Gas Issue Deepens Divisions in Bolivia (6/6/05)

Bolivia is again in turmoil. For the past two weeks, powerful social movements, from teachers to campesinos have taken to the streets, blockading roads throughout the country and, on more than one occasion, paralyzing La Paz, the country’s administrative capital. This round of protests was set off by the May 17th passage of a hydrocarbons law that, while increasing taxes for the foreign companies that have controlled Bolivia’s oil and gas industry since it was privatized in 1996, fell short of the aspirations of the social movements who were calling for outright nationalization. President Mesa’s unwillingness to sign the legislation or actively address the mounting "gas conflict" led to a sharp drop in his popularity and the growing perception that he is a powerless and ineffectual leader.

With privatization on terms highly favorable to multinational oil corporations, the government had less control over oil and gas revenues and faced increasing difficulties to service its international debt, a bankrupt pension system, and provide basic services. In the years following privatization, exploration by multinational oil companies discovered massive deposits of natural gas; Bolivia now has the second highest reserves of gas in South America, after Venezuela. With these discoveries, debates on what to do with these resources have dominated political discussions in a country that has experienced repeated resource booms since the 16th century. The memory of Potosí, which produced over half of the world’s gold and silver for over 100 years, figures prominently in the national imagination, as the country received few benefits from the riches extracted from its territory. The majority of poor Bolivians are determined that the gas resources, with the lowest production costs in the world, will not follow the same cycle.

The growth of a fiscal deficit led the International Monetary Fund to demand that Bolivia institute an income tax for the first time, which provoked riots in February 2003. Later the same year, World Bank and IMF insistence that Bolivia begin exporting its gas through a proposed pipeline via the territory of long-time enemy Chile provoked a cycle of protests met with severe government repression, called the "Gas War." When 500,000 citizens marched to demand the resignation of President Gonzalo "Goni" Sánchez de Lozada, because of the deaths of 60 civilians in confrontations with the military, Goni boarded a plane for Miami and continues to live in the United States. With the support of many of the same social sectors currently protesting the gas issue, Vice President Mesa took his place.

With the new fuel law, despite the increase in tax income for the nation (32 percent of revenues), protesting social groups widely fear that the law will ensure that multinational corporations, who currently owe significant back taxes, will remain the primary beneficiaries of the country’s oil and gas reserves. For their part, the multinationals are threatening to sue Bolivia in international courts, arguing that the new law will confiscate their investments. The contracts that awarded the concessions to multinationals, however, had not been approved by the Congress, as called for by the Bolivian constitution..

The social movements are demanding the re-nationalization of gas, and that value-added activities be developed in Bolivia. The Movimiento al Socialismo (Movement Towards Socialism, MAS) party, the strongest left party in the country, headed by coca grower Evo Morales, has taken a more moderate view, asking the protestors to respect the democratic process. MAS seeks modifications in the new law which would increase national control and the possibility to create a natural gas industry.

Two other key issues are behind the protests. One is the demand for a Constitutional Assembly, which was promised after the October 2003 Gas War. The popular movements are determined that a new constitution will be a step to overturn the current politicalpower structure and provide a framework for a more just and equitable country. The last constitution was written in 1994 during the first Sánchez de Lozada administration. While it increased indigenous self-government and decentralization at the municipal level, and provided for the direct election of half the legislators in the lower house of Congress, it reaffirmed Bolivia as a unitary state with departmental prefects chosen by the central government, and committed the country to a market directed economy. The protesting social movements want a new constitution to re-establish state control over natural resources, increase indigenous rights, and ensure that state benefits don’t just accrue to the urban elites. There are also demands from the eastern part of the country, with much of the gas reserves, to accelerate decentralization, possibly turning the country into a federal state.

The proposal for the Constitutional Assembly has to be approved by the Congress, controlled by traditional political parties. These parties have the most to lose most under a new constitution, and they have been dragging their heels in setting a date. For this reason, the demand for the Assembly has become the one point that most social movements agree on.

The final issue focuses on regional autonomy. Since the founding of the Republic in 1825, demands for greater regional autonomy in Bolivia’s highly-centralized and poorly-integrated state have surfaced regularly, in particular from Santa Cruz in the eastern part of the country. Feelings in Santa Cruz run strong that economic growth in the most economically dynamic department in the country, is slowed by the continued centralized governmental system and that taxes paid from the Department largely benefit other regions.

In January 2005, an enormous street protest, organized by Santa Cruz’s powerful regional oligarchy, demanded the direct election of departmental prefects, increased budgetary autonomy, and control over locally-raised tax revenues and royalties from natural resource production. They are joined in their demand for a national referendum on the autonomy issue — although less vociferously — by the eastern lowland department of Tarija (where a significant portion of oil and gas production is located). The issue has exacerbated a fundamental divide in the country between the western highland indigenous areas and the eastern lowland population that views itself as more European. Santa’ Cruz’s decision to hold a referendum on the autonomy issue with or without central government approval led to criticisms of the disintegration of rule of law in the small nation and heightened already high tensions in the highlands. Protesting indigenous and campesino groups have repeatedly criticized the Mesa administration for capitulating to the demands of the Santa Cruz elite, while ignoring the needs of low income and indigenous protesting sectors.

Congress is due to discuss the regional autonomies referendum and the prefecture elections (supported by the Santa Cruz elite), as well as the constitutional assembly (supported by the campesinos and workers) on Wednesday June 1. According to press calculations, the traditional parties have enough votes in Congress to pass these elections.

The divisions and shifting alliances between MAS and other social movements have fragmented current protests, which continue to lack the coherence of October 2003. So far President Mesa has not ordered the use of lethal force against protesters, and there have been no casualties, although there have been injuries. Efforts by traditional mediating groups, the Human Rights Ombudsman, Human Rights Assembly and the Catholic Church have failed so far to bring either side to the negotiating table. President Mesa has been largely delegated responsibility for pronouncements on the situation to his government ministers, and when he has appeared, has called for respect for the rule of law. Rumors of coups frequently surface, but nothing credible or concrete has been presented. Perhaps most accurate is that rumors run the gamut from the absurd to the frightening — abound.

In the meantime, roads out of La Paz are blockaded and daily demonstrations of varying intensities rock the city. Plaza Murillo, where the principal government buildings are located, is surrounded by police. Tens of thousands of people have marched on the city, but to date, the popular response has not been what was hoped for. Many small producers and merchants, although sympathetic to the marchers’ demands, find themselves unable to make a living. As a result, much of the reaction to the protests among the general population, not just the middle and upper classes, is negative, focusing on the problems created by the methods, rather than on the message.

After two threats to resign in March 2005, Mesa has lost credibility, and his affirmation that he would remain in office until the end of his term in 2007 failed to provoke relief or resentment with the great majority of Bolivian citizens. Although some groups have called for Mesa’s resignation and the closing of the Congress and two renegade military officers even called for a civil military pact to take control of the nation, yet no viable political alternatives have appeared on the horizon. The increasingly chaotic political landscape provides little indication of what the future holds for South America’s poorest nation.

Linda Farthing is an Andean Information Network board member, independent researcher and journalist, currently working in La Paz. For more information about AIN or to subscribe to the AIN email list, please write to the Andean Information Network: