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Morales nationalizes oil and natural gas
Bolivia takes on the multinationals

By Tom Lewis | May 12, 2006 | Page 12

BOLIVIA'S PRESIDENT Evo Morales surprised urban and rural workers on May Day by decreeing the re-nationalization of the country's natural gas and oil reserves. With the media covering the event, army units seized and occupied 56 installations held by transnational corporations.

Some future measure to challenge the corporate profiteering that has pillaged the country's natural resources had been expected from the Morales government, which came to power earlier this year.

But the timing as well as the extent of the government's action on International Workers' Day caught Bolivians off-guard and stunned the international community. "We are taking back our natural resources from the transnationals," Morales declared. "Today, we are ending the reign of privatization and recovering our national sovereignty."

For the biggest transnational companies--such as Brazil's Petrobras, the Argentine-Spanish conglomerate Repsol and France's Total--Morales' Supreme Decree 28701 turns upside down the shameful profit-sharing ratio enshrined in oil and gas contracts signed under former President Gonzalo Sánchez de Lozada. Those contracts gave 82 percent of revenue to the petroleum giants, leaving just 18 percent to flow into the national treasury.

Under the new law, transnationals producing 100 million cubic feet or more of natural gas daily will retain only 18 percent of their production revenues, and the state will receive the rest. Smaller companies--apparently including U.S.-based ExxonMobil--will do business according to a 50-50 arrangement.

Although it is the world's largest oil company, ExxonMobil's situation under the new law remains unclear. The American corporation owns a 30-percent share in a non-producing field named Itau, but Itau is operated by France's Total.

Still smaller companies will pay less than 50 percent of their revenues to the state if they are unable to survive on half royalties.

Bolivia's hydrocarbon deposits were sold off to transnational corporations in 1996 as part of a neoliberal economic program imposed by Sánchez de Lozada.

Mass protests calling for the nationalization of natural gas and oil rocked Bolivia in October 2003, and again in May-June 2005. Major cities, including the capital of La Paz, were gripped by a three-week general strike that led to food shortages and a sanitation crisis.

On those occasions, Morales and his Movement Toward Socialism (MAS) Party sat largely on the sidelines, seeking to broker a compromise between the social movements and international business.

Even so, the protests resulted in the ouster of two neoliberal presidents, Sánchez de Lozada in 2003 and Carlos Mesa Gisbert in 2005.

Morales' decree goes farther than anything MAS has proposed in the past. In addition to cutting transnational profits, all of the activities of foreign oil companies--from exploration to production to marketing--will be under the direct supervision of the Bolivian state oil company Yacimientos Petrolíferos Bolivianos (YPFB).

For the moment, Bolivia requires the presence of foreign companies, since it doesn't have the national capacity to industrialize natural gas production on its own. The long-term plan, however, is to use the transnationals to build up national infrastructure and industrial capacity.

"The days of superprofits are over," explained Jorge Alvarado, president of YPFB. "But even at 18 percent of the value of gas being produced," he added, "the foreign companies will enjoy 20-25 percent profits."

Morales' gas nationalization contains obvious weaknesses. Despite oversight by YPFB, the transnationals will still exercise a great deal of independent decision-making. Only oil and gas reserves in the ground have, in fact, been nationalized. Production and distribution effectively remain in private hands.

Moreover, according to CEDLA, a highly respected social science research group, transnational corporations still have the power to determine 90 percent of the components of the eventual price structure of Bolivian gas and oil. Nor is there any provision for workers' control of facilities or production.

At present, Bolivia's gas nationalization has resulted in a crisis for its two largest customers, Brazil and Argentina. Despite their attempts to mute their shock and worry, Brazilian President Luiz Inácio "Lula" da Silva and Argentine President Néstor Kirchner clearly face intense pressure at home to repudiate or moderate Morales' nationalization. Spain--because of its link to Argentina through Repsol--has also sent out disgruntled signals.

For the moment the social movements, too, have been largely quiet, despite MAS calls for mass mobilizations in support of Morales' decree.

There are only two certainties at present. One is that, after some time to study it, Bolivia's recent nationalization will prove too much for some, and too little for others. The second is that the mass actions of October 2003 and May-June 2005 won what steps forward Morales' decree does embody.

Further progress toward recovering Bolivia's natural resources for its people awaits action by urban and rural workers who brought the struggle to where it is today.

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