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Bolivia’s new business model: Custom laws for foreign investors

At last November’s Investing in the New Bolivia event, the Evo Morales government rolled out the red carpet for foreign corporations, with a little help from the Financial Times. Standing before an audience of executives and investment managers (no officials below the Chief Officer level allowed) at the Four Seasons Hotel in Manhattan, President Morales made a personal plea for the need for foreign investment:

We are accelerating our investment—the big problem that we have is with [our] private companies … Bolivian private companies are very small, and not even the state has the companies to build [on the scale we need]. This is what obliges us to come hear and propose to you to see how you can be of service, how you can be our partners.

Y estamos acelerando en tema de inversión—el gran problema que tenemos es con las empresas privadas,  … nuestros empresarios bolivianos son muy pequeños, ni el estado tiene empresas para construir. Este es lo que nos obliga venir acá plantearles a ver como pueden prestar servicio, pero pueden ser socios.

Development Minister Rene Orellana took it from there. In addition to a secure investment environment, secured by three new laws protecting investors, the Bolivian government offered direct support for investors. Orellana proposed that the government’s legislative and executive powers would be put at the disposal of foreign investors. Working together with investors, the state could “define or approve concrete norms, let me say laws or even Supreme Decrees, to support the initiatives to invest in Bolivia. So we are open to have a bilateral dialogue with those who are interested in investing in Bolivia” (originally in English).

At the center of this push is energy: generating electricity (mostly from large dams) and extracting fossil fuels. While exporting gas is the largest contributor to Bolivia’s trade surplus and the country has nearly doubled production since 2006, the sector has long struggled to find new gas resources and has been hard hit by falling prices. The state-owned gas producer YPFB has not found a major new field since the 1990s. For long- and short-term reasons, the Evo Morales government has declared attracting new investment in hydrocarbons a strategic priority.

In newly published interviews with Erbol, two experts on the oil and gas sector, Francesco Zaratti and Hugo del Granado argue that the Bolivian government is custom-tailoring laws to the needs of foreign corporations, Total . In December 2015, Bolivia passed an Incentives Law (Law 767: Ley de Promoción de inversión en exploración y explotación hidrocarburifera, full text) that transfers 12% of hydrocarbon tax revenue to a special fund to reward companies that make large investments in the sector. State incentives total US$2.89 billion. Zaratti argues the law had one particular company in mind:

“Mi criterio particular es que estas dos leyes son trajes hechos a la medida de algunas empresas. Por ejemplo, la primera ley de incentivos de diciembre del año pasado parecería estar hecha a medida de Total, con el fin de que pueda desarrollar el campo Incahuasi y Aquío, reservas conocidas, pero que no se volvían comerciales porque había algo que impedía a Total hacer la inversión necesaria para adecuar al campo.”

“My personal view is that these two laws are suits made to the measure of certain companies. For example, the first Incentives Law of December of last year seems to be made to fit Total, with the goal of it developing the Incahuasi and Aquío Field, whose [gas] reserves are already known but which has not been commercialized because something prevented Total from making the necessary investment to prepare the field.”

In May 2016, the government proposed amending the Incentives Law to extend the  production contracts of oil and gas corporations willing to commit at least $350 million to exploratory drilling or at least $500 million to exploration and production. Potential beneficiaries of this amendment include Repsol, Total, Pluspetrol, Panamerican, Petrobras, YPFB Andina, and British Gas. The amendment passed last week.

By returning tax funds guaranteed to regional and local governments, universities, and the Indigenous Fund, the Incentives Law rolls back one of the major gains of Bolivia’s partial nationalization of gas, demanded by the 2003 protests and delivered in 2006. However, the Morales government insists any short term losses will be made up when new investment produces a larger pie of gas export revenues beginning in 2017.

For now, a precedent has been set: even plurinational Bolivia will modify its domestic laws to attract and subsidize foreign corporate investment. The slide from 21st-century socialism to 21st-century capitalism continues.

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Bolivian government tells investors: “The era of nationalization has already finished.”

“We have now finished the legal framework in order to invite foreign investment to come to Bolivia. This legal framework is mainly composed by three things, the Law of Investments, the Law of Public Companies, and the Law of Conciliation and Arbitrage. These three laws have been already finished. They have been also conciliated, elaborated […]

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Bolivia voters set a limit on President Evo Morales

As previewed on this blog, Bolivians went to the polls on February 21 to decide on whether the 2009 Constitution should be amended to allow Evo Morales to run for a fourth term in 2020. There was strong participation, with 84.45% of registered voters going to the polls (a stronger showing than the 2015 regional election, but below the turnout in the last national vote). The result was a narrow but convincing defeat for Morales and the MAS party: 51.30% of voters rejected the constitutional change. (Final results)

Here are five quick things to take away from this result.

  1. This vote on Evo Morales getting a fourth term wasn’t to some extent a referendum on Evo Morales, but it was not a referendum on leftism, indigeneity, or standing up to neoliberalism. Evo’s personal image took a major hit with the revelation of his affair with Gabriela Zapata, a young law student in 2006 and 2007 who later became a well-paid representative of CAMC, a major government contractor. This scandalous revelation brought a whiff of corruption to the president in the final week of campaigning. Meanwhile, a deadly arson apparently set by pro-government protesters in the El Alto city hall undermined the standing of the governing Movement Towards Socialism party.
  2. Despite these winds, public perception of Evo Morales remained fairly positive. Polls showed his approval at 58%, far ahead of the support level for term extension. So, a significant fraction of the public supports him in his third term, but refuses to grant him a fourth. A narrative, transplanted from Venezuela, of collapsing support for a leftist goverment simply does not apply to the Bolivian referendum.
  3. The NO campaign on the referendum united left and indigenous critics of the government, advocates of rotating leadership, and right-wing opposition. This kind of tacit alliance has never fully coalesced before, although it appeared to some extent in the successful, if ineffectual, calls for blank or null ballots in the 2012 judicial elections. It also is highly unlikely for these forces to come together again in national elections. Nonetheless, the referendum did prompt a number of left dissidents to step forward as possible participants in 2019 elections. It remains to be seen which of their political projects will endure, win ballot access, and compete in that contest.
  4. The MAS and the YES campaign have lost Potosí. While all four of the western capital cities—La Paz, Oruro, Cochabamba, and Potosí —voted agaist the referendum, the poor and left-identified city of Potosí did so overwhelmingly. Over 85% of Potosinos refused to back another term for Morales. The department was once a MAS stronghold and has no significant right-wing presence, but its capital has spearheaded major protest campaigns in 2010 and 2015 demanding greater investment and new jobs. Serious disenchantment with the national government has set in.
  5. The MAS has a major challenge in candidate selection for 2019. It simply hasn’t been cultivating middle-level leaders to become national figures. There are certainly high-level party loyalists, like Silvia Lazarte, and a few long-time cabinet members, including David Choquehuanca, but no obvious successor to Evo. Meanwhile, numerous prominent MAS members of the past have gone from rising stars, to despised free thinkers (libre pensantes), to ex-members of the party. Still, Bolivia’s presidential runoff system and demographic composition makes it very difficult for a right-wing or anti-indigenous candidate to win. The interesting question is whether a left outsider could make it into that second round.

Other commentary on the results:

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Lliquimuni test well in Bolivian Amazon fails

The joint Bolivian-Venezuela state oil company Petroandina has announced that its exploratory drilling well Lliquimuni Centro X1 failed to find commercially viable quantities of oil after 440 days of drilling. As previously covered here, the Lliquimuni oil block is among those posing the greatest future environmental risk in Bolivia due to its location in the fragile Amazon rainforest and the lack of any reliable infrastructure to pump oil and gas extracted at the site to outside markets.

The government of Evo Morales has made extravagant claims about the potential of the block, located in northern La Paz department, suggesting that as many as 50 million barrels of oil and 1 trillion cubic feet of natural gas may be lie beneath the ground there. However, the $170-million dollar effort to find this oil has yet to produce a successful result. While oil and gas exist below the site, the quantities found would not be profitable to extract.

Undaunted, Minister of Hydrocarbons and Energy Luis Alberto Sánchez pledged to La Razón:

We will continue exploratory activities in the north of La Paz. We will not rest in the search for hydrocarbons; if the first well was not successful, the news isn’t discouraging since will will continue exploration in other wells until we find the reservoir that we know is there.

“Seguiremos las actividades exploratorias en el norte de La Paz. No vamos a descansar en la búsqueda de hidrocarburos; si bien el primer pozo no fue exitoso, la noticia no es desalentadora porque continuaremos la actividad exploratoria en otros pozos hasta encontrar el reservorio que sabemos que se encuentra ahí”

Despite his perseverance, the odds against a major oil complex in Lliquimuni have just gotten longer.

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(translated) Environmental activist Gustavo Castro is in danger in the community of La Esperanza, Honduras

[Not my translation, but I urge you to take action in response. Want to act immediately? Click here. —CBJ]

[March 8 update: Gustavo Castro Soto remains in Honduras, where the government has extended its order forbidding him to depart to his native Mexico for 30 more days. Gustavo’s anti-mining organization, the Movimiento M4, has a new action alert (in English here|Spanish original) urging continued pressure.  ]

Below is an action alert put out this morning, March 7, by Otros Mundos/Friends of the Earth Mexico, the organization headed by Mexican Gustavo Castro Soto, who is the sole witness to the assassination of COPINH leader Berta Caceres. (Gustavo is also co-founder and board member of Other Worlds, and coordinator of the Central American-wide anti-dam network, M4.) Gustavo was providing peace accompaniment to Berta on her last night of life; he himself was shot twice. Gustavo was immediately detained in inhumane conditions by the Honduran government for days for “questioning.” Thanks to national and international pressure, he was finally released and was accompanied by the Mexican ambassador and consul to the airport in Tegucigalpa. He was just about to go through customs when Honduran authorities tried to forcibly grab him. The Mexican government successfully intervened, and put Gustavo into protective custody in the Mexican Embassy. Now, the Honduran government has prevailed and reclaimed Gustavo, taking him back to the town of La Esperanza, where Berta lived and was killed. Gustavo is in terrible danger in Honduran custody, as what he witnessed is an impediment to the government’s attempts to pin Berta’s murder on COPINH itself.

Please take the actions requested below. Like Berta, Gustavo is a key leader to popular struggles against corporate extraction, government malfeasance, and US intervention in Mesoamerica. As Berta was, Gustavo’s life is in grave danger.

(from Otros Mundos [original here])…

BREAKING! Gustavo Castro is in danger in the community of La Esperanza, Honduras
March 7, 2016

– To the Secretary of Human Rights, Justice, Interior, and Decentralization of Honduras
– To the Secretary of Foreign Affairs of Honduras
– To the Secretary of Foreign Affairs of Mexico
– For national and international attention
– To all organizations defending human rights

At present, the Mexican environmentalist Gustavo Castro Soto, Coordinator of Other Worlds AC/Friends of the Earth Mexico, is adding to his statement in La Esperanza, Intibucá, southeastern Honduras, where he was the victim of an assassination attempt in which indigenous rights defender Berta Cáceres was murdered on March 3.

We are on HIGH ALERT because his departure from the Embassy of Mexico and transfer back to La Esperanza represent a high risk for his physical security and psychological wellbeing.

On Sunday, March 6, upon trying to leave Honduras, legally and under the protection of the Mexican Embassy in Honduras, he was arbitrarily intercepted by Honduran authorities before passing through immigration at the Tegucigalpa International Airport. They detained him under the justification that he needed to expand upon his declaration, but without notifying him of this previously.

We want to point out that Gustavo Castro in no way resisted making the full declaration that was asked of him, and he has accepted this request to expand his statement in the interest of clarifying the facts surrounding the assassination of Berta Cáceres, and to avoid the criminalization of members of COPINH.

Despite all of the requests made to ensure that this new declaration be made under proper conditions, to guarantee his physical safety and psychological well-being within the Mexican Embassy in Tegucigalpa, the General Prosecutor decided that Gustavo needed to make his statement in La Esperanza. We believe that this puts him in physical and psychological danger. We demand guarantee for Gustavo’s safety and security during the process of expanding his declaration and during his travel from the Embassy of Mexico in Tegucigalpa. We demand that the government of Honduras fulfill its promise to lift the immigration hold that prevented Gustavo Castro from immediately leaving Honduras after completing his required statement, since there is no reason to keep him in the country.

We ask everyone to act and help us demand Gustavo’s safety and security by contacting:

The Secretary of Foreign Affairs of Mexico/Secretaría de Relaciones Exteriores de México, (55) 3686 – 5100 y (55) 3686 – 5581
gobmx@funcionpublica.gob.mx
@SRE_mx

The National Commission on Human Rights of Mexico/Comisión Nacional de Derechos Humanos de México
(55) 56 81 81 25 |  (55) 54 90 74 00
cenadeh@cndh.org.mx
@CNDH

The Secretary of Human Rights, Justice, Interior and Decentralization of Honduras/La Secretaría de Derechos Humanos, Justicia, Gobernación y Descentralización de Honduras
(504) 2232-7800 y (504) 2232-8900
@sdhjgdhn

Secretary of Foreign Affairs of Honduras
(504) 2236-0200 y (504) 2236-03-00
cancilleria.honduras@gmail.com
@SRECIHonduras

Further contacts recommended by the Center for International Environmental Law. You can also use their online solidarity letter generator.

Honduran Embassy in United States
Email:consulado.washington@hondurasemb.org
Fax:202.525.4004

Honduran Embassy in Canada
Email:ambassador@embassyhonduras.hn
Fax:613 232 0193

Canadian Embassy in Honduras
Email:sjcra@international.gc.ca

US Embassy in Honduras
Email:irctgu@state.gov

CONADEH
Email:centrooriente@conadeh.hn
Email:secretaria.despacho@conadeh.hn

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Deadly El Alto protest casts shadow on Bolivian referendum

On Wednesday, February 17, a local protest in El Alto, Bolivia, became a national tragedy as flames engulfed several rooms of El Alto’s City Hall and six municipal employees died from inhaling the fumes from the blaze.

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The protest, sponsored by the Federación de Padres de Familia de El Alto (an association of parents demanding better school facilities), arrived at El Alto’s City Hall at 9:00 am. Aggressive actions by the crowd, including using a rocks and kicks to break the front door lock, began by 10am. As protesters turned aggressive outside El Alto’s City Hall, Mayor Soledad Chapetón repeatedly sent messengers to the Regional Police Command, asking for help. (The police command is less than two blocks away, per La Razón’s graphic.)

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Letter to police seeking protection, received at 10:20am

Shockingly, they asked her to put her request in writing. A letter demanding police intervention “to safeguard the central City Hall … with anti-riot troops” was delivered to the police at 10:20am. A significant police attachment then took over an hour to arrive on scene. Protesters had seized numerous files and computers, set fires inside offices and on the street, and burned out rooms inside the building. Six municipal workers sought refuge in a rear bathroom of the building. The room was unventilated and they asphyxiated from the smoke. By the time the police arrived, the six employees had already lost their lives.

El Alto protests: Militant, destructive, but rarely deadly in the past decade

Neither property destruction nor the use of fire is unusual in El Alto protests, but these tactics have rarely led to deadly casualties. El Alto, Bolivia’s second largest city and the larger if poorer twin to the capital of La Paz, is rightly seen as the most militant place for urban protest in the country. During February 2003, protesters against a suddenly-imposed new income tax broke into government offices and burned files in El Alto and La Paz, including the property records in El Alto’s City Hall. The tax plan was cancelled. Later that year, El Alto saw the fiercest confrontations in the Gas War protests, opposing the export of natural gas by foreign corporations. Alteños’ militancy, however, is typically unarmed and involves the greatest use of force against security forces and property rather than individual opponents. While both of the 2003 events saw dozens of deaths in the city, they were nearly all protesters killed by police or military forces.

Since the 2005 election of President Evo Morales, security forces have been less aggressive in their use of deadly force on protesters. Militant crowds in El Alto have kept the looting of government offices and the setting of fires in their repertoire of tactics, used at occasional moments of public outpouring, such as the December 2010 protests against the removal of subsidies for fuel. As part of a national wave of protest, Alteños sacked and burned the toll booths on the main highway to La Paz. The protest was also marked by dissension as some pro-government organizations tried to dissuade protest. Their offices were looted by angry crowds. However, protest actions had not led to any deaths in El Alto between 2005 and this past week.

Nationally, February 18, 2016, was the deadliest day in Bolivian protest since 2008.

Political implications for Sunday referendum

Evo Morales, who is seeking public backing for constitutional amendment allowing him a fourth term, has had a very bad month. On February 3, an opposition journalist revealed his 2007 affair with Gabriela Zapata, then a young law student who has since become exceptionally wealthy representing a major government contractor. The Vice President’s claims to academic credentials as a mathematician and sociologist have been called into question. But this deadly El Alto protest may have been the worst blow to the president’s image.

Many of the protagonists of Wednesday’s protest were affiliated with the president’s Movement Towards Socialism party, and they seem to have been protecting themselves from charges of local corruption through targeted arson, and killed six government workers in the process. The tragedy was compounded, and perhaps made possible, by government inaction. Once protesters had broken down the front door, they targeted the Investigating Unit (Oficina Sumariante) of the city government’s legal office. The head of that office told the press: “They came directly to attack first the Sumariante office and have burned my filings. What they were trying to cover up was the phantom billings, illegal contracts, and legally certified photocopies concerning the 33 vehicles that were to be sent for the [ongoing] criminal process, filings on illegal land occupations and charges.” The administration of former mayor Edgar Patana, affiliated with the MAS, is now under extensive investigation for corruption. Patana himself faces at least 11 denunciations of corruption and was jailed in San Pedro Prison last December.

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One of the destroyed offices in the aftermath of the fire.

Wednesday’s conflict pitted MAS affiliates against a City Hall led by Mayor Soledad Chapetón, affiliated with the center-right Unión Nacional. Two leaders of the protest singled out by the mayor in an emotional speech Wednesday night were Braulio Rocha and Wilmer Sarzuri, both MAS candidates for the El Alto municipal council in 2015. Rocha, leader of the shopkeepers union (Federación de Trabajadores Gremiales de El Alto) had been a close ally of outgoing Mayor Patana, whose administration redirected shopkeepers’ taxes into the control of the union. When Chapetón ended this practice, Rocha declared to Chapetón, “I will be your nightmare for the rest of your life,” reports El Diario. It now seems more likely that Wednesday’s deaths will haunt Braulio Rocha.

These elements of political dispute implicate the governing MAS party, at least on a local level. It might all look like a local crisis were it not for police inaction and the words of Marcelo Elío, the Vice Minister in charge of policing. Within hours of the fire, he blamed SOL.Bo for “provoking” the fire and described it as a self-directed attack (“auto-atentado”) and “a plan orchestrated from within City Hall.” Other national government figures initially emphasized the need for investigation and clarification of events. State-run media passed on allegations that vandals had “infiltrated” the protest causing the destruction, and the state-aligned Venezuelan channel Telesur even mis-captioned the event as an act by anti-Morales protesters opposed to the Sunday referendum. But by Friday prosecutors had accepted Chapetón’s version and arrested Rocha and Sarzuri, as well as two young MAS activists and charged them with homicide and other crimes. Even with these moves, death, corruption, and state complicity with both hang in air ahead of Sunday’s referendum on the future of President Evo Morales

 

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Bolivians to vote on a fourth Evo Morales term

On Sunday, February 21, Bolivians will vote in a constitutional referendum. A yes vote would authorize incumbent President Evo Morales to run for a fourth term in 2019, and to rule the country for an unprecedented twenty years, ending in 2025. Morales and his Movement Towards Socialism party (MAS-IPSP) have a long streak of national victories stretching back to his election in 2005 (with 54% of the vote), through a special vote of confidence in 2008 (67%), and two re-elections in 2009 (64%) and 2014 (61%). All of these contests involved face-offs against right-wing politicians associated with two decades of neoliberal economic policies from 1985 to 2005.

On the other hand, regional and local government elections in 2010 and 2015 showed more mixed results for the MAS-IPSP. Independent center-left parties like the Without Fear Movement (MSM) and its successor SOL.bo have gained important ground in these elections, while right wing forces have maintained a base in the country’s eastern departments. In the 2011 judicial elections a MAS-IPSP-backed slate of nominees was elected amid heavy abstention and massive numbers of blank or voided ballots. Likewise, five western departments rejected regional autonomy statutes in a September 2015 poll. While Vice President Álvaro García Linera tried to spin the result as validation of a strong central state, all of the statutes had been drafted by MAS-IPSP legislators.

Enter the present referendum. In 2008, Evo Morales agreed to a constitutional limit of two terms. In the run-up to the 2014 vote, he re-interpreted this limit as beginning with the 2009 constitution. During the 2014 political campaign, rumors of a constitutional amendment to extend his office began to circulate. While MAS-IPSP party activists backed the campaign from the beginning, it has been framed as an initiative arising from the Pact of Unity organizations—principally the CSUTCB peasant confederation and the “intercultural” federation of agrarian colonists—as well as the COB labor confederation, whose national leadership aligned with the MAS in 2013. While his party campaigned for it to happen, Evo only “agreed to the grassroots demand” that he run again four years from now.

The present campaign has the first effective collaboration between Evo Morales’ critics on the left and his long-time opponents on the right. With no political offices at stake, these two sides have been free to collaborate for the first time. Recent polls show the race to be a toss-up. You can read more about the vote here: