It has long been expected since Morales’ election, notes the Washington Post:
Bolivian President Evo Morales seized control of the country’s natural gas industry Monday, sending soldiers to occupy fields that he contends private companies have plundered for years.
Morales said that unless foreign energy firms agreed to give Bolivia’s state oil company oversight of production and a majority of their revenue generated in Bolivia, the government would evict them from the fields.
“The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources,” Morales said during a televised speech from a gas field near the country’s southern border. “The looting by foreign companies has ended.”
Bolivia is a very poor country, rich in natural resources but lacking in property rights institutions. Since the poor vastly outnumber the rich–70 percent of the population live below the poverty level–last year’s presidential election was simply Bolivia’s version of Mencken’s advanced auction of stolen goods.
But Morales’ populism isn’t exactly going to promote private capital flows into his country, something that is necessary for material progress and individual liberty to take root there. If he’s successful, he’ll bring to Bolivia what Huey Long brought to Louisiana or what Juan Peron brought to Argentina: the entrenchment of more muscular redistributive government that makes property less secure, scares away the productive, and ensures that poverty remains dominant for decades.
Let’s just say this isn’t the model followed by those countries that have developed advanced, wealth-producing economies over the last 40 years.
The U.S. Congress may pass a resolution condemning this episode, which would be ironic. After all, oil producers in the U.S. also agree to to give the feds oversight of their production, while they pay more in taxes than they earn in profits (according to a recent Tax Foundation study). Morales may simply be establishing practices that have become common in the northern hemisphere.
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“Morales may simply be establishing practices that have become common in the northern hemisphere.”
I wonder if the proposed ALBA agreement will also contain 1000s of lines of text, like with NAFTA.
So while everyone’s attention is on the daily carnage in Baghdad…. and by everyone I include those consumers of news in South America…. men who grew up idolizing Simon Bolivar and reading Karl Marx very seriously… men like Venezuelan President Hugo Chávez who uses the world’s most famous soccer player to fan anti-American discontent and anti-capitalist dogma all over South America, these men (and women) are working hard and they have a plan.
Read in the May Atlantic magazine how Chevez turned a disasterously failed coup against an elected government into a remarkable ascention to power. Bolivia, Argentina, and Chile are following in the wake of this dictator who has changed his country’s laws to control the press, intimidate dissenters, limit legislative power, lengthen his time in office, and stack the Supreme Court and the Army with loyal supporters.
His followers and method also threaten Brazil and Mexico…and he has close ties with Iranian President Mahmoud Ahmadinejad… and he’s a protégé of the late Argentine Holocaust denier Norberto Ceresole.
We were the generation who got to see on our televisions the most amazing coup of freedom in over 200 years….the remarkable conjunction of bravery, wisdom, and good fortune that was Walensa and Gorbachev, Pope John Paul and Reagan, Thatcher and Deng and Yeltsin…….
Cannot we see that what we do in Bagdhad, regardless of how it turns out, is being used to undo much of the progress of the last 20 years?
It’s as if smallpox and polio were returning and everyone’s attention was on the common cold.
“After all, oil producers in the U.S. also agree to to give the feds oversight of their production, while they pay more in taxes than they earn in profits (according to a recent Tax Foundation study).”
They are losing money? Lying with statistics!
It is hard to expect this decission will solve all Bolivia´s actual problem.However ,it will bring them a greater sense of respect, and self confidence for the bargaining table with Latin america partners discussing energy matters.From the stand point of incentives for foreign investment,it will impact credibility and risk evaluation of the Latin america economies,for future projects ,but only to the extent that each economy guidelines, are similar to Bolivia.So ,in this category are those countries more State intervention prone into the economy.-
bill wald seems not to understand that the profits of most enterprises are only a small part of their turnover.
Far more money goes from an oil company to the government (in taxes) than goes to its shareholders.
We are not just talking about a business profits tax (although corporation tax is rather high in the United States compared to many other contries – especially as there are State taxes also in the United States). There are other taxes.
Turning to Bolivia one of the (many) depressing parts of establishment media reporting is the implied claim that poverty in Bolivia (or other Latin American nations) is caused by the private ownership of minerial resources.
It normally goes something like this “President X of poverty ridden country Y, has taken over Z form of natural resouce from the companies he says have been exploiting his country for years”.
What is hardly ever reported is that it has all been done before.
Take the example of Bolivia. Oil and gas nationalized in the 1930′s, Tin nationalized in 1952 and big farming estates stolen (sorry “reformed”) also in 1952.
The government (or its dependents) run these enterprises into the ground (no pun intended) and then sell the mess to whoever things they might be able to rescue something.
Then (if the enterprise has been turned back into something worth stealing) a government takes it over again.
This has happened again and again in Latin American history.
The uncertainty of property rights is one of the principle reasons why Latin America has made so little economic progress.
“Look everything is private so why are we not rich” is silly if everything was not private a few years ago and may not be tomorrow.
Only a fool invests for the long term in Latin America.
The doctrine that poverty is casued by tghe existance of rich people is almost an article of faith in this area. And governments exploit this doctrine to win popularity.
This was true long before anyone had ever heard of Karl Marx in Latin America.
Well, I do not say that what they are doing is right, but I do not think that anyone can claim to know the answer on how to get these people out of poverty. Contrary to bold statements above, I do not think it is possible to say with confidence what the path to economic progress is for any poor country.
Following Washington Consensus obviously did not work for Bolivians since their per capita income today is lower that it was 25 years ago. And Bolivia is not the only poor country that has tried and failed to increase the living standard by implementing what they were told by economists from the West.
The really interesting development is that the brightest development story, China, has done that by mixing Marxist and free market principles. Go figure…
“I do not think it is possible to say with confidence what the path to economic progress is for any poor country.”
Really? Is it difficult to think that disengaging in stomping on your slaves, will make them more productive? How about giving them some property on which they can be productive?
“And Bolivia is not the only poor country that has tried and failed to increase the living standard by implementing what they were told by economists from the West.”
You mean the Communist and Fascists of the West?
“The really interesting development is that the brightest development story, China, has done that by mixing Marxist and free market principles. Go figure…”
Every other country on the face of the earth has a Marxist hampered market. The question is which direction are they headed? More or less Marxism.
No comment about Evo Morales’ measures is complete until one considers how private oil companies acquired ownership of Bolivian oil and gas.
Up until the early 1990s, the state oil company (YPFB) controlled 100% of the oil and gas industry. As others have pointed out, YPFB was very inneficient and corrupt. The government of Gonzalo Sanchez de Lozada (GSL), with full support from the US, announced that it would “capitalize” the company as a way to solve all its problems.
Capitalization consisted of transferring 51% of its shares to newly created pension funds (which would fund the retirement of Bolivians), and selling 49% of YPFB to private investors.
So far so good. Sanchez de Lozada seemed to know what he was doing, and the “capitalization” process made sense. It would be a step in the right direction, for state ownership of the oil and gas industry had been a disaster. Unfortunately, the whole process was a sham.
Several government officials and close associates of GSL (and perhaps GSL himself) set up shell companies that acquired YPFBs assets at a huge discount. Enron got involved, acquiring a pipeline network using loan guarantees from the US Export/Import bank. Bolivians quickly realized that “capitalization” was synonimous with plundering.
I should also add that shortly after YPFB was dismantled, the private companies that acquired its assets started announcing major discoveries of gas. I’m sure that some of the discoveries were a legitimate result of their efforts. But in many cases, all proven years later, it turned out that YPFB executives already knew about some of the huge gas reserves. They had passed confidential information to the private companies prior to YPFB’s assets being sold off. In fact, private companies had acquired the second largest natural gas reserves in South America for cents on the dollar.
As the economic situation in Bolivia continued to get worse, Bolivians started wondering how come none of GSL’s promises came to fruition. Several investigations were launched. An independent auditor discovered that the private companies were keeping at least two sets of accounting books. One that showed huge losses and thus minimized their tax exposure, and one that showed huge profits and thus made the companies attractive to private investors in Wall Street and other exchanges.
Ah! I should add that the special investigator appointed by the goverment died in a plane accident just as he was getting ready to go after Enron.
Anyway, the bottom line is that Bolivians became disgusted with GSL and booted him out of office. Evo’s promises of undoing everything GSL had done became hugely popular. In a country where most recent elections had been closely contested, Evo won with an absolute majority. His rise to power is a direct result of the corruption that has reigned in Bolivia for decades.
If you want to know more feel free to visit my Bolivian blog.
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