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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.


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 […]


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:

Noam Chomsky in his office, 1967

Liberal Imperialism, a classic definition

“Three years have passed since American intervention in a civil war in Vietnam was converted into a colonial war of the classic type. This was the decision of a liberal American administration. Like the earlier steps to enforce our will in Vietnam, it was taken with the support of leading political figures, intellectuals, and academic experts, many of whom now oppose the war because they do not believe that American repression can succeed in Vietnam and therefore urge, on pragmatic grounds, that we “take our stand” where the prospects are more hopeful. If the resistance in Vietnam were to collapse, if the situation were to revert to that of Thailand or Guatemala or Greece, where the forces of order, with our approval and assistance, are exercising a fair degree of control, then this opposition to the Vietnam war would also cease; in the words of one such spokesman, we might then ‘all be saluting the wisdom and statesmanship of the American government.’ If we are forced to liquidate this enterprise … the liberal ideologists will continue to urge that we organize and control as extensive a dominion as is feasible in what they take to be ‘our national interest’ and in the interest of the elements in other societies that we designate as fit to rule.

Noam Chomsky, Introduction to American Power and the New Mandarins, 1969.

The term liberal imperialism makes two distinctions: liberal imperialists are not radicals and are not always hawks. They accept exercising national power over other societies, whereas radical critics of war are simply against that goal, and the military mean of exercising it. Liberal imperialists make themselves against this or that war, precisely and only when the costs are too great, which boils down to when the resistance, abroad and at home, is too great. At the height of the Vietnam War, radical critic Noam Chomsky wrote a devastating moral challenge to the American public acceptance of their country’s power over others. He laments that his opposition to the war “ten or fifteen years too late” once American boots began to be on the ground in 1965, and not when the US military support began. He observes that “The war is simply an obscenity, a depraved act by weak and miserable men, including all of us, who have allowed it to go on and on with endless fury and destruction—all of us who would have remained silent had stability and order been secured.”

On Allegra: Can a gas pipeline heal Bolivia’s wounded geo-body?

Screen Shot 2015-09-11 at 8.41.42 PMMy latest essay on Bolivia was published by Allegra Laboratory. It looks at the deeply felt woundedness around Bolivia’s loss of coastal territory to Chile, and the surprising notion that exporting natural gas from a Peruvian port could heal that wound.

Allegra is a fascinating site dedicated to the anthropology of politics, law, and art. You can read about them here, and check out their Academic Slow Food Manifesto on the same page.

Bolivian President Evo Morales holds up a beaker of oil from Boquerón Norte extraction well, June 2015.

Plurinational Bolivia cultivates new image as oil and gas state (in videos)

The Bolivian government of Evo Morales is enthusiastically celebrating two new finds of petroleum and gas this month, at the Boquerón-Norte well in the east and in the Lliquimuni block in the Bolivian Amazon. These findings come just as new presidential decrees have opened parks and environmentally protected areas to oil and gas drilling.  You can get a flavor of the government’s excitement by seeing some of its image production around these finds.

First is this wordless video produced by Petroandina (the Bolivian-Venezuelan consortium of state-run oil companies) celebrating the construction of the test well LQC-X1, which began operation last December. Preliminary results presented this week place this block as the place where large-scale oil drilling could come to the northern Bolivian Amazon. The soundtrack befits a cinematic drama, and the intent is clearly to make drilling for oil into a national heroic endeavor.Read More »