Bolivia Has the Right:
Nationalizing the hydrocarbon industry

By Kavitha Chekuru

Put logic aside for a moment and imagine building a bridge from Bolivia to Spain. Now imagine that the bridge is built entirely of silver. I know; just stay with me. In Bolivia, the saying goes that with the amount of silver that Spain extracted from the mountain Cerro Rico, such a bridge could have been built. Judging by Spain’s wealth and power in its heyday, it seems almost plausible.

Profits from the silver were never seen in Potosí (the city around Cerro Rico). Rather, the utter depletion of silver by the Spanish empire left Potosí a veritable ghost town. Though it is still mined for other minerals today, Cerro Rico is a shadow of its former self. But this story is not an anomaly in Bolivian history; rather, it is one of many examples of the loss as a result of foreign intervention that characterizes the nation’s past. Understanding this history is essential to understanding the current debate over President Evo Morales’s decision to nationalize hydrocarbon resources.

In 1879, territorial disputes between Bolivia and Chile regarding land rich in minerals and other natural resources erupted in the War of the Pacific, also drawing in Peru on Bolivia’s side. Chile won, leaving Bolivia land-locked. (For this reason, if visiting Bolivia think twice before uttering, “ Chile.”)

In 2000, the city of Cochabamba was the site for the Water Wars—months of protests by Bolivians in response to the privatization of water by Aguas de Tunari, a subsidiary of the American corporation, Bechtel. The end result was an anomaly for the Andean nation—Bolivian protestors won and Bechtel was forced to leave.

In 2003, Gonzalo Sanchez de Lozada (locally referred to as Goni) led the gas wars to a peak when he privatized the gas. The military killed 81 people during protests in October of that year, now known as “Black October.” Though Goni resigned and lives as an exile in the U.S., the consequences of his actions remain in Bolivia as fuel for the current situation.

These anecdotes are only small parts of Bolivia’s 500-year history of exploitation. The most recent 20 years, during which this small Andean nation has lived under the strictures of International Monetary Fund (IMF) policies, are an important part of this history.

Goni himself was among those in the administration of President Victor Paz Estenssoro in the mid-1980s who implemented the economic policies of “shock therapy” and structural adjustment under the IMF, including the privatization of state industries, raising interest rates and cutting public spending, and free contracting of labor. As the Center for Economic Policy notes, Bolivia completed numerous structural reforms recommended by the IMF, as well as the U.S. But the results were less than spectacular: GDP per capita in Bolivia today is lower than it has been in 27 years and unemployment is high. Bolivia is also the most impoverished country in South America, second in the Western Hemisphere only to Haiti. More than 60 percent of Bolivians live below the poverty line.

So it is time for a change. On May 1, 2005, Evo Morales announced the nationalization of Bolivia’s hydrocarbon industry, meaning that the state would reclaim ownership of natural gas resources (largely from the Brazilian and Spanish companies that run and profit from the industry). Many reacted with alarm, likening Morales to Venezuela’s Hugo Chavez and proclaiming that foreign investment would dry up. Those fears are misplaced. Morales has not expelled foreign companies nor expropriated their property; nor does he plan to. Instead, he is forcing Petrobras (of Brazil) and Reposol YPF (of Spain and Argentina) to renegotiate their contracts within six months. They will see smaller profits, but their activities in Bolivia will remain profitable nonetheless.

No one can say if Morales will be successful or not; if nationalization will fail to provide profit to the impoverished country; or if its history of misfortune and loss will come to a close and perhaps an indigenous president will take Bolivia on a path that gives back to the country so rich in energy—both natural and national. What is certain and cannot be questioned is what Spanish protesters chanted during a May 5 protest in Madrid: “ Bolivia tiene derecho.” Bolivia has the right.

Kavitha Chekuru studied in Bolivia and is a recent Northwestern University graduate. Contact her at kchekuru@gmail.com.