Evo Morales takes on the gas multinationals, challenges Brazil, and aligns his country with Venezuela and Cuba
AS POLITICAL theatre goes, it was pure agitprop. Evo Morales chose May 1st, his hundredth day in office as Bolivia's president, to lead troops into his country's biggest natural-gas field, operated by Brazil's state-owned oil company, Petrobras. Wearing an oilworker's hard hat, he read out a nine-point decree under which the Bolivian state proclaimed its control of the country's oil and gas industry. “The plunder has ended,” Mr Morales, a socialist of indigenous descent, declared.
In the main square in La Paz, the capital, the president's supporters turned their May Day demonstration into a celebration. The reaction of the companies affected—and their national governments—ranged from caution to wounded surprise. José Sérgio Gabrielli, Petrobras's president, called the measures “unilateral and not friendly”—strong stuff from the normally conciliatory Brazilians. Spain's Repsol YPF, the second-largest investor, complained that promised negotiations had not taken place, while the Spanish government expressed “deep concern”.
Bolivia's reserves of natural gas are the largest in South America after Venezuela's. The deposits were discovered after the oil industry was privatised a decade ago. Foreign companies, including France's Total, and BP and BG Group of Britain, as well as Petrobras and Repsol, have invested some $5 billion in the country.
More is at stake in Bolivia than gas. Since his election in December with 54% of the vote, Mr Morales has talked like a revolutionary populist but given some signs of pragmatism. He has enjoyed good relations with social-democratic presidents in Brazil and Chile as well as with Cuba's Fidel Castro and Venezuela's populist leader, Hugo Chávez. Now he appears to have tilted away from moderation: the nationalisation decree came hours after he returned from Havana, where he signed a “people's trade agreement” with Messrs Castro and Chávez.
The tone of the nationalisation decree is grandiloquent. “The state recovers title, possession and total and absolute control over these resources,” it begins. Yet it was not unexpected. It fulfils a campaign promise. The decree implements—but goes further than—a law approved last year after weeks of street protests led, among others, by Mr Morales and a referendum in 2004 in which 92% backed nationalisation of oil and gas. That law required the companies to cede production to YPFB, Bolivia's former state energy monopoly, which would set its price and sell it.
The decree puts this into immediate effect. It also gives the companies 180 days to accept new contracts whose terms will be set after a government audit. In the interim, the state's take from the two largest fields will rise to 82% from 50% (itself an increase from 18% a year ago). This boosts the government's annual gas revenue by $320m to $780m.
Secondly, YPFB will take a majority stake not just in the main gas and oil production companies, but in refineries and pipelines. Previously, the foreign companies had 51%, with 49% split between private pension funds and the government, which used the dividends to pay a pension to older Bolivians. Those shares will be handed over to YPFB, potentially wrecking the pension system. (Since the funds have sold some of the shares, this provision may be unenforceable.) The extra shares needed for a majority stake will be “nationalised”—by unspecified means.
Bolivia needs outside capital and technology to develop its gas industry. Without new investment, by the end of next year it might struggle to fulfil its gas export contracts with Brazil and Argentina, says Carlos Alberto López, a consultant in La Paz. A recent landslide at one gasfield briefly cut exports, a sign that output is close to capacity.
Mr Morales seems to be gambling that the companies will not walk away. Bolivian gas accounts for almost 5% of total energy consumption in Brazil, its main market. That mutual dependence could lead to a deal on less draconian terms. One industry source calls the ceremony a “pantomime” to calm the radicals among Mr Morales's supporters, and forecasts that the government will offer the companies a 50/50 revenue split.
Yet this brinkmanship, if such it be, could backfire. Several companies may go to international arbitration to enforce their contracts. In that case, Mr Morales could turn to Mr Chávez. YPFB is being advised by lawyers and technicians from Petróleos de Venezuela (PDVSA). But Venezuela's president fired most of his state oil company's most experienced staff after a strike three years ago, and the company's output at home is falling steadily.
Mining and forestry will be the next to face higher taxes, officials said. But Mr Morales is grasping for more than control over natural resources. Despite granting wage increases to teachers and doctors, he is starting to lose the support of the middle class. In one poll, his approval rating has fallen from 80% to 68% since he took office. Nationalisation will restore his popularity ahead of elections on July 2nd for a constituent assembly.
Ostensibly, this is to write a new constitution to give more power to the impoverished indigenous majority. But Mr Morales's dream, says Carlos Toranzo, a political scientist, is to emulate Mr Chávez, who used a similar assembly in 1999 to seize control of all state institutions. Under agreements signed in January, Venezuelan and Cuban officials are advising on voter registration ahead of the assembly elections. That mimics a much-questioned registration drive which helped Mr Chávez defeat a 2004 recall referendum.
Already, Mr Morales has clashed with the judiciary. He accused Eduardo Rodríguez, a former head of the supreme court, of treason for allowing the armed forces to transfer Chinese-made missiles to the United States while acting as the country's caretaker president last year.
Even if he wants to follow Mr Chávez towards elected autocracy, he may be thwarted. To change Bolivia's constitution a two-thirds majority is required, and he may fall short. The outcome will be “more like reform than revolution,” predicts Walter Guevara, a political consultant.
Venezuela 1, Brazil 0
The nationalisation—and especially the circumstances in which it was done—reverberated around South America. It looked like a victory for the regional plans of Mr Chávez, and a defeat for those of Brazil's president, Luiz Inácio Lula da Silva. In Havana, Mr Morales signed an agreement under which Bolivia joins Cuba and Venezuela as the third member of the Bolivarian Alternative for the Americas (known by the acronym ALBA, which means “dawn” in Spanish). This alliance is supposed to be an alternative to a Free Trade Area of the Americas favoured by the United States. “Only in Cuba and Venezuela do we find unconditional support,” gushed Mr Morales.
Under trade preferences which expire in December, Bolivia exports some $160m a year to the United States. Those exports support 100,000 jobs, many in textile firms and two-thirds of them in El Alto, a restive satellite city overlooking La Paz. Bolivia has not asked for the preferences to be extended and the United States has not offered to do so. The alternative Mr Morales has chosen involves barter trade by governments. Mr Chávez has offered to buy all of Bolivia's soya crop (its second-biggest export) in return for all the diesel the country imports.
Mr Chávez constantly trumpets his support for regional integration. What he means by that is an anti-American political alliance, under his leadership and based primarily on the control and distribution of energy. Last month, he said that Venezuela would pull out of the five-country Andean Community because two of its members, Colombia and Peru, have signed free-trade agreements with the United States. Bolivia, which is also a member, may now also leave.
Mr Chávez's strategy clashes with Brazil's. It yearns to be the leader of a South America united by trade and co-operation between the Andean Community and Mercosur, the four-country block based on Brazil and Argentina. At Brazil's invitation, Venezuela is negotiating full membership of Mercosur. Yet Mr Chávez is stirring up trouble in that group too. If Mercosur “had to die” for something better to emerge, so be it, he said at a meeting with two of its presidents last month.
Lula's response to Mr Morales's decree was conciliatory. After an emergency cabinet meeting, he said Bolivia was within its sovereign rights. He invited Mr Morales, together with Mr Chávez and Argentina's president, Néstor Kirchner, to emergency talks on May 4th. But Bolivia's alliance with Venezuela, and its bullying of Petrobras, amount to a clear snub to Brazil.
Mr Morales may yet revert to a more pragmatic course. But his alliance with Mr Chávez and Mr Castro, even more than the nationalisation, sends a worrying signal that Bolivia may be moving backwards towards statist nationalism. If that is so, all the precedents suggest that while its government may get richer, its people are likely to grow even poorer.