; and the Compañí­a Logí­stica de Hidrocarburos, a Spain-based company engaged in transportation and storage of hydrocarbons. 

Petrobras made clear that the agreement did not extend to its two refineries, located in Cochabamba and Santa Cruz, which it acquired in 1999. It wants to remain in control or sell out completely. The dispute with Petrobras led to the resignation of the previous Bolivian hydrocarbons minister, Andrés Soliz, on 15 September. The new broom, Carlos Villegas, is adopting a more conciliatory approach than his predecessor but the issue will need to be broached now. As regards the price of gas, Brazil is currently paying just US$4 m per BTU.

Mining nationalisation

The prospect for the mining industry is now unclear. Morales earmarked 31 October as the date to proceed with the nationalisation process. This date fell conveniently after the gas deadline and on the anniversary of the first nationalisation of the mines in 1952. However, while Morales said he wanted the nationalisation of the sector; his spokesman, Alex Contreras, sent out a rather different message. He said that the media was talking about nationalisation but the government was concerned only with the reactivation of the sector. "We need to make clear that we are not dealing with nationalisation of the mining industry, as has been announced in some areas of the media, but_ a new mining and metallurgy policy," he said.

Morales said that just because the resources were not currently there did not mean that the government had dropped its nationalisation plan. Contreras said the government would strengthen the state-owned mining company Comibol, with the immediate contracting of the 4,000 freelance miners from the Fencomin cooperative. This is intended to resolve the conflict between Comibol and Fencomin, which led to the bloody clash in Huanuni (RA-06-10). The government also wants to make new, although limited, investments. Vice-President Alvaro Garcí­a Linera said this would be to the tune of US$10m.

Experts in the industry argue that the government is not going to solve the problems in the mining sector by employing more miners. They say that more labour will be a drain on resources and the key is to make the mining process more efficient. Some have (somewhat brutally) suggested that the government employ the tactic of former president Ví­ctor Paz Estenssoro in 1961 when he cut the mining workforce from 38,000 to 24,000 and sent the unemployed miners to the Chapare, to the north of La Paz, and to Santa Cruz to become farmers.