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Revolutionary Politics:

Bolivias New Natural Resource Policy

Contributing authors: M. Alexandra Contreras Ochoa ; Jose Alice Diemel; Emilie Ph. Fokkelman; Jetske Hylkema; Jos M. Maalderink; Julia McCall; T. Marijke Renzema; Janine Strijdonck; Bart-Jaap Verbeek;

Coordination: Dr. Barbara Hogenboom;

Cover: Reuters

This book is the final result of the Master course Politics and Protest in Latin America: The Politics of Natural Resources in Bolivia at the Centre for Latin American Research and Documentation CEDLA, Amsterdam, The Netherlands (October 2008 January 2009).

Amsterdam, March 2009

Revolutionary Politics:
Bolivias New Natural Resource Policy


Table of Contents
TABLE OF CONTENTS......................................................................................................................................V PREFACE.......................................................................................................................................................... VII ABBREVIATIONS ............................................................................................................................................. IX

THE PATH TO THE NEW HYDROCARBONS POLICY OF BOLIVIA ..................................................... 1

M. Alexandra Contreras Ochoa & T. Marijke Renzema

A PATH TO TRANSFORMATION?........................................................................................................................... 1 THE HISTORY OF HYDROCARBONS IN BOLIVIA AND ITS POWER STRUCTURES ...................................................... 2 THE POWER OF THE YPFB AND THE UPRISING OF SOCIAL MOVEMENTS .............................................................. 6 EVOS NATIONAL DEVELOPMENT PLAN: A WORTHY, DEMOCRATIC, SOVEREIGN AND PRODUCTIVE BOLIVIA IN ORDER TO LIVE WELL .......................................................................................................................................... 8 CONCLUSION ..................................................................................................................................................... 15 BIBLIOGRAPHY ................................................................................................................................................. 17

BOLIVIA'S RESOURCE POLICY 1880-1964 ................................................................................................ 21

Jos M. Maalderink
BOLIVIA AT THE TURN OF THE CENTURY ........................................................................................................... 21 THE REPUBLICANS AND THE DOUBLE CRISIS OF THE 1930S ............................................................................... 24 THE FIRST REFORM ATTEMPT: MILITARY SOCIALISM ........................................................................................ 26 THE SECOND REFORM ATTEMPT: NATIONAL REVOLUTION................................................................................ 29 CONCLUSION ..................................................................................................................................................... 31 BIBLIOGRAPHY ................................................................................................................................................. 32

CHANGING INTERNATIONAL RELATIONS: BOLIVIAS CALL FOR SELF-DETERMINATION ................................................................................................................................ 33

Bart-Jaap Verbeek
PERIODS OF INTENSIVE FOREIGN INTERFERENCE ............................................................................................... 33 MORALES NATIONALISATION POLITICS AND INTERNATIONAL CONCERNS ........................................................ 40 CONCLUSION ..................................................................................................................................................... 46 BIBLIOGRAPHY ................................................................................................................................................. 47

BOLIVIAS RELATIONS WITH LATIN-AMERICA: CHANGES UNDER THE PRESIDENCY OF EVO MORALES................................................................................................................................................. 53

Jetske Hylkema
THE RELATIONS WITH CHILE ............................................................................................................................. 54 THE RELATIONS WITH CAN .............................................................................................................................. 55 THE RELATIONS WITH MERCOSUR..................................................................................................................... 57 THE RELATIONS WITH ALBA............................................................................................................................ 60 THE RELATION WITH UNASUR ........................................................................................................................... 61 CONCLUSION ..................................................................................................................................................... 62 BIBLIOGRAPHY ................................................................................................................................................. 63


THE LEGACY OF THE WATER WAR IN COCHABAMBA...................................................................... 69

Janine Strijdonck
AN INTERNATIONAL SYMBOL OF POPULAR RESISTANCE .................................................................................... 69 A NEW FORM OF ORGANISATION AROUND WATER ............................................................................................. 70 THE DEEPER SIGNIFICANCE OF THE WATER WAR ............................................................................................... 72 PUBLIC-POPULAR WATER MANAGEMENT AND WATER AS A HUMAN RIGHT ....................................................... 75 THE CREATION OF AN ALTERNATIVE POLITICAL SPACE ..................................................................................... 77 CONCLUSION ..................................................................................................................................................... 78 BIBLIOGRAPHY ................................................................................................................................................. 78

NATURAL WEALTH IN BOLIVIA: FORTUNE OR MISFORTUNE?...................................................... 81

Emilie Ph. Fokkelman

HOW DOES MINING AFFECT PEOPLE AND THE ENVIRONMENT? .......................................................................... 83 ENVIRONMENTAL LAW IN BOLIVIA ................................................................................................................... 87 THE ENVIRONMENTAL BALANCE OF THREE YEARS OF INDIGENOUS CAPITALISM ............................................... 91 CONCLUSION ..................................................................................................................................................... 93 BIBLIOGRAPHY ................................................................................................................................................. 93

DEMANDS FROM THE EAST: A DESTABILISED BOLIVIA................................................................... 97

Jose Alice Diemel

THE RISE OF THE SANTA CRUZ AUTONOMY DEMAND: A RESPONSE TO INDIGENOUS MOBILISATION ................. 98 SANTA CRUZ' POLITICAL POSITION .................................................................................................................. 100 SANTA CRUZ' ECONOMIC POSITION IN COMPARISON TO THE REST OF BOLIVIA ................................................ 102 SOCIAL DIFFERENCES WITHIN SANTA CRUZ .................................................................................................... 108 CONCLUSION ................................................................................................................................................... 111 BIBLIOGRAPHY ............................................................................................................................................... 112

PACHA MAMA'S BELLY: AN ANALYSIS OF INDIGENOUS DISCOURSE IN MODERN BOLIVIA ........................................................................................................................................ 115

Julia McCall
BOLIVIAS INDIGENOUS MOVEMENT ............................................................................................................... 115 A BRIEF HISTORY OF INDIGENOUS UPRISING .................................................................................................... 117 THE PROTESTS OF THE NINETIES ...................................................................................................................... 119 POLITICAL SYSTEM.......................................................................................................................................... 122 CONCLUSION ................................................................................................................................................... 124 BIBLIOGRAPHY ............................................................................................................................................... 126 GENERAL CONCLUSION ............................................................................................................................. 129


As culmination of the master-subject De Politiek van Grondstoffen (Natural Resources Politics) at the Centre for Latin American Research and Documentation (CEDLA) in Amsterdam, master students of different disciplines and universities in The Netherlands came together to present the result of a semester of research, analysis and conclusions on the interesting topic of the new Policy on Natural Resources in Bolivia. From the mid 1980s onwards Bolivias governments implemented neo-liberal policies, in order to confront economic problems such as hyperinflation. These structural adjustment programmes can be seen in a region-wide hegemonic ideology of neo-liberalism, created and stimulated by the Washington Consensus. In the twenty first century popular movements resisted against the neo-liberal policies and the exploitation of Bolivias natural resources. The first popular resistance took place in 2000 in Cochabamba. The people successfully resisted the privatisation of the water supply system of the city. The so-called water war was followed by another water war in 2005 and two gas wars, in 2003 and 2005. The fact that transnational companies paid low taxes to the Bolivian government for the winning of gas was one of the motives for resistance in the gas war. The export of natural resources is an important source of income for Bolivia. Hydrocarbons have become the source of income on which president Morales economic plan is based. Also, natural resources are vital in the daily lives of many Bolivians. People use gas, oil, water and other natural resources on a daily basis. It is for these reasons that social movements have been involved in the matter of natural resources. One of the political parties supporting the protest was the Movimiento al Socialismo (Movement towards Socialism, MAS), led by president Morales. After a long period of social protests that caused the resignation of President Carlos Mesa, new elections were called. Bolivia witnessed in 2005 the election of the first indigenous President Evo Morales. The presidents National Development Plan has become the countrys internal policy, focusing mainly on social groups that were marginalised in previous governments. The execution of the policy has depended entirely on the income the government has received from the nationalisation of the hydrocarbon sectors. In January 2009 President Morales signed the Decreto Supremo 29888 (Supreme Decree) for the nationalisation of the Chaco Company, subsidiary of British Petroleum (BP). The aim of the decree was to recuperate the total shares of the company. A multitude of segments of Bolivian society supported the decree, such as members of Central Obrera Boliviana (Workers Union of Bolivia, COB), indigenous communities, farmers, locals, oil workers and members of the cabinet. Since the presidency of Evo Morales, nationalisation of hydrocarbons has been part of his government policy, which is still in place. Therefore we believe it is interesting and important to discuss all the events, actors and factors that made possible this policy as well as the consequences of the new resource policy. The aim of the master project is to make an analysis of the developments in the control and the distribution of natural resources in Bolivia. The research question of the project is; what is the meaning of the new natural resource policy of Bolivia in the light of present internal and external perspectives? Due to the nature of the subject, this document has been created from a multidisciplinary point of view. The analysis has been conducted from a historical, economic, political, social, environmental and cultural perspective. The levels of study are local, regional and international. This document has eight chapters, starting with The Path to a Hydrocarbon Policy in Bolivia; an introduction chapter which touches all the topics in the book, starting with a brief history of the hydrocarbons in Bolivia, the process of changes in this aspect until reaching the present hydrocarbon policy. Then the book continues with the chapter Bolivias Resource Policy 1880 - 1964 that examines the history of Bolivia's resource policy from 1880 to 1964. It focuses on the problems caused by Bolivia's position as a raw resource exporting country in the context of two main projects that tried to alter this situation, the reformist military regime from 1936 to 1939, and the Bolivian national revolution of 1952-1956. The third chapter Changing International Relations: Bolivias Call for Self-Determination discusses the long tradition of Western international influence on Bolivia and its policy-making, and

the consequences of Morales nationalisation politics to these international relations. The main focus of this essay will be on what the role of the key foreign actors in Bolivia has been, and how they have reacted to Morales (hydrocarbons) policies. The fourth chapter Bolivia's Relation with Latin-America: Changes under the Presidency of Evo Morales investigates and examines the bilateral and multilateral relations Bolivia has with other Latin-American countries and institutions like CAN, Mercosur and ALBA. It looks at the changes in these relations under the presidency of Evo Morales and the nationalisation of hydrocarbons. The fifth chapter, The Legacy of the Water War in Cochabamba, discusses the significance of the water war of Cochabamba in 2000 as the first successful popular resistance against neo-liberal policies, pacted democracy and the marginalisation of indigenous people in Bolivia. Furthermore this chapter analyses whether the water war also represents a turning point for Bolivia in the long term. The sixth chapter, called Natural Wealth in Bolivia: Fortune or Misfortune?, will focus on socio-environmental aspects of hydrocarbon mining in Bolivia. It discusses a few major problems with mining for both humans and nature, and the relevant environmental laws to mitigate these problems. Lastly, it analyses the possibilities for change that have been brought by Morales' new government. The seventh chapter, Demands from the East: A Destabilised Bolivia, focuses on the interests of the lowland department of Santa Cruz and their demand for autonomy, on what ground this autonomy demand in Santa Cruz is based and whether the autonomy quest turns out to be primarily important for cruceo elites or whether it is also wished for by the non-elite cruceo population. The eighth chapter, Pacha Mama's Belly: An Analysis of Indigenous Discourse in Modern Bolivia, discusses the role of indigenous discourse in the recent political protests of Bolivia, but also in the political programme of MAS. Indigenous issues are a large aspect of the recent calls for change and are intertwined with other political, economic and social issues. The chapter discusses three subjects in which indigenous discourse has played a major role in Bolivia and examines the way in which the discourse is used, for what purposes and by whom. The book ends with a general conclusion, which provides an answer to the research question that is central to this volume. During the writing of this book, we were fortunate to have discussed the content with our lecturer of the CEDLA course in Amsterdam, Barbara Hogenboom. We would like to thank her for her thorough comments, ideas and enthusiastic supervision.


ACI ADN AEI ALBA Andean Counterdrug Initiative Accin Democrtica Nacionalista, Nationalist Democratic Action Ashmore Energy International Alternativa Bolivariana de las Amricas, Bolivarian Alternative of the Americas ARI ATPDEA BIT BMI BDP BPRS CAO CAN CAINCO Andean Regional Initiative Andean Trade Promotion and Drug Eradication Act Bilateral Investment Treaty Business Monitor Index Barriles de Petrleo por Da, Barrels of Petrol per Day Bolivian Poverty Reduction Strategy Cmara Agropecuaria del Oriente, Eastern Agricultural Chamber Comunidad Andina de Naciones, Andean Community of Nations Cmara de Industria, Comercio, Servicios y Turismo de Santa Cruz, Chamber of Industry and Commerce CEPB Confederacin de Empresarios Privados de Bolivia, Confederation of Private Entrepreneurs of Bolivia CIA CIDOB Central Intelligence Agency Confederacin de Indgenas del Oriente de Bolivia, Confederation of Indigenous of Eastern Bolivia CIE CHB CLHB Comit Intencional del Estao, International Tin Committee Cmara de Hidrocarburos de Bolivia, Hydrocarbons Chamber of Bolivia Compaa Logstica de Hidrocarburos de Bolivia, Logistic Hydrocarbons Company of Bolivia CNDA Cmara Nacional de Despachantes de Aduana de Bolivia, Nacional Chamber of Customs Brokers of Bolivia COB COMIBOL CPSC CSUTCB Central Obrera Boliviana, Bolivian Workers' Center Corporacin Minera Boliviana, Bolivian Mining Corporation Comit Pro Santa Cruz Confederacin Sindical nica de Trabajadores Campesinos de Bolivia, Unitary Labour Conferedation of Agricultural Wokers of Bolivia DEA EBH EIA Drug Enforcement Agency Estratgia Boliviana de Hidrocarburos, Bolician Hydrocarbons Strategy Environmental Impact Assessment

EJ ECLAC ENDE ENTEL Environmental Justice Economic Commission on Latin America and the Caribbean Empresa Nacional de Electricidad, National Electricity Enterprise Empresa Nacional de Telecomunicaciones de Bolivia, National Telecommunications Enterprise of Bolivia ETI EU FDI FEPB-SC Euro Telecom International European Union Foreign Direct Investment Federacin de Empresarios Privados de BoliviaSanta Cruz, Federation of Private Entrepreneurs of BoliviaSanta Cruz FSB FTA FTAA G-7 GCS GDP IBCE ICSID IDA IDB IDH IEA IEHD Falange Socialista Boliviana, Bolivian Socialist Phalange Free Trade Agreement Free Trade Area of the Americas Group of Seven Industrialised Nations Greenberg Carville Shrum Gross Domestic Product Instituto Boliviano de Comercio Exterior, Bolivian Institute of Foreign Trade International Centre for the Settlement of Investment Disputes International Development Association Inter-American Development Bank Impuesto Directo a los Hydrocarburos, Direct Tax to Hydrocarbons International Energy Agency Impuesto Especial a los Hidrocarburos y sus Derivados, Special Tax on Hydrocarbons and Derived Products IFAD IFC IFI ILO IMF IPS LAB LIL LNG LPP MAS MCA MCC International Fund for Agricultural Development International Finance Corporation International Financial Institution International Labour Organisation International Monetary Fund Inter Press Service Lloyd Areo Boliviano Learning and Innovation Loan Liquified Natural Gas Law of Popular Participation Movimiento al Socialismo, Movement Towards Socialism Millennium Challenge Account Millennium Challenge Corporation

MDG MDRI MDSMA Millennium Development Goal Multilateral Debt Relief Initiative Ministerio de Desarrollo Sustentable y Medio Ambiente, Ministry for Sustainable Development and Environment MERCOSUR MHE MIR Mercado Comn del Sur, Common Market of the South Ministerio de Hidrocarburos y Energia, Hydrocarbons and Enegery Ministery Movimiento de la Izquierda Revolucionaria, Movement of the Revolutionary Left MMmcd MNCL Millones de metros cbicos por da, Millions of cubic metres per day Movimiento Nacin Camba de Liberacin, Movement for the Liberation of the Camba Nation MNR MST NDI NDP NED NEP NGO NHP OPIC OTB OTI PCM POR PRG PRSP SAP SEMAPA Movimiento Nacionalista Revolucionario, National Revolutionary Movement Movimiento Sin Tierra, Landless Peasant Movement National Democratic Institute National Development Plan National Endowment for Democracy New Economic Policy Non-Governmental Organisation Net Hydrocarbon Production Overseas Private Investment Corporation Organizacin Territorial de Base, Territorial Grassroots Organisation Office of Transition Initiatives Partido Comunista Boliviano, Bolivian Communist Party Partido Obrero Revolucionario, Revolutionary Workers' Party Partido Radical Genuino, Genuine Radical Party Poverty Reduction Strategy Paper Structural Adjustment Program Servicio Municipal de Agua Potable y Alcanterillado, Municipal Potable Water and Sewerage Service SOE TCO TCP UNASUR UMA UNPFII US USAID State Owned Enterprise Territorio Comunitarios de Origen, Communitary native reserves Tratado Comercial de los Pueblos, Peoples Commercial Treaty Union Suramericana de Naciones, South American Community of Nations Unidad del Medio Ambiente, Environment Unity United Nations Permanent Forum on Indigenous Issues United States United States Agency for International Development

USD WTO YPFB YPHB United States Dollars World Trade Organisation Yacimientos Petrolferos Fiscales de Bolivia, Bolivian Fiscal Petroleum Fields Yacimientos Petrolferos Fiscales Bolivianos, Bolivian Fiscal Hydrocarbon Deposits

The Path to the New Hydrocarbons Policy of Bolivia

M. Alexandra Contreras Ochoa & T. Marijke Renzema

Abstract: As the title of the chapter indicates, the authors have focused, investigated and examined the process of transformation that Bolivia has faced in its history of Hydrocarbons until reaching the current Hydrocarbons Policy. The chapter has two parts. The first reviews the history, movements and actors that brought us to the current Hydrocarbons Policy, which is the subject assessed in the second part. Keywords: Yacimientos Petrolferos Fiscales Bolivianos, Transnational Companies, Neo-liberal policies, Capitalisation, Social movements, Hydrocarbons, Nationalisation, National Plan of Development, Hydrocarbons Policy

A path to transformation?
The political history of Bolivia can best be described as cyclic periods in which nationalist or liberal forces were reigning over Bolivia. With the ascent of Evo Morales as new leader of Bolivia it appears that not just these traditional dichotomies in Bolivian politics are readjusting themselves to the new situation but also that the traditional structures and institutions of politics might be changing. The reformation of Bolivian society appears to be an indicator for this change and appears to be more than just a mere change of direction within the old structures of Bolivian politics. The inclusion of marginalised indigenous sectors of the Bolivian society and their cosmo-vision into politics might point to this potentially profound change happening in Bolivia. If all parties active in this process of change succeed an inclusive Bolivian society might emerge. Nevertheless, legitimate questions are being raised about this transformation and specifically about the inclusion and effectiveness of social movements and indigenous groups on politics in Bolivia. Because Evo Morales, like his two predecessors could no longer ignore the social movements, the only logical thing to do was to include them into politics. However, their inclusion into politics does not guarantee effective and clear policies for all Bolivians. Further changes set in motion by Evo Morales seem to be a repetition of steps previously undertaken by preceding Bolivian governments. Whether this process of change thus really marks the beginning of a transformation or whether it is a repetition of events in old structures will be further examined in this chapter. By looking at the history of the oil and gas industry in Bolivia and the nationalisations that took place in the hydrocarbons sector, the power structures in Bolivia and powers involved from the exterior will be discussed. The position of the hydrocarbon state company and the uprising of social movements as defying the old structures will conclude the first part of this chapter. A discussion of the new hydrocarbons law and its strategies coupled with the new foreign policies of Evo Morales will provide further insight into the effect of the inclusion of the social movements in politics and power structures in Bolivia. The last part of this chapter will further analyse and discuss these findings and conclude with final remarks.

The history of hydrocarbons in Bolivia and its power structures

The history of the hydrocarbons industry in Bolivia starts at the end of the nineteenth century when the first petition to an oil concession was made to the government of Jose Maria Acha in the year 1865. The first oil discovery in Latin America took place in Santa Cruz, Bolivia in 1875 (Philip 1982, 193). Subsequently Bolivian companies were founded to engage in the industry and in 1921 the Bolivian State issued the first Ley Organica de Petrleo (Ministerio de Hidrocarburos y Energia 2008, 495). At that time Richmond Levering, a North American company received large concessions to oil fields in the south of Bolivia in Bermejo and Sanandita and this marked the further expansion of the oil industry in Bolivia. The Richmond Levering company later sold these concessions to Standard Oil of New Jersey also a North American company. The Standard Oil company however, did not make its first extractive activities until the year 1924, in the Pozo Bj 2 in Bermejo, the region of el Chaco (Paz Patino 2005, 98). In the decades that followed oil became the prime commodity for generating income for the Bolivian state and the country had high hopes for a successful trade and export of this product. Due to the growing worldwide demand of oil the Bolivian State highly preferred the development of the oil industry whereas gas at that time was seen as a by-product of the oil extraction and would not gain significant importance until the 1980's. By the above stated, one can say that since its beginning the oil and gas industry and its development in Bolivia have been of interest and were influenced by foreign political and economic powers and structures. A more descriptive historical account of their influence on the position and development of the hydrocarbon industry of Bolivia will be further given below. This part will end with discussing most recent developments within these political and economical structures. Also more deep information regarding Bolivias history will be analyzed in the chapter Bolivias resource policy 1880 1964.

The development of the hydrocarbon industry in Latin America Due to the increasing demand for oil in the United States of America and the world economy in the years following the First World War, many small and large North American and also British companies went on to pursue concessions in potential oil fields and areas in countries in Latin America. During the 1920's the oil industry in Latin America was expanding at a high rate. Before that time, prospecting and drilling for oil in Latin America had been regarded as being too risky and oil companies were more interested in marketing their own oil to Latin America. But by the 1920's the oil prices had risen, taxes to be paid to the countries were low compared to for example rubber, gold and diamonds and oil demand was growing. However the first companies to enter Bolivia prospecting for oil often left the country empty handed. There was such a high technological risk at that time that companies could not find fields profitable enough to extract. And if there would be a significant oil discovery the transportation of the oil would confront them with a next problem. In 1927 Standard Jersey Oil for example reported having invested $ 11.4m in the oil industry in Bolivia but not having made any money (Philip 1982, 87 ) On the other hand, these risks of high costs were also considered as being part of and a characteristic of the business. As innovative developments in the oil industry were being made the prospective profits increased. Therefore even despite the high risks and even though in several Latin American countries much of the earnings went to local elites and regional governments, profitable opportunities for the companies were seemingly unlimited as production and exploration techniques developed. In this period in the 1920s many local landowners in Latin America became very willing to sell their land to foreign companies prospecting for oil. For the Latin American countries the gain in the activities and the development of the oil business lay more ahead in the future once the international companies had explored and developed the fields, for this would put them in a much better bargaining position. The Bolivian State itself also did not have access to the investments and skilled personnel needed in the oil industry and was dependent on international companies to develop the sector in Bolivia. The domestic market for oil in Bolivia was too small to generate enough income for the Bolivian State to make investments possible. The local elite in Bolivia neither had enough funds to invest in the industry nor did they want to take

excessive risks. This tendency however could be observed in many Latin American countries. The investments made by international investors furthermore inhibited the development of local capital in Latin American countries (Philip 1982, 30). By the year 1928 all activities in the oil industry in Latin America were in the hands of transnational companies or state companies. In the 1930's the focus of oil companies had shifted from exploration to management due to the worldwide depression and the prospect of an upcoming war. In these years the governments of the United States of America and Britain directed much of their power to maintain good relations with the Latin American countries. This often did have a negative effect on the relations with their national oil companies as will be discussed below.

Political structures of power and the hydrocarbons industry in Bolivia

At the time the Bolivian State nationalised the Standard Oil Company in 1937, the US government did not take harsh measures against the Nationalisation of Standard Oil out of fear that Bolivia would develop close relations with fascist regimes like Nazi Germany. Moreover the US government persuaded the country with extra aid to open up its economy for foreign direct investment. The Bolivian State had nationalised the Standard Oil Company, since the company smuggled oil to Paraguay during the Chaco war. The events that led to the Chaco war between Bolivia and Paraguay and events which took place afterwards show the influence of national and regional powers and their interests in the hydrocarbons industry in Bolivia. Argentina first refused to permit the building of a pipeline to transport the oil from the Chaco area in the South of Bolivia and then raised taxes on import of Bolivian oil thus limiting the growth of the industry in Bolivia. In 1933 Bolivia started the war with Paraguay to obtain a port on the Paraguay river for the transportation of oil and recruited many of its indigenous people to go to war in the Chaco area. The Bolivian army was defeated by Paraguay in 1936 which had received help from Argentina to fight Bolivia. Argentina later on, became involved as mediator in the peace talks between Paraguay and Bolivia. In return for concessions given to the Argentine oil state company Yacimientos Petrolferas Fiscales (YPF) Paraguay guaranteed it would not again go to war with Bolivia. In 1936 Bolivia founded the Yacimientos Petrolferos Fiscales Bolivianos (YPFB) named after the Argentine state company. In a mixed enterprise both companies were to discover and develop the new oil fields in the Santa Cruz, Chaco area. Lastly Argentina built a rail road for the transportation of oil connecting the Chaco fields to Argentina. In the years following the Chaco war the interest demonstrated by Argentina and later on by Brazil in the Bolivian oil and potential gas fields and its export, made Bolivia seek for closer US cooperation in the exploration and exploitation of the oil and gas fields to counter the perceived threat coming from its neighbouring countries. The fact that the Bolivian State had lacked its own State oil company prior to the Chaco war is important in the sense that when it founded the YPFB it immediately became a very important national institution of political and economical power. With the installation of the YPFB, Bolivia had despite the war strengthened its position in the national oil industry by founding a State oil company and had managed to secure the oilfields in the Chaco area. For many Bolivians the YPFB became a symbol of nationalism and nationalistic pride. By furthermore stating that all natural resources of the country belonged to all Bolivians the hydrocarbons became an issue of national importance. With the positioning of the hydrocarbon industry by the Bolivian state as an issue of national interest, the hydrocarbons were made to appeal to all different classes and groups living in Bolivia. These events and the position taken by the Bolivian state on the matter of hydrocarbons led to the nationalisation of the Standard Oil Company in 1937 right after the Chaco war. The nationalisation was supported by the large indigenous population, which had been fighting in the war. Their support was ensured by the plan of the Bolivian government to pay their war pensions with the revenue of the national oil industry now in the hands of the YPFB. The YPFB has from that moment on been of great importance to succeeding political parties and powers in Bolivia, due to its perceived symbolic and economic significance. Either in suppressing its importance by favouring foreign control over the hydrocarbons or by emphasizing its importance and nationalising hydrocarbons, the YPFB became an important issue in Bolivian politics.

Economic power structures and the hydrocarbon industry in Bolivia

Until 1945 taxes to be paid to Latin American countries were nominal and differed per company and per country and could best be described as favouring the international companies disproportionally. The relationship of the Bolivian state with the international companies involved in its hydrocarbon industry was one of mutual interest but not of mutual benefit. Corruption also played a role in this relationship either used to strengthen the position of governments with backing of international companies and their money or for personal enrichment. In Bolivia President Saavedra in the 1920's used the oil contracts to attract further loans necessary for his new public policies to win over parts of the urban population. Several Latin American governments at that time requested oil companies to participate in public works, by for example building rail roads and ports or otherwise the governments would refuse giving concessions. Even despite the fact that by the 40's there were already nationalisation movements and opposition to foreign investment in this industry, many governments and elites in the Latin American countries perceived the companies as a way to modernise their economies. This being a modernisation according to their structures of power in a post-colonial way and representing their view on modernisation. The opposition to foreign involvement in the Bolivian hydrocarbon industry, according to Philip, was arguing that: Bolivia's petroleum potential should be developed by native capitalist rather than foreign interests... While these same men never questioned the introduction of foreign capital in every other economic activity of the nation, to them petroleum represented a kind of mystique of national sovereignty. Furthermore the nationalist movements were seen as representing in large part an assertion of the rights of the central government over those of provincial authorities and landowners (Philip 1982, 31). Near the end of the Second World War the USA decided to stop granting loans to State companies in conflict with oil companies and changed their strategy in Latin America due to the new oil fields discovered in the Middle East. In 1945 Bolivia agreed to let foreign direct investment in again for the first time since the Nationalisation of Standard Oil in order to obtain a loan from the Import-Export bank. The World Bank's strategy since 1949 was aimed at promoting increased private enterprise. The Inter-American Development Bank in the 1950's financed state companies handling the distribution of natural gas as the consumption of natural gas increased. This can be seen as an indication for the global economic interest in the sector in Latin America. In 1952 the Movimiento Nacionalista Revolucionario (National Revolutionary Movement, MNR) came to power after the revolution in Bolivia. The government led by this party sought a closer relationship with the US government. The interest of the MNR in cooperating with the US was stemming from fear of domination by Argentina and from the potential benefit the cooperation could hold for the development of the Bolivian economy. In 1957 the right-wing Pro-Santa-Cruz Committee was founded in the province of Santa Cruz and launched a campaign against the pro-MNR political leadership of the province on the issue of regalias from the oil and gas export. The North American company Gulf Oil who had been able to enter the country in the 1940's as part of the agreements under the Davenport code 1 and the leaders of the Committee sought an alliance. This indicates that both parties intended to strengthen and expand their powerbase with economical and political power. When Gulf Oil proposed to supply natural gas directly to the Santa Cruz area the Bolivian government refused despite protests of the Santa Cruz leaders. The government wanted the gas to be distributed through the YPFB to emphasize its role in the national economy and politics and as a symbol of national sovereignty and power. Thereby also underscoring the importance of natural resources as propriety of the State and maintaining its control over the region. By refusing the direct supply to the Santa Cruz area the Bolivian State was also able

An agreement made by the Bolivian State and the USA after the Nationalisation of Standard Oil in 1937 to open the country again for foreign direct investment

to maintain a high price for gas which would generate higher revenues destined for the development of the national economy. Prior to these events Gulf Oil had obtained international political protection by involving the World Bank in the construction of a natural gas pipeline that was going to transport natural gas to Argentina. The economic power of Gulf Oil combined with the political alliances it had forged, had made it a powerful and potential political danger to the Bolivian State. This would eventually lead to the second Nationalisation made by the Bolivian State. The position of the YPFB as a political and economic power in the national hydrocarbon industry at that time was seriously eroded by these economic powers. The president of Bolivia, Barrientos himself was personally involved with Gulf Oil by accepting personal funds from the North American company. When evidence of deep North American Central Intelligence Agency (CIA) penetration in Bolivia came out, the situation for the Gulf Oil company became critical for the North American company had become a symbol of USA interference. In 1969 then Bolivian President Siles nationalised natural gas and expropriated large concession fields of Gulf Oil. The company retaliated by offering the Santa Cruz province free natural gas for 20 years. This offer eventually led to the nationalisation of the Gulf Oil company in 1969. The Bolivian government declared the offer made by Gulf Oil to the Santa Cruz province as an intervention in the affairs of the country which would cause the other provinces requesting for free gas. The official reason for nationalising Gulf Oil was the smuggling of hydrocarbons to Argentina (Ministerio de Hidrocrburos y Energa 2008, 478). These events give an indication of foreign economical interests in the hydrocarbons sector and their position in Bolivia. Through these events the YPFB became once again a symbol of national sovereignty and was to operate successfully in the industry especially with prices of oil and gas increasing at the beginning of the 1970's. Until 1970 most of the gas found in the Latin American countries was destined for domestic consumption only. As prices of oil and gas started to rise the producing countries were given a much better bargaining position and this reinforced the position of the YPFB in the national economic and political structures. In the 1970's the Bolivian governments' strategy was based on changing the Bolivian pattern of growth, the industrialisation and the development of the domestic market for gas. With this strategy the Bolivian government planned to position the national hydrocarbon industry in the economic structure in the country as a major tool for the development of the Bolivian economy. These strategies still prevail in the current government of Evo Morales who in a similar way positions the YPFB in the major economic sector in Bolivia. More detailed information about the history of hydrocarbons in Bolivia can be found in the chapter Bolivias resource policy 1880 1964.

Alternative power structures in Bolivia

Most of the natural gas and oil found in Bolivia comes from the Santa Cruz, Chaco area in the southeastern part of the country. As soon as the first concessions in this part of the country had been given in 1875 subsequent governments had sought to consolidate the area because of its potential profits from the oil fields and its strategic position. For the indigenous population living in the area this has had severe effects. In order to strengthen its power in the area and over its population the Bolivian government started the war of Curuyuqui in the year 1892. The indigenous population was defeated and this marked the beginning of several agricultural development projects in the area. This development plan was known as Plan Boha and was initiated by the Bolivian government to further consolidate the province of Santa Cruz. By developing an agricultural sector in the area which would attract migrants from all over the country to the Santa Cruz area the assimilation process of the indigenous peoples was started and control over the area was secured. The above indicates the importance of the area for the Bolivian State. The Santa Cruz area since then has been of special interest for development by Bolivian governments. This was especially the case since the 1940's due to the rising world prices for oil with the Second World War on its way. Santa Cruz will be analyzed deeply in the chapter Demands from the East: A destabilised Bolivia. Due to the agricultural sector that had been developed in the Santa Cruz province water had become another significant natural resource in the area. The oil industry was in need of this natural

resource and for the indigenous peoples living in the area water was needed for self-subsistence activities. Land was bought, sold and invaded to gain access to water. The control over water in el Chaco meant to have power over the whole area (Paz Patino 2005, 156). In this light the land reforms made possible by the Agrarian Law after the revolution in 1952 are important in the sense that they did not include the lowlands in the province of Santa Cruz (Crabtree 2005, 61). When the exploration and exploitation of oil and gas especially in the 1950's became more profitable, the economy in this area flourished. The elites of the province became more demanding and vocal with backing of the oil companies active in the area. These companies as an economic power sought political power and alliances to secure their position as were discussed above. This gives an indication of the power of the elite in the province of Santa Cruz. The indigenous population in Bolivia has since the beginning of the hydrocarbon industry been involved in its development, through the war of Curuyuqui and the Chaco war in order to obtain and secure potentially natural resource rich areas. They did not however form part of the traditional power in the Bolivia of that time to exert control over them. In time many indigenous people left their communities and places of origin and migrated to urban centres due to the poor economic situation in the rural areas of Bolivia. Although the Agrarian Law of 1952 had brought some improvements to the rural areas by ending the oligarchic system and the hacienda structures, this law however had not changed the isolated, discriminated and marginalised position of the indigenous peoples of Bolivia. The politics of that time labelled them as campesinos instead of referring to their ethnicity to distinguish differences in class as this was seen as a means through which their emancipation should be reached. The indigenous people protested against these policies emphasizing their own culture, cosmovisions, codes and ethnicity. By doing so they eventually were able to position themselves as an alternative power in the Bolivia of today. This position, culture and vision would have its appeal to large parts of Bolivia's society as will be discussed below. Furthermore it provided the indigenous communities with a possibility to gain control over the natural resources in Bolivia. The legally recognised communal indigenous territories have been given a better position against the interests of landowners and the hydrocarbon industry. The recognition of the indigenous peoples culture and rights are the indication of the emerging of an alternative power in Bolivia.

The power of the YPFB and the uprising of social movements

During the last years of the 1980's and the mid 1990's the political party MNR introduced a neo-liberal approach to fight the huge external debt that Bolivia had accumulated. Under influence of the International Monetary Fund (IMF) presidents Sanchez de Losada and Mesa put the neo-liberal approach into full force and further expanded and implemented neo-liberal policies. At the start of the neo-liberal policies in the 1990's the country had an external debt of US$ 4 billion. In the year 2003 this had risen to US$ 5 billion despite debt relief programmes and the privatisation of the oil and gas industry. In 1996 the neo-liberal policies of the MNR introduced the capitalizacin of the YPFB, once a symbol of political and economical sovereignty. With the capitalizacin all of the activities of the YPFB were transferred to international companies. This process had been started in March 1994 when the Bolivian government had decided on the capitalizacin and later privatisation of the 5 main State companies: hydrocarbons, electricity, rail roads, telecommunications and national airlines (Ministerio de Hidrocrburos y Energa 2008, 496). The capitalizacin indicates that traditional power within the Bolivian government and in the exterior were imposing their modernisation on the Bolivian people. The YPFB with the capitalizacin was subsequently divided into three different companies: Chaco, Andina and Transredes. The activities of YPFB were reduced to administrative and small operational activities. This form of privatisation according to some was meant to prevent a situation in which one single company or small group of companies would be able to obtain all the assets and activities of the YPFB State Company (Paz Patino 2005, 100). In the year 1997 the transport of hydrocarbons was sold to private companies and Transredes S.A. was formed. The main stakeholders were Enron, Shell and TR Holdings which held a 50% interest in the company and an additional portion through other companies involved (Ministerio de Hidrocrburos y Energa 2008, 499). The

capitalizacin had made some major companies in the oil and gas industry combine forces and interests. In 2000 the activities of transport through Poliductos and warehousing that formerly were handled by YPFB were sold. In addition, the company Logistica de Hidrocarburos Boliviana S.A. was founded by a German-Peruvian group made up by Oil Tanking GMBH and Grana y Montero S.A (Ministerio de Hidrocrburos y Energa 2008, 499). The refineries were sold to Petrobras Bolivia S.A. in that same year. These neo-liberal politics aimed at attracting more foreign direct investment and cutting back on public spending while serving the traditional economic powers marked the ending of once powerful position of the YPFB. After the capitalizacin the Bolivian states' sole responsibility in the hydrocarbon industry was supply to the domestic market. The decline of the YPFB gives evidence of the erosion of not just the economic but also the political structures of power in Bolivia at that time.

The uprising of the social movements and the defiance of traditional power structures
At the time in the 1980's and 1990's as President Sanchez de Losado expanded his neo-liberal policies in Bolivia, the pueblos originarios raised their voice about the conservation of natural resources in Bolivia. In the year 1994 President Sanchez de Losado recognised the multicultural Bolivian society in its constitution. This action changed the discourse of the indigenous people against exclusion, discrimination and racism. The term pueblos originarios gained importance and the indigenous people demanded their rightful place in Bolivia and the world, thereby referring to their cosmovision, the Pacha Mama and the Pacha Kuti structures and their ethnicity. These concepts can also be found in the rotation scheme used in the indigenous pueblos. The Pacha mama and the Pacha Kuti are two important aspects of their cosmovision. To the indigenous the earth, the Pacha mama, is to be conserved and managed in a sustainable way. The concept of Pacha Kuti refers to how time in their cosmos is shaped in an non-linear way and how the management of the earth should rightfully again be the turn of the Bolivian people. Around the year 2000 new social movements started to take on importance and challenging the old power structures. By that time the traditional institutional social movements had been weakened by the declining population working in the formal sector due to the worsening economic situation in Bolivia. A large part of the population by then was employed in the informal sector where the labour unions did not reach. Many of these new social movements were founded in the context of the Water war in Cochabamba in 2000. The events there saw alliances being made between a varied, heterogeneous field of movements. These alliances cut across different interest groups and formed a coalition of movements protesting against the implemented neo-liberal policies and their disastrous effects on the people and the natural resources in Bolivia. The coalitions were inspired by the organisational structure of the indigenous people and the principle of consensus and harmony. This event will be discussed into detail in the Chapter of J. Strijdonck. During this time the Movimiento al Socialismo (Movement to Socialism, MAS) also became an important movement, this was in part a political party and in part a social movement. At the elections of 2002 two pro-indigenous parties: MAS and Movimiento Indigena Pachakuti (Pachakuti Indigenous Movement, MIP) led by Felipe Quispe joined the elections. Whereas MAS was able to appeal to various parts of Bolivias population whereas the MIP has had a more radical and indigenous focus. Detailed information on the indigenous movements can be found in the chapter Pacha Mamas Belly: An analysis of Indigenous Discourse in Modern Bolivia. The sale of the YPFB in 1996 was the primary event that had led to the mobilisations during the gas war in October 2003. Since the capitalizacin seven years before the prices of gasoline and gas for household consumption in Bolivia had increased despite the privatisation of the YPFB. The YPFB was still by many Bolivians perceived as a symbol of State sovereignty and national pride. Its decline, the rising costs of gas for household-consumption and the structural adjustment and reform plans that had been implemented in Bolivia provoked deep resentment against the MNR's neo-liberal approach. In the context of the mass mobilisations that occurred in 2003, most notably in the city of El Alto, these feelings were expressed. The growing dissatisfaction over the corruption of subsequent Bolivian governments, which had spent excessively and had delegitimised its own democracy were other aspects that gave rise to this social unrest. The cultural traditions and cosmovision of the indigenous

people of Bolivia functioned as a factor that inspired and bound the protests together on an issue that appealed to all Bolivians for its historical nationalistic symbolism. By taking the indigenous point of view on the matter of hydrocarbons the demand to again nationalise all natural resources was given a tone made to appeal to all but not only Bolivians. This position made it possible for social organisations, labour unions, indigenous and peasant communities to mobilise great parts of the population to reclaim the hydrocarbons as State property. These events challenging the traditional power structures in an unprecedented way would ultimately lead to the resignation of presidents Sanchez de Losado and Mesa. This alternative power that had emerged in Bolivia led to the victory of Evo Morales and MAS in the 2005 elections as they saw the potential of this alternative power and realised they could not govern Bolivia without their support. Fears that the inclusion of the marginalised indigenous sectors into government would inhibit real changes in the traditional power structures in Bolivia were legitimate. So far events which have taken place under the government of Evo Morales seem to be keeping the old power structures firmly in place. When looking at the nationalisation of the hydrocarbons industry and the strategy for the hydrocarbons' sector of the 1970's they appear to be a repetition of steps. The inclusion of previously marginalised and discriminated groups with their different cosmovisions into politics might indicate a serious attempt to let these groups in on politics, economics and hydrocarbons control of the country but neither had there been another option for they had become a force to reckon with. What the effect has been of the incorporation of this power into the policy of the hydrocarbons of Bolivia under Evo Morales will be further discussed in the next part of this chapter by looking at the new hydrocarbons law.

Evos National Development Plan: A worthy, democratic, sovereign and productive Bolivia in order to live well
Five months after Evo Morales assumed the presidency, his government presented the new National Development Plan (NDP) 2 . The NDP criticizes the liberal policies of previous governments that did not modernise the country and brought inequality among social classes and regions. Therefore, the NDP indicated a necessity to transition from a liberal laissez-faire policy to nationalisation of the hydrocarbon industry. In the Decreto Supremo no. 29272, the term to live well is explained as: the access to, and enjoyment of material goods, and living in a society, which is in harmony with other human beings and nature in general. It seems that the government positions itself as a pluri-national statewide promoter of development. One of the objectives of the plan is to create one hundred thousand jobs per year by 2011 (Los Tiempos, 2006). The investment for creating these jobs comes from nationalisation of the hydrocarbons industry. The NDP also has a social aspect. It intends to create opportunities for those who dont have access to education, means to communicate, housing, health or community services. According to the Inter Press Service (IPS), the plan intends to reduce the population living in abject poverty from 34.5 to 27.1 per cent within 5 years. According to president Morales, the plan will raise the Gross Domestic Product (GDP) from 4.3 per cent in 2006 to 7.6 per cent in 2011 and the public investment from 783 million dollars in 2006 to 1.600 million dollars in 2011 (Vaca, 2006). It seems that the foundation under Morales NDP has four pillars. These are intended to take Bolivia out of its crisis. These four pillars are: A Worthy Bolivia; A Democratic Bolivia; A Sovereign Bolivia and a Productive Bolivia. The main focus in this chapter is on a Productive Bolivia, mainly the policy on the hydrocarbons industry, since that sector will provide most of the financing of the NDP. What follows first is a brief discussion of the other three pillars. Regarding the first pillar, a Worthy Bolivia, the main focus is the elimination of poverty and inequality. The goal is to reach equality through the redistribution of income and opportunities. It appears that the areas that will benefit from this pillar are education, health, justice, culture, social security, social protection and communitarian development. It seems that the second pillar, a Democratic Bolivia, is focused towards the construction of a pluri2

Plan Nacional de Desarrollo: Bolivia Digna, Democractica, Sorberana, Productiva para vivir Bien (The National Development Plan: A Worthy, Democratic, Sovereign and Productive Bolivia in order to live well).

national society. The intent is to make the people co-responsible in the decision making process. This is a fundamental change from the old model where social sectors were excluded, and a small elite group was privileged. It clearly shows that decentralisation is a central theme. The municipalities will be held responsible for planning and developing the area on behalf of the state. By doing so, municipalities get to serve as a bridge between the government and its electorate. A Sovereign Bolivia, the third pillar, appears to centralise around justice, equality and the improvement of cultural dialogue between its people. These three elements are used for the new message that Bolivia wants to present to the world. A message that is clear in the new foreign policy. The foreign policy will promulgate the participation of the pueblos and the sustainability of the natural resources and biodiversity. A Productive Bolivia is the pillar on which the entire NDP rests. It is clear to see that the main goal is transforming the hydrocarbons industry into a strategic sector. Another goal is modernisation of the transport and telecom infrastructure. Lastly, part of this pillar is the development of the agricultural sector, the manufacturing industry and tourism. Regarding investments, the government estimates that Foreign Direct Investment (FDI) will increase up to 9 per cent by 2011 which, during the period 1990 -2005, had an annual average of 4.5 per cent. To achieve this objective, it is clear that the plan depends on the Ley de Tratamiento y Fomento a la Inversin Extranjera (Law for Creating and Processing Foreign Investment). The law is based on principles of sovereignty and honorability in a context where fair payment of taxes and loyalties to the state, especially on non-sustainable natural resources, are common ground. According to the Morales administration, the access to, and distribution of hydrocarbons within Bolivia is limited due to the absence of modern infrastructure (Tsolaski 2007, p18). This made Bolivia dependent on diesel imports. It is evident that the government not only assumes control of production surplus, but also on the supply chain (exploitation, exploration, transportation, commercialisation and distribution). With this panorama, the Bolivian government is set to gain control of the hydrocarbons industry and to set the volumes and prices, set up new rules for contracts between the transnational companies and YPFB. The details and main aspects of the hydrocarbons industry in Bolivia during the Morales administration are discussed in the next section.

The hydrocarbons policy

The policy of hydrocarbons is part of the National Development Plan and has become a state policy. The policy of hydrocarbons sustained the surplus created at the generic sector. It is clear that this surplus will not only be re-invested in the sector, but will also be invested in sectors producing income and employment, in order to promulgate the social development and diversify the economy. According to the Estrategia Boliviana de Hidrocrburos (Bolivian Hydrocarbons Strategy, EBH), the countrys policy on hydrocarbons has the following goals: to consolidate the ownership of the hydrocarbons by the State; to guarantee the sovereignty of the energy sector; to produce surpluses; to make Bolivia the Regional Center of Gas (Centro Gasfero Regional); to achieve an efficient development of the supply chain; to bring the gas to the Bolivian people and end-users, and lastly to reduce damages to the environment (La Primerisima, 2008). More on the relations of Bolivia with the rest of the world and the region since the presidency of Morales can be found in the chapters Changing international relations: Bolivias call for self determintation and Bolivias relation with Latin-America: changes under the presidency of Evo Morales. Within the hydrocarbons policy, the exploration of traditional and non-traditional areas will create high opportunities for the hydrocarbons production. This will allow the increase of national reservoirs, exploitation, commercialisation and sustainable industrialisation of the hydrocarbons. It appears that there are two important aspects within the exploration policy: 33 reserved areas for the YPFB and 44 contracts between YPFB and the petroleras (Estrategia Boliviana de Hidrocrburos 2008, 67). Within the frame of the 44 contracts, YPFB will take permanent control of hydrocarbon activities of the petroleras. It needs to monitor that petroleras execute their planned activities, of course authorised by the YPFB. It should also study protected areas to prevent environmental damage and develop alternative ways of exploration. Regarding the 33 reserved areas, the YPFB will develop

activities for exploration and exploitation by itself or in association with third parties. The policy mentions that YPFB should form a Sociedad Anonima Mixta (Public Limited Mixed Corporation) with 50 per cent shares plus one share in the new company as well as in the decision-making and control (Medinaceli, 2007). Depending on the area, an agreement between YPFB and the petrolera will be signed where the company partner will be responsible for the technology and capacitation of the personnel. It is clear that the company partner will incur most of the cost and will have to make significant investments, while the benefit lies mostly with the YPFB. Within the exploration activity, it seems that YPFB will act as promoter for national and international investments. Based on previous studies and technical support, the area suitable for hydrocarbons will be valued in a clear and fair way. Also, a database will be created to provide an evaluation of the areas for exploration. Furthermore, YPFB will be responsible for the control of the reservoirs For the internal market, the policy has the use of natural gas at the different sectors of the economy as priority, which will allow the reduction on consumption of combustible liquids. It is clear that this will only be possible with a high investment in infrastructure, which is what Bolivia lacks in (DeShazo 2006, 2). It appears that the principal aspect of industrialisation of natural gas is the transformation from being a Bolivian exporter of raw material to a Bolivian exporter of petrochemical products (Aramayo 2006, 2). The institution responsible for the process of industrialisation will be the Empresa Boliviana de Industrializacin de Hidrocrburos (The Bolivian Institution for the Industrialisation of the Hydrocarbons) which in association with petroleras or by itself, will start with the production of urea fertilizer, polythene and the construction of Gas to Liquid (GTL) plants with the respective infrastructure for its transportation and for having access to the market (Estrategia Boliviana de Hidrocrburos 2008, 511). Another important aspect within the hydrocarbons policy is the production of combustible liquid. It seems that the goal is to create surpluses that will supply the international demand. It will avoid the import of combustible liquid. Transportation of gas will supply more geographic areas to suite demand in the internal and external market. Different oil and gas pipelines will be built. It seems that there are concrete plans for different projects for pipelines such as the Carrasco-Cochabamba gas pipeline that covers the demand of western Bolivia (El Mundo, 2008). It seems that Bolivia wants to become the Gas Center of the Region (Diario Critico, 2008). According to the Hydrocarbons Policy, Bolivia is the biggest producer of Natural Gas and it has neighbouring countries like Brazil and Argentina, which have high demand for energy. There are bilateral conversations with Uruguay and Paraguay to find the best way to supply gas to them. (Estrategia Boliviana de Hidrocarburos 2008, 523). The environmental aspect of the policy emphasizes that the native communities and farmers have the right to a fair share of the pacha mama during the hydrocarbon activities of the petroleras. Therefore the sense of respect for the territory, the participation of the communities in the decisionmaking process and the enjoyment of the benefits generated from the hydrocarbon activities will be fundamental aspects of the policy. The environmental aspect will be explored in more detail in the chapter Natural wealth in Bolivia: fortunre or misfortune?. It seems that in order to accomplish the goals established in the NDP and the Hydrocarbon Policy of Bolivia an institutional re-structuring is necessary. Within this frame the Ministerio de Hidrocrburos y Energia will start a planning effort. YPFB will act as investor, administrator of productive and commercial operations and responsible for the economical and financial yield. A third institution called el Ente Regulador (The Regulator Entity) will act as regulator and supervisor in the downstream and upstream activities (Estrategia Boliviana de Hidrocrburos 2008, 199).

Figure 1: Supply Chain of Hydrocarbons before Evo's Nationalisation Source: Estrategia Boliviana de Hidrocrburos Superintendencia OPERATOR Activity Hidrocrburos YPFB Mixed Exploration Control Exploitation Control Transport pipeline Regulate tariff Transport others Refinery Regulation Storage & Sending Control X Exportation NG & LG Authorization Aggregator Importation Authorization Trade wholesaler Control X Trade retailer Control X Distribution per network Control X x Industrialization Figure 2: Supply Chain of Hydrocarbons after Evo's Nationalisation Source: Estrategia Boliviana de Hidrocrburos Superintendencia Activity Hidrocrburos YPFB Exploration X Exploitation X Transport pipeline Regulate tariff Transport others Refinery Regulation X Storage & Sending Control X Exportation NG & LG Authorization X Importation Authorization X Trade wholesaler Control X Trade retailer Control X Distribution per network Control X Industrialization X

Privado X X X X X X X X X X X


Mixed x x x x x

Privado Service Service X X X X


The three nationalisations of hydrocarbons

Nationalisation is the action of taking over an industry or asset into public ownership of the state or national government. This action has occurred in Bolivias history on four occasions, three out of these four occasions have been in the hydrocarbons industry. What is interesting to point out about this hydrocarbon industry is the fact that the ownership of assets has passed from private hands to the state and vice versa on several occasions, therefore we can also consider this process of transferring ownership as a re-nationalisation. Nationalisation or re-nationalisation is mostly a policy of a socialist state, which considers production, distribution and exchange should be owned by the government on behalf of the people for a better control of the economy (Bolton, 1985). This policy has been part of the government programme of president Evo Morales with his political party MAS Movimiento al Socialismo (Movement to Socialism). The following lines will present a brief overview of the two previous nationalisations before the last one in 2006 pursued by president Morales. As mentioned in the first part of this chapter, during the history of the hydrocarbons, Bolivia had three nationalisations. The First Nationalisation occurred in 1937 during the government of the General Toro. While Standard Oil was present in Bolivia, the government of Salamanca declared war

on Paraguay. The Chaco War (19321935) was about the control of part of the Gran Chaco region, which seems to be incorrectly thought rich in natural sources such as gas and oil. Another reason for the war was the access to the Atlantic Ocean through the Paraguay River. This was important to Bolivia, which lost its Pacific Ocean coast to Chile in the War of the Pacific in 1883. Due to the war, Paraguay was awarded three-quarters of the Chaco Boreal, while Bolivia received the remaining quarter that bordered the Paraguay's River Puerto Busch. Later, it was discovered that there were no oil or gas resources in the Chaco kept by Paraguay, however, the territories kept by Bolivia demonstrated to be rich in oil and gas resources. During the war, the government declared Standard Oil to be disloyal. The reasons were that the company did not support the Bolivian troops. According to the government, the company rejected the proposal of the government to produce fuel for the aircrafts of the air force due to a shortage of technical resources. With this antecedent, the government sent the order to take over the installations of the company and put Bolivian engineers to produce the fuel. The coup d'etat of 1936 by military veterans of the Chaco war was the beginning of the first Nationalisation (Farcau, Bruce W. 1996, 138). It seems that the company had also presented false information to the Bolivian authorities regarding volume of production, the quality of the oil found and the investments made (Camacho, Teran, Palacios, 2007). With these antecedents the government of Toro nationalised the hydrocarbons and created Yacimientos Petrolferos Fiscales Bolivianos (YPFB) on December 20th, 1936. This state company aimed to control the national resources as state ownership. The second nationalisation was also a consequence of an abuse of power by another American transnational: Gulf Oil (Camacho, Teran, Palacios, 2007). In 1956 a contract was signed between YPFB and Gulf Oil for the exploration of one and a half million hectares. For Gulf Oil, the costs of extraction were 80 cents per hectare and the payment of 11 per cent on regalias (privileges) and 19 per cent on taxes to YPFB. In other words of the whole extraction by Gulf Oil, YPFB received only 30 per cent. By 1965 Gulf Oil had already extracted 220 million barrels for an amount of 360 million dollar, of which the State only received 39 million dollars. According to the book La nacionalizacin del gas by Mirko Orgaz (2005), Gulf Oil used bribery and bought representatives of the State. The transnational company owned 90 per cent of the reservoirs of gas due to bribes to government agents. These were the reasons for the third nationalisation. The new government of General Alfredo Ovando Candia prepared a decree where the Bolivian State would get back all the concessions given to Gulf Oil. With this decree, the installations, studies, planes, vehicles and other goods of Gulf Oil were nationalised. With this decree the military took over the offices of the company in La Paz and the army took over the reservoirs of Colpa, Caranda and Rio Grande.

Evos Nationalisation of the Hydrocarbons

Evo Morales, in a speech to the nation on his first month as president, announced that the next step regarding national resources was the Nationalisation of the hydrocarbons industry. The president announced its line of political campaigning again: Bolivia quiere socios, no patrones (Bolivia wants partners, not bosses). It seems that he was fulfilling one of his popular campaign promises to the electorate (Martinez 2007, 1). He also argued that Bolivia has the right to achieve a higher income by getting a better price for its natural resources. President Morales called for a meeting with the Minister of Presidency Juan Ramon Quintana, the Minister of Hydrocarbons, Andres Soliz and the vice-president Alvaro Garca Linera on April 26, 2006. The president told his cabinet that the process of nationalisation would start on Labour Day (May 1, 2006). The cabinet received the order of the president to prepare the logistics, contact the military and to arrange everything for that day, while announcing that the initiative would not be an expropriation. The military was ordered to prepare an operative plan that during the day of the announcement, the military would occupy the installations of the transnational oil and gas companies. Thousands of soldiers from the army and air force mobilised in silence and occupied 56 gas installations at the same time. Troops were also sent to the two Petrobras-owned refineries in Bolivia,

which provide over 90% of Bolivia's refining-capacity. The decree of the president was to first take over San Alberto in Carapari; one of the biggest reservoirs of gas (Zona Econmica, 2006). On the morning of the international Labour Day in 2006, the Minister of Labour announced that president Morales would make an important announcement to the Bolivian people. A Fokker F-27 and members of the Special Forces transported the president to el Chaco from where he would make the announcement. At noon, the troops received the president and its committee and transported them to the San Albert reservoirs, which has been operated by Petrobras. The national TV channel broadcasted the presidents speech on all the TV channels. The president read the Decreto Supremo de Nacionalizacin (National Decree of Nationalisation) that contained three main goals: To recover the property, possession and control of the hydrocarbons by the State. Two important reasons for the national decree can be found in the Guerra del Gas. These aspects were political and economical. The political aspect was due to the MAS, the party of Morales during the elections that received the majority of support by the Bolivian people, becoming a compromise with the population. The economical aspect had to do with the increase of national income helping to get Bolivia out of a crisis, promoting the national development and creating better conditions for the population. The national decree in its legal part argued that the hydrocarbons are national resources and the Bolivian State has inalienable rights to it. It seems that for these reason hydrocarbons are public property. The following aspect of the Decree signalled that by sentence of the Tribunal Constitucional No. 0019/2005 of March 7, 2005, the contracts for exploitation of the national resources should be authorised and approved by the Legislative power. Article 4 of the Decree established that until new negotiations of the contracts with the transnational gas-oil companies, the companies should pay 18 per cent for regalias, 32 per cent for Impuesto Directo a los Hidrocrburos (IDH: Direct Tax on Hydrocarbons) and a 32 per cent for additional participation for YPFB. In other words, 82 per cent of income for hydrocarbon activities was for the State and 18 per cent for the petroleras (Medinaceli 2007, 4). The petroleras had 180 days to negotiate their contracts with the YPFB. In case the companies would not agree, the Government announced that they could Irse de Bolivia (Get out of Bolivia), this is; the petroleras would voluntarily renounce all kind of negotiations, indemnification or appellation of the national decisions in front of the International Tribunals (Zissis 2006, 3). Furthermore, the decree based its legality on the Pacto Internacional de los Derechos Civiles y Polticos and the Pacto de los Derechos Econmicos y Culturales (1966) where it noted that: Todos los pueblos pueden disponer libremente de sus riquezas y recursos naturales, sin perjuicio de las obligaciones que derivan de la cooperacion economica internacional basada en el principio del beneficio reciproco, asi como del derecho internacional. En ningun caso podra privarse a un pueblo de sus propios medios de subsistencia. In other words, all countries can make use of its richness and natural sources without damaging the obligations derived from the economic international cooperation based on the principle of reciprocal benefit, as written in international law. In no case can the resources be retained while not given to the people as livelihoods. According to the Ministry of Hydrocarbons and Energy, one of the reasons for the decree was to pass the production of hydrocarbons from the petroleras to the YPFB for its commercialisation and industrialisation. For the government of Morales, the State was the owner of the hydrocarbons; therefore it was necessary for the State to participate in the chain of production. With this argument, the nationalisation would not affect the physical properties of the petroleras (La Razon, 2006). Another point of the decree refers to the fact that the State would be the entity setting the prices of the hydrocarbons in the internal market, taking into account the international prices. Furthermore, the nationalisation decree also guaranteed the continuity of the hydrocarbons production, announcing that if any of the petroleras would refuse to accept the decree, YPFB would take over the production activity. During the speech of May 1, 2006, Morales invited the transnational oil-gas company to obey the new national decree otherwise they would need to leave the country: Si las empresas no nos respetan, nos haremos respetar por la fuerza (If the transnational companies do not respect us, we will make them respect us with force.). Behind the president, in the gas installations a big board was set with the text: Nacionalizado, propiedad de los Bolivianos (Nationalised, property of the

Bolivians). Next to the board was a soldier holding the Bolivian flag. The committee continued to other gas and oil reservoirs such as the refineries of Entre Rios in El Chapre. After this historical event, the group of officials returned to La Paz where the president would talk to the people at Plaza Murillo (Weber, 2006). It is clear that what is different about this nationalisation to the others before is that the people behind the process of nationalisation where indigenous people and the farmers who traditionally did not belong to the high layer of society, with a populist coca farmer as president. In the two previous cases, the pursuers of the process were people traditionally in government and supported by the upper and middle class of society. Furthermore, what is also important to note is that in this nationalisation there was not an expropriation of the installations, instead a negotiation regarding production with changes in the percentage of profits for the petrolera and for YPFB. According to the Bolivian specialist Eduardo Gamarra in an interview with the Latin American and Caribbean Center, right after a nationalisation, the government has capital to invest in public works, however the government will give the next government the strenuous assignment to deal with the companies affected by the nationalisation and future investors (Jova 2006, 3).

Achievements, changes and outlook

There have been a series of events until reaching the Hydrocarbon policy, which is the pedestal of support of the Bolivian economy. The different events have been the path that the country needed to cross. Although the goal of having a new hydrocarbon policy and the change of the national constitution has been achieved, some people have questioned the achievements reached. According to the Camara de Hidrocrburos de Bolivia (CHB, Chamber of Hydrocarbons of Bolivia) the only achievements that can be seen are the Bono Juancito Pinto (Juancito Pinto Gift) and the Renta Dignidad (Rent Dignity). The bono is a subsidy that the government gives to the parents of children that are assisting and finishing the first five years of primary school. The amount that they receive is 200 Bolivarianos (28.44 USD) and it is given in two parts: at the beginning of the study and the other part when the child has finished it (Decreto Supremo 28899: 2006). The Ley de Renta Universal y Vitalicia de Vejez consists of 2400 bolivarianos (340 USD) per year for elderly people. This law will benefit 676.000 elderly above the age of 60. Additionally a new social programme is running; Electricidad para vivir con Dignidad (Electricity to live worthy), which has as goal the access of the rural and urban population to electricity by 2025. Other than these achievements, benefits have not been seen. Economists find it difficult to fulfil the above programmes due to the decline of the price of oil. The Presupuesto General de la Nacin (National Budget) was based on an oil barrel of 73.5 USD and the actual price is of 40 USD, a difference of more than 45 per cent (La razn, 2009). With the presidency of Evo Morales, social changes have occurred in the minds of Bolivians regarding social classes. Sociologist Pablo Mamani signals a change in the identity attitude: Before, to be called indigenous or Aymara was considered an insult. Now, its a sign of strength and pride. From this have come political projects, local leadership, strategic actions, and concrete demands for peoples livesfor things like water and electricity. The indigenous culture has become more an issue of pride than an issue of shame (Eviatar, 2005). The nationalisation of hydrocarbons in Bolivia has been accepted positively by those previously marginalised in society. Those people who are proud of Bolivia and feel a connection with their Bolivian ground (Pacha Mama) and identity; creating in this way a nationalist feeling among the people. However, nationalisation can be a way to reach the masses but it might not be the panacea for solving Bolivias problems, as Jova signals: Nationalisation is an easy sell to the masses of a country eager to recover its national sovereignty and pride. The pro-nationalist arguments can be nicely packaged into inspiring and patriotic speeches that will surely stir up the masses and secure an electoral victory. This old recipe for rallying popular support of a doubtful policy is no secret, no mystery, and certainly not a strategy that Bolivian President Evo Morales has failed to enthusiastically exploit.


So far, there have been proposals by the government that have been positively accepted by the majority of the population. The big incognita is how the winning of the yes in the referendum in January 2009 is going to change Bolivia socially, economically and politically. The confirmation of it will have an impact on Bolivia that would be interesting to monitor in the future.

Two theoretical approaches are sometimes used to consider the issue of politics and oil and might also be considered applicable to the issue of all hydrocarbons. One approach corresponds to the assumptions made by theoretical economists which have been applied to the question of foreign investment by means of a bargaining model and sees governments and companies involved in hydrocarbons as maximisers in a situation where there are interests in common but also interests in conflict that hold each other in balance. This bargaining model is helpful to identify the analytical relationships of shared or conflicting interests during an investment, for governments are not usually seen as maximisers. When for example during a successful investment renegotiations take place the advantage for the government will increase over time as risks have decreased and the ratio of sunk capital and new investments increase and the country learns more about the industry. In the end both still benefit from the situation. The other approach is more focussed on sociological factors and states that a State will pursue political and economic strategies in cooperating with foreign companies and will not 'maximise'. The States' interests are as likely to be in conflict with external interests as with internal interests. In many cases however Latin American governments have been more interested in a quick pay-off than in providing long-term advantages to the country (Philip 1982, 160) by for example not learning about the nature of the industry. A further distinction between these two approaches can be made by looking at the leaders it envisions in charge. For both approaches can envision different leaders controlling a countrys hydrocarbon industry. One approach envisions a country where technocrats are seeking to maximise economical gains and one where political leaders follow their ideology and believes to develop a country with for example the revenues of the hydrocarbon industry. But as Philip states 'technocratic bargaining' has mostly been subordinate to the overall ideological orientation of the governments and both approaches can somehow best be regarded as complementary to each other in a mix of economic interests and political ideologies as not to dismiss important factors external to either one of the two approaches (Philip 1982, 161). In this light it is interesting to read in the new hydrocarbons law of Bolivia that the act of nationalising the oil and gas industry in 2006 in Bolivia was clearly a political act by the State 3 while it simultaneously sought to increase its production levels. The current production capacity could have been even higher if the State Decree of October 2001 would not have resigned foreign companies from their obligation to invest in the development of oil and gas fields according to the Ministry of Energy and Hydrocarbons of Bolivia. Since the domestic demand is still not very much developed in Bolivia and if production levels can be maintained or increased more surpluses can be exported. These facts give evidence of a mix of economic and political interests as stated above.

The Ministerio de Hidrocarburos y Energia in Estrategia Boliviana de Hidrocrburos states that: The nationalisation is fundamentally a political act which originates from the firm decision made by the Bolivian people to reclaim control over its hydrocarbons which have systematically and arbitrarily been given over to transnational interests. (Own translation.)

Figure 3: History Volume of Production and Processed Gas & Oil Source: Bolivian Hydrocarbons Strategy
Natural Gas Production Year *MM mcd 1997 14.61 1998 14.71 1999 13.71 2000 15.58 2001 19.6 2002 24.4 2003 28.01 2004 34.67 2005 40.24 2006 40.24 2007 41.74 Grow 1997 2007: 186% Processed *MM mcd Year 7.59 1997 7.86 1998 6.39 1999 8.92 2000 13.42 2001 16.45 2002 19.06 2003 26.78 2004 33.04 2005 35.5 2006 37.93 2007 Grow 1997 2007: 49,69% Oil Production **BPD 32.935 37.799 32.46 31.415 35.794 36.28 39.547 46.442 50.758 48.762 49.302 Processed **BPD 13.073 36.925 31.51 30.962 33.613 37.137 41.046 43.904 48.845 48.84 49.238

* MMmcd = Millones de metros cbicos por da (Million Cubic Meters per Day) ** BDP = Barriles de petrleo por dia ( Oil barrels per day)

The current Hydrocarbon Policy of Bolivia also indicates a mix of economic and political interests due to it being the result of a process of changes in political, social and economic structures of power and that it appears to be an expression of the ideology and beliefs held by its leader Evo Morales to benefit all Bolivians. The new hydrocarbon law was made after mass mobilisations by the Bolivian people. The mobilisations took place due to the fact that all activities in the hydrocarbons sector were in the hands of powerful international petroleras operating in the country. Because the export of the hydrocarbons represent an important source of income to support the countrys economy and the payment of taxes on hydrocarbons by the petroleras to the Bolivian State were low the social movements started to protest. The result of the protests was the resignation of president Mesa and the election of Evo Morales as new leader of Bolivia. Evo Morales who was also a protagonist of the protest could not disappoint the social groups and forget his campaigns promises of: Bolivia quiere socios, no patrones and the third nationalisation of hydrocarbons became a fact. Apart from this, the social movements had become a force of power that could not be ignored. The new hydrocarbons policy of Bolivia was then reached and the petroleras were to re-negotiate their contracts with the state. The nationalisation of 2006 is therefore known as a nationalisation without expropriation. In fact it was more a change on percentage of payments on volume of production. This gives evidence of the mutual interest of the Bolivian State and the international companies involved in the hydrocarbons in Bolivia and an improved bargaining position for the Bolivian State. This improved position is used to pursue political and ideological goals designed to benefit all Bolivians like the National Development Plan. With the rise on the payment of taxes, the countrys income is presumed to increase. However, because of the drop of the price of gas, the budget for the National Plan of Development will be affected. A close monitoring of the achievements or failures of the plan should take place. The new hydrocarbon law has indeed incorporated some articles expressing more rights for the previously marginalised indigenous sectors of Bolivian society. By 'making themselves present' and by expressing their different cosmovisions and daily lives they have found a way ''... to affirm, to expand, to shine a light on the new world that already lives within the world of the oppressed' (Zibechi 2005, 37) and they made themselves be heard. At the same time evidence has been given that traditional economic and political powers have remained in place in Bolivia albeit under different circumstances and weakened. Because the inclusion of these articles in the new hydrocarbon law are indeed indicating at a serious attempt to open up political and economic structures for control by this alternative power of previously marginalised indigenous people and indicate to a change in structures of power, how this is unfolding in the future and what effects it will have on Bolivia's society is an interesting process worth following.


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Bolivia's Resource Policy 1880-1964

Jos M. Maalderink

Abstract: This chapter will give a historical description of Bolivia's dependent situation as a raw resource exporter. It will provide an overview of the two main reformist projects of the twentieth century, military socialism and the national revolution, and will argue that both projects were not successful because they ignored more fundamental causes of Bolivia's dependent position. Keywords: Economic history, military socialism, national revolution, dependency, nationalisation

Bolivia has since long been one of the poorest countries of Latin America, despite having a large quantity of natural resources. The exploitation of these riches has never really benefited Bolivia. The country's chronic underdevelopment despite being such a large resource exporter has been one of the most tragic aspects of Bolivia's tumultuous history, and at times different Bolivian governments have tried various projects to put an end to this situation. Several of these projects have tried to change Bolivias dependence as a raw resource exporter on the world market and usually this was attempted by increasing state control over the extraction and export of the republics subsoil resources one way or another. The current administration of Evo Morales, who partially nationalized the countrys gas production, is a good example of this, but it is by no means the first attempt. The most notable historical projects that tried to put an end to Bolivias dependent and impoverished situation have been projects that tried to alter this situation have been the reformist military regime from 1936 to 1939, known as military socialism, and the Bolivian national revolution of 1952-1956. History does not teach us unambiguously what to do, but that does not mean it is not relevant to look at successes and failures from the past. If it cant teach us what to do, at least it can give insights in what not to do. In this essay I will therefore discuss the history of Bolivia's resource policy from 1880 to 1964. I will focus on the problems caused by Bolivia's position as a raw resource exporting country, and especially deal with the two main projects mentioned above. I will try to find out if those attempts were successful, and if not, what caused their failure.

Bolivia at the turn of the century

Bolivia achieved its independence in 1825. Within a few years after the consummation of independence the country started to disintegrate, and it fell into the hands of military strongmen and caudillos. In the colonial era the country had become one of the main sources of silver for the Spanish empire and indeed for the entire world, although since the output was carried off to Spain Bolivia profited very little from its enormous mineral wealth. The turmoil of the 19th century greatly hurt the Bolivian economy. Coups, rebellions and civil wars were commonplace, and any form of consistent economic policy was absent.

Liberals and conservatives

In 1879 the conflict with Chile, which had been lingering for several decades, about the region around Antofagasta, Bolivia's Pacific littoral, finally erupted into a war. The region had belonged to Bolivia in

the colonial era, and it was usually agreed upon that the Spanish internal borders should be used as borders for the newly independent republics as the various parts of the Spanish colonial empire declared themselves independent. Chile however proved to be much more stable and prosperous in the nineteenth century, and was able to open up the region and exploit its rich saltpetre resources before Bolivia was able to do so. Eventually the struggle for control of the region pitted Chile against Bolivia and Peru in the War of the Pacific, in which Chile inflicted a smashing defeat on both countries. The war proved to be a catalyst for change. The country ousted the military charlatans and established constitutional government in 1880 (Morales 2003, 83). Thus the country started a period of relative stability that lasted four decades. Although the country had a stable constitutionalist political system and was formally a democracy, only a small percentage of the population was allowed to vote and most elections were decided by fraud rather than by the will of the voters. There were two groups competing for power, the conservatives and the liberals (Morales 2003, 84). The political differences between both groups were negligible, both groups supported laissez faire economic policy and free trade. The only major controversial issue at the time was separation between church and state, supported by liberals and opposed by conservatives. It was even said that the only difference between conservatives and liberals was that conservatives were Catholics and liberals Freemasons (Capriles 1977, 99). There was however an important difference in the backgrounds of both groups. The conservatives were associated with silver interests and the city of Sucre, while the liberals were mostly involved in the tin market and lived in La Paz. When silver prices plummeted in the 1890s the conservatives lost most of their political and economic power. In 1898 the federal revolution erupted over a minor controversy related to departmental rights and after a brief civil war the liberals took over from the conservatives. It was also on this occasion that the seat of government was moved from Sucre to La Paz. Not much changed in the economic structure of the country, although the revolution did have two indirect effects, related to the shift from silver to tin. Firstly Chile lost much of its importance as a major trading partner for Bolivia to the United States. Chile was an importer of silver but not of tin while the United States was a big importer of tin. Furthermore the liberal tin barons were less inclined to govern in person, like the conservative tin barons did, and chose to rule by political organisations and intermediaries rather than assume governmental power themselves. This was especially true after the rise of the Republican Party, which will be discussed later, from 1915 onwards (Hermosa 1979, 127).

Silver and tin

Both in the conservative silver and the liberal tin eras Bolivia was ruled by an almost omnipotent oligarchy, popularly known as La Rosca. (Morales 2003, 94) Economic and political interests were strongly intertwined, with the people in political power often being the same persons as those who controlled the mines or industry, especially so in the conservative era. Of president Mariano Baptista for example it was said that 'when he wasn't giving speeches he was working for the mining companies' (Lujn & Antezana 2005, 51). In both eras there were eventually three persons, three barons, whose wealth and influence dwarfed that of the rest of the elite. In the conservative era those three names were Jos Avelino Aramayo, Aniceto Arce and Gregorio Pacheco (Morales 2003, 91). Aramayo was born in 1809 in Bolivia but was raised and educated in France and the United Kingdom. He served as member of the constituent assembly of 1880 and was ambassador to various countries, but died in 1882, his empire being inherited by his son Flix Avelino Aramayo. Gregorio Pacheco was also born in Bolivia and educated in Europe, and like Aramayo he was member of the constituent assembly. He also was elected deputy to the national congress and served as president from 1884 to 1888. Pacheco was known for his humanitarianism. The labour circumstances in his mines where somewhat better than in those owned by the other barons. When a famine threatened during the War of the Pacific he donated food to the poorest Bolivians and he campaigned for the abolishment of corporal punishment in the military (Capriles 1977, 104). The third and most important silver baron was Aniceto Acre. At a young age he participated in a mission to Paraguay and became the first

Bolivian ambassador to that country. He later became deputy, prefect of Potos and finance secretary. In 1888 he was elected president of Bolivia, being the successor of Pacheco, for a four year term. As said before, silver prices collapsed in the 1890s and the silver barons had to make place for the tin barons. By 1904 tin already accounted for half of Bolivia's total export value, a share that rose to a staggering 73 per cent in 1913 (Hermosa 1979, 123). In 1925 Bolivia counted no less than 112 tin mining enterprises (Capriles 1977, 120). Just like with silver however, three main tin barons arose: Carlos Vctor Aramayo, Mauricio Hochschild and Simon I. Patio. Carlos Vctor Aramayo was a son of Flix Aramayo. Unlike the rest of the big three (or rather, of the big six if one includes the silver barons), he inherited his initial fortune. He had inherited most of his fortune and position from his father. Unlike the two other tin barons he was personally involved in politics, becoming finance secretary in 1939 and launching his (unsuccessful) presidential candidacy on the ticket of his own Centrist Party 1951. Nonetheless he was the least powerful of the three tin barons (Capriles 1977, 125). Mauricio (Moritz) Hochschild was an Argentine of German-Jewish descent. He was the last of the big three to establish his mining enterprise, managing to profit from the crisis of the twenties and thirties by buying unprofitable mines at low prices and making them profitable again (Capriles 1977, 128). During the Second World War he left South America, disappointed with the prevalence of sympathy for Nazi Germany amongst many of the continent's political leaders. The most notable and by far the most powerful tin baron however was Simn Iturri Patio. Patio was born in Cochabamba in 1862. Even though he claimed to be of pure European descent, in reality he probably was of mixed Quechua and Spanish heritage. He began his career in the administration of a silver mine. In 1895 he acquired a concession of the silver mine 'La Salvadora', which in reality happened to contain the world's richest tin vein. Although he was initially being obstructed by the country's oligarchy, considering him a parvenu, by 1905 he already had become Bolivia's most important tin baron. Eventually his mines produced almost half the country's tin. At the time of the tin nationalisation in 1952 Patio's share of the country's tin production was 46 per cent. He grew to become one of the world's richest people, and was nicknamed 'the tin king' (el rey del estao) and 'the Bolivian Rockerfeller'. He also was very influential in Bolivian politics, as his support was necessary for the survival of any government. He married a Spanish noblewoman but eventually divorced, for which he managed to amend Bolivian family law (Capriles 1977, 116). It is worth noting that of the big three of silver and the big three of tin only one, Hochschild, was a foreigner, and the other five were Bolivian. Furthermore, for both the tin and the silver barons is true that they were not born especially rich nor very poor, with the exception of the younger Aramayos. It has often been claimed they were mere puppets of imperialism. And although it is true that they were xenophile (most of them were educated in Europe) and the production of the mines they owned was almost fully directed at export to foreign countries, they did have enough space to make their own decisions and were not subordinated to foreign imperialists. In Patio's case one could even say that imperialism was a tool to him rather than the other way around (Capriles 1977, 128). Nevertheless the economic policies the liberals and conservatives carried out ensured that Bolivia could profit only minimally from its rich mineral wealth. Even though the country had a trade surplus from 1908 to 1929 (Morales 2003, 12), tax rates on mining exports were so low that less than three per cent of the wealth produced by the country's mines ended up in the national treasury. The Bolivian government was chronically cash-starved; in the first three decades of the twentieth century the national budget saw a deficit twenty-six times and a surplus only four times (Capriles 1977, 133). From the government of president Linares in the 1850s, one of the few civilian rulers before the defeat by Chile, the government had slowly started to open up Bolivia's economy. One of the clauses of the peace treaty with Chile of 1884 was guaranteeing free trade between Chile and Bolivia, making Bolivia heavily dependent on Chile and by extension the United Kingdom (Lujn & Antezana 2005, 46). The country exported raw resources to Chile, and had to import processed goods from Chile, the United Kingdom and the United States, creating a dependent relationship. The conservatives were generally very pro-Chilean and pro-British, and believed free trade was the best way to develop the countries. Until the rise of the republicans alternatives were not even considered in government circles. When the ailing silver industry entered into a crisis in 1894 the government's reaction was to lower taxes even further (Capriles 1977, 108) and policies under the liberals were not different. On top of the unfavourable international trade position came the fact that exporting raw resources proved such

an easy way to make money, that the country's development was neglected. There was no real investment in things other than cheap labour, and nobody cared to diversify Bolivia's exports to make sure the country would remain economically viable in case of a collapse of the resource markets (Morales 2003, 13).

The republicans and the double crisis of the 1930s

The republicans
It was for political rather than economic reasons however that the first opposition movement was founded. Calling themselves Republicans, they organised a party in 1915. Their political programme was not very distinct from that of the liberal party. Instead, their opposition against the liberals was caused by liberal corruption and authoritarianism. The republicans promised respect for the constitution, a more robust separation of powers and fair elections (Mesa 1999, 511). The most important republican leaders were Daniel Salamanca and Bautista Saavedra. In 1920 the republicans, supported by a large part of the population that had become increasingly opposed to the liberals because of their corruption and authoritarian tactics, managed to topple Jos Gutierrez Guerra, the last liberal president. Elections were held and in 1921 Saavedra assumed presidency. Quickly a division emerged in the Republican Party, caused by Saavedra's uncompromising and populist style of governing. Republican dissidents, led by Salamanca, left the party and founded the Partido Republicano Genuino (Genuine Republican Party, PRG). Subsequently Saavedra had most genuine republicans exiled. Though Saavedra broke most of his democratic promises, he was the first president to try to improve state control over the economy. The first social legislation was introduced, including the eight hour working day, putting limitations on female and child labour amongst others and the right to strike was recognised (Mesa 1999, 527). Nonetheless labour unrest was in reality usually repressed, leading to a massacre in Unca in 1923. In 1923 Saavedra had a tax law enacted that would put a tax on mining utilities (Capriles 1977, 133) and two years later a new mining law was proclaimed that gave the nation the 'original domain' over the country's resources. Still, private enterprises were given the right to extract the country's national resources, so in reality not much changed (Capriles 1977, 143). The republican governments were also noted for their modernising programme, bringing railways, air planes and the radio to Bolivia. Nevertheless, considering the fact that tax revenues were still very low, this caused the Bolivian state to indebt itself heavily. Meanwhile Bolivia had started to become an oil producing country. The first oil well was discovered in 1897 and in 1902 the first concession to extract oil was given. The first large scale oil concession was awarded to the Richard Levering co. in 1920. Levering's concession was ceded to Standard Oil in 1921. Although this was actually illegal, Saavedra decided to approve the transfer retroactively, and gave Standard Oil a concession for 55 years, demanding the company to pay the Bolivian government eleven per cent in royalties (Mesa 1999, 537).

The economic crisis

After having reached a high point in the First World War, tin prices started to decline from 1921 onwards (Hermosa 1979, 127). The crash of 1929 and the abandonment of the gold standard in 1931 caused an even stronger collapse of resource prices. In the 1920s there had been a world overproduction of tin, the results of which were felt during the great depression. In 1929 the total world tin production was 200,000 tonnes, of which Bolivia produced 46,000 tonnes. Four years later this number had more than halved to 80,000 tonnes, and Bolivia's production fell to 14.700 tonnes per year. In these four years tin had lost half its value on the market, meaning that the total revenue gained from tin mining in 1934 was less than one sixth of that of 1929 (Hermosa 1979, 131). At this time Salamanca, the leader of the PRG and a protg of Patio, had taken over the presidency. It was Patio

himself however, rather than the government, who sought a solution to the country's economic hardship. In 1931 he organised the Comit Internacional del Estao (International Tin Committee, CIE), inviting the world's most important tin producing territories: the Netherlands East Indies, British Malaya, French Indochina, Siam, Nigeria and the Belgian Congo. The participants agreed to establish fixed prices and quota, turning the CIE into a kind of tin-OPEC avant la lettre. Bolivia was allowed to produce 46,338 tonnes, the second largest share after Malaya (Capriles 1977, 138). The Bolivian government gave its assent to the CIE and the plan proved to be reasonably successful. From 1934 onwards tin revenues started to rise again, albeit slowly.

The Chaco crisis

On top of the economic crisis came a second crisis that would arguably even leave an even bigger impact on Bolivia. The situation was similar to the conflict with Chile, but this time Paraguay was the opponent. According to the colonial territorial divisions the Chaco Boreal, the northern part of the enormous and inhospitable Gran Chaco plain of South America's heartland, had belonged to Bolivia, but it was Paraguay that first managed to penetrate and develop the area. In the 1920s already both countries started to militarise the region, building forts and military outposts, and occasionally skirmishes erupted between soldiers of both countries. In 1932 eventually a full-scale war broke out. It is often said that the Chaco War was in reality a war between Standard Oil, on the Bolivian Side, and Royal Dutch shell, on the Paraguayan side, and the war erupted after it had been reported that the Chaco was rich in oil reserves. Standard and Shell would have incited the respective countries where they had concession to wage war on each other, because the Chaco Boreal would contain large oil reserves. If Bolivia would win the war Standard Oil would see it's potential number of oil fields greatly expand, and the same goes for Shell and Paraguay. In reality however there was very little oil. After the war it appeared that the rumoured oil reserves were mostly non-existent, but also before the war both oil companies were aware that even if there would be oil in the Chaco it would be very little, not enough to wage a war for. Also the shares of both countries in the production of the respective oil companies were very small, again not big enough to take such great risks (Mesa 1999, 544). But what is even more important to note is that Standard Oil did not actually support Bolivia actively during the war. It did not comply with its contractual obligations, pumping up less oil than it promised to. Standard clandestinely pumped away oil to Argentina, a country known to be supportive of Paraguay, and refused to charge lower petrol prises for the Bolivian military (Almaraz 1958, 110). As will be seen later, after the war Standard Oil was even tried for sabotaging the war effort. If oil and natural resources played a role in the Chaco conflict, it was indirectly rather than directly. Having become a landlocked country since the loss of the littoral to Chile, it was imperative for Bolivia to have at least a navigable river to connect the country with the ocean. Paraguayan encroachment into the Chaco Boreal threatened just that, since the only rivers Bolivia could use for transport towards the Atlantic flow through that region (Mesa 1999, 545). Although Bolivia initially managed to defeat Paraguay in several battles, soon the Paraguayans recuperated and started a successful offensive into the Chaco Boreal. Bolivia's army consisted for a large part of Quechua and Aymara Indians, people from the highlands, not used to the climatological and geographical conditions of the Chaco Boreal, dry and hot during the dry season, a swamp during the rainy season, while the Paraguayan soldiers were used to the kind of terrain they were fighting on. Furthermore the Paraguayans were fighting for the very existence of their country, the Bolivian claim extending almost up to the suburbs of the Paraguayan capital of Asuncin, while most Bolivians did not see any reason to fight for a plain they had no direct interests in. The Paraguayan advance was not stopped until February 1935 at Villamontes, already at the foothills of the Andes. Four months later the warring nations signed an armistice, and in 1938 eventually agreed to a peace treaty, awarding most of the Chaco Boreal to Paraguay, while Bolivia retained the northern part including a port on the Paraguay River (Morales 2003, 105). Ironically the part retained by Bolivia turned out to be the only part that did in fact contain oil reserves.


The first reform attempt: Military socialism

As with the War of the Pacific, the Chaco War had a profound effect on Bolivia's political life. Again an entire generation of politicians was completely discredited by a war that had a disastrous outcome for Bolivia. Salamanca, whose relationship with the military had always been difficult, was deposed in a military coup d'etat in 1934, already before the end of the war, and was replaced by his liberal vice president Jos Luis Tejada. The new government, supported by the Bolivian population, blamed Standard Oil for the war, and Tejada accused Standard of having illegally siphoned off oil to Argentina during the war. Public opinion however rather wanted the civil and military leadership tried first, Tejada being considered just a continuation of the old elite that had led the country to ruin (Mesa 1999, 554).

The military socialists

On May 1936 eventually Tejada was deposed as well in a coup organised by young officers, veterans of the Chaco War. General David Toro was installed as president but it was the flamboyant lieutenant colonel Germn Busch, a war hero from the war against Paraguay, who was the leader of the group and the one who orchestrated the putsch against Tejada. As Busch did not consider himself to be enough of a politician, for the time being he decided to let Toro govern the country. Toro, Busch and their supporters organised themselves in the Legion of Ex-Combatants (Legin de Excombatientes) and their ideology was named military socialism (socialismo militar). Military socialism was not a pre-conceived ideology, although it drew part of its support and inspiration from the many moderate socialist opposition movements that had arisen in the 1920s, but rather it was developed as the military socialists governed (Gallego 1993, 214). In many ways military socialism was nationalist rather than socialist. Fundamental to the movement was the concept of national sovereignty. The military socialists liked to compare the loss of the territorial integrity of Bolivia after the Chaco War to the loss of economic sovereignty caused by the country's dependent relationship on foreign countries (Morales 2003, 110). Inept government by Salamanca, and indeed all his republican, liberal and conservative predecessors, had led to the loss of both Bolivia's economic and territorial sovereignty. Just as it was the task of the military to the country's territorial sovereignty, so should it also be their task to defend the country's economic sovereignty. By controlling the nation's own resources, so they thought, Bolivia would finally be able to take its future into its own hands. In the political atmosphere of the 1930s there was a lack of alternatives and the Bolivian army was considered the only body capable of actually reforming the country. However, military socialism did lack practical solutions to the problems it formulated, which where therefore formed on the go (Gallego 1993, 213, 215).

Toro and Busch in power

Although opposed to foreign oil companies, Toro initially governed with a conciliatory attitude towards them, not declaring his disapproval of Saavedra's dubious recognition of Standard Oil's concession of 1921 and acquitting the company of paying its outstanding debts (Mesa 1999, 559). Then suddenly on 17 March 1937 Toro nationalised Standard Oil, finally giving in to popular pressure. The concessions and properties of Standard Oil were taken over by the new state oil company Yacimientos Petrolferos Fiscales Bolivianos (Bolivian Fiscal Petroleum Fields, YPFB). The importance of this nationalisation is not to be underestimated. It was the first time a Latin American country expropriated the properties of a big American company, a full year before Mexico would nationalise its oil. Toro did not introduce any new legislation to make the expropriation possible. According to the existing petroleum laws, although it was not necessarily responsible for its extraction, the state already had the original domain over the country's national resources, so from a legal point of view in reverting Standard's concession the state was only re-appropriating to itself

something it already owned. The expropriation of Standard's infrastructure was justified by pointing at the company's alleged illegal acts committed during the war. After the nationalisation however Toro introduced a new petroleum law in which speculating with oil concessions became legally restricted and founded the Secretariat of Mining and Petrol (Gallego 1993, 221). Furthermore Toro decreed that mining companies were to hand in forty two per cent of their foreign currency to the Central Bank, which would then exchange it to Bolivian currency at an official rate. This measure had only limited success. Although tin prices were on the rise again, Bolivia's tin production continued to drop, meaning decreasing revenue for both mining companies and the Bolivian treasury (Gallego 1993, 219). The oil nationalisation would be Toro's most notable act as president, because on July 13 Busch, supported by the Legion of Ex-Warriors, finally decided to take over the presidency himself. Initially the country's elite, fearing the tin mines were next on the nationalisation list, supported Busch' takeover, hoping things would return to the old order with Busch in power. Patio was even one of Busch' most important supporters during the early months of his presidency (Capriles 1977, 144). It soon became clear however that they were mistaken, as Busch proved to be more radical than Toro. He called elections for a constituent assembly in 1938 to replace the 1880 constitution, and on October 1938 the new constitution was promulgated. The constitution was inspired by the Mexican constitution of 1917, limiting the liberal notions of the right to property as laid down in the constitution of 1880. Property was henceforth considered a 'social right', that should function only if it would contain a certain utility for society (Mesa 1999, 564). The constitution named the state owner of Bolivia's subsoil resources and this time the state was also responsible for the extraction of oil. The possibilities for expropriations were expanded and the government was granted the right to direct the country's commercial and economic activities (Gallego 1993, 229). After the constitution was enacted, Busch was proclaimed constitutional president by the assembly. Despite the constitution, promises and rhetoric, Busch never managed to do something against the big three mining companies. Busch could not afford losing the support and money of the tin barons, especially Patio and his influence in the ITC, if he wanted to push through his modernisation programme, expanding infrastructure and diversifying the economy. Busch did manage to appoint the big three a fixed share of the country's tin export, granting Patio 50.34 per cent, brought back to 46 per cent after protests from Hochschild (Gallego 1993, 222, 225). Hochschild and Busch shared a strong mutual antipathy, not in the least because of the latter's suspected Nazi sympathies. Busch at one point had Hochschild arrested for allegedly forging Bolivian passports for Jewish refugees, but eventually let him go after he paid a fine. Believing his reform attempts were being sabotaged from all sides, in April 1939 Busch suspended his own constitution and proclaimed himself dictator. This allowed him to finally take measures against the tin oligarchy. His finance secretary Santiago Schulze initially suggested only to raise taxes. Busch however discovered that Schulze was on the payroll of the mining corporations, who had suggested the measure hoping to avoid anything more radical. Having discovered this, he had Schulze fired and decreed, on 7 June 1939, that the mining companies hand in 100 per cent of their foreign currency to the Central Bank, which was nationalised shortly thereafter. Furthermore a twenty five per cent tax was levied on the profits of the mining corporations. These measures meant that, even though the big three continued to exist as private corporations, the Bolivian government finally controlled the country's resource export, and that the state would for the first time seriously benefit from the country's mineral exports (Gallego 1993, 232).

The legacy of Military Socialism

The stage of military socialism ended abruptly in the morning of 23 August 1939 when Busch shot himself through his head, without having implemented any instruments that could ensure the continuity of his regime after his death (Gallego 1993, 233). A combination of opposition by his enemies and his own flamboyant character had forced him to resort to extraconstitutional means to make his political survival possible.

After Busch's dramatic death the old elite managed to get back into power. General Carlos Quintanilla, another Chaco War veteran, succeeded him. Aramayo was named Quintanilla's finance secretary and at the end of September 1939 most of the economic reforms of military socialism had been reverted. Quintanilla called for elections, which were won by Enrique Pearanda, the same person who had overthrown Salamanca in 1934. Pearanda was supported by a concordancia of the old parties: liberals, conservatives and both republican parties. Pearanda had several military socialists exiled and agreed to compensate Standard Oil for its expropriation, paying 1,7 million American dollars in indemnification (Mesa 1999, 568). Military socialism, thus, had not been successful in changing Bolivia's economic life except for the nationalisation of Standard and the existence of YPFB. A large part of this was caused by internal opposition, or arguably Busch being 'ahead of his time', the political and ideological climate as yet unready for an economic paradigm shift. It is definitely true that the tin oligarchy - and tin was still by far the most important economic sector in the 1930s, accounting for 66.12 per cent of Bolivia's total export value in 1936 - had successfully managed to keep the damage to their interest limited, at least until the decree of 7 June, and had managed to revert back to the old situation after Busch's demise. What is more important however, is that the military socialists had not been able to change the country's economic position in the world, it's geography and it's infrastructure. Even with oil in government hands and tin nearly so, the country was still dependent on international market prices, and was greatly hindered by its landlocked situation, lack of good infrastructure and lack of processing industries, meaning that the country still needed to import processed products. This lack of power, combined with a simple lack of money, prevented Busch and Toro from implementing any extensive modernisation programme (Gallego 1993, 218, 219, 215). Nevertheless it had become clear that the tide had changed, and even though the oligarchy didn't like it, they could not let the era before the Chaco War and the Great Depression return. Military socialism was over, but new opposition groups were soon founded. The most notable of these was the Movimiento Nacional Revolucionario (National Revolutionary Movement, MNR), founded in 1941 by Vctor Paz Estenssoro, a former legal employee of one of Patio's mines and member of Busch' constituent assembly, and Hernn Siles Zuazo, son of a former republican president. In line of the dependencia thought of the era, the MNR criticised Bolivia's dependence on the rest of the world, caused by the fact that its economy was almost completely based on the export of raw resources (Lujn & Antezana 2005, 77). The MNR was not necessarily a continuation of military socialism, it owed a large part of its economic though to it. The military socialists achieved government power almost at the same time the movement was formed and that way had to change their ideas according to the political and economic circumstances before they were thoroughly formulated in the first place. The MNR on the other hand started as an opposition movement and had the time to come up with a well developed ideology. As with Busch, the MNR was distrusted internationally because of its alleged ties with the fascist regimes of Europe. To the left of the MNR Trotskyte and communist groups started to gain popularity, the most notable examples being the Trotskyist Partido Obrero Revolucionario (Revolutionary Workers' Party, POB) and the pro-Moscow Partido Comunista Boliviano (Bolivian Communist Party, PCB). Another notable opposition group, though right wing and conservative rather than revolutionary, was the Falange Socialista Boliviano (Bolivian Socialist Phalange, PSB), inspired by Spain's Francisco Franco. The period between the death of Busch and the national revolution was also marked by a growing political, especially labour, unrest. A very notorious incident occurred in Catavi in 1942. Soldiers opened fire on a crowd of striking miners, demanding wage increases, and their families, leaving at least twenty death and fifty wounded. The massacre greatly hurt the government's popularity, and led to a rise in MNR ranks (Mesa 1999, 572). During the Second World War tin prices soared again, in large part because of the Japanese occupation of the British, Dutch and French possessions in South East Asia, the world's largest tin producing region. By 1945 Bolivia had grown to become the world's top tin exporter, with 42.8 per cent of all tin production (Hermosa 1979, 141). The Pearanda government signed an agreement with the United States in which Bolivia promised to export tin, as well as wolfram, only to the United States. Thus World War II marked the definite positioning of the United States as Bolivia's most important trading partner (Capriles 1977, 140). After the end of the war both prices and production fell

again, recuperating a final time during the Korean War. After the end of that war, in 1953, prices plummeted again, this time for good (Hermosa 1979, 145).

The second reform attempt: National Revolution

In 1943 general Gualberto Villarroel, yet another Chaco War veteran, staged a coup against Pearanda and installed a reformist military regime. Villarroel's regime was supported by the MNR and the Radepa, a secret Buschist military-political organisation. Paz Estenssoro was finance secretary in the Villarroel government, but was forced to resign after the United States demanded Villarroel purge his government of Nazi sympathisers in return for diplomatic recognition. Villarroel reintroduced many of the social reforms of the military socialists, but nonetheless could not count on enough popular support to ensure his regimes survival. Increasingly dependent on political repression, in 1946 an angry mob entered the presidential palace. He was burnt to death and hung from a La Paz lamppost. In another round of musical chairs, the old oligarchy took over again. Supported by a reunited republican party, by now archconservative, the country was ruled by presidents Enrique Hertzog and Mamerto Urriolagoitia. In 1951 the tide finally turned against the oligarchy when Vctor Paz Estenssoro and the MNR where triumphant in the elections. Urriolagoitia decided to support a military coup rather than to recognise a MNR victory and handed over power to the military. By now the socio-political situation had reached its boiling point. In April 1952 an MNR-led popular revolution finally managed to overthrow the elite, this time (seemingly) for good. Paz Estenssoro returned from his Argentine exile and was inaugurated as president on 15 April 1952.

Nationalising mines, liberalising oil

The Bolivian National Revolution had three main targets: universal suffrage, land reform, and national control over the country's natural resources (Morales 2003, 142). The MNR considered two options to fulfil the third of these targets. The first option was to reintroduce Busch's decree of 7 June 1939, requiring mining corporations to hand in hundred per cent of their foreign currency at the Central Bank and rising taxes on exports. The other option was to nationalise the big mining corporations altogether (Capriles 1977, 151). This second option was chosen, and on 31 October 1952 mining secretary Juan Lechn nationalised the mining corporations of Patio (who had died by then), Hochschild (who had left the country) and Aramayo. With this decree about eighty five per cent of Bolivia's tin production was now in hands of the government. Lechn signed the decree in Catavi, site of the 1942 massacre (Mesa 1999, 625). The nationalised mines were put under control of the Corporacin Minera de Bolivia (Bolivian Mining Corporation, COMIBOL). COMIBOL became the world's largest mining company at the very moment it was founded (Capriles 1977, 151). The corporation was put under worker control (at least nominally), putting an end to the secretive, little transparent business practices of the era of the big barons (Capriles 1977, 161). Worker control of the mines turned the Bolivian Workers' Center (Central Obrera Boliviana, COB), the official MNR-tied labour union founded in the wake of the national revolution, into a powerful organ and its leader Lechn into one of the most powerful people in the country. COMIBOL was also responsible for social services like hospital and education as well as infrastructure of mining towns. Working and health circumstances in Bolivia's mines improved under COMIBOL control, although the risk of diseases and accidents in Bolivia's mines still was amongst the highest in the world (Historia de la Mineria 168). Although with the nationalisation of the mines something long wished for by many Bolivians had finally been achieved, it did not turn out to be the success many hoped for. COMIBOL suffered from bad management, and in reality the mines were in the hands of the bureaucracy rather than the nation or the workers (Capriles 1977, 172). Furthermore the number of employees 'exterior mina', not directly engaged in mining mineral deposits grew steadily, from 28,900 in 1952 to 35,000 three years later (Mesa 1999, 626). COMIBOL was used as a cash cow, it had to hand in its profits at the central bank at a fixed rate, in spite of the high inflation rates (Capriles 1977, 158). The $21,000,000 dollar which the company had to pay in indemnification to the three expropriated companies placed another

drain on the company's financial situation (Mesa 1999, 626). The equipment used by the company was outdated and little money was invested in new equipment. Research after subsoil mineral deposits were inadequate, so COMIBOL occasionally mined for resources where there weren't any, with actual mineral veins unused (Capriles 1977, 170). Another major problem was, still, the lack of a processing industry. Bolivia lacked foundries and blast furnaces for processing its minerals, for which it was mostly dependent on foreign countries, ironically in foundries usually owned by Patio's companies. This implied that most of the value added was lost, and Bolivia still was dependent on exporting raw materials and importing processed ones (Mesa 1999, 625). All this led to decreasing output of minerals, and by extension less revenue for COMIBOL and the Bolivian government. Public opinion and the government blamed 'lazy miners' for this (Kofas 1995, 221). In reality however the production of raw material grew in the years after 1952 but the purity of the mined material was decreasing, in part because of COMIBOL mismanagement, in part because of Bolivia's tin deposits getting depleted. So even with an increased output of raw material the output of pure tin was shrinking, from 26,034 in 1953 to 15,230 in 1960 (Capriles 1977, 157). All this, combined with the continuing fall of tin prices made the tin nationalisation much less successful than was anticipated. In his first term as president Paz Estenssoro also approved a new petroleum law. Realising he needed the know-how and capital of the United States, his oil policy was much less statist than his mining policies. The new law was approved by the Bolivian Congress, dominated by the MNR, in 1956. It demanded that oil firms pay eleven per cent in royalties to the government and levied a thirty per cent utility tax, but apart from this foreign companies were mostly left alone. It was above all Bolivian Gulf Oil, a franchise of Gulf Oil, that benefited from this, and became the largest private oil company (Mesa 1999, 628). Oil production boomed, going from 2,500 barrels a day in 1952 to 10,000 barrels a day in 1964. Around this time Bolivia also started to extract and export natural gas (Mesa 1999, 628). Paradoxically the oil policy of the revolution was almost a mirror of the mining policy. Mining was controlled by private companies and went into state hands after 1952, while most oil production was in hands of YPFB, controlled by the Bolivian government, before 1952, went mostly into private hands after 1952.

The revolution loses steam

The governments of the MNR were continuously plagued by rising inflation rates and fluctuating commodity prices. The cost of living in La Paz rose spectacularly by 791.4 per cent from 1955 to 1961 (Kofas 1995, 231). The MNR turned to the United States, already influential during the early stages of the revolution, for help. The government accepted a stabilisation plan from the United States and the Federal Republic of Germany in 1956 and another one from the International Monetary Fund (IMF), known as he 'triangular operation', in 1961. 4 These plans included bringing back the deficit on the national budget, lifting price fixes. and firing redundant COMIBOL employees (Kofas 1995, 219). The triangular operation was somewhat successful in boosting tin production, rising from 15,260 tonne pure tin in 1962 to 17,713 tonne in 1964 but was less successful in other terrains, and raised Bolivia's foreign debt (Capriles 1977, 188). It also raised discontent about the MNR revolution, leaving some on the left to believe that the revolution was being frittered away (Kofas 1995, 219). The MNR was a multi-sectoral party, and during the decade after the revolution the only party of any importance in Bolivian politics. It was agreed to let the presidency rotate amongst various factions of the party, meaning that the more conservative Hernn Siles Zuazo was named the MNR candidate in the 1956, which he won without any difficulties. Juan Lechn, representing the left wing of the MNR, was considered the most likely candidate for the 1960 elections, but considering the troubled economy and the recent Cuban Revolution, sections of the MNR leadership as well as the United States did rather not want to see a left wing president in Bolivia. Therefore the tacit succession rules were broken and Paz Estenssoro was elected president for a second term, who was notably more authoritarian than during his first term, and in 1964 even for a third term. This third term would last

Discussed in more detail in the next chapter (Verbeek).

only for two months however, when he was overthrown by his vice president, air force general Ren Barrientos. With Barrientos' coup d'etat started a period lasting almost twenty years, in which Bolivia was under the yoke of different military dictators. The coup is generally considered the end of the revolution. Although subsequently most governments continued to refer to the revolution, the period of nationalist reforms was over, apart from the two short lived reformist military dictatorships of Alfredo Ovando and Juan Jos Torres, the former nationalising Gulf Oil in 1969.

The strange national revolution

The Bolivian national revolution of 1952 was a paradoxical one. The revolutionary leadership criticised Bolivia's dependent situation in the world economy, and wanted to change this by expanding state control of the economy. The most notable measure to achieve this was the nationalisation of the big mining companies. The MNR leadership however never intended to put an end to the market economy altogether, or to severe economic ties with the United States or the rest of the world (Kofas 1995, 216). The money gained by the nationalisation of the tin companies was intended to diversify the country's economy and to make sure that the country would no longer be as dependent on a single export product as it used to be (Mesa 1999, 626). What happened in reality however was not so much a diversification of Bolivia's export but rather a switch to another export product. The world tin market was moribund after the end of the Korean War and the MNR realised that the Bolivia's future lay in oil and gas export. This is however exactly the sector the MNR liberalised, opening it for foreign investors. This makes clear the paradoxical nature of the MNR revolution: even though it considered economic nationalism necessary for the country's economic development and emancipation, it was exactly the sector which was of importance for the country's future where very opposite, economically liberal, measures were undertaken (Kofas 1995, 220).

Bolivia's economic history has definitely not been a rosy story. The natural resource-related economic problems Bolivia suffered at the turn of the twentieth century, mono-export, foreign dependence and sensitivity for international resource market prices, are mostly the same as they are today. The twentieth century saw two big projects to put an end to this situation: military socialism and the national revolution. Both projects had their own specific faults. Military socialism failed because of a lack of institutionalisation and inability to break the power of the old oligarchy. The national revolution failed because of mismanagement in the nationalised mining sector and petroleum policy that was inconsistent with the revolution's official doctrines. If military socialism came too early, the national revolution came too late. More important however are the faults both projects had in common, which where fourfold. Firstly neither programme managed to address Bolivia's dependence on one export product. Although under military socialism Standard Oil was nationalised, oil was still of relatively minor economic importance in the 1930's, and the state's expanded control of the mining sector was too short lived to garner enough resources to enable the government to embark on a development programme that could diversify Bolivia's export. The national revolution did manage to put the mining sector under state control, but the sector was already moribund, so the investment in the (liberalised) hydrocarbons sector was a switch to another main export product rather than a diversification. Secondly both programmes were unable to address Bolivia's dependent situation in general. If resource exports are in state or private hands, in both situations the country is dependent on international market prices. Nationalisation of resource exports is ineffective if resource prices are collapsing. Thirdly Bolivia still lacked adequate processing capacity to make profit out of its nationalised resource sector. Even with nationalised resource production, most of the value added was lost due to the fact that they had to be processed in foreign countries, and the country was still exporting raw resources and importing processed goods. Finally Bolivia's infrastructure and geography

are a great obstacle to the development of the country. Lacking a coastline and having a relatively poor internal infrastructure, it is costly for Bolivia to get its resources on the world market. These are four problems that have to be addressed first before any Bolivian development programme, liberal or nationalist, can be really successful. And although history rarely teaches us unambiguous lessons, it is important to understand that both previous nationalist reform attempts have failed in part due to declining resource prices. Considering that the resource prices have been falling significantly during the last few months, it is very hard not to compare this situation with the tin market at the time of the National Revolution, the MNR government nationalized an already moribund sector and Bolivia never managed to reap the profits from its nationalized tin mines. If gas and oil prices continue falling, Morales will have to look for other sources of income to be able finance his programme, or in fact to be able to finance any programme. Nationalisation or otherwise increasing government control over subsoil resources will not guarantee an eternal inflow of riches and without good management, improved infrastructure and processing industry it will definitely not be successful. But whatever the future will bring, one should keep in mind that - even in case resource prices recuperate - the nationalisation of Bolivia's gas deposits under the current MAS government will not work miracles.

Almaraz, Sergio (1958) Petrleo en Bolivia. La Paz: Editorial Juventud. Capriles Villazn, Orlando (1977) Historia de la mineria boliviana. La Paz: Biblioteca Bamin. Gallego, Ferrn (1993) 'La poltica econmica del socialismo militar boliviano'. Anuario de estudios americanos 50 (1): 213-234. Hermosa Virreira, Walter (1979) Breve historia de la minera en Bolivia. La Paz: Editorial Los Amigos del Libro. Kofas, Jon V. (1995) 'The politics of austerity: The IMF and US foreign policy in Bolivia, 1956-1964'. Journal of developing areas (2): 213-236. Lujn Cruz, Eloy & Luis Antezana Ergueta (2005) Proteccionismo y librecomercio en Bolivia. La Paz: Fondo Editorial de los Diputados. Mesa, Jos de, Teresa Gisbert & Carlos Mesa Gisbert (1999) Historia de Bolivia. La Paz: Editorial Gisbert. Morales, Waltraud Q. (2003) A Lujn & Antezana of Bolivia. New York: Facts on File. Pealoza Cordero, Luis (1987) Nueva historia econmica de Bolivia, Bolivia en el siglo XX. La Paz: Editorial Los Amigos del Libro.


Changing International Relations: Bolivias call for selfdetermination

Bart-Jaap Verbeek

Abstract: This essay will demonstrate how Bolivia has been influenced by Western actors in its policy-making and control of the hydrocarbons sector throughout the last two decades. It will explain what their current position toward Bolivia is and what their biggest concerns are regarding the rise of President Evo Morales and his nationalist and anti-imperialist discourse. Keywords: neo-liberalism, IMF, World Bank, IDB, United States, hydrocarbons, nationalisation, FDI

Already since the Monroe Doctrine in the first half of the nineteenth century, Latin America has been the target of active US policy and interference. In Bolivia, the United States and especially the major international financial institutions have played an important role in shaping and developing the national hydrocarbons sector. Bolivia is rich in natural resources, but still lacks the full capacity to distribute these riches equally. Foreign companies have brought investments, technology and knowledge under terms set by the IMF and World Bank in order to open Bolivias economy to save the country from hyperinflation and economic malaise. With the rise of President Evo Morales in 2005 and the nationalisation of the hydrocarbons sector in 2006, these foreign actors have become anxious about the sustainability of their investments, as certain Western governments are concerned about the spread of resource nationalism and democratic breakdown throughout the region. This essay will focus on the long tradition of Western international influence on Bolivia and its policy-making, and the consequences of Morales nationalisation politics to these international relations, with the following research question: What has been the role of the key foreign actors in Bolivia, and how have they reacted to Morales (hydrocarbons) policies? In order to answer this question, certain sub-questions will have to be answered first to clearly comprehend the main theme of the essay. In what way did Western institutions penetrate and influence the Bolivian hydrocarbons sector and with what consequences? What are the effects of Morales policies on these foreign relations? To what extent does the United States play a role in this? The outset of the essay will be based on these sub-questions. The first part will describe and explain the different periods of Western influence in Bolivia until the coming of Evo Morales; the second part will focus on the concerns and reactions of these key actors to Morales policies.

Periods of intensive foreign interference

The following section will explore the long tradition of Western pro-active attitudes toward Bolivia throughout the second half of the twentieth century. This period will be divided into two separate periods of time, based on the division made by Roncallo, who recognises two phases of capitalist accumulation during the Pax Americana under US world leadership, which must be seen as a

context of changes in the structures of the international order: the postwar settlement (1940s 1970s) and disciplinary neo-liberalism (since the 1980s) (Roncallo 2006).

The politics of austerity during the postwar settlement: 1952 - 1964

With the creation of the Bretton Woods institutions in 1944, the International Monetary Fund (IMF) and the World Bank became in the first place key regulators of containment politics. With national development programmes by these institutions, strongly nationalist and developmental states in Latin America could carry out new reforms and policies like economic modernisation and industrialisation. These states were to a certain extent tied to external financial resources and depended upon the United States in containing the spread of communism (Roncallo 2006). As the emerging world force after the Second World War, the United States dominated the IMF and used the funds influence as an integral part of larger US foreign policy goals. In 1959 Undersecretary of State for Economic Affairs C. Douglas Dillon stated that both the IMF and the World Bank had been catalytic institutions to our foreign relations and in particular to the achievement of the objectives of our overall foreign economic policy (Kofas 1995). In Bolivia, the IMF and the United States became key actors in policy-making after 1952. The nationalist revolution of 1952, carried out by Vctor Paz Estenssoro and the Movimiento Nacionalista Revolucionario (Nationalist Revolutionary Movement, MNR), led to the nationalisation of tin mines, agrarian reforms and modernisation of the economy. However, there was never any intention to undermine the market economy or break the dependency relationship with the United States as Paz opted for closer integration of the Bolivian economy with that of the United States while advocating a strong anticommunist policy (Kofas 1995). The creation of the Corporacin Minera de Bolivia (Bolivian Mining Corporation, COMIBOL) as a state corporation led to certain problems in Bolivia. Falling tin prices resulted in hyperinflation and state revenues dropped significantly. Although the MNR regime was anxious to secure loans from the United States and the World Bank, both the IMF and the US State Department refused granting loans before implementing austerity measures to stabilise the Bolivian economy (Kofas 1995). Meanwhile, the tension between the highly organised mine workers and the state became more problematic when the public support and foreign loans from the United States, the World Bank, and the Inter-American Development Bank (IDB) were increasingly channelled to the eastern region to subsidise other sectors of the economy such as petroleum and agro-export, dominated by local elites and eventually foreign capital (Roncallo 2006). In 1956, the administration of the new president Hernn Siles Zuazo accepted a stabilisation plan set up by the IMF, which consisted of austerity measures such as the sharp reduction of budgetary deficits by the government and its agencies, a unitary exchange rate and fluctuating currency, decontrol of prices, lifting of restrictions on foreign trade, and reduction of the surplus COMIBOL workers. Within the MNR, serious reservations about these measures were expressed, which led to a nationwide trade union strike. The US embassy feared a political crisis and recommended more aid in order to prevent that miners would form an alliance with communists and Trotskyists. President Siles offered to re-examine the stabilisation plan since the direct impacts were disastrous. Washington refused to modify the stabilisation plan and Bolivia went into the worst depression crisis in its history, while wealth was increasingly redistributed to the upper income groups (Kofas 1995, 219-221). Anxious about popular resistance to stabilisation, the programme was extended for one year in 1958 after Siles implemented three labour decrees, which led to social unrest and major strikes. President Siles had been resisting IMF pressure to further devalue the boliviano and US Ambassador Bonsal promised $26 million of US aid for special assistance. Bonsal admitted that the IMF stabilisation plan had failed because it focused only on controlling monetary inflation (Kofas 1995, 221-223). The IMFs insistence on foreign exchange and trade restrictions as the remedy for Bolivias balance-of-payments deficit failed to recognise that these measures were subject to manipulation for political favouritism and personal gain when implemented. The US State Department concluded that it was merely impossible to combine US economic aid with the IMF stabilisation plan in order to establish public confidence to save the MNR regime. With the Cuban Revolution in mind, Washington continued to look toward private foreign investment as the solution. Although the State Department

cut economic aid and provided maximum assistance for the military and police, it did not abandon the IMF plan (Kofas 1995, 224-226). In 1960, Paz became president again and stated that he would continue with the stabilisation programme. In fear of Soviet advance, Washington made an offer, known as the Triangular Plan, which the Paz administration accepted (Kofas 1995, 227). The Plan was set up with the IDB, West Germany and the United States and consisted of a $38 million loan in order to modernise the mines and bring the cost of producing tin lower than the sale price. It initiated de-nationalisation of the mining industry by allowing for the penetration of foreign capital and the possibility of massive layoffs (Kofas 1995, 227-228; Roncallo 2006, 67). Through the Triangular Plan, the United States attempted to push the Paz administration to adopt a more stringent policy towards the miners and their mobilisation. This shows clearly from a CIA intelligence memorandum: From the beginning of the Triangular Plan it was recognised that the most serious obstacle to the rehabilitation program was the inability of COMIBOL to make management decisions stick in the face of labour obstruction. In recognition of this, the Paz Estenssoro government issued a decree in August 1961 clearly limiting labour prerogatives vis--vis management. The decree was never effectively implemented despite pressure from the Triangular partners. The miners reacted to any government intervention by striking and, in some cases, by taking hostage COMIBOL administrators and foreign technicians. Political pressure would then force President Paz to back down. During the summer of 1964 the rehabilitation program ground to a halt when Triangular consultants were unable to visit the mines without danger of incurring physical violence. The Paz government was informed, on 25 September, that no further financial assistance would be forthcoming until civil authority was established in the mines. Paz remained extremely reluctant to move against the miners and twice cancelled plan for military action. No further progress was made on the matter and on 4 November 1964 the Paz government was overthrown (CIA 1965, 5-6). Further US assistance in restoring efficient production of tin and diversifying the Bolivian economy through industrial and agricultural reforms and development, was channelled through the Alliance for Progress. Initiated by US President John F. Kennedy in 1961, it aimed to establish economic cooperation between North and South America by calling for an annual increase of 2.5 per cent in per capita income, the establishment of democratic governments, the elimination of adult illiteracy by 1970 price stability, to avoid inflation or deflation more equitable income distribution, land reform, and economic and social planning (Smith 1999, 150-152; Horowitz 1964). Neither the development loan under the Triangular Plan nor the US aid under the Alliance for Progress was sufficient to prevent social and political instability. Major riots and strikes were the consequence of the Plans initiatives and led to an increased US aid to the military for stability to contain the spread of Castroism (Kofas 1995, 228). The role of the Alliance for Progress as an instrument promoting democracy through social and economic development, raised questions about the two-tier foreign policy in Latin America. The coup dtat in 1964 and the following military regime were a result of harsh austerity measures under the stabilisation programme by the IMF and the failure of the US politically motivated aid programme to promote economic development which was, in fact, designed to keep the MNR in power and to contain communism (Kofas 1995, 229, 231). This first period of intensive interference demonstrates that different interests from the involved parties, have led to the implosion of the MNR regime. The consequences of these various austerity measures made Bolivia experience major economic crises and political instability, eventually leading to a military dictatorship that would last until 1982 5 . From this point on, a new hegemonic ideology becomes the main catalyst behind international involvement.

See previous chapter (Maalderink) for further insight in the period 1952-1964.


Shock therapy and disciplinary neo-liberalism

During the early 1980s, most of the Latin American countries were unable to finance the huge foreign debt payments they were encouraged to assume by the international financial institutions. This led to the debt crisis of the 1980s. To avoid a complete collapse of their highly inflated and indebted economies, most of the governments were forced to devalue their currencies, refinance their foreign debts, reduce government expenditures, and restructure their economies according to the terms set by the IMF, the World Bank, and the IDB. Harris sees this process in a larger context of increasing globalisation or integration of national and regional economies into the global capitalist economic system (Harris 2003, 366). Governments were required to reach an agreement with the IMF in order to obtain possible loans from the World Bank, IDB, G-7 government loans and grants, and sometime from the private sector. This group of creditors was influential in creating the Washington Consensus (Weisbrot 2006). The Washington Consensus 6 is often referred to as a package of policies emphasising on privatisation, price stabilisation, reduction of import tariffs, liberalisation of local financial markets and opening of economies to foreign investment. The resulting growth would eventually trickle down as economies become more competitive and efficient (Birdsall, de la Torre & Menezes 2008, 1). Neo-liberalism has provided ideological justification for capitalist restructuring and in the Washington Consensus this ideology was adopted by the international financial institutions (IFIs) and the US governments whose headquarters are in Washington, DC. Their stabilisation and structural adjustment programmes imposed on the national governments consisted of debt payments, opening up of the economies to transnational capital, and integrate their economies into the global market (Harris 2003, 368). It was possible to implement such reforms due to the failing preceding populist regimes, who had lost their electoral support. Veltmeyer argues that through electoral support for neo-liberal regimes in Latin America, neo-liberalism has become the hegemonic ideology in the region, even influencing leftist political parties and intellectuals (Veltmeyer, Petras & Vieu 1997, 213; Harris 2003, 369). Robinson describes the political domination under disciplinary neo-liberalism as capitalist polyarchy. These regimes consist of a small group that rules on behalf of capital. They are dominated by transnationalised factions of the local elites in Latin America and have the structural power of the global economy supporting them. During the political transition from military to civilian rule they gained control to neutralise the democratisation process in the region. They have enabled the transnational elites to reorganise state institutions and create a more favourable institutional framework for a deepening of neo-liberal adjustment (Robinson 1998/1999, 121; Harris 2003, 371). It is in this context that in August 1985, after the return to civilian rule in Bolivia in 1982, President Vctor Paz Estenssoro introduced the administrations New Economic Policy (NEP). With insistence of the World Bank and the IMF, together with the Harvard economist Jeffrey Sachs, the Bolivian government designed a package of measures existing from reducing fiscal deficit, reforming the monetary system, rationalising the bureaucracy (through mass dismissals), liberalising markets, promoting exports, and reforming the tax system (Salman 2007, 116). These measures were harshly implemented by the planning minister Gonzalo Goni Snchez de Lozado, who would later become president of Bolivia. Such a sudden implementation of newly designed governmental policies is also known as shock therapy, which turned out to be a popular instrument later in other Latin American countries and former planned economies to reform their economies. The shock therapy led to the control of hyperinflation and Goni was credited with having the Bolivian state restructured. However, direct effects of these drastic measures were the dismissal of 23,000 miners 7 ; cheap imported goods overloaded the Bolivian market due to trade liberalisation, leading to the closure of many factories and to an increase of urban employment 8 . Eventually, due to the World Banks suggestion of withdrawing
6 7

See Williamson (1990) for further analysis of the Washington Consensus. This measure was suggested by the World Bank, convinced as it was of the detrimental effects of state involvement in the economy, even if the economic activities were of strategic interest or great social importance (Salman, 2007: 116-117). Urban employment in 1985 was less than 6 per cent; in 1988 it was already 12 per cent.

state control, drug trade flourished and the coca economy had a relative importance to the gross domestic product of Bolivia which was fiercely resisted by the United States (Salman 2007, 117). In 1993, after Gonis election as president, the administration of among others the neo-liberal technocrats of the MNR set up a neo-liberal social reformism. He believed he could use privatisation as a tool to achieve social benefits and employment. The system was called capitalisation, meaning fifty per cent of the companies would be privatised and fifty per cent would be administered by private pension funds. The companies were sold mainly to foreign buyers and most transfers were unpopular with the workforce (Crabtree 2006). Under Gonis presidency, the national oil company (YPFB), the national telecommunication company (ENTEL), the electricity company (ENDE), the airline (LAB), and others were privatised. These measures were essential to maintain credit with the international financial institutions and for investor confidence in its economy (Salman 2007, 119). In 1996, with the Law of Capitalisation and the Hydrocarbons Law, the hydrocarbons sector became capitalised. Capitalisation differs from traditional privatisation in that ownership is not transferred entirely to the strategic private investor. Theoretically, while the private investor owns a controlling share of the enterprise, the Bolivian population, represented by an institutional investor, owns a significant part of the shares. This allowed private investors to obtain fifty per cent ownership of an enterprise; the State held the other fifty per cent. The state company Yacimientos Petrolferos Fiscales de Bolivia (YPFB), prior to the capitalisation in which the State only held thirty per cent of its ownership and only under Mesas administration up to fifty per cent, was about to sign a contract to build a pipeline to Brazil which would increase its profits significantly. Instead, these earnings were largely transferred to private firms that borrowed capital from the same international institutions that had previously offered loans to YPFB. This led to an outflow of money, increasing Bolivias budget borrowing. Privatisation of the hydrocarbons sector was regarded as a key component in the World Banks and IMFs country strategy for Bolivia. The IMF stressed on the necessity of cuts in social spending in order to made up the budget shortfall, and increases in regressive taxes that hit poor Bolivians the hardest 9 (Spronk & Webber 2007, 34-35). Even though such reforms were strongly questioned by the population, the multilateral agencies viewed them as an example of best practice (Assies 2004, 28). Already under the presidency of Hugo Banzer Surez (1997 2001) a deal to export gas through a Chilean or Peruvian port to northern Mexico and the west coast of the United States was initiated with Pacific LNG (Liquefied Natural Gas). This consortium existed of the Spanish oil giant Repsol-YPF, the British Gas, and US Pan-American Energy; British Petrol, British Gas and Repsol formed a consortium with Sempra Energy in the Margarita gas field in the Department of Tarija which would take charge of the distribution of the liquefied gas. In 2002, Goni attempted to close the gas deal which initiated a massive opposition despite a World Bank funded campaign to promote the project and eventually led to the Gas War of 2003. The deal was regarded as disadvantageous for Bolivia (Assies 2004, 29; Spronk & Webber 2007, 35-36). The penetration of foreign multinationals in the Bolivian economy and politics becomes clearly visible in the political organisation of the internationalised bourgeoisie, rooted in the petroleum and natural gas industry based in the Department of Santa Cruz. This organisation, called Comit pro Santa Cruz, consisted from key organisations including the Cmara de Industria, Comercio, Servicios y Turismo de Santa Cruz (Chamber of Commerce, Industry, Service, and Tourism of Santa Cruz, CAINCO) where Repsol-YPF, Brazilian state-owned Petrobras, and Enron are members of its board of directors (Spronk & Webber 2007, 37). By the end of 2004 there were twelve international companies in Bolivia involved in the exploration and exploitation of hydrocarbons, five working in pipeline transportation, three devoted to refining activities (particularly Petrobras), five in charge of natural gas distribution pipe systems, and approximately 600 involved in marketing petroleum by-products (Mayorga & Tapia 2006, 165). Furthermore, the World Bank supported the privatisation of water with a US$4.5 million loan in the mid-1990s, intended to improve the efficiency of the public water and sanitation utilities and make them more attractive to private investors. In 1999, the Cochabamba municipal water utility was sold to Aguas del Tunari, a consortium controlled by the San Francisco based construction giant

The tax bill of 2003 proposed a 12.5 per cent increase in income tax for every salary above 880 bolivianos (approximately US$115) per month (Salman, 2007: 120-121).

Bechtel. In La Paz and El Alto, Aguas del Illimani became the municipal water utility, a consortium controlled by the French multinational Suez. The World Bank also strongly recommended that public money was not to be involved in the construction of Misicuni, a costly dam and tunnel project (Spronk & Webber 2007, 39; Crabtree 2006) 10 . This second period of international involvement clearly has a different character than the first (1952 1964). Under the regulation by and dependence on the main IFIs, Bolivia has opened up its economy in order to obtain loans and attract foreign direct investment. This led to large-scale privatisations and capitalisations and multinationals have become powerful and even influential in policy-making. Since neo-liberalism was the hegemonic ideology, foreign involvement and privatisations led to little social and political opposition, even though its results were often disastrous. However, social tensions and dissatisfaction grew. As the next section will show, policies and strategies by the IFIs changed its character.

Strategic country policies

In recent years, there has been a common strategy by the World Bank, IDB and IMF that the Latin American governments should complement their neo-liberal structural adjustment and austerity programmes with poverty alleviation or poverty reduction programmes. This has added a neostructuralist element to the neo-liberal package of programmes and policies, which targets the social investment at those sectors hardest hit by the structural adjustment programmes. Already in the 1960s, the United Nations Economic Commission on Latin America and the Caribbean (ECLAC, or CEPAL as its Spanish acronym) advocated for a structuralist approach to economic and social development based on state-supported strategies of import-substitution industrialisation together with income redistribution measures, but this was strongly rejected by the neo-liberal agencies (Harris 2003, 396). Under the current revision of neo-liberalism approach with neo-structuralist elements, the Washington Consensus has been augmented. As Harris recognises: The new approach of the IFIs and the Group of 7, led by the US government, goes beyond liberalisation and privatisation and emphasises the need to create what are considered the necessary institutional infrastructure for effective market economies (Harris 2003, 398). The emphasis now lies on poverty alleviation by creating social safety nets and poverty reduction programmes. This becomes visible in the certain country policies of the major IFIs. The World Bank was in strong favour of capitalising the hydrocarbons sector, which resulted in the Hydrocarbons Law in 1996. The US economic interest was also a significant motive for this process. CORE International Inc., which assessed the funding prospects for the US Trade and Development Agency, stated that privatisation would benefit US investors, create demand for equipment, open new markets and create jobs. Together with the IDB, the US government promoted the capitalisation (Hindery 2004, 288). An IDB study sought to measure the change in performance of the privatised firms in Bolivia by comparing certain ratios before and after the transfers. Results suggest that the privatisation of the former State Owned Enterprises (SOEs) is significant in explaining the improvement in the firms operating efficiency. Size of the firms is an important variable in explaining the improvement in operating efficiency. This result is not surprising; the private investors to whom the larger SOEs were transferred made the most significant investments and brought in specific know-how in the form of management and management systems. In particular, the Bank found that while privatisation did not have a significant impact on profitability, it increased operating efficiency, reduced employment at the firm level, and decreased fixed assets (Garrn, Machicado & Capra 2003). The World Bank itself pressured the Bolivian congress to approve certain laws, and loans were granted under strong preconditions. Through these laws and loans, as Hindery argues, the World Bank shaped virtually every major state institution in Bolivia, effectively making state employees dependent on World Bank funding. As a consequence, conflicts of interest in monitoring the World Banks economic reforms in the hydrocarbons sector by state institutions arose. The World Bank sponsored the creation of an environmental office, Unidad del Medio Ambiente (UMA) to prevent

See chapter about the water movement (Strijdonck) for extensive analysis of the Water War and popular resistance to neo-liberal policy.

negative social and environmental impacts of the reforms in the hydrocarbons sector. The learning and innovation loan (LIL) was an additional project to strengthen the implementation of UMA, which was merely fully financed by the World Bank (Hindery 2004, 289). However, the World Bank was aware that the Bank supported the project because of its high return, rather than preventing the negative impacts and addressing sustainable development and poverty alleviation (Hindery 2004, 291). The supported LIL project and the creation of UMA meant developing a state agency heavily influenced by multinational oil corporations such as Enron and Shell (Hindery 2004, 295). These companies were developing the Cuiab pipeline and in 1999 they were granted a US$200 million loan from the US governments Overseas Private Investment Corporation (OPIC) (Hindery 2004, 293). The World Banks Poverty Reduction Strategy Paper (PRSP) is an important element in neostructuralist neo-liberalism. The PRSP for Bolivia has the following strategic actions: 1. Expanding opportunities for employment and income for the poor population, by developing the rural area; 2. Developing the productive capabilities of the poor, by focusing on education and health; 3. Increasing security and protection for the poor, by setting up social protection and child care programmes; 4. Increasing societal participation and integration, by reducing inequities and providing training on participation. The Strategy Paper recognises the need to incorporate cross-cutting issues in the four strategic components, relating to ethnicity, gender, the environment, and natural resources. Institutional development is a basic requirement for the implementation of these strategies where decentralisation and anti-corruption are high on the agenda (World Bank 2001). Nevertheless, the Strategy Paper ends with: One of the structural solutions to the problem of the sustainability of Bolivias development process is to open markets, particularly in the more developed countries. This approach has already begun to be suggested as a Bolivian initiative in terms of the scope of the alternative development programs that are being analyzed to confront the effects of the fight against drugtrafficking and the eradication of coca crops. It is understood that the opening of markets and free trade agreements constitute one of the more solid responses for alternative development specifically and for the BPRS in general. There is no suggestion in the BPRS that the State alone should be responsible for fighting poverty, for if does not pretend to encourage a return to State paternalism (World Bank 2001, 213-214). Earlier PRSPs for Bolivia aimed to encourage foreign investment by reforming legal and investment regimes and institutions that would enforce the new policies. These facilitated the entrance of transnational companies to the region and the expected economic growth would indirectly address poverty (Roncallo 2006, 68). In the IDBs Country Strategy with Bolivia for the period 2004 2007, the IDB expresses its concerns about the polarisation due to political tensions that are slowing the countrys progress toward the poverty reduction targets. The Banks activities are structured around three actions focuses: 1. Improve management and transparency of the State. This implies support for Bolivias fiscal institutions, support for the National Transparency Programme, decentralisation and community-based justice; 2. Support competitiveness and sustainable development of the private sector. It calls for scaledup Bank involvement in competitiveness issues, rural development and corporate restructuring. A key facet of this action focus is market access and preparation of Bolivia for trade talks, as the country is engaged in negotiations with on Andean integration, Mercosur, the Free Trade Area of the Americas (FTAA), and new multilateral negotiating round. To better articulate its interests the Bank will assist Bolivia to improve its strategy formulation. 3. Enhance efficiency and equity of basic social services delivery. The Bank can influence sector outcomes by way of the distribution of cooperation assistance and resources in its active projects, helping Bolivia rise to its education, health, sanitation, urban development challenges, municipal strengthening, gender equity and cultural relevance. The Millennium Development Goals are considered a key target (IDB 2004, 48-54).

In 2004, the Bank already foresees problems and challenges concerning the hydrocarbons sector. The discovery of gas reserves raises the possibility of easing constraints on private capital flows and stimulating foreign direct investments (FDI). Preventing this hydrocarbon wealth from becoming a source of macroeconomic instability, government corruption, inequality, and poverty is a stiff challenge concerning the weak fiscal institutions and thin management capacity in the public sector (IDB 2004, 6). On the other hand, the IDB sees new opportunities for Bolivian export growth within the FTAA and the WTO (IDB 2004, 6). It acknowledges, though, the volatility of its programming process due to breaking the continuity that is needed for projects to have a real impact. Fiscal constraints are a serious threat to the continuity and the Bank implies to help identify the fiscal commitment in agreements with the IMF (IDB 2004, 40). The social policies of the structural adjustment programmes carried out by the IFIs were not very effective at alleviating poverty. They emphasise three returning basic elements, as we have seen: privatisation, targeting and decentralisation which help to legitimate themselves and make them more effective as a strategic measure for controlling popular resistance and opposition to neo-liberal regimes (Harris 2003, 399). It is remarkable that programmes aiming at alleviating poverty still emphasise on the necessity of opening markets and attracting foreign direct investment instead on focussing on social programmes. After two decades of neo-liberal hegemony and active foreign involvement, Bolivia was still a highly unequal and a poor, indebted nation. The election of Evo Morales could therefore be regarded as an expression of accumulated frustration by ousting the discourse of the last twenty years and regaining Bolivian control of its resources as a call for self-determination.

Morales nationalisation politics and international concerns

On May 1 2006, the newly elected indigenous president Evo Morales announced the nationalisation of the natural hydrocarbons resources and declared that the state recovers the property, possession, and total and absolute control of these resources. YPFB was placed in control of all aspects of the natural gas industry and forcing the private companies into the role of service providers who receive a shrinking share of profits. Hydrocarbons companies, such as Repsol YPF, Total and Petrobras, had to renegotiate their contracts in order to comply with the new preconditions set up in the Hydrocarbons Law; these would transfer revenues drastically to YPFB, increasing the overall Bolivian state incomes 11 . Concerning the long and deep tradition of foreign involvement in the Bolivian economy and policy-making, and especially in the hydrocarbons sector, a reply from these actors to Morales measures was to be expected. Despite Morales socialist ideology, strong anti-imperialist language and his alliance with Venezuelas Hugo Chvez, most of the concerns are about the deteriorating foreign investment climate.

A rise to the challenge?

The World Bank states in its Interim Strategy Note for Bolivia that the private sector is worried about the nationalisation process and the raise of minimum wages and restrictions on hiring and firing labour services, which have led to low foreign direct investment. It predicts a decline in investment will likely constrain the governments ability to create employment and infrastructure investment. With the increasing participation of the public sector, the Bank foresees challenges and risks considering the non-market nature of the programme, especially the financial and technical capacity of the government

See first and second chapter (Contreras, Renzema) for extensive analysis of the nationalisation decree.

to implement the announced reforms (World Bank 2006a, 7-8). In order to reduce poverty and inequality and to keep its economy growing, Bolivia needs to attract a large amount of FDI. Therefore, the government needs to establish a stable investment environment so the World Bank can seek to support both foreign and domestic investment in Bolivia in sectors where the country has opportunities and the World Bank has comparative advantages (World Bank 2006a, 27). To attract private investment, the concerns of oil companies and other investors about the Hydrocarbons Law need to be addressed. Moreover, the measures taken by Morales may create discord with the interests of European and US governments, foreign hydrocarbon companies, landowners, business owners, and multilaterals. Arbitration processes can undermine Bolivias credibility toward the international investor community and the World Banks ability to provide financing. Extending nationalisation could further weaken Bolivias investment climate and opportunities for World Bank support (World Bank 2006a, 32-33). Furthermore, it rejects the Hydrocarbon Act of 2005 12 , which enabled the state in deeper control of the hydrocarbons and changed the favourable investment framework that allowed companies like Andina S.A., Chaco S.A., British Gas, British Petroleum, Total, Repsol YPF, Petrobras, Pluspetrol and Vintage to made major successful investments. Nationalising the gas industry could have harmful effects, delay investments and restrain the development of the gas industry. Law 3058 does not provide a legal framework contributing to attracting investment and flexibility to facilitate investment. It lacks a clear plan and might place YPFB in charge of problems that are beyond its technical and financial capacity (Mayorga & Tapia 2006, 180-181). However, the World Bank argues in its decentralisation strategy for Bolivia 13 , which is already in process in Bolivia under the Hydrocarbons Law of 2005, that hydrocarbons revenues play a crucial role. The large rents should belong to the central government for two reasons: equity, since oil and gas resources are concentrated in only certain departments, and volatility, where the central government has more stable sources of revenues than municipalities and departments. The Bank opts for a national fund for hydrocarbon rent stabilisation which could reduce government income volatility even more (World Bank 2006b, 29-30). This shows a slight support for centralising hydrocarbons revenues, whereas normally the World Bank is in strong favour of decentralisation. In its new Country Strategy for 2008 2010, the IDB emphasises that Bolivia must restore international investor confidence to attract more foreign capital. Bolivias natural gas needs international markets that have absorption capacity and that are stable over time; selling the gas demands major investments in exploitation and in infrastructure for getting it to market. A drop in investment to expand oil and gas exploration and production capacities means a potential delivery shortfall of 8.2 million cubic meters a day, nearly 20 per cent of the expected demand. It could diminish Bolivias capacity to deliver liquefied and condensed gas, in particular to fulfil its contracts with Brazil and Argentine. Challenges are lying in technological and institutional risks: natural resource rents restrain the development of the tax system and the mechanisms of oversight and discipline which leads to political patronage and clientelism (IDB 2008a). However, a recent IDB study concludes that most of the privatisations made during the nineties have had positive results mainly for the middle and higher incomes in Bolivia; efficiency and profitability changes of the companies after privatisation are significantly higher. It recognises, thus, the social effects of these privatisations which not always have been positive (Chong 2008). Where the IDB already mentioned it, the IMF fully pays attention to the risk of the Dutch Disease which describes the subsequent adverse effects on other economic sectors after the discovery of natural gas. The Dutch Disease operates through two channels, namely the resource movement effect and the spending effect. The first is associated with the reallocation of factors from various sectors of the economy to the natural resources and export boom sector. The second is associated with the impact on the economy of the booming sectors extra income (IMF 2007a, 4). The IMF analysis shows that although there are no Dutch Disease symptoms visible, it could become an important policy issue for Bolivia. It is therefore essential to exercise prudent fiscal and monetary policies, and ensure openness of the exchange rate system. The government will need to control its overall fiscal balance excluding revenues from hydrocarbons (IMF 2007a; Cerutti & Mansilla 2008).

12 13

Law 3058. World Bank (2006), Bolivia: Towards a New Social Contract. Options for the Constituent Assembly.

Under the Multilateral Debt Relief Initiative (MDRI), Bolivia was granted in 2005 a hundred per cent debt relief from the IMF that remained outstanding about US$0.23 billion and the World Bank cancelled the International Development Association (IDA) debt amounted to about US$1.5 billion. In 2007, the IDB also granted debt relief to Bolivia making it a total of US$2.8 billion, which decreased the external public debt from 52 per cent of the GDP in 2005 to 16 per cent in 2007. The IMF stresses the need to use this money on poverty reduction and on reaching the Millennium Development Goals. Bolivia qualified for debt relief because of its satisfactory recent macroeconomic performance, advances toward poverty alleviation and improved public expenditure management (World Bank 2006a). Morales has shown his gratitude regarding the debt forgiveness by acknowledging the World Banks intentions. Under the framework of the Interim Strategy Note the number of projects increased from five in 2007 to eleven in 2008, while building a relationship with the new administration (World Bank 2008). With this debt cancellation and Morales announcement not the re-sign the last standby agreement between the Bolivian government and the IMF which expired March 31, 2006, Bolivia is no longer bounded by the IMF. The IMF, however, remains critical of Morales measures and pressured him to guarantee that the results of the implemented IMF policies will not be interfered with by the masses (Uco 2006). The country would be hurt by raising the royalty rates as part of the risky nationalisation process due to the increasing lack of foreign investment (IMF 2005). It could lose access to foreign capital when it doesnt compensate companies affected by the nationalisation. Mahsood Ahmed, an IMF spokesman, recognises the importance of hydrocarbons in the Bolivian economy and the need of domestic and foreign private capital (The Industry Week 2006). The by then Director of the Western Hemisphere Department of the IMF, Anoop Singh, responded to the threat of the diminishing free market and nationalisation that although the IMF is not ideological in its approach to investment, public or private investment needs to be increased and more productive in the energy sector (IMF 2007b). Given these new and changing relations between the IMF and Latin American countries, it is necessary to reform the IMFs policies in order not to become irrelevant. Cabezas pleads for more diversification in the sources of funding, giving more clarity on supporting developing countries. Representation of its members should be revised to strengthen its character as a multilateral surveillance institution and more awareness of dominant private capital flows and regional and global linkages are recommended (Cabezas 2008).

International business relations under pressure

The Business Monitor International which comments and gives interpretation of key financial and economic developments across emerging markets warns in its influential Business Monitor Online Global Country Risk & Industry Analysis of Bolivia that there is little potential for significant improvement in the investment climate in Bolivia over the next few years. The government remains keen to nationalise the mining industry, much as it has taken greater control of the hydrocarbons sector. Furthermore, the overall drift toward populist policy within South Americas informal leftist alliance (Venezuela, Bolivia and Ecuador) has led to greater state involvement in the economy, which does not bode well for foreign business interests (BMI 2007a). Morales increase of mining and hydrocarbon taxes would further reduce the attractiveness of the Bolivian business environment and may lead to more strike action. Negative information on Morales politics by the BMI continues with reports on striking miners and his problems with judges who are being accused by the president of aligning themselves with rightwing politicians, who have filed lawsuits to block his reforms. Opposition of Morales, however, has accused him of wanting not only to reform, but to control the system (BMI 2007b). Nevertheless, the BMI acknowledges the strong macroeconomic results in 2006, due to the high hydrocarbon prices which have led to higher budgetary fiscal revenue (BMI 2007a).

According to BMIs proprietary ratings, Bolivias business environment suffers from the ongoing political malaise and Morales nationalisation drive and is considered the second most hostile in Latin America with an overall score of 36.6 just after Venezuela. Despite Morales attempts to improve the countrys infrastructure with World Bank funded US$30 million Urban Infrastructure Project in 2006, Bolivia scores only 37.4 out of 100 on infrastructure; labour, market and financial infrastructure are also in need of development. High levels of bureaucracy and a weak legal framework will continue to undermine the countrys attractiveness to foreign and domestic investors. Bolivia scores poorly on institutions with 40.2 and contract issues and property rights may continue to constrain investment in Bolivias rich hydrocarbons sector as Morales nationalisation drive will go on. On market orientation, Bolivia scores only 35.1 due to the governments nationalist policies. Morales has inflicted on foreign investors by taking over US-based Ashmore Energys remaining stake in the Transredes gas pipeline company after it failed to reach a share buyback agreement (BMI 2008). This project, with a US$75 million private sector loan from the IDB, aimed to expand its delivery capacity of the gas from Bolivia for export to Brazil (IDB 2008b). However Presidents Lula and Kirchner of Brazil and Argentina 14 , as well as Prime Minister Zapatero of Spain, were in favour of Bolivias sovereign right to control its natural resources, the nationalisation process has led to some problems, especially concerning the enterprises of these countries operating in Bolivia. Uco reports that the Spanish Minister of Economy, Pedro Solbes, called Bolivias demand that Banco Bilbao-Vizcaya (BBVA) and the Swiss insurer Zurich turn over shares held by the pension funds they manage without compensation unacceptable (Uco 2006). Discontent among foreign companies could become serious, since multinationals are able to sue national governments through the World Banks International Centre for the Settlement of Investment Disputes (ICSID), which is set up under international trade and investment agreements. Its role has been highly criticised since it lacks transparency although its findings are binding and is accused of having conflict of interests in Bolivia. It is used by mainly US and European corporations to hinder the efforts to nationalise natural resources by developing countries. In the case of Aguas de Illimani, controlled by the French company Suez, it turned out that the International Finance Corporation (IFC), which belongs to the World Bank Group, was a shareholder in Aguas de Illimani. The ousted US water company Bechtel, after Cochabambas Water War in 2000, and Italian company Euro Telecom International (ETI) stepped to the ICSID by using the Dutch-Bolivian BIT which was accepted by the ICSID Tribunal. It is therefore that in May 2007, Bolivia withdrew from the ICSID with Morales calling on a global campaign against this type of investor rule (James & Benjamin 2007; Anderson & Grusky 2007, 18). ETI reclaims US$350 million as compensation for nationalising the Italian shares in the Empresa Nacional de Telecomunicaciones (National Telecommunication Company, ENTEL) (El Pas 16 July 2008; Van Dijk 2008). The most important demand, up to US$500 million, corresponds to the firm Ashmore Energy International (AEI), who requested arbitration from the Stockholm Chamber of Commerce in its reclamation for the confiscation of twenty five per cent of the shares in the hydrocarbons transport company Transredes, which were transferred to the Bolivian state in June 2008. Furthermore, the Bolivian government is reaching agreements with Swiss Glencore, who administrated the metal foundry Vinto and who was included in the nationalisation process by Morales, and with the firms Graa y Montero from Peru and the German Oil Tanking GMBH, whose shares were confiscated during the nationalisation of the Hydrocarbons Logistic Company of Bolivia (Compaa Logstica de Hidrocarburos de Bolivia, CLHB) (El Pas 16 July 2008). These disputes could cost the Bolivian government millions of dollars, despite the fact that it retreated from the ICSID. It is therefore important to retain better relations with multinationals in order to settle these disputes that could seriously harm the Bolivian government. The Spanish-Argentine company Repsol YPF signed on May 1, 2008 a new agreement with Morales administration that allows the Bolivian state fifty one per cent of its branch Andina, whose administration and management will be shared. Ever since Andina became privatised in the nineties, Repsol YPF possessed fifty per cent of the shares and the companys administration, which exploited eighteen minor oil fields, and could count on a participation of fifty per cent in the mega fields of San

See next chapter (Hylkema) for an extensive analysis of Bolivians relationship with Brazil and Argentina, as well as with other Latin American countries

Antonio and San Alberto which were operated by the Brazilian state-company Petrobras. The Director of Exploration and Production of Repsol YPF in Argentina, Toms Garca Blanco, speaks of a new stage in which a model operation will be developed what can be an example of synergy and work between a state-company and a private company (El Pas 1 May 2008; Roberto Prez Llanes 2005, 2021).

Relations with the United States under pressure

With Morales coming to power, the United States has expressed several times its discontent with the undertaken measures by the new Bolivian government. President Bush stated that he was concerned about the erosion of democracy and former republican candidate for the US presidency, John McCain, claimed that the populist Evo Morales is a menace to democracy. McCain promised to give free trade between the US and Latin America a new impulse in order to confront the increasing antiAmericanism (El Pas 6 June 2008). There are actually some greater concerns about the development of the hydrocarbons sector in Bolivia. US companies have investments in Bolivia, but not at the same scale as Brazil or Spain. However, the US Council on Foreign Relations emphasises that the US demand, due to the advantages of liquefied natural gas (LNG) processing and transportation, will probably increase according to the Energy International Administrations International Energy Outlook 2007 (Barshefsky, Hill & ONeill 2008, 52). The emerging of resource nationalism, therefore, can be considered as problematic for the United States. The International Energy Agency (IEA) calculated that Latin America needs US$1.3 trillion in overall investment in the energy sector between 2001 and 2030. Governments need to adjust the regulatory frameworks and provide opportunities for private and public investment from the United States and other countries. State ownership and political unrest will constrain international and private sector involvement (Barshefsky et al 2008, 53). In 1999, Bolivia became part of Plan Colombia in order to combat drug trafficking and guerrilla activity with US assistance. In cooperation with the Drug Enforcement Agency (DEA), agents are acting as frontline troops actively implementing US policy by providing technical advice and training. The Andean Counterdrug Initiative (ACI) provided additional funding. US President Bush expanded Plan Colombia with new additional funds through ACI with his own modernising programme Andean Regional Initiative (ARI). This programme attempts to strengthen Andean governments by economic development, trade enhancement, and democratic institutions-building in order to protect them from spill-over of drug trafficking and guerrilla activity into other countries. Morales openly criticises the US drug policy, especially the emphasis on crop fumigation and aerial spraying. The Bolivian president has resisted cooperating with the US and the DEA agents and decriminalised coca growing, eventually leading to the suspension of DEA activities in Bolivia after accusing it of the violation of human rights. Washington has been deeply concerned with this resistance and keeps on threatening with putting foreign assistance on hold (Kryzanek 2008). The antidrug campaign in the Andean region makes up more than half of all US aid to Latin America 15 . The eradication of the coca plants is not considered effective when small coca farmers cannot find alternative employment. The Centre for Global Development sees an opportunity for further US assistance in cooperation with the World Bank and the IDB to fight crime by police reforms and signing on to the United Nations protocol on small arms trafficking (Birdsall et al 2008, 168). The United States has recently cut off Bolivias preferential access to the US market under the Andean Trade Promotion and Drug Eradication (ATPDEA), in which the United States lifted the barriers for goods in exchange for drug control measures. The US Embassy in La Paz estimated that approximately 150,000 jobs could be lost due the suspension of ATPDEA (Gamarra, 2007: 28). According to the World Bank, it will affect the export prospects and hinder Bolivias ability to diversify the economy (World Bank 2006a). Bolivia became excluded from the ATPDEA on 15 December 2008 with the argument that La Paz failed in cooperating with the United States in the war on drugs. The president of the Bolivian Institute of Foreign Trade, Gary Rodrguez, sees this as a direct consequence of the expulsion of the Ambassador Philip Goldberg, the CIA and the DEA. Research pointed out that in the period of 2002-2006, fifty-five per cent of the total export was

About $750 million of $1.4 billion in 2006.

destined to the United States and ninety-five per cent of the export to the United States was free of tariffs. It is clear that this action will have its consequences for the Bolivian economy 16 and Morales is hoping to renegotiate on the beneficiary tariffs of ATPDEA with the new Obama administration (El Pas 27 November 2008). However, Mercosur, the Common Market of the South, has announced that it will import US$30 million on Bolivian products in 2009 as a response to Bolivias exclusion from the ATPDEA (China View 2008). The Council on Foreign Relations advises that the US government should work with Bolivia bilaterally, channelled through the United States Agency for International Development (USAID) and it should provide trade adjustment assistance for bilateral trade agreements with the Andean countries. It should also seek for compensation for the loss of the Colombian soybean market that resulted from the US Colombia Free Trade Agreement (FTA) 17 . The United States must prevent conflict and promote to strengthen democratic institutions (Gamarra 2007). USAID already spent US$95 million in 2004 and US$85 million in 2005 and 2006 in Bolivia which aimed at improving the poorest sectors by interacting with community leaders. USAID has to expand its public profile in Bolivia by branding and marketing its initiatives carried out by the USAID mission in La Paz, although it has just been closed by Bolivia (Gamarra 2007, 41). Hence, Bolivia had been declared eligible for funding by the US Millennium Challenge Corporation (MCC) for nearly US$600 million for infrastructure and development projects (DeShazo 2006). Rather than be linked to drug eradication programmes, the Millennium Challenge Account (MCA) should be dedicated to the continuity of a pluralist democracy; according to the Council of Foreign Relations, this means a system of government where minority parties and organisations are not subjected to unrestricted majority rule. This refers to the anxiety for Morales intent to reform the constitution by a simple majority vote that technically excludes the opposition (Gamarra 2007, 44). MCC has paused its engagement with the government of Bolivia until 2009 after Bolivia will have certain environmental, social and civil issues resolved (Cuenta del Desafio del Milenio 2008). Through USAID, the United States operates an Office of Transition Initiatives (OTI) in Bolivia, which is being accused by the Bolivian government of building opposition to the new government and its political party. USAID sponsored a political party reform project to help build moderate, pro-democracy political parties that can serve as a counterweight to the radical MAS or its successors (James & Benjamin, 2007). Unconventional US interference in Bolivia remains a delicate subject, since evidence is scarce. During the elections of 2002, the US Ambassador Manuel Rocha openly warned that a victory for Morales would lead to a cut off of all US aid to Bolivia. Goni himself, who would win the 2002 elections, was heavily influenced by American political campaign marketing tactics of Greenberg Carville Shrum (GCS). The US Expeditionary Task Force, a 1,500-man paramilitary group created in 2001 under the State Departments International Narcotics Control Programme, was already at Washingtons disposal in order to direct a coup if Morales would win. These men were under direct control of the US Embassy in La Paz and have been involved in assaults against protesters and coca farmers. Increasing military funding to establish three US military bases in Bolivia led to the sending of 350 troops to the Chaco region, where US company Enron as part of Transredes was involved in the construction of a gas-pipeline. During the 2003 uprisings that tackled Gonis administration, American military commanders had an active role in the brutal repression by the Bolivian army, while the Bush administration fully supported the democratically and constitutionally elected government (Saavedra 2003; Vann 2003). Goni eventually fled to the United States, where Bolivias demand to hand over Goni, ex-Minister of Defence Carlos Snchez Berzan and ex-Minister of Hydrocarbons Jorge Berindoague, to put them on trial for the massacres during the Gas War, became only last November official (Andean Information Netwerk, 2007; El Pas, 11 November 2008). USAID has worked also together with the National Endowment for Democracy (NED) and the National Democratic Institute (NDI) in order to finance and support the Santa Cruz opposition, where many of the NED-sponsored projects show a political bias, and former US



The suspension could jeopardise tens of thousands manufacturing jobs and US$150 up million up to US$210 million in trade. The U.S. Colombia FTA was signed in April 2006, which would cost Bolivia US$170 million in soybean export to Colombia (Weisbrot, 2006).

Ambassador Philip Goldberg had a close relationship with indigenous leader of the opposition regions to create a front against Morales (Bigwood 2008).

Western influences by the United States and the major international financial institutions have been playing an important role in Bolivia throughout the last fifty years. Where the first period of intensive influencing and involvement in Bolivia failed mainly because of the two-tier foreign policy of the United States, the second period was characterised by the importance of multinationals. In order to restore macro-economic stability and growth, Bolivia adopted structural adjustment policies according to the set terms by the IMF and the World Bank, which is also known as the Washington Consensus 18 . Neo-liberalism in Bolivia led to privatisations of the hydrocarbons sector, as well as many other sectors and state companies. Opening up the economy and market to foreign investment would eventually lead to equal growth. The first part of the essay showed that the many harsh measures taken by the Bolivian governments led to mass dismissals, tax increases for the poor, more power to multinationals among other social problems. As an answer the first sub-question in what way did Western institutions penetrate and influence the Bolivian hydrocarbons sector and with what consequences one could say that through various loans, grants and technical assistance, the World Bank, IMF, IDB and the United States have penetrated and influenced the Bolivian hydrocarbons sector heavily. Since Bolivia was not in the position to oppose the strategy of the IFIs that attach policy regulations to the granted loans, the country simply had to take these measures. Obviously, it helped that many of the presidents and members of the governments had been educated in the United States and formed a group of capitalist polyarchs, or technocrats, that widened the gap between the government and the people. When looking at the specific country reports and strategies on Bolivia, the World Bank and IDB clearly shift their policies together with the changing economic and political situation in Bolivia. The consequences of Western involvement at first looked disastrous, eventually more attention was given at the reduction of poverty and the creation of social safety nets. The outcomes of these strategies are questionable, but are visible that also the characters of these IFIs do change. As for the second sub-question what are the effects of Morales policies on these foreign relations it becomes clear that after decades of involvement, the expropriation of multinationals and nationalisation policies by Morales are not favoured by the United States and the IFIs. Concerns about lack of capacity, technology and deteriorating investment climate are expressed in various IFI reports. The risk of the Dutch Disease is imaginable, foreign direct investment is necessary and the world demand for LNG keeps on rising; Bolivia will face some serious troubles according to these institutions. Furthermore, the possibility for multinationals to put the Bolivian government on trial in order to obtain compensations for the losses due to the nationalisation could harm Morales administration. The United States have been more active in its reaction to Morales politics than the IFIs. It has cut off Bolivias preferential trade access to the US market recently, which could damage the Bolivian economy. Also cooperation in the field of drug eradication has been stopped and US involvement in supporting Bolivian opposition to Morales led to the ousting of both the Ambassadors. Regarding the third sub-question to what extent does the United States play a role the United States has always played an important role in catalysing IMF and World Bank policies, but during recent years it has used its influence more on the background. Bolivia certainly has some serious challenges to meet in the nearby future. The economy is highly volatile and dependent on the current hydrocarbons prices. It has indeed been able to pay its debt to the major IFIs it was also granted debt relief but if hydrocarbons prices will fall, a scenario where Bolivia will need new loans from the IMF and World Bank is possible. Moreover, economic losses due to the cancelled trade preferences to the United States could become an issue for Bolivia. Morales has expressed his hope on the possibility of new negotiations with the newly elected US

The term Washington Agenda is often preferred, since there was hardly any consensus on the austerity measures to be taken.

President Barack Obama. Although Mercosur stepped in as a potential buyer of Bolivian goods, it is still highly questionable how and if the new emerging alliances in Latin America can fill in the created emptiness left behind by the United States and the major international financial institutions. The recently signed contract with Repsol YPF may be a new best practice in which Bolivia remains in control of the hydrocarbons sector, but uses the knowledge and investment of experienced multinationals to exploit and sell the gas in such a way that the revenues can truly be equally divided. Therefore, it is necessary that the IMF, World Bank, IDB and the United States also revise their position and strategy toward Bolivia in order to prevent being irrelevant.

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Bolivias Relations with Latin-America: Changes under the presidency of Evo Morales
Jetske Hylkema

Abstract: This paper will investigate and examine Bolivias bilateral and multilateral relations with other Latin American countries. It will mainly focus on economic and political relations. It will look at the changes in these relations under the presidency of Evo Morales and the nationalisation of the hydrocarbons. Keywords: CAN, Mercosur, ALBA, Unasur, Bilateral relations, nationalisation, hydrocarbons

...mi nombre lo lleva un estado que tiene en su seno hombres amantes de la libertad, y entraas de oro y plata Simn Bolvar Bolivia with such richness, but also with such poverty. It is not about distributing poverty but about redistributing the richness. And to redistribute this richness we have the obligation to win it back, to nationalise it (Evo Morales cited in Pineda 2007, 158). The republic of Bolivia is a landlocked South American country sharing borders with Brazil, Argentina, Paraguay, Chile and Peru. In 2006, Evo Morales became president being the first indigenous president of the continent. His election programme focused on the nationalisation of the hydrocarbons and the redistribution of land, hoping that this would decrease the gap between poor and rich in one of the most polarized countries of the world and to contribute to the development of his country that is, although very rich in natural resources, the poorest country of South-America. In Changing international relations: Bolivias call for self-determination, Verbeek investigated the influence of Western actors on Bolivia in its policy-making and control of the hydrocarbons sector throughout the last two decades. This paper looks closer to home, namely LatinAmerica. There are different sounds that Latin-America is searching for a way to be self providing and less dependent on Western actors than it was during the glory days of neo-liberalism: I want to learn to eliminate the inequalities, to improve the destination of our people, to change the neo-liberal model for a dignified and sovereign Bolivia. The neo-liberal system is not the solution (Evo Morales cited in Pineda 2007, 33). The economic relation of Bolivia with other Latin-American countries has grown enormously starting from the mid-nineties; the imports have grown from thirty nine per cent in 1995 to fifty five per cent in 2008 and the exports from thirty six per cent in 1995 to sixty five per cent in 2008 (ALADI SICOEX). Bolivia has signed different agreements of economic complementation with Latin-American countries and is involved in three Latin-American organisations focusing on regional integration; Bolivia is full member of the Comunidad Andina de Naciones (Andean Community of Nations, CAN) and the Alternativa Bolivariana para las Amricas (Bolivarian Alternative for the Americas, ALBA) and associated member at the Mercado Comn del Sur (Southern Common Market, Mercosur). The nationalisation of the hydrocarbons has also influenced the diplomatic relations of Bolivia with Latin-American countries as the Brazilian state petrolera Petrobras was one of the transnational companies present in Bolivia. As seen in Verbeek his paper, neo-liberalism has not given the economic development to Bolivia as it hoped for. This paper looks at Bolivias bilateral and multilateral relations with LatinAmerica and the national resource policy under the presidency of Evo Morales. It investigates the changes in these relations and how these changes are manifested. To answer this question I will look at the economic and diplomatic relation of Bolivia with Chile, CAN, Mercosur, ALBA and Unasur. Can

Latin-America give Bolivia what it economically hopes for and is Evo Morales able to improve both the economical and political relations?

The relations with Chile

The commercial relation with Chile has always been unprofitable for Bolivia although Bolivia subscribed a partial tax agreement of economic complementation [AAP.CE.No 22] with Chile on 6 April 1993. In 2007 the Chilean exports to Bolivia represented 6.35 per cent of the total Bolivian imports while the Bolivian exports to Chile were fifty five million dollar, representing 1.23 per cent of the total Bolivian exports and 0.13 per cent of the Chilean imports (ALADI - SICOEX). The sea has distanced us from Chile, the sea has divided us and the sea has to unite us, the sea has to bring us together to find solutions (Evo Morales cited in Pineda 2007, 105). The formal relations between Chile and Bolivia reached a minimum after the War of the Pacific of 1879 19 (Pineda 2007, 98); there is representation at consul-general level. During this war Bolivia lost its coastal provinces, something that was confirmed with the formation of the Treaty of Peace and Friendship in 1904. For decades the fundamental objective of the Bolivian exterior politics was the maritime reintegration through a sovereign and useful access to the Pacific. Every year, on 23 March, Bolivia memorizes the loss of its access to the sea in el Da del Mar. The first step towards an improvement of the diplomatic relation was made with the presence of former Chilean president Ricardo Lagos at the inauguration of Evo Morales. This expression of good will was returned by Evo Morales who was present in Santiago when Michelle Bachelet took possession on 11 March 2006. Bachelet manifested that she wanted to solve this ancient problem but she left clear that she would not allow any type of political blackmailing from the side of Bolivia, referring to the referendum that was announced by the former Bolivian president Carlos Mesa who saw the utilisation of gas as a strategic resource to reach an access to the sea, something supported by eighty seven per cent of the Bolivian people but not by Evo Morales (Pineda 2007, 95, 108). For Chile putting sovereignty over the disputed area into question was not an option either because this would mean a modification of the 1904 Treaty and it would go against the principle of territorial integrity (Pineda 2007, 98,99, 103). Evo Morales requested the Organisation of American States (OAS) to help solving this problem; the OAS received its request but declared that it could only mediate because it was a conflict between two legitimate nations. In April 2006 the OAS announced that it would not act as a mediator. During the celebration of the IV summit meeting of the European Union (EU) and Latin America in Vienna in May 2006, Bachelet and Morales agreed to define a work programme to continue advancing towards an agreement of economic complementation in the frame of a bilateral dialogue without any exclusion. Starting from 17 July 2006, the conversations between the Bolivian and Chilean consuls to agree on the work agenda between the two countries initiated. The bi-national working agenda consists of thirteen points in which the maritime sovereignty is not included although the Chilean government expressed that it was willing to facilitate the Bolivian access to the Pacific Ocean (Pineda 2007, 104). The maritime reintegration of Bolivia is supported by Venezuela 20 , Cuba, Uruguay and Argentina (CEDIB, 21 November 2006). This support is rejected by Chile claiming that the issue is bilateral. Chile has a serious energy problem and is interested in Bolivias gas but so far no deals have been closed. Today, Bolivia is more interested than ever to sell natural gas to Chile because of a possible reduction of the purchase of Bolivian gas by Argentina and Brazil. However, the planning minister, Carlos Villegas, expressed that the maritime demand should be solved first (Bolpress, 12 January 2009). It seems that the expression gas in return for the sea is becoming a real option for both countries. Chile wanted to improve its relation with Peru as well after the election of Aln Garca as president in February 2006. In January 2008, Peru challenged the International Court of Justice over their maritime border with Chile. Both the improvement of the relationship between Chile and Peru
19 20

See chapter of Maalderink for more information about the War of the Pacific Hugo Chvez said in 2003 that he desired bathing in the Bolivian sea

and the Peruvian challenge has complicated the maritime dispute between Bolivia and Chile (Bolivia Info Forum). More information about the relation between Bolivia and Peru can be found in the following paragraph.

The relations with CAN

I sent a letter to president Chvez in which I asked him not to withdraw, and also to Toledo and Uribe so that they stop their negotiation about a FTA with the United States, because the FTA is destroying the CAN (Evo Morales cited in El Pas, 12 May 2006). The CAN was created through the Trujillo Protocol of 1997 that reformed the Cartagena Agreement of 1969 and giving more importance to economic integration. This Protocol formed also a free trade space, the Andean Custom Union and the Andean system of price volumes (IBCE CAN). All CAN member states, Colombia, Ecuador, Peru, and Bolivia, are rich in natural resources and the trade between these countries focuses mainly on agricultural products. The trade of Bolivia with Ecuador is insignificant because it was less than one per cent in 2007 (ALADI - SICOEX). Ecuador has negotiated a FTA with the US but so far without any result, also because of popular resistance. Peru is one of Bolivias most important commercial partners, although the import of Peruvian products was only 6.57 per cent of the total Bolivian imports of 2007 and the exports less than five per cent (ALADI - SICOEX). In 2004, a general treaty of integration and social economic cooperation for the conformation of a common market between Bolivia and Peru was signed (IBCE Tratado Bolivia Peru). On 12 April 2006, Peru signed a bilateral Free Trade Agreement (FTA) with the United States (US) that was implemented on 1 February 2009 (US Federal Register). Like Bolivia, Peru was involved in the War of the Pacific and lost it, but the Peruvian unwillingness to concede Bolivia access to the Pacific Ocean hinders the relationship. In 2002, Peru offered Bolivia an alternative route for its gas exports but this project has been put on hold. This project included the building of a pipeline to connect the Tarija department with the Pacific coast of Peru. Peru and Bolivia are also rivals in the sale of natural gas; Peru has plans to export natural gas to Chile and Argentina and to build a pipeline to Chile. During the first months of his presidency, Peruvian president Aln Garca expressed his wish to improve the relations with Chile which further complicates the Bolivian relation with both Chile and Peru (Bolivia Info Forum). The principal Bolivian products exported to Colombia in 2007 were different types of soy products, different types of oil and different types of beans. In 2007, the exportations of the Bolivian products destined to the Colombian market, were little less than 154 million dollars; this meant a perceptual participation of Bolivia in the Colombian market of 0.47 per cent. (IBCE 005/2008 2008, 15). In November 2006, Colombia signed a FTA with the US This agreement has been renegotiated by the US government and has not yet been ratified. This FTA puts Bolivian exports in danger, especially soy products. It could endanger some 1,700 million dollars annually and some 200 million dollars being supplied to the country, as well putting in danger some 200,000 direct and indirect jobs in the sector (Pineda 2007, 52). The tribunal of the CAN announced a judgement in which it found Colombia guilty of breach of contract and to abstain of emitting new restrictive measures. It authorized the member countries to internally repair the occasioned damages and losses. The Colombian government has not emitted a revoking regulation yet (Riva Arena 2008, 16).

Table 1: total CAN, Mercosur and Latin-American imports of Bolivia from 1995 to 2008 (ALADISICOEX)

Table 2: total Bolivian exports to CAN, Mercosur and Latin-America from 1995 to 2008 (ALADISICOEX)

As table 1 and 2 show, the CAN used to be the main economic bloc for the Bolivian exports between 1995 and 2001 and from that year on, the Bolivian exports to the CAN member states have only decreased. The Bolivian imports from the CAN have only slightly increased between 1995 and 2008 (ALADI - SICOEX). A social face was given to the CAN in 2003 by the establishment of the Plan Integral de Desarrollo Social (Integral Social Development Plan) that resulted in the project Accin con la Sociedad Civil para la Integracin Regional Andina (Action with Civil Society for Regional Andean Integration, SOCICAN) that started in July 2008 (CAN Cronologia por fechas). In 2007 the member states declared in Tarija, Bolivia that: it is necessary to develop and deepen the Andean Community integration process by taking more effective account of the visions and approaches of the Member Countries, in order to achieve unity within our diversity to serve our peoples wellbeing and our harmony with nature. It is necessary to forge a comprehensive integration movement in which social, cultural, economic, environmental and trade aspects are in better balance (CAN brief history). Despite this positive intention, the CAN is currently living a political crisis between its members after the withdrawal of Venezuela in 2006 and the FTAs of Peru and Colombia with the US At the IV summit meeting between the EU and Latin-America in Vienna in May 2006, the possibility of an association agreement of the CAN with the EU was negotiated but the EU decided to take a step back

and to wait for a better opportunity in the future (El Pas 12 May 2006). On 14 October 2008, the Andean Community presidents held a summit in which they agreed to ask the EU for a new meeting in order to salvage the negotiations between the two blocs (CAN, 14 October 2008). Bolivia opposed to the inclusion of themes like the intellectual property, the use of basic services and to some of the demands of the EU to enter the Andean markets (El Pas, 15 November 2008). As a result of this, the EU commissioner for external relations, Benita Ferreo Waldnef, decided that it would only negotiate a FTA with Peru and Colombia (ABI, 12 November 2008) and not a bloc-to-bloc negotiation, which would go against the Andean decision number 667 to maintain the bloc for an associative and commercial agreement with the EU Ecuador has also requested the EU to negotiate a bilateral agreement. Although it has not been the intention of the EU to ruin the CAN, or to divide it; according to the Bolivian vice minister on trade, Pablo Gzman, the EU has left the CAN in a coma (El Pas, 15 November 2008).

The relations with Mercosur

Mercosur was established on 26 March 1991 by Argentina, Brazil, Paraguay and Uruguay with the purpose of increasing regional economic cooperation. Mercosur is the principal economic trade bloc of Bolivia representing fifty per cent of the Bolivian exports and forty per cent of its imports as table 1 and 2 clearly show. In February 1997, Bolivia became an associate member of Mercosur when it subscribed an agreement of partial tax and economic complementation with Mercosur [ACE 36]. After signing the ACE 36, the imports have increased with almost 1.500 per cent and the exports with 400 per cent. According to the International Monetary Fund (IMF), the bloc is the sixth economy in the world after the US, the EU, China, Japan and India (Menacho Ardaya 2007, 7). Table 3: dimension of Mercosur in contrast with Bolivia (ALADI-SICOEX)
Mercosur 2006 GNP: 1 billion dollars Population: 236 million inhabitants Exports: 190,000 million dollars Imports: 141,000 million dollars Bolivia 2006 GNP: Population: Exports: Imports: 10,2 million dollars 9,6 million inhabitants 4,079 million dollars 2,821 million dollars % 1.02 4.06 2.15 2.00

Table 3 clearly shows that the size of Bolivia in GNP, population, exports and imports is very small in comparison to Mercosur. Bolivias most important export partners of Mercosur are Brazil and Argentina; the Bolivian relation with these countries will be extensively described below. The commercial relations with Paraguay and Uruguay is insignificant. Nonetheless, the Chaco war of 1932-1935 between Bolivia and Paraguay has had its influence on the diplomatic relation between these countries 21 .

Brazil occupies the status of most important commercial partner of Bolivia in both import and export. The commercial relation between Bolivia and Brazil has been growing starting from 1995. Especially the export of Bolivian products to Brazil has grown enormously from less than three per cent in 1995 to little more than forty two per cent in 2008 (ALADI - SICOEX). This growth is mainly due to the export of gas; in 2007 Brazil imported seventy five per cent of the total Bolivian gas production (IMF 2008, 7). In 1992, the Brazilian state petrol company Petrobras signed a preliminary contract with the Bolivian petrol company Yacimientos Petrolferos Fiscales Bolivianos (YPFB), to participate in the exploration and exploitation of hydrocarbons. In 1996, Petrobras and YPFB signed a contract for the sale of natural gas from Bolivia to Brazil; this contract had a duration of twenty years and established

More extent information on the Chaco war can be found in the chapter of Maalderink

a maximum of thirty millions of cubic meters/day. In 1997, YPFB was capitalised 22 . Together with his partners, Petrobras has invested more than 1.600 million dollars in Bolivia between 1996 and 2006, equivalent to eighteen per cent of the Bolivian GNP. These investments included the construction of a pipeline to transport gas from Santa Cruz to Sao Paulo. This pipeline is the longest in the region with a total length of more than 3000 kilometres (Cerutti & Mansilla 2008, 7). The president of Petrobras, Sergio Gabrielli, said that the nationalisation of the hydrocarbons, which was announced on 1 May 2006, was a unilateral and unfriendly decision that could lead to dramatic situations (El Pas 3 May 2006). He also announced that Petrobras was willing to go to the international arbitrage in New York to defend the Brazilian interests. The Brazilian president Luiz Incio Lula da Silva publicly manifested that Bolivia had the sovereign right to be in charge of their resources and he was willing to negotiate about the gas prices and a compensation for Petrobras, but the decision of Evo Morales to send military troops to the installations of Petrobras caused tension between the two countries. Argentina, Bolivia, Brazil and Venezuela met on 5 May 2006 to discuss the nationalisation of hydrocarbons; Morales guaranteed the deliverance of gas to Argentina and Brazil while Argentina, Venezuela and Brazil agreed to invest together in the development of Bolivia (El Pas, 4 May 2006). According to Petrobras, this meeting created better conditions for a more technical and business negotiation (El Pas, 7 May 2006). A few days later, the negotiations between the Bolivian and Brazilian government started but with no immediate result; on 15 June 2006 Petrobras, Repsol YPF and Total announced that they wanted international arbitrage. The Bolivian army responded by saying that it would expel the companies appealing but that it would refine the nationalisation decree (El Pas, 15 June 2006). At the end of October 2006, the new contracts between Bolivia and the petrol companies were signed. The contract between Petrobras and YPFB included a price fixation every three months (YPFB 2008, 122). There are various rumours that Lula da Silvas diplomacy and willingness was the key factor to the success of these negotiations; he feels connected to Evo Morales because they both have been union leaders before they became president. According to the Spanish newspaper El Pas and the Bolivian press agency Bolpress, the Brazilian government decided half January 2009 to reduce the Bolivian gas imports to the minimum amount possible of nineteen million cubic meters/day instead of the thirty one million cubic meters/day that it imported earlier, because Brazil did not need that much gas anymore and also because of the financial crisis that is affecting the country (El Pas, 14 January 2009). After negotiation between the two governments, Brazil decided to decrease the import to twenty four million cubic meters/day (Bolpress, 8 January 2009). However, according to YPFB, Lula da Silva announced on 16 January 2009 that Petrobras would invest around 1,100 million dollars in the Bolivian gas production and that the big differences between the two countries during the nationalisation process was consolidating in a very positive form...Evo has been honest to his word that Brazil would never lack gas and therefore I [Lula da Silva] say that this richness of the Bolivian people will never lack Brazilian investments (Lula da Silva cited in YPFB, 16 January 2009). Whether the information about a decrease in the Brazilian import of Bolivian gas is true or not, it shows the Bolivian dependence from Brazil and its vulnerability.

Argentina is the second most important Latin-American partner of Bolivia in both exports and imports; the Bolivian exports to Argentina represented almost nine per cent of the total Bolivian exports in 2007 while the Bolivian import from Argentinean products was seventeen per cent of the total Bolivian exports (ALADI - SICOEX). The commercial relation between Bolivia and Argentina is given in the context of Mercosur through the agreement of economic complementation of 1996.


For further information see previous chapter of Verbeek

Table 4: The commercial relation of Bolivia with Argentina (ALADI-IBCE)
Amount of gas Million US$ 68,4 186,6 243,3 83,6 % 49,4 69,3 75,4 71,4 Amount of other goods Million US$ 70,2 82,7 79,3 33,6 % 50,6 30,7 24,6 28,7 Total exports of Bolivia to Argentina Million US$ 138,6 269,2 322,6 117,2 % 100,0 100,0 100,0 100,0

2004 2005 2006 January-June 2007

The commerce between Argentina and Bolivia duplicated between 2004 and 2007, as table 4 clearly shows, and has been growing at both sides although this commercial expansion is mainly due to the augmentation of the prices, not the volume of the products. Natural gas accounts over seventy per cent of the Bolivian imports to Argentina (Gonzlez 2008, 8). In 2006, YPFB signed an agreement with the Argentinean energy company Energa Argentina S.A.(ENARSA) with a duration of twenty years starting from 1 January 2007 and an initial volume of 7.7 million cubic meters/day for the first two years; starting from 2010 this volume would increase to 27.7 million cubic meters/day (YPFB 2008, 127). This contract will provide Bolivia to receive around 17,000 million dollars. Because a different formula is used to calculate the gas price, Argentina pays more for the Bolivian gas than Brazil (YPFB 2008, 128). A major investment as a consequence of this agreement includes the construction of the North-eastern pipeline which will cost around 2,500 billion dollars on both sides of the border, most of it in Argentina (Cerutti & Mansilla 2008, 9). On 10 August 2007, Argentina, Venezuela and Bolivia signed the act of Tarija that consolidates the sub regional energy integration through subscribing different agreements that guarantee an inversion of 1,120 million dollars for projects focusing on the exploration and industrialisation of hydrocarbons (YPFB 2008, 22). According to Bolpress, Argentina announced also that it wanted to reduce its daily demand from six million cubic meters/day to 1.8 million cubic meters/day (Bolpress, 6 January 2009). This seems very strange because the contract guarantees a minimum of sixty per cent of the initial volume during the first two years and hundred per cent of the initial volume during the third year which would be 2009 (YPFB 2008, 129). Information about the Argentinean decision to decrease the Bolivian gas import can neither be found at YPFB nor at ENARSA.

The examples of Argentina and Bolivia show that if there would have been no gas, the commercial relation of Bolivia with Mercosur would have been unprofitable because of the 2,203 million dollars exported by Bolivia to Mercosur, 1,983 million was natural gas (Menacho Ardaya 2008, 8). The sales of non-traditional Bolivian products with zero tax towards Mercosur have decreased while in the contrary the entry of products with zero or partially benefits of products coming from Mercosur to the Bolivian market has been constantly growing (Vilaseca Gonzles 2007, 4). However, Bolivia believes that full membership of Mercosur would benefit the country because in December 2006, one year after Venezuela, Bolivia applied formally for admission to Mercosur as a full member. Unlike Venezuela, Bolivia does not intend leaving the CAN. Neither the Treaty of Asuncin, the constitutive agreement of Mercosur, nor the Cartagena Agreement has any restriction to the participation of countries that already belong to another bloc of regional integration or to participate in other blocs (Menacho Ardaya 2007, 7). When applying for its adhesion to Mercosur, Bolivia requested a special treatment, different from the agreement granted to the smaller member countries Paraguay and Uruguay because Mercosur did not give these countries what they commercially had hoped for; they have openly manifested their discontent towards Mercosur (Menacho Ardaya 2007, 8). The president of the Cmara Nacional de Despachantes de Aduana de Bolivia (CNDA), Juan Carlos Vilaseca Gonzles, fears a full membership of Bolivia at Mercosur: ...we should also consider that Mercosur, as a huge authority in the field of agriculture and agro industry, given its closeness, is a threat to the Bolivian agricultural sector that is the

fundamental pillar of our non-traditional products...from the other side it should be considered that although there are no restrictions for Bolivia to be a full member in both blocs [Mercosur and CAN], the possible integration of Bolivia as a full member of Mercosur, could leave her to lose its full membership at CAN except if the common external tax of both blocs would be similar or compatible... (Vilaseca Gonzles 2007, 4-5). The adhesion of Bolivia in Mercosur is still in the negotiation phase. However, Mercosur decided to purchase Bolivian products in preferential conditions as some kind of substitution of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) from which Bolivia was suspended on 15 December 2008 (Presidencia de la Repblica de Bolivia, 15 January 2009).

The relations with ALBA

There have been several agreements between Bolivia and Cuba focused on commerce and economic integration, the first was the agreement of partial taxation number 34 that was celebrated in the protection of the treaty of Montevideo between Bolivia and Cuba. When Cuba became a member again of the Asociacion Latinoamericana de Integracin (ALADI) in August 1999, this derived in the necessity of renegotiating the agreed preferences between both countries which resulted in the signing of the partial taxation agreement of economic complementation of 22 August 2001 [AAP.CE.47] (Menacho Ardaya 2008, 14). Nevertheless the commercial balance between Bolivia and Cuba has only been unprofitable and could be defined as insignificant as it has been little more than 0.0 per cent of the total Bolivian imports and exports between 1995 and 2008 (ALADI SICOEX). I am impressed to see how a country [Cuba] that is economically blocked by the empire, practices solidarity, and not only with Bolivia (Evo Morales cited in Pineda 2007, 113-114). The diplomatic relation between the two countries seems good because Cuba was the first country visited by Evo Morales when elected president. Both countries signed a cooperation agreement in January 2006 focused on education and health. According to this agreement, the people of Cuba recognized that both he [Evo Morales] and his people, one of the poorest and most exploited in the hemisphere, are facing new and enormous challenges which call for the greatest possible solidarity from both Latin America and the world. This agreement expresses as well that both nations are resolved to fight for the unity and integration of the brotherly peoples of Latin America and the Caribbean and for peace and friendship among all peoples of the world (CUBAMINREX). One of the agreements was that Cuba would provide Bolivia with know-how, teaching materials and technical facilities for a literacy programme that covers the entire population. On 20 December 2008, thirty months after it started the literacy programme, Bolivia announced that it was the third Latin-American country, after Cuba and Venezuela, which was free of illiteracy.

In the year 2007, the exports of the Bolivian products destined to the Venezuelan market were little more than 242 million dollars; Bolivia contributed to only 0.58 per cent of the Venezuelan market. On 22 April 2006, Venezuela retired the Cartagena Agreement before the Commission of the Andean community adducing that the free trade zones of Colombia and Peru with the US were killing the CAN. As a consequence, Venezuela was obligated to maintain the derivate preferences of the zone of the Andean free commerce for a period of five years although it negotiated a less long period (IBCE 004/2008 2008, 1-7). The diplomatic relation between Bolivia and Venezuela is very good and from the first moment Evo Morales feels very close with both Hugo Chvez and Fidel Castro as both countries manifested their immediate support, especially in the field of health and education, to Bolivia in

defence of the change in the country (Pineda 2007, 111). In the years 2006 and 2007, Bolivia and Venezuela have signed various agreements of cooperation, conventions and declarations including the agreement on energetic cooperation, memorandum of understanding between the Ministry of Basic Industries and Mining of Venezuela and the Ministry of Mining and Metallurgy of Bolivia (IBCE 004/2008 2008, 8). The involvement of Venezuela in Bolivias nationalisation process has been criticized by different persons including Petrobras president Sergio Gabrielli and Brazilian minister of mines and energy Silas Rondeau (El Pas, 11 May 2006). The Spanish Popular Party also accused Venezuela to have urged Bolivia to nationalise its hydrocarbons, something heavily denied by the Venezuelan government because Evo Morales was chosen democratically as a result of the rise of popular movements claiming the sovereignty over the natural resources (El Pas, 20 May 2006).

On 14 December 2004, Venezuela and Cuba signed ALBA as an alternative to the Free Trade Area of the Americas (FTAA). Bolivia joined the ALBA on 29 April 2006, followed by Nicaragua in January 2007 and Honduras in August 2008. With the occasion of the adhesion of Bolivia to the ALBA, Bolivia signed the Tratado Commercial de los Pueblos (TCP) to improve the commercial relation with Cuba and Venezuela introducing aspects in the commercial integration like solidarity, reciprocity, prosperity and respect to the sovereignty of the countries. The TCP limits and regulates the rights of foreign and transnational investors under the motto socios y no dueos. Cuba and Venezuela also guaranteed to purchase Bolivian products that it cannot sell anymore to its commercial partners due to a FTA with the US or European governments (IBCE TCP). In 2008, the commercial relation of Bolivia with the ALBA members resulted in a positive balance of 8.5 million dollars (IBCE, 24 December 2008). The technical director of the Instituto Boliviano de Comercio Exterior (IBCE), engineer Limberg A. Menacho Ardaya, said the following about the TCP: [...]what can be observed after almost two years of the enforcement of the TCP is that the hoped commercial benefits have not been reported except in interconnected aspects of cooperation. It should be mentioned that Cuba has a very reduced market with little power of purchasing [...] above that the Cuban state is a natural importer. With regard to Venezuela, the promised resources to this country [Bolivia] like cooperation have had a modest application [...] Above that [...]Venezuela imposes obstructions to the Bolivian exports that are contradictory with the objectives pursued by the TCP (Menacho Ardaya 2008, 15). On 22 April 2008, the ALBA member states came together in an extraordinary summit in which an agreement was signed to fight the alimentary crisis in Bolivia and a document in which they expressed their support to Evo Morales: [...]this has been a special occasion to ratify our unconditional support to the president Evo Morales Ayma and his government in the efforts that they realize to overcome the fluid plans and to continue guiding the process of historic transformation of Bolivia in peace and democracy (El Pas, 23 April 2008).

The relation with Unasur

The Unin Suramericana de Naciones (Union of South American Nations, Unasur) originates from the Comunidad Sudamericana de Naciones; a community set up by Mercosur and CAN in order to establish a free trade zone that involved Chile, Suriname and Guyana as well. All twelve countries signed a treaty during a summit in Brazil that created the Unasur, a regional body focusing on economic and political integration. Because of tensions between member states, it is difficult to create

a strong institution (BBC, 23 May 2008). On 15 September 2008, Unasur declared unanimously that it fully and decisively supported the constitutional government of Evo Morales after the massacre that occurred in the department of Pando (ABN, 15 September 2008).

Evo Morales election is in some way comparable to the election of Obama because both persons represent a change from old politics; Evo for being the first indigenous president of Latin-America and Obama for being the first black president of the United States. Therefore it could be said that they do not only represent change but they are change itself. The election of Evo Morales has opened doors that used to be closed but during his presidency doors were also closed that used to be open. Bolivias diplomatic relations with most Latin-American countries are good and have improved during his presidency. This essay has investigated and examined the bilateral and multilateral economic and political relations of Bolivia with Latin-American countries and institutions with a focus on Chile, CAN, Mercosur and ALBA. The economic relations of Bolivia with the above mentioned countries and institutions are historically deficit and this has not improved during the presidency of Morales. This negative balance is unexpected because Bolivia has subscribed various agreements of economic complementation with these countries. Only the commercial relation with ALBA resulted in a slightly positive balance in 2008. The relationship with Chile has improved under the presidency of Morales and Bachelet, mostly in the diplomatic field although the commercial relations are improving as well; a work agenda to develop the economic relations started in 2006 and has also opened a dialogue on the Bolivian access to the Pacific Ocean; something desired by Bolivia for decades and which would give the South-American country the possibility to better access to other markets. This relationship is threatened however, by the relationship its neighbouring country Peru has with Chile; Peru is also interested in exporting natural gas to Chile and Argentine. Due to Chiles hunger for energy and a possible loss of the Argentinean and Brazilian imports of Bolivian gas, the expression gas in turn of the sea is becoming a real option for both countries. The CAN seems nearly dead after the withdrawal of Venezuela in 2006 and the FTAs of Peru and Colombia with the United States. The negotiations of the CAN with the EU have ended of being a bloc-to-bloc negotiation and resulted in bilateral negotiations of the EU with Colombia and Peru. The CAN is really important to Bolivia because the trade between its members focuses on agricultural products and although Bolivia has applied for full membership at Mercosur, it does not intend to leave the CAN. Bolivia has strong commercial relations with Argentina and Brazil, due to its deliverance of natural gas. This relationship is interdependent but this essay has also shown Bolivias dependence of the Argentinean and Brazilian gas market and its vulnerability in this field. The commercial relations with Argentina and Brazil would be deficit if there would not be natural gas because most of the Bolivian exports to these countries consist of gas. The diplomacy and willingness of Lula da Silva has been a key factor in the negotiations of Bolivia with the Brazilian state petrolera Petrobras. Bolivia has negotiated the gas prices with Brazil and Argentina and receives more money for its gas than it did before the nationalisation of its hydrocarbons. The Mercosur means a real threat to the production of agricultural products because of its size in comparison to Bolivia. Also, the examples of Paraguay and Uruguay have shown that smaller countries do not profit that much from one of the most important economic blocs of the world. Evo Morales closest allies are Cuba and Venezuela; both countries immediately supported him and his country especially in the field of education and health and have given Morales the opportunity to declare his country free of illiteracy in December 2008. This special relation has been formalised with the subscription of the TCP and Bolivias adhesion to the ALBA. The ALBA claims to be an alternative to the FTAA with a focus on solidarity and cooperation but has not given yet to Bolivia what it commercially hoped for.

This essay has also demonstrated that Bolivias position and its underdevelopment in the production of goods and services makes its vulnerable and one step behind its neighbour countries. Only the future knows if Evo Morales is capable to run hard enough to decrease this distance but the CAN, Mercosur and ALBA are all tripping Bolivia up and giving running shoes to Bolivia at the same time.

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Estratega Boliviana de Hidrocarburos (accessed 9 January 2009) Yacimientos Petrolferos Fiscales Bolivianos (YPFB) (16 January 2009) Petrobras invertir US$ 1.100M en Bolivia (accessed 30 January 2009)



The Legacy of the Water War in Cochabamba

Janine Strijdonck

Abstract: This chapter demonstrates that the direct outcome of the water war of Cochabamba in 2000 can be called a turning point for Bolivia in three different ways. The water war is not only a revolt against the privatisation of the water supply system, but it can also be seen as resistance against and a victory over the neoliberal policies that the government promoted, pacted democracy, and the marginalisation of the indigenous inhabitants of Bolivia. Although the direct outcome of the water war was indeed a major national achievement, this chapter will furthermore analyse whether the water war also represents a turning point for the population of Cochabamba and Bolivia in the long term. Keywords: water war, Cochabamba, Coordinadora, popular resistance, SEMAPA

An international symbol of popular resistance

In February 2000 Jim Shultz, executive director of the Democracy Center 23 , published his first news item about the popular resistance against the rise of water prices in Cochabamba. In September 1999 the citys public water supply system had been sold by the Bolivian government to a private company, named Aguas del Tunari. When in January 2000 the first water bills reached the population of Cochabamba Schultz pointed out that Cochabambinos, who had paid scant attention to the deal when it was being worked out behind closed doors, were sent into shock and into action (Shultz, 4 February 2000). On February 4 a peaceful march was organised in the city centre which was countered with teargas by the police. Schultz lived and worked in Cochabamba at that time and was able to report the events he witnessed with his own eyes. He stresses that a diverse range of people took part in the march. Poor people, but also people who can be counted to the middle class participated, young and old, and not only urban population but also people from rural towns joined the march (Shultz, 4 February 2000). Shultz made it his goal to inform the world about the so-called water war and his news items were published in newspapers in the United States and Canada and even circulated around the world through internet (Albro 2005, 257). Shultz was one of the many reporters who placed the water war in an international spotlight. The water war received ample international attention in newspapers and when the water war ended with the withdrawal of Aguas del Tunari it became the first victory against privatisation in Bolivia and an international symbol for anti-globalisation activism (Albro 2005, 252-253). Or as Shultz stresses The Bolivian water revolt had become an international symbol of popular resistance to global economic rules imposed from above (Shultz 2003, 35). After the water war Oscar Olivera, the leader of the Coordinadora, a coalition of diverse social movements, became the international representative of the popular resistance. He held speeches in the United States and Canada about the water war, and how it is an example of resistance by ordinary people against globalisation and the policies of the World Bank and the International Monetary Fund (IMF). Olivera even received awards, among which

The Democracy Center is located in Cochabamba, Bolivia and has as goal to advance social justice.

the Letelier-Moffit prize from the Institute for Policy Studies in Washington, DC, for the grassroots hero of the year because of his resistance against the neo-liberal policies of the World Bank and the IMF (Albro 2005, 259). The short presentation of the water war presented above indicates that the water war was not just another ordinary public resistance, but that it was the first successful resistance against privatisation in Bolivia and represents an important victory in the international resistance against the policies of the World Bank and the IMF. The purpose of this chapter is to analyse the actual meaning of the water war for the population of Cochabamba and Bolivia. This analysis is important because it presents a study of the way in which the water war has led to changes in society and power relations within Bolivia and in Bolivias new natural resource politics. It thus discusses the meaning of the new natural resource politics in Bolivia from a specific perspective. The main question that will be answered in this chapter is: to what extent is the water war a significant turning point for the population of Cochabamba and the population of Bolivia in general, and to what extent did the water war influence the new natural resource policy of Bolivia? I will discuss the significance of the direct outcome of the water war, but to give a thorough answer to the main question, it is also necessary to analyse the significance of the water war in the long term. Therefore the evaluation of the functioning of the water supply system of Cochabamba after the water war and an evaluation of Bolivias constitution with regard to national water policies are important. Also, the extent to which the water war had meaning with regard to other issues then water management and water policy are important within this context. By not only analysing the direct outcome of the water war, but also discussing the long term influence of the water war, I believe this chapter gives a more complete view on changes in society and power relations in Bolivia, and more specifically with regard to Bolivias natural resource politics. The first paragraph of the chapter gives a description of the main actors and main events of the water war. The second paragraph analyses the way in which the water war represents a turning point and can be seen as an act of resistance against and a victory over firstly the neo-liberal policies of the government, secondly pacted democracy and thirdly, the marginalisation of the indigenous peoples of Bolivia. In the third paragraph the functioning of an alternative water supply service, which has managed the water facilities in Cochabamba after the water war, is discussed. Furthermore an analysis of Bolivias new constitution gives insight into the question whether the vision on water and water management in Bolivia has changed. In paragraph four the influence of the water war on issues that are not about water, are discussed. First this section pays attention to the meaning of the water war for popular resistance against the export of gas in Bolivia. Secondly the meaning of the water war in relation to social change and changes of power relations in Bolivia in general is discussed. The conclusion is a final discussion of what the legacy of the water war is and to what extent this is a significant turning point for Bolivia.

A new form of organisation around water

The most important actor in the water war in Cochabamba is the Coordinadora por la Defensa del Agua y de la Vida (the coalition for the defence of water and life, the Coordinadora), which can be said to be a new form of organisation of citizens in the public space. It was founded in December 1999 by various organisations and social movements. The two most significant organisations were the Federacin Departamental Cochabambina de Organizaciones de Regantes (Cochabamba Department Federation of Irrigators Organisations, FEDECOR), which was founded in 1996 and is the organisation that defends the interests of the irrigators of Cochabamba (Albro 2005, 250) and the local trade union, the Federacin Departamental de Trabajadores Fabriles de Cochabamba (Departmental Federation of Factory Workers of Cochabamba, FDTFC). Phillipp Terhorst, PhD candidate at the Water Engineering Development Centre in the United Kingdom, calls the Coordinadora a social movement coalition, because various organisations and social movements are part of it. The Coordinadora was no legal organisation, because the organisation was not recognised by law. Furthermore it was not connected to a political party or a particular ideology. It functioned through open assemblies (cabildos) and general assemblies (Terhorst 2003, 61).

The water war started in January 2000, when after the privatization of the municipal water supply system Servicio Municipal de Agua Potable y Alcanterillado (Municipal Potable Water and Sewerage Service, SEMAPA) in 1999, the water bills of the urban population started to rise. In September 1999 the company Aguas del Tunari, a subsidiary of Bechtel Corporation, an American construction company, became the owner of the water supply system in Cochabamba after the Bolivian government signed a contract with the company (Albro 2005, 250). The Coordinadora organised a meeting about the privatisation and the rate increases, which was attended by the above mentioned organisations, but also by citizens and academics. This meeting led to the agreement to block the main roads leading to the city, thus making all economic activity impossible (Assies 2003, 24). According to Shultz the blockades lasted for three days and the whole city was shut down. Not only the main roads were made impassable, but also the airport was closed (Shultz 2003, 34). The Andean expert John Crabtree explains that roadblocks are an important method of protest in Bolivia, because of the countrys geography of relatively few major roads and the long distances between cities, a few strategically situated roadblocks can bring transport and commerce to a standstill (Crabtree 2005, 12). Negotiations between representatives of the government, the Coordinadora and the Civic Committee, which can be regarded as a representative of the business sector and notables (Assies & Salman 2003, 27), started in January and led to an agreement that the government would review the water rates. But the government did not review the water rates and negotiations continued on 4 February. A new proposal of the government gave the private water company the permission to carry through a rate increase of 20 per cent. This proposal was not accepted by the people and initiated a second wave of street protests which was repressed with violence by special police force. On 5 February a new agreement was signed by representatives of the government, the Coordinadora and Civic Committee. Besides the agreement, the results of one and a half day of protest were 70 wounded civilians, 51 wounded policemen and 172 arrests (Assies 2003, 25-26). The absence of street protests and blockades lasted for a month. The agreement of February included further negotiations between the various parties about modifications to the law which had made the privatisation of the water supply system in Cochabamba legal and about the appointment of a commission of representatives from the various parties, which would revise the contract of the private water company. Because the parties could not work together properly and accused each other of delaying the process and not co-operating, tensions increased. Since the end of February the Coordinadora stopped attending the meetings about the revision of the technical aspects of the contract with the private company and in March the Coordinadora announced a third round of street protests which would start in April if the government did not came up with a solid proposal before 3 March (Assies 2003, 27-28). By this time the demands of the Coordinadora did not focus anymore on limitation of the rate increases but demanded the cancellation of the contract with Agua del Tunari and demanded a new water law (Shultz 2003, 34). This third period of protests and violence began on 4 April. This time people mobilised not only within the city, but also in other parts of the country people went on the streets to protest. Important to highlight is the heterogeneity of the mobilisation. People and organisations united around the water issue, but had different motivations. The urban population resisted the price hikes, while farmers resisted the contract with the private water company, because the farmers would lose the ownership over their own wells. In this third period of protest even more people joined the crowds. Also the urban middle class joined, stimulated by the amount of violence used by the government (Crabtree 2005, 24-28). At the outbreak of the third mobilisation, the government declared a state of siege and the military was sent to get the situation under control (Crabtree 2005, 24). The government tried to downplay the situation, but the people did not back off because of the repression. Then the government agreed to new negotiations which would be led by Cochabambas Catholic archbishop (Shultz 20003, 35). The outcome was the withdrawal of the contract with Aguas del Tunari. The water supply service came back in the hands of the municipality, but its users received influence on the management of the service. Furthermore the national water law which had made the contract with Aguas del Tunari possible was amended. The new law included the recognition of indigenous collective water rights (Postero 2006, 196). This description has explained the course of the water war

and the success of the popular resistance. This information is significant for the analysis of the meaning of the water war for the population of Cochabamba and Bolivia.

The deeper significance of the water war

Now I will analyse whether the direct outcome of the water war might be called a turning point for the population of Bolivia. First of all I will discuss the resistance against the privatisation of the water supply system into depth and analyse the meaning of the antipathy with regard to privatisation. The privatisation of the water supply system in the city of Cochabamba was made possible through Ley 2029 de Servicios de Agua Potable y Alcantarillado Sanitario (Law 2029 of Potable Water and Sewerage Services) which was introduced in October 1999. The law had been passed through Congress without any consultation of the Bolivian people (Laurie, Andolina & Radcliffe 2002, 258). The anthropologist Willem Assies argues that the law was not in the best interest of the citizens of Cochabamba. In this law it was stated that institutions could get the concessions to supply the drinking water in an area if the area had more than 10,000 inhabitants and the water system would be financially self-sustaining. Although it did not state what kind of institution could apply for the concession rights, the requirements favoured large private enterprises. Also, the institution would acquire the right to supply the water in the whole area and would be the owner of all water in the area. This means that also the water in the self-made wells of the farmers surrounding the city of Cochabamba, would be property of the institution and that every drop of rain belonged to the company which had the concessions (Assies 2003, 17). Robert Albro stresses that not only the farmers had private wells, but that also rural and peripheral communities often had their own community-based water resources which the participating families paid, constructed and maintained themselves. All water resources would belong, in the case of Cochabamba, to Aguas del Tunari and the company would have a monopoly over all the water resources (Albro 2005, 250). Also important is that the law legalised price increases, without a maximum percentage increase of the price of water. According to the law, the company had to comply with a range of criteria, such as transparency and redistribution, but the law also stated that financial sufficiency had to be given priority over all other criteria when there would be conflict between the criteria. In this way the law guaranteed that the institution could not have a negative account. A last point made by Assies is that users, communities, local organisations and municipalities could not have any influence on the institution, because its functioning would be judged by a superintendency, which is a national institute, existing of representatives chosen by the Senate and the President (Assies 2003, 18). Although Assies agues that the new law was not in the best interest of the citizens of Cochabamba, the World Bank pronounced her support for this new law and specifically praised the decision that the water tariffs be adapted to the costs of the services. Furthermore the World Bank supported the law because concessions could not only be rewarded to municipal water utilities but also to cooperatives and private companies. This meant that a municipal water utility had to comply with the standards set in the law, otherwise it would be replaced by a cooperative or a private company. The decision to award the concession rights did now longer depend on local politics, but on the standards set out in the new law (World Bank 1999, 141-142). The World Bank report paid special attention to the privatisation of the water supply services in Cochabamba. The World Bank summed up the costs Aguas del Tunari would have and recognised that the company had to make a huge investment. Furthermore the report predicted that the farmers probably did not want to pay for their irrigation water and that the rates for water would increase sharply. Still the World Bank concluded its analysis by stating that the consumers just had to comply even if political pressure was necessary. It fully supported the decision of the Bolivian government to give no subsidies (World Bank 1999, 152). The support of the World Bank for law 2029 and the privatisation of the water facilities in Cochabamba can be explained by the policies the World Bank promoted. Since the early 1980s, privatisation has been one of the neo-liberal policies the World Bank promotes together with the IMF in developing countries such as Bolivia. Privatisation was part of the Structural Adjustment Programs, programmes that a government had to follow to acquire loans to pay of their debts (Barlow

& Clarke 2002, 156). Governments were obliged to take part in global free trade and reduce their public spending on health, education and social services and privatise state enterprises such as water facilities (Barlow & Clarke 2002, 175) (Consult the chapter of B.J. Verbeek for more general information about neo-liberal policies of Bolivias governments, the World Bank and the IMF). Maude Barlow and Tony Clarke even state that in 1998, the World Bank notified the Bolivian government that it would refuse to guarantee a US$25 million loan to refinance water services in the city of Cochabamba unless the local government sold its public water utility to the private sector and passed on the costs to the consumers (Barlow & Clarke 2002, 154). This indicates that by praising the Bolivian government for their new law and the privatisation of the water utility in Cochabamba in the report of 1999, what the World Bank really did, was praising its own compelling recommendations. The outcome of the water war thus does not only represent a victory over privatisation. Because privatisation is part of a neo-liberal ideology, the outcome might be regarded as a victory over neo-liberal policies.

Resistance against pacted democracy

The success of the popular resistance in the water war has been made possible, because the people endured the violent repression of Bolivias government during the water war. Therefore I will now analyse the meaning of the fact that the people did not back off. The way in which the government responded to the popular movement in the water war reveals the nature of the Bolivian government. Since the mid-eighties of the twentieth century the formation of Bolivian governments were based on pacts among the party leaders of three political parties. These parties were the Movimiento Nacionalista Revolucionario (Revolutionary Nationalist Movement, MNR), the Movimiento de la Izquierda Revolucionario (Movement of the Revolutionary Left, MIR) and the Accin Democrtica Nacionalista (National Democratic Action, ADN). Each election one of these parties received the largest number of votes which made it possible for these three parties to govern in a coalition or pact. Therefore Assies refers to Bolivia as a pacted democracy (Assies 2004, 32). Important is that none of these parties has ever received the absolute majority of the votes of the people, therefore to form a coalition was the only option to create a new government (Crabtree 2008, 1). This coalition made it possible to carry out increasingly unpopular and often anti-popular economic policies at the cost of excluding most of the population from having any real influence on political decision-making (Assies & Salman 2003, 7). The anthropologists Willem Assies and Ton Salman stress five important features of the water war which indicate that the government did not pay any attention to the demands of the Bolivian people and tried to exclude them from having any political influence. First of all the Bolivian government instructed special police forces to repress the protests if necessary with violence. This indicates that the government is not willing to listen to the demands of the people. Secondly the government did not want to recognise the Coordinadora as a legitimate intermediate. Instead it tried to negotiate with the Civic Committee and ignore the Coordinadora, while the Coordinadora did have legitimacy among a large part of the population. Thirdly, political parties did not play a role in the formation of the final agreements. Archbishop Tito Solari and the national Ombudsman played the role of mediators because there was no political party which could represent the wishes of the people, while normally political parties should have no problems representing the demands of the population. The fourth point that Assies and Salman make is that a diverse range of people participated in the water war. It was not only one population group that protested against the government policies. The fifth argument is that the protests were not only about the tariff hike, but also about the fact that the population was not informed about the negotiations with Aguas del Tunari. The fourth and fifth argument show that a large part of the population, and not just one population group distrusted the government which indicates that they did not feel represented by the government (Assies & Salman 2003, 27-28). This argumentation leads to the conclusion that because the popular resistance endured the violent repression of the government, the water war also symbolises a victory over pacted democracy. The government was forced to reverse the privatisation of the water supply system of

Cochabamba and had to answer to the demands of the people which indicates another turning point in Bolivia.

Resistance against the marginalisation of indigenous rights

Under law 2029 and with the privatisation of the water supply system the customs from the indigenous population were not respected. Therefore popular resistance made use of specific indigenous argumentation against the privatisation of the water supply system. I will now discuss whether the success of the popular resistance also indicates a turning point with regard to these indigenous customs. The marginalisation of the indigenous population in Bolivia has been present since the intrusion of Europeans in America. The Spanish rulers clearly differentiated Indians and Spaniard under the law. There were dual standards which benefited the colonial powers. When Bolivia became an independent country in 1825 these standards remained in existence. Although the marginalisation has a long history, Bolivian governments did make efforts to counter the marginalisation of Indians and developed policies which acknowledge ethnical difference (Postero 2004, 193-194). The attempt of President Gonzalo Snchez de Lozada (1993-1997) and the MNR to increase the rights of the indigenous people, was the last effort of the Bolivian government to counter the marginalisation of the indigenous people before the popular resistance in Cochabamba. In 1994, Article One of Bolivias Constitution was changed, now recognising Bolivia as a state with different ethnicities and cultures. Furthermore the Constitution explicitly stated that the rights of indigenous people should be recognised and respected (Postero 2004, 196-197). Also in 1994 a new law was passed, the Law of Popular Participation (LPP) which recognises rural as well as urban traditional organisations, such as unions, local councils and neighbourhood councils, as legitimate organisations (Alb 2002, 79). Furthermore the law has given more responsibility to the municipalities. They have received the authority to allocate the regional development budget apportioned to the municipalities. With this money local development, such as education and infrastructure was to be financed. The traditional organisations could become organizacines territoriales de base (territorial grassroots organisations, OTBs). The OTBs were given the opportunity to present a proposal about how the budget should be spent (Postero 2006, 129) and choose the members of the vigilance committee which checked the budget implementation (Alb 2002, 79). Alb stresses that a lack of resources and training limit the effective functioning of the vigilance committee. Furthermore organisations lost instead of gained influence when they had no support from governmental or other institutions, because the municipal governments control the allocation of resources and the organisations did not (Alb 2002, 89-90). Postero emphasises that the LPP was not a new system of participation designed by indigenous people in a bottom-up process to gain political power or control over the state (Postero 2006, 129). The LPP was designed by the state without the participation of civil society. Also, not all indigenous people understood how the law functioned and although information meetings were organised not everybody spoke Spanish (Postero 2006, 139). Contrary to the top-down implementation of the LPP, the water war represented a bottom-up process which achieved the protection of the usos y costumbres (existing uses en customs) before the Bolivian law. Rights with regard to water are part of the indigenous customary law which reflects the existing uses and customs. One of these existing customs is the collective management of water which is an element of the collective labour system in traditional communities. Each community has its own water supply system which is financed by the members of the community and managed by a special water committee. Members of the community are automatically regarded as participants of this system and the committee will allocate the water among them. This form of water management is also established in peripheral-urban areas which are not connected to the municipal water services. In these areas neighbours set up a collective water system, they share the costs, and a water committee is set up to manage the water supply (Laurie, Andolina & Radcliffe 2002, 257-258).

The protection of the existing indigenous uses and customs was used as argument in the water war against law 2029 and the privatisation of the water supply system. Law 2029 stated that the concession holder had the right to supply water in the whole area, which undermined the functioning of the water committees. The Coordinadora made use of the rural-indigenous ideas of water as a collective right. The slogan the water is ours was often used in the protest marches and the Coordinadora designed posters on which respect was demanded for the rights of drinking water committees and cooperatives with their uses and customs (Laurie, Andolina & Radcliffe 2002, 267). Rural as well as urban and indigenous as well as non-indigenous population united around the idea that the existing uses and customs should be protected. Consequently Laurie, Andolina and Radcliffe describe the water war as a call for the defence of cultural heritage by a diverse set of interest groups, united by a seemingly common idea of how cultural practices are threatened by market forces (Laurie, Andolina & Radcliffe 2002, 265) (For more information about indigenous history and indigenous movements consult the chapter by McCall). An outcome of the water war was the amendment of law 2029 which included the recognition of the existing uses and customs before the law. This was the first time in this period of neo-liberal reforms that indigenous collective water rights were recognised in Bolivia before the law (Laurie, Andolina & Radcliffe 2002, 265) which leads to the conclusion that the outcome of the water war also symbolises a victory for the indigenous population of Bolivia and represents a turning point. In this section I outlined three ways in which the direct outcome of the water war represents a turning point for Bolivia. In the next section I will discusses whether the water war also represents a turning point for the population of Cochabamba and Bolivia in the long term.

Public-popular water management and water as a human right

As stated above this section will analyse the meaning of the outcome of the water war in the long term. On the local level this asks for an investigation of what happened to the water supply system of Cochabamba after the water war. Theoretically the popular resistance in Cochabamba had the potential to become a movement which develops an alternative water management facility. According to the classification of water movements by Terhorst there exist three types of water movements. The first type of movement tries to change the way water is valued in the world. It argues water is a public good and people have the right to water. The second type of movement opposes the privatisation of water facilities. This is usually done by local or national campaigning against privatisation plans. Besides the defence of water facilities against privatisation, these movements can also come up with alternatives for privatisation. Thus they do not only want to stop privatisation, but also think ahead and sometimes propose public alternatives. The third type of movement Terhorst distinguishes aims at finding alternatives for public institutions that provide water facilities but fail in doing this properly. This type of water movement proposes improvements of the publicly run water facility (Terhorst 2008, 105-106). The water war in Cochabamba can best be described as the second type of movement Terhorst discusses, because it countered the privatisation of the water facilities in Cochabamba. This indicates that the popular resistance in Cochabamba had the potential to become a movement which develops an alternative water management facility. The popular resistance in Cochabamba indeed demanded for the water supply system to be managed by the people themselves, as an autonomous company led by citizens. After the water war the management was restored to SEMAPA and it turned into a public-popular arrangement. The term public-popular indicates that water was regarded as a non-exclusive and non-rival good, which is distributed in public and in this public space the participation of popular groups is possible (Terhorst 2003, 153). A change in ownership of water and sanitation towards collective public property that brings responsibility and empowerment to citizens, who are consumers and take on the parts of running the water provision in tandem with the workforce (Terhorst 2003, 155), is the core of this arrangement. This change of ownership has been implemented in several ways. Immediate after the water war leaders of the Coordinadora joined the interim board of directors. After two years, in April 2002

the first election for the board members was held. The population of Cochabamba could participate by electing representatives onto the board of directors of the company (Shultz, 2007, 3). In the first election, users for example chose a pastor to be on the board (Crabtree 2005, 29). This indicates that participation of the population is implemented on the level of policymaking. The Coordinadora has also created a support group which has to debate how to change the administration of the company to enlarge the participation of citizens. Public participation in the control of the water supply can be said to have increased through the cooperation with local water committees. This takes place with regard to the shaping of the plans to expand the water supply of SEMAPA to parts of the city that are not yet connected to the water utility (Terhorst 2003, 144-154). This description of the functioning of the management reveals that SEMAPA has indeed become an alternative water supply system and it indicates that the Coordinadora played a significant role in this process. Important to note however is that the water shortage which was already a problem in Cochabamba in the seventies of the twentieth century, was not resolved with the installation of the public-popular management. Although there has been progress in connecting poor neighbourhoods to the water system, there are still a lot of households in Cochabamba without access to running water. This indicates that the actual service level of the water supply system has not increased significantly (Crabtree 2005, 29). Schultz even states that of the 50,000 people who should have access to running water, only half of this number actually is connected to the water supply system (Shultz 2007, 4). Besides this first critical remark, the realisation of the participation of citizens in the publicpopular management of SEMAPA can also be questioned. Schultz stresses that less than 4 per cent of eligible voters went to the polls (Shultz 2007, 3) for the first election of board members of the water facility. Terhorst points to the lack of socio-technical interaction. It is difficult for citizens to understand the technical side of water supply, which minimizes their control over the functioning of the company. Furthermore the employees of SEMAPA did not make use of their opportunity to participate in the discussions about the functioning of the company according to the research of Terhorst. Because the employees probably have more knowledge of the water supply system then ordinary citizens, they could have an important influence. And a structural barrier to substantially changing the water supply system is the lack of local autonomy. The company is of course bound to national regulations (Terhorst 2003, 151). I would like to add that the organisations and citizens who do participate may have their own agenda or just have different ideas than other organisations or citizens who do not participate. Although I do not want to deny that the management of SEMAPA changed and the company, as Terhorst emphasises, operates on the assumption that participation of the citizen users is important and is looking for ways to implement this participation (Terhorst 2003, 151), the public-popular management will in some form always be an ideal situation that can never be completely realised, because not literally everyone can participate. On the national level an analysis of Bolivias new 2009 constitution might give insight into the meaning of the water war in the long term. The constitution has a decisive power with regard to national policies on water and water management, because the constitution is the highest order of law in a democracy. Through a constitution the people of a country lay down on paper which power they give to the government and which rules a government should follow. The constitution was drafted by a Constituent Assembly of which the delegates were chosen in national elections in 2006 (Olivera, Orellana & Whitesell 2007, 4-8) and was approved by Bolivias Congress in October 2008 and in a nation-wide referendum on 25 January 2009. The constitution states that water is a human right and that the government is responsible for the access to water. The slogan of the Coordinadora in the water war was The water is ours. With this constitution the water indeed became of the people, because it is recognised as a basic right. Furthermore the privatisation of water supply systems is explicitly banned in Article twenty. This also indicates a victory for the Coordinadora, because the coalition turned against the privatisation of water facilities and demanded that the privatisation of the water facility in Cochabamba be withdrawn. Now privatisation is even banned by the law (Van Schaick 2009). The preamble of the new constitution refers to the water war as one of the elements which led the population of Bolivia to the decision to construct a new constitution (Nueva Constitucin poltica del Estado 2008, 2).This indicates that the content of the constitution and more specifically its sections about water, are probably also influenced by the water war and its outcome. However as van Schaick

stresses while Bolivias new constitution undoubtedly represents a major advantage for the countrys social movements, the real test will come when its often-vague and unclear language is actually legislated (Van Schaick 2009). It can for example be questioned what kind of access to water the government is responsible for, under the new constitution: whether it implies a connection to the water supply system or access to water in bottles. The analysis of the public-popular management of the water facility in Cochabamba and the new constitution of Bolivia point to important social changes and changes in power relations in the long run. The population of Cochabamba have gained influence on the management of the citys water facility, water has become a basic right and privatisation of water facilities is illegal. Still, as has been argued above, these social changes and changes in power relations should not be overestimated.

The creation of an alternative political space

In this section I will continue the analysis of the meaning of the water war in the long term. However the emphasis will now be on whether the water war had any significance for other discontents of Bolivias population with regard to natural resources and whether it had any influence on the social relations and power relations in Bolivia in general. It can be said that the Coordinadora, which was a new form of popular organisation, had a widespread influence. The Coordinadora not only had the aim of making water facilities public ownership, but as its name says, Coordinadora por la Defensa del Agua y de la Vida, it also wants to defend life itself. The Coordinadora not only became involved in the management of SEMAPA, but they also became involved in the struggle of people in Bolivia with other natural resource issues. One example that Terhorst mentions is that the Coordinadora supported the coca farmers (Terhorst 2003, 62). Furthermore a new Coordinadora, the Coordinadora del Gas was created in El Alto in 2003, when people protested against the plan of the government to export Bolivian gas to Mexico and the United States through Chili (For more information about the causes of the gas war consult the chapter of M. Renzema and A. Contreras Ochoa). This Coordinadora was again led by Oscar Olivera and again functioned as an umbrella organisation that structured popular mobilisation (Crabtree 2005, 23). The development of the gas war also shows resemblance with the water war in Cochabamba. First of all road blockades played a major role in the protests. Secondly, the government again reacted by allowing police forces to use force to end the protests. And thirdly, the governments reaction only led to more people going onto the streets and joining the protests. Fourthly just like during the water war, the participants of the gas war consisted of diverse population groups (Spronk & Webber 2007, 3536). These resemblances make it possible not only to argue that the Coordinadora por la Defensa del Agua y de la Vida had an important influence on the manner in which civilians organise, but also that the protest of diverse population groups together in the water war served as an example for the gas war. Furthermore Luis Tapia stresses that the coordinadora helped promote the campaign for a constituent assembly (Tapia 2008, 165). The Coordinadora functioned as a direct democracy, because delegates of communities or social organisations were given the opportunity to debate the water supply system, evaluate changes and present alternatives. The representatives of a particular group attended meetings of the Coordinadora on rotational basis and represented the ideas and interests of their community or organisation. This indicates that the Coordinadora itself worked as a kind of assembly and according to Tapia it became a form of constituent power because it opened up political spaces far broader and more dynamic than anything organized by the state or envisaged in the constitution (Tapia 2008, 166). With the term constituent power he refers to the actors, the events and the processes that create a certain political order. This power develops when actors are not satisfied with the existing order and try to change it (Tapia 2008, 162). Because the Coordinadora provided a place for people where they could debate political issues it helped building a constituent power, it helped to create actors which were not satisfied with the existing order (Tapia 2008, 166). The conclusion can be drawn that besides protesting against the privatisation of the water supply system of Cochabamba and besides promoting an alternative kind of water management, the

Coordinadora also helped to construct an alternative political space. The popular resistance in the water war has had an important influence on popular mobilisation in Bolivia through its functioning as an example for citizens how to organise and speak up.

This chapter has analysed the meaning of the water war for the inhabitants of Cochabamba and the population of Bolivia. From this analysis it can be concluded that the water war in Cochabamba is more than a national and international symbol of successful popular resistance. The successful popular resistance against the water rate increases and the privatisation of the water supply system of Cochabamba represents a turning point in Bolivian history in three different ways. Firstly the withdrawal of the contract with Aguas del Tunari might be seen as the first victory over neo-liberal policies implemented since 1985 by Bolivias governments and the promotion of these policies by the World Bank and the IMF. Secondly the success of the resistance symbolises a victory over pacted democracy because the popular resistance endured the violent repression of the government. Thirdly, the outcome of the water war symbolises a turning point for the marginalisation of indigenous peoples in Bolivia, because the indigenous collective water rights were recognised by law. The outcome of the water war thus symbolises changing social relations, because the indigenous peoples gained recognition and changing power relations, because the demands of the popular resistance were fulfilled by the government. From the analysis of the meaning of the popular resistance in the long term with regard to the water management in Cochabamba a less positive conclusion can be drawn. Although public participation is possible since the water supply system of Cochabamba is a public-popular organisation, the actual participation by the population is low. Also there are structural barriers with regard to this public participation, such as a lack of technical knowledge. Furthermore still half of all citizens of the city do not have access to running water. On a national level the impact of the water war seems to have a more positive result. In Bolivias new constitution water has been recognised as a human right and privatisation of water facilities is not allowed. An important critical remark however is that it still remains to be seen how this will work in practice. The population of Cochabamba and the population of Bolivia have indeed gained political power. The citizens of Cochabamba have influence on the functioning of the water facility and the Bolivian population have a right to water, but, as argued, this power should not be overestimated. The water war has also influenced Bolivias natural resource politics, because the Coordinadora has been an important form of organisation during the gas war. Furthermore the structure of the gas war shows much resemblance with the water war, which might indicate that the successful popular resistance in the water war has been an example for the popular resistance in the gas war. It can even be concluded that the water war has led to general social changes and changes in power relations because the Coordinadora was a form of direct democracy which can be regarded as an alternative political space which helped to develop the popular demand for a new constitution.

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Natural Wealth in Bolivia: fortune or misfortune?

Emilie Ph. Fokkelman

Abstract: This paper will outline the major socioenvironmental problems associated with hydrocarbon mining in Bolivia in recent decades. The concept of Environmental Justice will be used to analyse the link between environmental damage such as oil spills, and social injustices facing indigenous and peasant communities. Relevant Bolivian environmental policy regulating the hydrocarbon sector will be evaluated, as well as recent policy developments since the inauguration of the Morales administration. Keywords: Environmental Justice, mining, hydrocarbons, indigenous peoples, environmental policy

The previous chapters have pointed out the major controversies related to policies of natural resources in Bolivia. These have had a major influence on the social and political stability of the country in the last few decades and even the last two centuries. However, in the debate not much attention has been paid to the consequences of natural resource exploitation for people and nature. In many parts of Latin America, environmental damage from mining is an important issue, even though this has not often been highlighted like the water war described above, for example. There have been numerous cases of communities and natural reserves being affected by the contamination and destruction caused by mining of various resources. In some cases, it has also led to violent protests and deep social conflicts. Due to activism by transnational social movements, the mining industry is now much more aware and cautious of the problems they may cause, but progress is slow (D. Szablowski, in L. North 2006, 41). In contrast to previous decades, communities increasingly take the opportunity to prevent such destruction, although with mixed results. A case illustrating this is Peru: in the repression of community protest against a copper mine pressed by the national government, two deaths have been reported in 2005. The main argument of protest of the farming communities in Rio Blanco is the enormous environmental damage the project is expected to bring, for example threatening rare wildlife in the area with extinction (Pype, 2007). Although the media have not recently paid as much attention to it as to cases in Peru, Brazil and Ecuador 24 , in this article I will focus upon environmental consequences of oil and gas mining in Bolivia. I will evaluate the efforts taken to mitigate the negative effects of petrochemical companies on the environment, and investigate to what extent environmental considerations are taken into account by the mining companies of Bolivia. I will also investigate the social aspects of these environmental costs, such as the problems facing communities, created by degradation of their living environment. Bolivia is endowed with an extremely high degree of biodiversity, on top of being rich in all kinds of natural resources, from hydrocarbons and minerals to forests. Keeping this natural wealth can be very important for current and future social and economic welfare in Bolivia. Therefore, an analysis of the interaction between the mining sector and the natural environment it exploits, is very relevant to the topic of this book, the politics of resources. The cost of degradation of the Bolivian environment

See Mining Watch, Observatorio de Conflictos Mineros de America Latina

has been estimated to exceed 6 per cent of Gross Domestic Product (GDP), including damage from El Nio phenomenon for example, which can be aggravated by already existing erosion of soil and absence of forests. Costs of substituting polluted waterways for drinking water from somewhere else is also included in this figure (Slunge and Jaldin 2007, 1). It can therefore be beneficial and even profitable to preserve the natural environment, even without consideration of revenue flowing from other ways of using it, such as through ecotourism projects and sustainable forestry. To shape my research on this topic, I will use the concept and theory of environmental justice (EJ) and its antonym, environmental injustice. The concept of this type of injustice first came up in the US in the 1970s, where it was used in relation to specific cases of dumping of toxic waste near black or poor neighbourhoods. Nowadays, it refers to the inequitable burden of various environmental problems that minority groups, such as women, racial groups, less educated groups and even developing countries as a whole have to bear, according to Robert Bullard, one of the founders of the Environmental Justice movement in the US (2009). There is still some discussion about the exact definition of environmental justice, and the possibility of ever reaching this situation. For example, a definition by the Central European University in Hungary is the following: A condition of environmental justice exists when environmental risks and hazards and investments and benefits are equally distributed with a lack of discrimination, whether direct or indirect, at any jurisdictional level; and when access to environmental investments, benefits, and natural resources are equally distributed; and when access to information, participation in decision making, and access to justice in environment-related matters are enjoyed by all. (Central European University 2009) It can be questioned whether this condition of EJ, meaning equality of distribution of environmental risks and benefits, is ever attainable. This makes the European definition an interesting goal for the future, but less easy to work with. The US Environmental Protection Agency, focusing more on the equal involvement of stakeholders in the decision making process has a more positive view, stating that: Environmental Justice is the fair treatment and meaningful involvement of all people regardless of race, colour, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. [...] It will be achieved when everyone enjoys the same degree of protection from environmental and health hazards and equal access to the decision-making process to have a healthy environment in which to live, learn, and work. (EPA 2009) This definition places more attention on the effective prevention of environmental problems for communities and individuals, and is therefore more workable. From these definitions it follows that the theory of environmental justice is made up from a few interacting elements. One interesting theory of environmental justice that combines these elements, is the one from David Schlosberg, who divides the concept into 3 circles of concern: the recognitional, distributional and the procedural justice (McLean 2007, 25). Recognition of difference, of living habits and traditional knowledge, is a first step to reaching environmental justice. This can be done through legal entitlements to own territory, but not necessarily: its basis is mutual respect. The second circle has to do with fair and equitable distribution of problems and benefits of economic activities, once they have been started. The third refers to the procedure of deciding on how and where to begin a (petrochemical) industrial project, changing the way it is going and possibly ending it. The most important thing in this dimension is equity of participation: all parties that have a stake in an area, have to be consulted and have influence on the decision making process (McLean 2007, 27-8). Even after the rather long history of about 40 years of environmental justice theory and practice, there is a wide gap in practice between North and South America. First of all, the number of cases of corporations and institutions indicted for environmental damage that make it to court is very small in comparison. While in the US there have been numerous cases of companies brought to trial for the environmental degradation they caused (the most well-known is the case presented in the 'Erin Brockovich' movie), in Latin America this is definitely not the case (Carruthers, 2008, 3). There have been two cases of oil companies (Texaco) being brought to trial for 'intentionally' polluting by spilling

oil in Peru and Ecuador, although negligence might have been easier to prove in court. In these cases, indigenous tribes filed cases against the company in a US court, because of the American origin of the companies (Corp Watch, 2009). The cases have proceeded for more than a decade now because the US courts, in Texas and New York, both found that the appeal was invalid: the judges stated that the lawsuits should be filed in Ecuador and Peru, not in the US. Apart from actual jurisdiction in courts, something the concept of environmental justice also highlights however, is the idea that communities living on or next to a site of commercially viable gas or oil, have to be able to live free from negative consequences, and at least be able to have a say in the decision making process whether and how extraction will take place. Schlosberg (2003) calls this the procedural dimension of EJ. In this regard, EJ has a lot to do with social justice, and this is especially true in Latin America, where environmental concerns cross with older forms of social activism, such as claims for land. In areas where population is already poor, such as with communities living in Bolivia's forests, a destructive mine can put increasing pressure on people. If the place they live on is not in their possession, the struggle against a polluting mine will generally add to the social struggle for land rights (Carruthers 2008, 7). The main question to be answered in this article will be: to what extent is environmental injustice a problem with petrochemical industry in Bolivia, and does the nationalization of the industry change this situation? In order to give an answer to this question, I will outline the most common controversies between hydrocarbon mining and the environment in the first paragraph. The procedure of exploration and exploitation will be described, and then a summary of the most well-known cases of pollution and damage will be given, as well as the communities involved. In the second paragraph the Bolivian environmental policy will be discussed. How did it evolve over the years and what are its main characteristics? Next, in paragraph three the question will be how international agreements, between governments and industry sectors, govern the behaviour of petrochemical companies in Bolivia. The last section will be dedicated to the new environmental policy of the Morales government and will try to find out how it differs from the old policy.

How does mining affect people and the environment?

Bolivia has a long mining history dating back to the Spanish Colonial era. Large and medium scale mining activities were intensively developed in several regions of the country (Salvarredy-Aranguren 2008, 1300). The most important natural resources found in Bolivian soil are metals such as gold, silver, tin, cadmium, tungsten, iron, lead and antimony, aside from the oil and gas discussed here (World Factbook, CIA 2009). Together, these resources make up a sizable share of the GDP, although fluctuating world prices have made it difficult for Bolivians to build a stable, broad-based economy with the proceedings (Slunge and Jaldin 2007, 2). Mining for oil and gas specifically began in the 19th century but intensified heavily as a result of the Structural Adjustment Programs (SAP) promoted by the International Financing Institutions (World Bank, IMF) in the 1980s. Foreign companies such as Repsol (Spain) and Texaco (USA) were asked to invest in technologies in return for a major share of the revenues. The main hydrocarbon fields such as San Antonio, Sabalo (both oil and gas), Margarita (oil) and Vuelta Grande (gas) started to be exploited heavily (Energy Information Administration, 2007 and Economist Intelligence Unit, 2007). This has also been outlined in the first chapter about the history of oil and gas mining, so it will not be further elaborated here. Like in many other countries around the world, mining has resulted in significant environmental damage. In this paragraph a number of environmental problems associated with mining will be explored. Along with this, the connection to the livelihood of communities will be explained.

Environmental impacts from mining

In comparison to other sources of income, it can be argued that mining in general can be an environmentally sustainable economic activity, when it is kept at a small scale, does not contaminate and benefits both industry and communities nearby by providing jobs for example (Auty, 2008).

Hydrocarbon mining in its current state however, is essentially a dirty, unsustainable business, for multiple reasons. Firstly, the greenhouse gases its products release when burned or used, pollute the air and contribute to global warming. Bolivia, however, is not a large producer of greenhouse gases and the emission of one ton CO2 on average per capita places Bolivia well below the Latin American average of two and a half tons per capita. CO2-emissions from deforestation should not be overlooked either, and so if these were included in the figure, the emission rate would likely increase significantly (Slunge and Jaldin 2007, 19). Moreover, oil and gas extraction is limited in time and not renewable, and therefore unsustainable for the future. Secondly and most important for this article is the destruction and contamination of the natural environment these resources cause during extraction and processing. The consequences of hydrocarbon mining depend on the methods used for extraction of the oil and gas reserves. There are four stages in this type of mining. The first stage is exploration, or looking and probing to find out the exact presence and exact location of the hydrocarbons. The second is the actual drilling for oil and pumping it up. The next stage is its transport to the location of its use or treatment into secondary products. The last stage is the eventual closing down of the concession when the resources are depleted or when it becomes too expensive to operate. In the initial exploratory stage, a mining company will execute a series of seismic exploration projects in a given territory. That means they will open paths of 2 meters wide and about 20 kilometers long, in which they bury explosives at a depth of about 10 meters. By detonating the explosives, the blasts will give an underground 'echo', and with use of seismic detection systems, the location of hydrocarbons can be detected. Besides the obvious destructive consequences of the explosions for the forest and soil, there will be a need for construction of mobile camps for employees, helicopter platforms and temporary roads (Gavald Salacn 2005: 60). All these activities have an invasive effect on the environment. After the opening of a road in a dense tropical forest, there is often an influx of people doing other exploitative activities, such as hunting and logging of special species of trees. After a section of tropical forest has been cleared, agroindustrial activities are generally set up to make use of the short-lived richness of former forest soil (De los Rios, 2007: 3). Once the oil or gas field has been discovered, secondly the companies will start to dig various holes at different depths to pump it up. Depending on the size of the field, a pumping installation will be large or small. The need for refinery also influences the size of the installation. A common activity at the head of a gas field is flaring of gas, both during exploration activities and during production. This releases a continuous flow of CO2 into the air, contributing to the problem of global warming and causing acid rain that degrades tropical rain forests. Levels of flaring vary by month but have been as high as six hundred million tons of CO2 in the year 1997 in the Chaco region alone. Since then, flaring has been monitored and reduced to a quarter of that figure 10 years later (Chaco, 2007: 6). Effluence of oil or gas into drinking water systems close to a pumping station is a problem that is harder to control (Chaco, 7). Heavy seasonal rainfall flowing from El Nio contributes to spreading contaminating substances, threatening the health of people not even close to the mines (Gavald Salacn, 60). In the third stage, the transportation of hydrocarbons through pipelines, the main risks are ruptures of pipes or seepage. Corrosion is a major problem with iron pipes, especially in wet tropical areas. Regular checkups and maintenance of the pipes are therefore essential, but also a costly activity for mining companies. In the Chaco oil field, spills averaged between 5077 liters annually in 1997 and 311 liters in 2007. Oil and gas spills not only contaminate the surface of land and water but they also pose a high incendiary and explosive risk (Chaco, 7). Also, just like in the exploratory stage of hydrocarbon mining, in order to build the pipeline, forest and farmland areas along its paths have to be cleared. This causes invasion of hundreds of kilometers of land for the length of the pipeline, crossing numerous people's territories (Gavald Salacn, 62). This also involves temporary settlement of workers and building of roads, which, as we will see from a few case studies below, has invasive consequences for the area's residents. As a last stage, after an oil field has been exhausted, the pumping installation has to be removed and the area has to be cleaned. Any possible new leaking of oil has to be prevented by building walls around the wells. The soil that has been polluted with hydrocarbons needs to be taken away to a processing plant, and new trees planted (Chaco, 8). This became an obligation only after

1995, when new environmental legislation was enacted in Bolivia. This will be discussed in more depth in the next paragraph.

Examples of environmental injustice

As a result of the described process of hydrocarbon mining, there have been numerous reports of environmental problems in Bolivia associated with this type of mining in Bolivia. Some of the cases which have received international attention for their influence on neighboring communities, will be touched upon here. Most of them involve problems with the locations of oil and gas fields or pipelines. Even though there has not always been a thorough scientific study of specific problems, there is enough information to conclude that the stakes are high for the people affected by mining. When outlining the cases, the most important issues of environmental justice will be highlighted. A case of social impact during explorative activities is that of Repsol in the Chimn territory Amazonian region since 1999. They disturbed the culture of these people by offering them toothbrushes and buying up the animals hunted by the Chimn. As a result of this, the locals stopped hunting for subsistence, instead focusing on the sale of hunted animals to the company workers and using the money to buy alcohol. This is an example of how a people's right to its own different lifestyle is being overlooked, even by good intentions (Gavald Palacn, 61) and how this forms a problem for equal recognition as theorized by the Environmental Justice movement. The overlap between legal indigenous territory and the oil concessions is shown in the figures below. In the past this has often led to intrusions by oil companies, because of the importance of the hydrocarbon industry to national politics. As shown in the first figure, there are many native reserves (Territorios Comunitarios de Origen, TCO) in Bolivia, most of which have potential for hydrocarbon mining (figure two). Of these, Repsol has intervened in most reserves: about seventeen TCOs in the Amazon and Chaco regions have been affected more or less by its activities.

Figure 1: Native reserves and forest concessions in Bolivia (source: Slunge and Jaldin, 30)

Figure 2: Native reserves and mining concessions in Bolivia (source: Slunge and Jaldin, 31)

Most often, the forest communities involved are small and do not have much contact with other people (Gavald Palacn, 62). In relation to Schlosberg's dimensions of environmental justice, each plays a part in the conflicts, as will be elaborated in the second section of the article. Especially since oil and gas mining nowadays require much more technology than man power, in only a few cases the communities can benefit economically from provision of jobs, which makes it harder to meet the dimension of equal distribution of cost and benefits. With regard to the construction phase of pipelines, one problem case is that of the BoliviaBrazil pipeline and its impact on the Kaa-Iya people, who live in the Chaco national park. The pipeline runs for about 3,000 kilometers, east from Santa Cruz, through San Jos de Chiquitos to Puerto Suarez and, ultimately, Porto Alegre in southern Brazil, crossing a number of sensitive ecosystems and seriously threatening the livelihoods of indigenous Guaran, Chiquitano and Ayoreo communities, both in Bolivia and Brazil. Owned by Enron and Shell in the Bolivian section, the pipeline has been in operation since 1999, after much problems with its financing because of protests from affected municipalities. At some point, the building area had to be protected by the military (Gavald Palacn, 62) so that the process would not be stalled. This shows how intense the debate became and stresses the importance of environmental justice, because of the wide influence it has. Apart from the deforestation of thousands of hectares, the fragmentation of ecosystems and the necessity to build additional feeding pipelines (Hindery 2008, 284), the social impacts were huge. A small village, Carmen Rivero Torres, was flooded by 2000 workers, as a result of which the village was left without water and electricity for two months. Local people were confronted with harassment and violence,

there was increased delinquency and six underage girls ended up pregnant (Gavald Palacn, 62). The goals of equal participation and recognition proved difficult to attain in this project. The next major pipeline project in which Enron was involved, also proved to be problematic: the Cuiab gas pipeline. In this case, the trajectory of the pipeline cut right through the last dry tropical forest of Chiquitano, containing a large wealth of rare species. As soon as US-based bank Overseas Private Investment Corporation (OPIC) found out about this, they withdrew financing of the project because its statutes prohibit investments in projects that affect primary forests. Enron and Shell then redrew the project proposal, promising a forest conservation programme of twenty million dollars, and received the loan. In contrast, after two years of negotiations a plan of development for the 37 affected indigenous groups was launched, with a budget of only two million dollars. Under the forest conservation programme, a license was granted to a US company to extract man plants, which resulted in a case of biopiracy. Communities in the construction area were hindered by the destruction of their roads and fields, and the contamination of water bodies, especially in the Pantanal. This affected for example the community of Entreros, who saw their only source of freshwater taken away from them (Gavald Palacn, 63-64). Just like in the case mentioned above, the participatory dimension of environmental justice was not fulfilled well enough. As to oil spills in Bolivia, the best known case is that of the Desaguadero spill near the border with Peru, in February 2000. Here, 29,000 barrels of crude oil spilled from the OSSA II pipeline into the Desaguadero river and lake Poop. This contaminated patches of native prairies, pastures and crops in an area of about 18,000 hectares. The spill occurred near the town of Sica Sica, in the rural Bolivian altiplano region. It affected some 127 communities in eighteen municipalities within an area of almost 500 square kilometers of lowlands (Slunge and Jaldin, 19) including 400 kilometers of river banks. The 7000 Quechua and Aymara people that live here, especially the Uru community, depend on livestock and irrigated cultivation of crops. These were polluted heavily, as well as the main drinking water provision (Hindery, 286). As an example of distributional environmental justice, Enron recieved a fine of $5.9 million for the oil spill from the Superintendencia de Hidrocarburos (Hydrocarbons Superintendency) because it had failed to do proper maintenance on the pipelines. Part of this money went to the indigenous groups as compensation, part of it went to nature conservation programmes. They also had to pay about thirty-five million dollars for cleaning up the spill (Hindery, 286). This of course contributed to an improvement of their situation but it does not make the balance equal. In conclusion to this paragraph, the main outcome is that the threats of hydrocarbon mining are specifically large in natural areas, both for the environment itself (meaning for example reduced biodiversity) and for communities depending on this environment for their livelihood. The environmental consequences of each stage of the petrochemical industry have been outlined and a few exemplary cases of environmental injustice were described. The cases mentioned involve all three aspects of environmental justice: people's different ways of living were not taken into full consideration, the revenues of the activities did not reach to the communities and their opinion of the projects was not always taken into account. Although all aspects of environmental justice are important in the case of Bolivia, participation seems to be the most fundamental and politically sensitive aspect in relation to the situation of indigenous people there. A major shortcoming in the hydrocarbon sector has been the participation of neighboring communities in the decision making process of projects. Therefore, in the next paragraph, the challenges and possibilities of environmental law in Bolivia to mitigate environmental problems with mining beforehand will be outlined.

Environmental law in Bolivia

In this paragraph the history and current state of environmental policy and law in Bolivia will be reviewed. Environmental law is defined as the law that concerns the natural or physical environment, and regulating the interaction of humans with this environment. This can be law at national and subnational level, and international agreements. It forms the basis for environmental justice, because it can force companies to pay attention to the consequences of their activities, gives them and the rural communities certain rights and obligations and makes them legally enforceable. The international and

company law applicable to mining in Bolivia will not be outlined in detail in this paper, but a few remarks will be made on it throughout the analysis of environmental law.

History and state of Bolivian environmental law

Nowadays, Bolivia is internationally recognized for being a leader in the protection of its natural environment. This is a result of the large amount of international environmental conventions the country has signed, such as the early ratification of the Biodiversity Treaty. The country led the international campaign for the ban on mahogany wood and generally has a very high level of support for environmental causes among its population. This environmental activism is reinforced by the indigenous movement, which for example made possible the establishment of a large dry forest protection area in the Chaco national park in Tarija, because of its national struggle for land rights (Steinberg, 2001: 21). Some native communities have successfully claimed a level of autonomy over their own territory, arguing that they are better at ecological preservation than the national government. The situation has not always been like this, however. Before the 1980s, there was hardly any attention for ecological issues in national politics or the media, for example, because of the superior international concerns with poverty. Some also argue that Western countries were less inclined to help the environmental movement in this period because of their disapproval with dictator rule (Steinberg, 2003, 28) . National institutions for ecological preservation were only established after the return of democracy in 1982 and general attention for the environment started to grow (Steinberg, 2003: 14). In 1988 an Underdirectorate for Renewable Natural Resources and the Environment was formed, and evolved into the General Secretariat for the Environment in 1990. From this time on, environmental law started to develop, beginning with the approval of Environmental Law number 1333 in 1992, which mentioned the concept of sustainable development as introduced by the international Brandt report in 1987 (Slunge and Jaldin, 33). The most important change in Bolivian environmental policy that resulted from the Sustainable Development Conference in Rio de Janeiro in 1992 was the creation of the Ministry for Sustainable Development and Environment (MDSMA) that same year (Slunge and Jaldin, 20). The national park system rapidly expanded, especially after the daughter of president Sanchez de Lozada, an environmentalist, became Director of the National Biodiversity Conservation Directorate in 1993. With help of the strengthened movement for indigenous territorial rights, she was able to enforce management authority to several native groups in the national parks. Bolivia became one of the first countries to implement a debt-for-nature swap and has developed the largest forest-based climate mitigation project in the world (Steinberg 2001, 13-5). There are now twenty-one protected nature reserves (amounting to some fifteen per cent of the national territory), eleven of which have been affected by oil and gas companies for exploratory activities at least (Gavald Palacn, 61). This shows how environmental law has to comprehend more than just the institution of national parks, in order to be able to really enforce environmental justice. It needs to delineate what is allowed within these territories, and give national institutions the instruments to enforce the rules, for example with fines.

Non-national sources of environmental attention

As mentioned before, there is an international dimension to environmental policy in Bolivia as well. In the 1990s, the country became well known for its early ratification of various international agreements for environmental protection such as the Biodiversity Treaty and Kyoto Protocol (Slunge and Jaldin, 20). These still constitute a major commitment to environmental issues for the Bolivian government. Similarly, regarding the protection of the habitat of communities, Convention 169 of the International Labor Organisation, to which Bolivia has subscribed, gives a particularly strong backing to indigenous communities and their claims for environmental justice. This Indigenous and Tribal People Convention, which was signed by Bolivia after a relatively short period of two years of consideration in 1991, gives them the right to an undisturbed living area (ILO 2009).

Another international source of attention for socio-environmental issues of mining comes from the sector itself. Canadian research (D. Szablowski, in L. North 2006: 39) has demonstrated that multinational mining companies have been confronted with increasing opposition against the damage their activities inflict on communities and the natural environment. In reaction to this, many companies have started to draw up their own environmental and social guidelines. The ISO 14001 for example is the generic certification standard for Environmental Management Systems (EMS) that also applies to the petrochemical sector. In Bolivia, Chaco SA is one of the companies that has received certification. The requirements are to identify and control the environmental impact of activities, products or services, and to improve its environmental performance continually. Companies also oblige themselves to implement a systematic approach to setting environmental objectives, to achieving these and to demonstrating that they have been achieved (ISO, 2004). For the gas sector, possibilities exist for cleaner exploitation of gas reserves, such as horizontal drilling and accessing more wells from drilling in one place (Natural Gas 2009). Aside from the sector's guidelines, in many cases projects need to use foreign capital to be able to make investments in the capital-intensive technologies required for hydrocarbon mining. Most foreign banks and financial institutions also require project managers to show the project's proposed impact. All major projects of the World Bank and the International Monetary Fund have to comply with the institutions' own socio-environmental standards, which have been sharpened recently after much criticism (Szablowski in L. North, 42). This has been touched upon in the chapter by Verbeek. In 2003, the private banking sector drew up its own set of environmental benchmarks, called the Equator Principles. About sixty major financial institutions have agreed to consider social and environmental risks in project financing (Equator Principles, 2009). The case of the OPIC refusing the investment in the pipeline (Gavalda Palacin, 63) is the clearest case of corporate influence on a project. Taking into account some of the positive international influences, since its first implementation in the 1990s, the experience with environmental policy in Bolivia has shown mixed results. In forestry and biodiversity conservation, good results were achieved but in other policy areas that are even more related to poverty, less progress was made. In 1996, a set of Environmental Regulations for the hydrocarbon sector was issued, outlining the obligations for companies, such as obtaining an environmental license from the Ministry for Sustainable Development. In order to get one, they were obliged to show the efforts made to protect water and soil resources from pollution by extraction activities (Slunge and Jaldin, 33). This license has proved to be relatively easy for the companies to obtain, by pledging precautionary measures and compensation in case of failure, as will be further analysed in the next section. The challenge of legally enforcing these obligations on companies by Bolivian state institutions is another big problem. As Hindery (2004: 288) points out, it is significant that the institutions have imposed relatively minimal sanctions, did not press criminal charges nor suspended construction or operation of the pipelines, which are all possible actions that were supported by existing legislation. This argument also goes for contamination from oil spills. Because previous cases against foreign companies on other accounts (incorrect disposal of waste from sugar refineries) had always been ruled in favour of the companies, the ministers decided not to press criminal charges against Transredes for the Desaguadero spill. They only imposed the financial compensation on the company that was mentioned earlier. The difficult trade-off between national development on the one hand and conservation of nature and social diversity on the other, and the priority given therein to hydrocarbon mining, is also reflected in the actions of Neisa Roca, the vice minister of Environment, Natural Resources and Forest Development (Vice Ministerio de Medio Ambiente, Recursos Naturales y Desarrollo Forestal), in the case of the Cuiab pipeline in 2000. After it became clear from public protest that the constructors of the pipeline had not fulfilled the social obligations outlined in the project's proposal, the vice minister only issued a formal warning against the company. She did not impose a fine, although this was a possibility under the ministry's natural conservation guidelines. Preference was given to the ministry's portfolio of Forest Development, which involved pipeline construction (Hindery, 287). The possibilities for reaching environmental justice in Bolivia are limited by the lack of legal actions by state institutions in the past. Unlike in the US for example, minority groups in Bolivia have

little legal standing based on previous court cases. This judicial aspect of environmental justice is an important point that has to be addressed by the government.

Pre-project mitigation
In 1993 the government decided to actively promote the enforcement of environmental legislation. Therefore, in 1995 national regulations on the Environmental Impact Assessment (EIA) process were approved. These rules of procedure contain requirements such as public participation, obtaining an environmental permit, and provisions regarding transboundary implications. Although there is a considerable degree of decentralization (meaning that provinces and municipalities have the power to enforce the environmental standards), the central ministry for sustainable development is still the only institution with the capacity and authority to review the EIAs. Because of that and because of the limited timetable (twenty to thirty days) for environmental review of a project proposal, it may happen that a project is automatically approved as it was proposed by the developer. In such a case, the developer and the government agency are liable when environmental damage occurs, but this has never been reported. Apart from the time pressure, other shortcomings of the EIA law are the lack of projectspecific terms of reference, making the review of the checklist into a superficial bureaucratic process. Also, public participation is a requirement but without specific conditions in the law, in practice however it has not proved to be effective often. The lack of detail of the EIA reports combines with the difficulty of public access (illiteracy, consultation venues in places far-away from those affected, lack of specific technical knowledge), resulting in a limitation of meaningful public participation. There have been reports of corruption in the hiring of consultants as well, facilitated by the easy access to the Consultant Register. A developer is free to hire any politically benevolent consulting firm, thereby gaining considerable influence on the outcomes of the reports (Petts, 1999: 195-196). In general, it can be concluded that the process of environmental assessment in Bolivia is not very well implemented or executed, which is a constraint on the participatory dimension of environmental justice in particular. In 2004 the ministry began to improve the EIA process as a result of a five-year World Bank project, with help of the Dutch Commission for Environmental Assessment (NCEA, 2009). Especially the project's focus on introducing strategic environmental assessment (which takes place at the national, strategic level of policymaking, instead of at project-level), may help to increase the attention for socio-environmental impacts during the discussion of national economic strategy. Not only the vice ministry of Biodiversity, Forestry and Environment but also the vice ministry of Hydrocarbons have recently requested assistance in the improvement of EIA regulation. Even with this rather limited set of environmental regulations in place, the attribution of accountability for damages is sometimes difficult because of the frequent shift of ownership of oil and gas installations in Bolivia. The World Bank project, initially implemented by the Bolivian government in 1996, shifted control over oil and gas pipelines, such as the Cuiab pipeline, from the state to Enron and Shell. With this shift, Enron, Shell and their Bolivian consortia (Transporte de Hidrocarburos S.A., or Transredes, GasOriente Boliviano and GasTransboliviano) became responsible for impacts generated from new hydrocarbons activities (such as construction of pipelines, wells and plants). There is ongoing debate on the degree to which Enron, Shell and their local counterparts can be held accountable for impacts of the pre-existing infrastructure inherited from YPFB which was in extremely poor condition, as company representatives have declared (Hindery, 286). This was illustrated by the Desaguadero oil spill mentioned before. The main source of conflict between the mining sector and environmental policy however, was the fact that after its privatisation in 1996, hydrocarbon mining was given a status of national priority because of the Strategic Adjustment Programs, as illustrated by the introductory chapter by Contreras and Renzema. As mentioned above, the subsequent hydrocarbon laws all prevailed over the set of environmental regulations. This situation is further enhanced by the fact that the first article of the hydrocarbons law declared all subsoil (subsuelo in Spanish) oil and gas reserves the inalienable property of the State. As demonstrated by the list of conflicts in the first paragraph, this sometimes interferes with the fact that the soil surface (suelo) is often in private or community hands. The status

of the petrochemical sector during the neo-liberal period made the national interest more important than the interests of private groups (McDowell, 2007). Concluding the analysis of Bolivian environmental law, there seems to have been a certain progress in the general environmental law of the country. However, the environmental policies targeting the mining sector in particular have been relatively weak, especially during the neo-liberal period. On top of that, the status of the hydrocarbons sector in neo-liberal policymaking and in jurisprudence has made it difficult for affected groups to protest against their actions. This complicated the fulfillment of any dimension of environmental justice. However, there have also been positive developments such as international environmental policy and corporate social responsibility by the mining sector. In the last section of this paper, the strategy of the new Morales government towards the protection of the environment and towards social justice will be further explored.

The environmental balance of three years of indigenous capitalism

In this paragraph I will shortly discuss the changes in environmental regulations of the hydrocarbons sector, after the change of government and the subsequent nationalization of the industry. Most of the causes and developments leading up to and during the nationalization have been analysed in other chapters of this book, so the focus will be on the role of environmental justice in the changing politics on natural resources.

Environmental justice concerns in the resistance movement before 2006

First of all, it is possible to argue that environmental concerns have contributed to the decision to nationalise the oil and gas sector in 2006, because of the connection between the environment and social justice. The period until 2004 had seen a succession of coalitions by mainly white-led political parties, who mostly adhered to the strategy of privatisation and dependence on foreign oil companies for investments, as promoted by the IFIs. As described by the first chapter, the opposition against foreign exploitation of Bolivian resources evolved into violent resistance when the plan for a pipeline to Chile (Pacific Liquefied Natural Gas project) was proposed. The most important argument of the protesters was the right to sovereignty over the country's natural resources. Opposition groups demanded that the foreign companies receive a much smaller share of the royalties, redistribute revenues more evenly geographically and create more jobs for the local population (Hindery, 284). From this, one can conclude that the protests were mainly economical. However, the growing resistance against the exploitation of Bolivian oil and gas reserves, can also be analysed as a concern with the distributional dimension of environmental justice. After the multitude of cases of environmental damage in native reserves, the demand for more equal distribution of benefits combined with a general attitude of apprehension against the foreign companies operating the production plants. The lack of openness and participation increasingly became an issue of protests. Although concerns for the environment certainly played a role in the protests and subsequent policy change, the role they played was not direct. It was a part of the basis of antipathy towards the foreign countries, just as in the water sector privatisation conflict described in the chapter about the water war by Strijdonck.

Indigenous environmental politics

In 2006, the Morales administration came to power, representing a takeover of state power by the indigenous population of Bolivia, in which Morales himself grew up. It can be argued that the environmental policies issued by the new government, will reflect the position of indigenas towards the environment and its use. An important concept in their world view is the Pacha Mama or mother Earth, which gives life, interacts continuously with human life and has to be protected. According to the indigenous people, human wellbeing does not depend on mass consumption products and

industrialism. Instead, according to the Movimiento Al Socialismo (Movement towards socialism, MAS), living well means harmony between the material and spiritual world, and between the human being and the environment and the community. Affection, appreciation, social recognition, self-esteem and self-confidence are the main goals in life ( 2009). This is a radically new paradigm of civilisation, very much opposed to neo-liberal ideas, that guides the new government's strategy to a large extent. However, the economic position of Bolivia is such that the country can not afford to leave all its natural resources in the soil without using them, which would in theory amount to a situation of almost perfect environmental justice. In such a situation, there would be no projects, no participation, no distribution and no recognition of difference. This however is an unrealistic scenario in the current international economic system. Therefore, the strategy of president Morales seems to be the best option available. His plan is to redistribute the revenues of the nationalized oil and gas sector to all Bolivians, by focusing on education and creation of jobs. This was explained in the first chapter discussing the Plan Nacional de Desarrollo (National Development Plan, PND) of June 2006. As such, mining in Bolivia is already taking on a more sustainable form, in line with the distributional dimension of environmental justice. Apart from a focus on natural resources and redistribution of benefits however, the PND does not outline any measures in relation to the abatement of damage from mining. Only on a general level a commitment to balancing the use of natural resources for development purposes with the needs for environmental conservation is recognized. There is a particular emphasis on developing renewable natural resources, but the ambitious plan for public investments in large scale projects the PND outlines may also pose a risk to the natural wealth of Bolivia. These include big investments in refineries, a distribution network for natural gas, hydroelectric projects and transport infrastructure. If not managed properly, these planned investments can potentially have big negative environmental impacts, just like many of the other ambitious reform processes initiated by the Bolivian government. The weakness of the system for environmental impact assessments of projects and strategic environmental assessment of plans, programmes and policies contributes to the problems (Slunge and Jaldin, 14). This situation may be further aggravated by the fact that the MDSMA has been divided into several ministries. Responsibilities related to environmental protection and natural resources management are now divided between principally three different ministries: the Ministry of Development Planning, Ministry of Rural and Farming Development and Environment and the Ministry of Water Resources (Slunge and Jaldin, 20). If these new institutions do not make an effort to towards cooperation, then the effect of policymaking on the environment may actually turn out to be negative. However, the latest promising development is that with the new Constitution in place, Morales is considering the creation of a separate, independent ministry of Environment (Business News Americas, 2009). In view of the experiences in the past that were outlined in the third paragraph, the success of this new institution will depend on the powers and institutional resources assigned to it. Based on the previous analysis, the contribution of the change in national policies to environmental justice can be summarized as ambiguous. There seems to be a much larger commitment to the protection of natural resources and communities' livelihoods, but the practical enactment of these ideas appears to be falling short of those ideas. The new Bolivian Constitution, which was recently adopted in January 2009, contains some interesting amendments focusing on environmental protection. It states that all forms of economic organization have the obligation to protect the environment. The state takes up the task of conserving natural resources and protecting biodiversity, in order to maintain equilibrium with the environment (WW4 Report 2009). However, no changes have been made to the hierarchy between suelo and subsuelo: natural resources are still collective propriety of the Bolivian people while the surface of the land is in private or communitarian possession and the potential for conflict remains. The protection of nature and communities from damaging industries is therefore dependent on pre-project mitigation and prevention as regulated by environmental law, which, as was concluded from the previous section, is still weak in Bolivia.


With regard to Bolivia, the situation of environmental justice in the country in relation to the petrochemical industry can be summarized as follows. After reviewing some general environmental consequences of hydrocarbon mining, there can be little doubt that this industry has major implications for the natural environment and the people depending both directly and indirectly on it. The cases outlined in the second paragraph show that environmental issues are very close to social issues. Environmental justice presents a major challenge to the political system, to society and to private companies. Especially in a country like Bolivia that possesses an extraordinary degree of biodiversity and tropical forest, attention has to be paid to keeping that wealth intact at a local level, while meeting national economic goals. The question remains whether the policies of the new government can make a significant contribution towards reaching a situation of environmental justice. In the end, a trade-off has to be settled between using the country's natural resources for economic benefit by means of mining, and keeping them intact. The first option reflects the neo-liberal strategy adopted and promoted by international financing institutions such as the IMF from the 1990s onwards. The second option would be the choice of indigenous and peasant communities living in or close to areas of great natural value, such as forest and lakes. They might rather make use of the environment in their own way, and make profit out of it through ecotourism or small-scale mining, for example. The new government of president Morales is trying to apply this alternative strategy, but it is also forced to meet the demands of the national and international market. It gives a better outlook for reaching a situation of environmental justice because the new policies pay more attention to social equality and environmental concerns. As follows from the above analysis, their implementation has so far brought mixed results, although it is still a bit too early for full evaluation. What is important to note from the concept of environmental justice is that it is not only about conserving natural resources such as a diversity of trees and clean water springs but also the value these have for people's livelihood and economic situation. Especially for indigenous and peasant groups that can not easily benefit from the international economic system, the preservation of the natural wealth is a key element in the reduction of their poverty and economic development. By reducing environment-related health problems for example, they will have a better position to work and develop. As could be concluded from the second paragraph, the problems the communities have faced during construction and exploitation of petrochemical installations have been quite substantial. They have shown that concern for environmental justice was limited during the time of capitalizacin, but the developments in environmental law and the new policies of Morales' government have brought some improvements. The dilemma of combining economic progress with environmental conservation and social equity will however remain relevant to most developing countries in the future, and especially for Bolivia. A new challenge is underway for the country's developing environmental law system: the construction of new pipelines as part of the Initiative for the Regional Infrastructure of South America (Iniciativa para la Infraestructura de Sudamerica, IIRSA). In 2000, the twelve countries of South America decided to cooperate to improve the infrastructure of transport, telecommunications and electricity, creating integrated corridors of transport. The focus of the programme seems to be on the export of natural resources such as hydrocarbons and foodstuffs to Western countries, which is seen as vital for the region's economic development. The confrontation between this neo-liberal investment scheme, indigenous views of natural exploitation as represented by the Morales government and Bolivian environmental regulations could be an interesting new research topic for the future.

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Bullard, R.D., 'Environmental Justice in the 21st century', Environmental Justice Resource Center, Clark University,, accessed 13 january 2009) Carruthers, D. ed. (2008) Environmental Justice in Latin America: problems, promise, and practice, MIT Press, London Central European University, Hungary, Environmental Justice Program, (, accessed 14 january 2009) Constance, P. (2005) 'All about reputation', IDB Amrica, September 2005, (, accessed 14 February 2009) Crabtree, J. (2005) 'Patterns of Protest, Politics and social movements in Bolivia', Latin American Bureau, London EarthWorks Sources of Oil and Gas Air pollution,
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Economist Intelligence Unit (2007) Bolivia Country Briefing November 13, 2007,, accessed 5 February 2009) Energy Information Administration (2007) Bolivia Energy Data, Statistics and Analysis, December 2007 (, accessed 30 January 2009) Equator Principles (2002) A benchmark for the financial industry to manage social and environmental issues in project financing,, (accessed 10 February 2009) Fretes Cibils, F., Marcelo Giugale, Connie Luff (2007) Bolivia: Public Policy Options for the Well-being of All, World Bank Gavald Palacn, M. (2005) Los conflictos ambientales del gas Boliviano, Iconos: Revista de Ciencias Sociales, no. 21, Quito, January 2005, pp 57-66 Gestion ambiental en el Sector Hidrocarburos Hindery, D. 'Social and environmental impacts of World Bank/IMF-funded economic restructuring in Bolivia: An analysis of Enron and Shell's hydrocarbons projects', Singapore Journal of Tropical Geography (2004), vol 25, no. 3, pp 281-303 International Labor Organisation (1989) Convention 169, (accessed 5 February 2009) International Labour Organisation (2009) (, accessed 5 February 2009) International Organisation for Standardization ISO 14000 certification, (accessed 10 February 2009) Langman, J. (2002) 'Enron - Bulldozing Bolivia', Corp Watch, 9 May 2002, ivia.htm, accessed 20 January 2009)

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(accessed 15 January 2009) Netherlands Commission on Environmental Assessment SEA Workshops in La Paz and Cochabamba, 6 August 2008, (, accessed 6 February 2009) North, L., T.D. Clark & V. Patrioni eds. (2006) Community Rights and Corporate Responsibility: Canadian Mining and Oil Companies in Latin America, Between The Lines, Toronto Perreault, Th. (2008) Natural Gas, Indigenous Mobilization and Bolivian State, UNRISD, (

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Demands from the East: A destabilised Bolivia

Jose Alice Diemel

Abstract: This chapter descibes the rise of the autonomy demand in Santa Cruz as a response to the indigenous mobilisation and political power gain at the end of the 20th century. In the first part of this chapter the question on what ground this autonomy demand in the Santa Cruz lowland department is based will be central. When looking into more depth at the autonomy demand in Santa Cruz one may wonder whether autonomy is equally wished for throughout the entire Santa Cruz population. Therefore, the second part of this chapter will describe the social differences within Santa Cruz, in order to investigate whether the autonomy quest turns out to be primarily important for cruceo elites or whether it is also wished for by the non-elite cruceo population. Keywords: Santa Cruz, autonomy, gas revenues, land, resource distribution

Although more than 60 per cent (World Bank) of Bolivias population constitutes of indigenous people, this enormous group of Bolivian citizens has not been able to change 500 years of suppression by ruling colonial powers and their descendants. Well into the twentieth century, the majority of the Bolivian population has effectively been deprived of economic opportunities and a political voice. It was only at the end of the twentieth century that the political party Movimiento Al Socialismo 25 (MAS) managed to bind various indigenous interests together and MAS candidate Evo Morales won a landslide victory of 54 per cent in the presidential elections of December 2005 (Eaton 2008, 19). This electoral victory of the first indigenous leader would form a breach with the past of white/mestizo dominance in Bolivian politics. Central in Morales policy is a pledge to reverse the institutionalised injustice committed against Bolivias indigenous majority (DeShazo 2008, 1). Though, taking a better inside look into Morales constituency and his main policy, suggests more is going on in Bolivia than a struggle between ethnic groups. The rewinding of neo-liberal policies and reform policies favourable to the indigenous population, indicate that Morales political struggle is also focussed on ending social inequality by redistributing the countrys resources (Hylton and Thomson 2007, 134-138). To the established interests of the Media Luna 26 departments in Eastern Bolivia, Morales presidential election represents an enormous challenge. Morales election as president and with it his reforming policies widens the gap between what is recently called the two Bolivias. Many in the MAS for example consider the country's poverty a direct result of exploitation by foreign gas companies, and therefore strongly favoured the nationalisation of Bolivias hydrocarbon sector of 2006. Conversely, the majority of the white and richer Media Luna population derives a substantial proportion of its wealth from foreign involvement in the Bolivian (gas) economy and for that reason favours this foreign exploitation.
25 26

Movement Towards Socialism The Media Luna provinces entail the four eastern provinces of Bolivia, namely: Pando, Beni, Santa Cruz, Tarija (and Chuquisaca).

Nevertheless, the cleavage between the indigenous highland provinces and the white/mestizo lowland departments runs deeper than the gas controversy. Economically, the highland provinces are geared towards domestic markets, whereas the resource-rich Media Luna is export-oriented. For instance, Santa Cruz, one of the Media Luna departments, counts for less than a quarter of Bolivias population, whilst providing 42 per cent of its tax revenues (Eaton 2008, 14). In addition, Morales Land Reform Act as well as the Eastern elites loss of power in the national government has led the Eastern provinces to protest centralist politics and to demand greater political, fiscal and economic autonomy for the Media Luna departments. The earlier mentioned power transition in the resource politics of Bolivia has had an enormous impact on the country. It changed politics dramatically as well as the internal and external relations of the country. Hence, an analysis of the highly changed domestic situation is very relevant to the topic of this book. In much academic work, as well as in the media the focus is laid on the indigenous perspective in the analysis of Bolivias current internal developments. In order to counterbalance this bias towards the indigenous viewpoint this chapter will focus on the other party in the conflict, namely on the interests of the Eastern departments of Bolivia. Although opposition against Morales and his political party MAS are visible throughout all five Media Luna provinces, in this chapter the spotlight will be on the Santa Cruz department, since protest and demands for autonomy are strongest in this Bolivian province. Fundamental to this chapter will be the question on what ground this autonomy demand in the Santa Cruz lowland department is based. The first section of this chapter will be dedicated to a short overview of the occurrences during the end of the 1990s and the first years of the 21st century. In order to comprehend the tensions in Bolivia between the pro-MAS highlands and the autonomy seeking Santa Cruz department, the next two sections will elaborate on the regional differences at play within the country. Firstly the political history of Santa Cruz will be described as well as its changing political position in comparison to the rest of Bolivia. In addition, since the economic regional differences between Santa Cruz and the rest of Bolivia are crucial in understanding the power struggle over natural resources, the economic perspective will extensively be discussed in section three. However, it would be too narrow minded to perceive Bolivias nowadays conflict as a dispute between the impoverished Western highlands and richer Eastern lowlands only. The reality apears to be more complicated. When looking into more depth at the autonomy demand in Santa Cruz one may wonder whether autonomy is equally wished for throughout the entire Santa Cruz population. Therefore, the last section of this chapter will describe the social differences within Santa Cruz, in order to investigate whether the autonomy quest turns out to be primarily important for cruceo elites or whether it is also wished for by the non-elite cruceo population.

The rise of the Santa Cruz autonomy demand: A response to indigenous mobilisation
In order to get a better understanding on what grounds and in what circumstances the autonomy demand came in to being, in this section a background of the rise of the autonomy demand is discussed. During the 1980s and 1990s, in the midst of a worldwide economic recession the International Monetary Fund (IMF) and the World Bank (WB) granted Bolivia enormous loans in order to eradicate Bolivias high inflation rate and stimulate its economic growth. Unfortunately, this financial injection did not appear to improve Bolivias economic situation. Between 1985 and 2000, the economys average growth remained less than 1.0 per cent a year and actually became negative during the 1990s (Lehoucq 2008, 115). The wide-ranging structural neo-liberal reforms, imposed by the IMF and WB and connected to the loans, aggravated Bolivias economic situation even more. Although probably entirely against the IMFs objective, the imposed reforms, such as privatisation of state enterprises and a restriction of government spending, widened even further the gigantic income inequalities the country had already suffered for decades. In those days over 60 per cent of Bolivians citizens lived, and today still does live, in poverty. Remarkably, poverty mainly existed among

Bolivias indigenous population of which 74 per cent lived in poverty and 53 per cent even had to get by on less than one dollar a day (World Bank). 27

Origin of the October Agenda 2003

Not surprisingly, the strongly disappointing economic growth of the 1990s turned large numbers of poor, mainly indigenous Bolivians against the new neo-liberal economic policy that seemed to widen the gap between poor and rich Bolivians even further. The social protests were primarily focussed on the exploitation of natural resources, gas in particular. Many Bolivians came to believe that the terms offered to foreign gas extraction companies had been overly generous. No more than 18 per cent of all revenues from Bolivian gas production was returned to the country by the foreign companies (Velasquez-Donaldson 2007). Large parts of the population consequently felt deprived of their rightful share of revenues from this valuable resource. Social unrest started to escalate by the late 1990s and became violent in February of 2003 when the citizens started claiming the resignation of President Gonzalo Sanchez de Lozada. The protests from Bolivias indigenous population from the poorer Western highlands found political expression in the October Agenda of 2003. In short this Agenda consisted of; 1. Nationalisation of Bolivias gas resources, 2. the establishment of an Asemblea Constituyente 28 in order to give the indigenous more political and cultural rights, and 3. a lawsuit against President Gonzalo Sanchez de Lozada for the use of violence against civilian population during the protest marches earlier that year (Quack 2006, 2). Although President Mesa, Lozadas successor, accepted the October Agenda and planned a referendum on the nationalisation of Bolivias gas resources, he proved no more capable than Lozada had been of coping with the soaring protests and popular demands. By early June 2005, President Mesa resigned as well and by December of the same year presidential elections were organised (Lehoucq 2008, 117).

Morales' landslide election victory in December 2005

In December 2005 Evo Morales wins the presidential elections with a landslide victory of 54 per cent, being the first indigenous president of Bolivia (Crabtree, 2007). The central point in MAS election campaign and later in the MAS government policy, becomes the position of Bolivias indigenous population. The Republic of Bolivia needs, in Morales vision, to be refound on new lines by granting the countrys indigenous majority participation in political decision-making mechanisms. In addition, Morales policy involves the extension of respect for indigenous cultures and traditions. Concerning the unequal distribution of wealth within the country, the MAS government decides to extend indigenous social-economic rights by initiating redistributive programmes. In a country with such high levels of rural poverty as Bolivia and such extreme concentration of large landholdings, it is understandable that land reform is a priority in Morales policy. Morales and his political party MAS have reintroduced the earlier Land Reform Act of 1952 that incites the lowland departments to break up large landholdings that are considered unproductive. Additionally, in the area of control over natural resource exploitation President Morales nationalised the natural gas industry in order to redistribute the nations wealth and to stimulate less developed sectors. (Crabtree 2007, 2)

Santa Cruz' response

The indigenous popular demands of 2003 and consequently Morales' total victory in the December 2005 presidential elections represent a challenge to the established interests of Santa Cruz. Firstly, the reversion of market-friendly and pro-export economic policies, introduced by MAS have a very negative impact on the economically export-oriented Eastern departments. Secondly, the redistribution
27 28

World Banks indication for extreme poverty Constituent Assembly

in the areas of landholding, natural resources and political influence, negatively affect Santa Cruz elites who for decades have been the leading actors in all three areas. The policy of dividing up large landed estates in Santa Cruz to the benefit of landless indigenous peasants in the department, only diminish the cruceo elites economic means. In addition, the strong and well developed private sector of Santa Cruz that benefited from the continued exportation of gas by multinational corporations will be negatively affected by the nationalisation of Bolivias gas industry. Finally, in the eyes of many Santa Cruz residents, the resource rich department does not have to shoulder the economic burden of an overly dependent country (Ballv 2004, 2). Facing the overthrow of President Gonzalo Snchez de Lozada in 2003 and MAS reform policies which only favour the indigenous highland population in 2005, Santa Cruz movement for autonomy is brought alive. Hundreds of thousands of Santa Cruz residents answer the call from the Comit Pro Santa Cruz (CPSC), leading the autonomy demand, to demonstrate on behalf of autonomy for the Santa Cruz department. In June 2004, more than half a million movement participants sign a petition demanding a referendum on autonomy for the Eastern departments. Faced with La Paz opposition to holding a referendum, over 350,000 people participate in a second rally in Santa Cruz in January 2005, creating Bolivias largest-ever public demonstration. (Eaton 2008, 6) Precisely a year after the Santa Cruz petition for autonomy was offered to Bolivias government, President Mesa agrees in June 2005 to hold a nation-wide referendum on departmental autonomy. While 56 per cent of Bolivias citizens reject regional autonomy in this referendum held on July 2, 2006, 71.1 per cent of voters from the Santa Cruz department vote in favour of autonomy (Corte National Electoral). Although, President Morales pledged his MAS party would respect the autonomy referendum results, he and his party failed to include significant autonomy measures in the new Bolivian constitution (Eaton 2008, 7). In response, the opposition-dominated Eastern departments organised an unofficial autonomy-seeking referendum in May 2008 which in Santa Cruz was overwhelmingly approved by 82 per cent of the voters. In the next month, three other Eastern Bolivian departments (Beni, Pando and Tarija) followed suit, clearly showing how the polarisation of Bolivias society had only grown since the beginning of social unrest in the late 1990s (Lehoucq 2008, 120).

Santa Cruz' political position

With the purpose of comprehending the tensions in Bolivia between the pro-MAS highlands and the autonomy seeking Santa Cruz department, one must understand the regional differences at play within the country. According to Kent Eaton, an associate professor at the University of California and a Bolivia specialist, recent large scale changes within Bolivias politics and economy have stimulated Santa Cruzs demand for autonomy (Eaton 2008, 3). The political factors underlying the autonomy demand will be discussed in this section in order to provide the reader with a better idea of Santa Cruzs political position vis--vis the rest of Bolivias departments. In addition, in short a description will be given of the content of the autonomy demand.

Political history
Throughout Bolivias history the power struggle between central and regional power bases has been a recurrent source for unrest and tensions. The Guerra Federal 29 indicates that even as early as the late 19th century power struggles between the core and periphery played a significant role in Bolivias politics. The war took place between La Paz, which was the leading actor in the tin boom, and Chuquisaca which was then losing power due to its collapsing silver economy. When economic elites from La Paz eventually won the war in 1899, the country was both politically and economically highly centralised around the powers of La Paz (Eaton 2007, 75). A revolution taking place in 1952 even further accentuated the dependence of the regional departments on the centre. But when later in the 1950s municipal elections were prohibited by the central powers, a period of regional protest emerged in which a regional civic society was created. Santa Cruz was the first department to start a civic

Federal war

committee, the Comit Pro-Santa Cruz (CPSC) and quickly became an example for the creation of similar committees in other departments. A collapse of the tin industry in the Western department of La Paz, just as the collapse of the silver industry in Chuquisaca several decades earlier, preluded a decline of La Pazs power relative to the power of the Eastern departments of the Media Luna (Eaton 2007, 76). Santa Cruz uneasiness with the political centralistic developments is nowadays expressed through a demand for decentralisation of power. Nevertheless, in the past Santa Cruz elite knew how to influence the highly centralised institutions in such ways that it promoted regional economic development in their department. On the one hand Santa Cruz elites exercised substantial influence on the national government or provided critical support in the overthrow and replacement of politically and economically less favourable regimes. After a military coop in the seventies for example, Santa Cruz elites played the leading role in selecting Hugo Banzer, a native of Santa Cruz as president (Eaton 2008, 16). On the other hand, the department did also derive noteworthy economic and fiscal benefits from the central power in La Paz. Thanks to the bulk of subsidies, loans and aid money Santa Cruz received from the national government, the department could easily overtake the growth rate of the rest of the country. Between 1938 and 1948, for instance, almost all of Bolivias external debt was invested into development projects in Santa Cruz (Eaton 2007, 78).

Recent political situation 1990-today

Democratisation is one of the recent large scale changes within Bolivias politics that has stimulated Santa Cruzs demand for autonomy as indicated above (Eaton 2008, 3). Democratisation occurring in the 1990s favoured Santa Cruz decentralisation politics through opening up space for all kinds of demands while at the same time sidelining the military from politics. Moreover the democratisation process provided the departments with an increase in fiscal powers and greater administrative powers. Another more specific factor that facilitated Santa Cruzs road to autonomy was a series of major transformations at the municipal and national levels that directly threatened economic elites in Santa Cruz. One of the major threats to Santa Cruz in the 1990s was the municipal decentralising law of 1994 initiated by President Lozada who feared a decentralisation at the departmental level would lead to the disintegration of the country (Eaton 2007, 80). This decentralisation law infuriated Santa Cruz elites since they saw the departments and not the municipalities as the true sub-national unit. Moreover, the new law transferred sizable revenues from the capital to the municipalities, adding political significance to the success of new, to Santa Cruz threatening, indigenous parties in municipal elections in the late 1990s, such as the MAS party of Evo Morales (Eaton 2007, 81). The presidential elections that took place in June 2002 generated additional concern among the Santa Cruz elites. The emergence of many new parties together with the inferior performance of Bolivias traditional political parties 30 in which the elites still had great influence, aggravated fears within the cruceo elite that they could no longer account on sufficient representation in the central government. The election of Evo Morales for President with a landslide victory of 54 per cent was the zenith of Santa Cruzs decline of influence in national power. Not just due to Morales introduction of major redistribution programmes and policies favouring mainly Bolivias indigenous population. Morales victory of the presidency also marked the definitive end of the consensus-oriented multiparty system that had been so vivid in earlier decades. Whereas the fragmentation of Bolivias party system forced previous political leaders to negotiate inter-party coalitions, the emergence of the MAS as a majority party after 2005 meant Morales did not need to negotiate with any of the traditional parties (Eaton 2007, 83). At the end of 2005 it became clear to the cruceo elite they could no longer use their political influence in order to secure their economic privileged position. They were left with little alternatives for re-establishing their power in the national government than the road to autonomy.


Traditional political parties such as Accin Democrtica Nacionalista (ADN) of Banzer and the Movimiento Nacionalista Revolucionario (MNR).

102 What does autonomy demand consists of?

It is still very unclear what exactly the Santa Cruz autonomy demand consists of. Although at the very least it is clear the autonomy demand revolves mainly around increased levels of self-government and greater autonomy in policy concerning natural resources, it is important to note there are differences in opinion over how and with what speed the autonomy demand should be worked out. Roughly it can be said the autonomy movement in Santa Cruz consists of two main trends. On the one hand, the radical Movimiento Nacin Camba de Liberacion 31 (MNCL), proposing the breakaway of the departments of Beni, Pando, Santa Cruz, Chuquisaca and Tarija (together the so called Nacin Camba) (Ballv 2004, 3). On the other hand is the more moderate CPSC that supports far reaching regional independence (Crabtree 2007). Even though these currents see a different future for Santa Cruz, there are common ideas both groups stand for. Firstly both currents agree Santa Cruz should get regional control over its natural resources (e.g. land, gas and oil). Not only do both movements want to pursue their own policy in this area, they believe Santa Cruz has the right to retain control over the largest part of the gas tax revenues. The remainder can be shared with other departments. Secondly, these parties demand the right to endorse their own economic development model at the sub-national level that might differ from the national model. Thirdly, both agree on the idea that legislative authority to set policies on all policies other than defence, currency and foreign relations, should be transferred to departmental assemblies. And finally, the movements perception of negligent law enforcement by the national government during tense situations, explains the demand for departmental control over police institutions (Eaton 2007, 9, 74, 88).

Santa Cruz' economic position in comparison to the rest of Bolivia

A second explanation for Santa Cruz wish for autonomy can be found in the changed economic position of Santa Cruz in comparison to the rest the country. Therefore, the economic factors underlying the autonomy demand will be described in this part in order to provide the reader with a better idea of Santa Cruzs economic position vis--vis the rest of Bolivias departments. The emergence of Santa Cruz as Bolivias wealthiest and most productive region is a fairly new phenomenon. For decennia, Santa Cruz was an underdeveloped department, isolated from central rule from La Paz. Its position changed however at the beginning of the sixties when the government decided to integrate Santa Cruz and connected the Eastern department to the rest of Bolivia by roads and railways (Quack 2007). From these years on Santa Cruz developed itself into one of the most prosperous and rich parts of the country, generating the highest percentage of GDP as is illustrated by table 1, column 5.


Movement for the Liberation of the Camba Nation

Table 1: Data on Bolivias Departments Source: Weisbrot and Sandoval, 2008

Moreover, the radical process of economic stabilisation and liberalisation experienced by Bolivia in the eighties and nineties, disproportionately benefited Bolivias Eastern regions, under which Santa Cruz. Due to the existence of a strong and well developed private sector as well as a great wealth in resources, Santa Cruz could prosper well during these years of neo-liberal policy. Some scholars indicate the absence and neglect of the central government in the decades before the sixties as the factor that promoted the growth of an independent and free market system in Santa Cruz, in contrast to the state interfered economy in the rest of Bolivia (Eaton 2007, 78). In particular because two decades of neo-liberal market reforms had brought Santa Cruz substantial economic advantages, Morales economic reform politics at the beginning of the 21st century formed a serious threat to the market-oriented economic preference of Santa Cruz. Especially, the gas and land redistributive programmes introduced by the MAS government served as a substantial stimulating force for the creation of a Santa Cruz autonomy movement. The distribution of Bolivias two most profitable natural resources, land and gas, became the most important underlying source for the dispute between the impoverished Western highlands and richer Eastern lowlands. For this reason, the next two sub-section will extensively discuss this distribution of gas revenues and land and emphasise on Santa Cruz special position when it comes to natural resources.

Land policy and distribution

For a country with a high percentage of rural population, of which 66 per cent lives in extreme poverty (World Bank) and of which the majority is employed in agriculture, it is not surprising that land reforms have been the vanguard of Morales election campaign and subsequently one of his main policy issues once he became president of Bolivia. To great inconvenience of the Santa Cruz landholders, land redistribution became Morales most important instrument in addressing the problems of rural underdevelopment and poverty. This apprehensiveness of Santa Cruz land owning elite with the newly introduced land redistribution programme of 2005 can be explained by the following figures.

Already from the 1950s on, when approximately 82 per cent of all surveyed Bolivian land surface was controlled by only 4 per cent of all agricultural units (Weisbrot and Sandoval 2008, 2), land has been unequally distributed. In the decades following the fifties, there has been some redistribution of land from large landholders to indigenous peasants. However, Table 2 shows that land distribution has not become fairer. Due to corruption in the central government vast amounts of hectares were given to small groups of elites in the Eastern part of the country during the sixties, seventies and nineties. Table 2: Distribution of farm units by size (2006) Source: Weisbrot and Sandoval, 2008

Table 2 illustrates that Bolivia's land ownership is still extremely concentrated. Just 686 farm units, or 0.22 per cent of the total number of farm units, have power over almost half of Bolivias agricultural land. Or put differently in order to make todays situation better comparable to the one in 1950, 3.8 per cent of the total landowners controls at present 81.0 per cent of all surveyed Bolivian land surface. Turned the other way around, 80 per cent of landowning Bolivians have to share just 2.4 per cent of the remaining agricultural land. Meaning that a majority of peasants possess only very small surfaces of land and in addition that many rural families have to live without owning any land at all. Although no similar detailed information on land distribution as such for Bolivia as a whole is available for the department of Santa Cruz, it is generally agreed upon that Santa Cruz takes up much of the concentration of large landholdings. This presumption is underlined by data from the International Fund for Agricultural Development, which estimated 77 per cent of all cultivated land in Bolivia is in the hands of a small percentage of landholdings situated in the three most Eastern Media Luna provinces of Pando, Beni and above all Santa Cruz (Weisbrot and Sandoval 2008, 2). One of the main arguments used by large landholders in Santa Cruz to extenuate high concentration of land in their department is that larger farm units are able to produce more effectively and productively than smaller farm units. However, this argument does not hold firm when the use of large parts of land in Santa Cruz for speculative means, is taken into account. This land is thus not used for production by these large landholders and is in addition not exploitable by smaller or even landless peasants. Moreover, the efficiency argument is undermined by the fact that these large agrobusinesses appear to receive state subsidies, even though these subsidies are inefficient and regressive in terms of income distribution. Examples of these state subsidies include subsidies on diesel fuel which is provided to large landholders in Santa Cruz. The evaluation of the possibility to eliminate the diesel subsidy by the Finance Ministry in April 2008, is hence reason for large landholders in Santa Cruz to fear for their agricultural interests (Weisbrot and Sandoval 2008, 5). In addition, a constitutional clause approved through a referendum on 25 January 2009, requires the expropriation and redistribution of landholdings above 5,000 hectares if they are not actively being used to produce tax revenue for the state (Bolpress 2009).

Considering this high concentration of landholdings in the Santa Cruz department, it is not surprising that large-scale agro businesses and cattle ranchers from this department feel threatened in their interests by the possible diminishing agricultural subsidies from the state as well as by these constitutional changes on land distribution. Consequently, large landowners have a high interest in promoting more autonomy for the department. If the Santa Cruz would have more autonomy, the department can ensure that regional governments continue these agricultural subsidies in Santa Cruz even in spite of central governments decisions.

Gas policy
A second large threat to the Santa Cruz department are the reforms concerning the hydrocarbon revenues distribution. Over 22 per cent of Bolivias total gas production is concentrated in Santa Cruz, the countrys second largest natural gas producer (Weisbrot and Sandoval 2008, 8). The new Hydrocarbon Law No. 3058 the government passed in 2005 as well as the placement of the Bolivian hydrocarbon sector under state control by passing the Supreme Decree of Nationalisation in 2006 have experienced a lot of protest from the Eastern gas producing department. This discontent of the Santa Cruz population with the new gas policies can be divided into two separate forms of objections. First of all, Santa Cruz feels under compensated by the newly introduced distribution system for its gas producing activities. This feeling of discontent will be described in the next part by means of an elaboration on Bolivias current gas revenue distribution system. In addition, attention is paid to how this distribution system induces agitation among cruceo elites. The second objection of the Santa Cruz population with the current gas policy is based on the fear that the nationalisation of the Bolivian hydrocarbon sector will severely deteriorate Bolivias international trade position. This fear will be described in more detail further on in this section. There has been an almost five-fold increase in three years in hydrocarbon revenues since the implementation of the new hydrocarbon law in 2005 and the nationalisation in 2006, from which the Santa Cruz department benefited as much as any other department (Weisbrot and Sandoval 2008, 9). Nevertheless, the Santa Cruz department feels it has right to a bigger share of the gas revenues, than it currently receives based on the distribution system since 2005. This view is based on the departments claim of local ownership over its natural resources. Over and above this, the gas revenue distribution system is the only instrument for the department through which it can generate income (VelasquezDonaldson 2007, 26). Therefore, Santa Cruz push for a higher degree of decentralisation in order to take more advantage of the vast flows of income its gas production sector generates, is a logical consequence. The system that is currently used to distribute the countrys gas revenues is based on the New Hydrocarbon Law No. 3058 of 2005 and the Supreme Decree of Nationalisation in 2006. Before 2005 the Bolivian state charged the gas producing companies only 18 per cent royalty, which allowed these companies to maintain 82 per cent of the revenues acquired from gas production. With the introduction of the new hydrocarbon law in 2005 an Impuesto Directo a los Hydrocarburos (IDH) 32 of 32 per cent was stipulated in addition to the 18 per cent royalties. This new distribution and tax system thus imposed gas companies to remit a minimum of 50 per cent share of hydrocarbon revenues within the Bolivian territory to the state (Velasquez-Donaldson 2007, 16). The collection of tax from the hydrocarbon sector in Bolivia occurs in two phases. In the initial phase of gas and oil production the state imposes IDH of 32 per cent and royalties of 18 per cent. A second kind of tax, which is called Impuesto Especial a los Hidrocarburos y sus Derivados (IEHD) 33 is levied in during the process of refining, transport and marketing (Weisbrot and Sandoval 2008, 13). Over the Net Hydrocarbon Production (NHP), an 18 per cent royalty and a 32 per cent IDH are levied. The remaining 50 per cent of Net Hydrocarbon Production, minus the recovery costs are shared by the Yacimientos Petrolferos Fiscales Bolivianos (YPFB) 34 and the gas producing company. From the imposed 18 per cent royalty, 11 per cent is allocated to the producing department. The remaining 7 per cent is divided between 6 per cent of the total national production revenues for the
32 33 34

Direct Tax to Hydrocarbons Special Tax on Hydrocarbons and Derived Products Bolivian Fiscal Hydrocarbon Deposits = National hydrocarbon distribution company

central government (through the National Treasury) and 1 per cent for the departments of Pando and Beni in the form of a National Compensatory Royalty. The IDH are then distributed at different levels among the non-producing departments, producing departments, municipalities, universities, the National Treasury and some special funds. Each producing department gets 12.5 per cent share of the IDH revenues according to its own hydrocarbon production. Of the remaining IDH revenues 56.25 per cent goes to the National Treasury (central government) and 31.25 per cent goes to the non-producing departments of which each department receives 6.25. Of the IDH revenues received by the central government, 15 per cent has to be used for special funds such as Indigenous Fund, the Natural Gas Mass Use Fund and the Compensation Fund for the three most populated departments in Bolivia. Of the latter fund Santa Cruz receives 36 per cent. Table 3 : IDHs Departmental distribution system in US dollars Source: Velasquez-Donaldson 2007, 31

12,5 / 6,25 % At first sight this distributive system seems quite beneficial for Santa Cruz. At the end of all calculations even less than 25 per cent of the total hydrocarbon revenue accrues to the central government. Producing departments receive 11 per cent of the royalty and densely populated departments are partly compensated through an extra fund. All three steps in the system are beneficial to an autonomy demanding department such as Santa Cruz. However, when taking a closer look at the distribution percentages in relation to the departments population figures, the departmental distribution systems seems not that beneficial at all. Although densely populated departments are compensated in the current distribution system, the Compensatory Funds seems not able to compensate Santa Cruz entirely for its enormous population. Santa Cruzs population (25 per cent of Bolivias total population, table 1, column 1) is allocated only a very small amount of gas revenues per capita in comparison to the rest of Bolivias departments (see table 3). Moreover, table 3 demonstrates how non-producing departments, such as Beni, Pando and Oruro are given a significantly larger share of gas revenues than producing ones, such as Santa Cruz, Cochabamba and Chuquisaca. Consequently, Santa Cruz feels under compensated for its work as a gas-producing province. The current distribution system of the first phase of royalty and IDH collection is diagrammed in figure 1 on the next page, so as to enhance the readers understanding of the gas revenue distribution system.

Figure 1: Bolivias Distribution of gas revenues collected at the production phase Source: Weisbrot and Sandoval 2008

Another way of gas revenue distribution against which Santa Cruz expresses its apprehensiveness is the distribution of the Impuesto Especial a los Hidrocarburos y sus Derivados (IEHD), which was already shortly mentioned earlier. Each department is given a 25 percentage of the total levied IEHD by the central government. This gas revenue is allocated to the various departments in two parts. The first part is distributed on the basis of population density of the department and the second part of the IEHD is divided equally between the nine Bolivian departments, without taking any poverty, population or economic characteristic in account (Velasquez-Donaldson 2007, 29). It is noticeable, when looking at the structure of the distribution system of the IEHD, that it causes the same problems for densely populated departments as mentioned above concerning the IDH/royalty distribution system. As is shown by table 4, Santa Cruz gets, due to its large population,

again disproportionally less revenue than departments such as Pando with a significant lower population number. Table 4: IEHD Departmental distribution system in US dollars Source: Velasquez-Donaldson 2007, 29

As mentioned earlier, the Santa Cruz elite is not merely discontent with the new gas revenue distribution system. The fear that the gas policy change since 2005 as well as the nationalisation of the Bolivian hydrocarbon sector will severely deteriorate the countrys and departments international trade position plays a significant role as well. The fact that from the gas revenues produced by foreign gas companies, on average 75 to 85 per cent is taken by the government is worrisome to many elites living in Santa Cruz (VelasquezDonaldson 2007, 18). They fear Bolivias business environment has deteriorated in such a way by the measures taken by the Bolivian government since 2005, that foreign investors might abstain from new investment in the Bolivian gas sector and other sectors (Stanley 2008, 16). For the Santa Cruz department, which is very internationally and export oriented, a decrease in foreign investment could have disastrous effects on its economic position. In addition, cruceo elites worry that the Bolivian state will not be able to successfully develop and maintain the natural gas sector (Eaton 2008, 21).

Social differences within Santa Cruz

Throughout this chapter it has become clear that the conflict over Bolivias natural resources has motivated certain groups from the resource-rich Santa Cruz to call for more departmental autonomy. However, it is crucial in understanding Bolivias present tensions to realise that Santa Cruz is not a unified department. It might even be said that social differences within Santa Cruz are as wide as the social differences between Santa Cruz and the rest of Bolivia. In this rich department in comparison to the Bolivian impoverished highlands, the wealth is spatially and socially concentrated among the middle and upper classes of Santa Cruz (Gustafson 2006, 360). Consequently, cruceos elites do not only face the threat from the MAS government redistributive reforms, but also have to face opposition to their autonomy agenda from within their own department. This part of the chapter will elaborate on the social differences at play in Santa Cruz. It will shed light on both the interests of firstly the nonelites and secondly the interests of Santa Cruz elites.

Non-elite Santa Cruz

Santa Cruz growth, as well as state-sponsored migration programmes have spurred poor indigenous groups from the Andean regions to settle in Santa Cruz. From the 1960s until today, over half a million people from Bolivias highlands settled as rural smallholders, urban merchants and labourers in the Eastern lowland department (Gustafon 2006, 355). This large-scale migration significantly reshaped the social and political landscape of Santa Cruz and changed its society into a multicultural one. Many of the Andean migrants settled in the Norte Integrado (integrated North) a region in Santa Cruz, were they established colonies that today are lively trading and farming municipalities, as is indicated by Map 1. (Gustafon 358). Consequently, the Norte Integrado region, as well as other Santa Cruz regions such as Chiquitana, are the stage of tensions between small indigenous landholders and large-scale soy farmers and cattlemen.

Map 1: Santa Cruz Department Source: Gustafson 2008 The small landholdings of these sindicatos (settlers) feel threatened by the continuous frontier expansion of large-scale agricultural producers, cattle ranchers and natural resource extracting companies. Therefore, the small landholders and landless peasants have united themselves in the Movimiento Sin Tierra (MST, Landless Movement) in order to fight the unequal land distribution in the department. In response to the strengthening of the MST and the expropriation provisions in the MAS reform politics, landowners in Santa Cruz have increasingly organised paramilitary squads to defend their properties against land invasions (Eaton 2007, 88).

Nevertheless, land distribution is not the only issue on which large scale landholders and poor peasants/ labourers hold very differing visions. Nowadays, gas and soy products comprise over 80 per cent of Santa Cruz exports. Which is very problematic to the poorer citizens of Santa Cruz since, neither of both products generates significant employment in the department nor economic diversification (Gustafon 2006, 360). This narrow-based economic structure present in Santa Cruz, concentrates economic wealth and productive activities in the hands of a small upper class group. Given the strong concentration of wealth and political power in Santa Cruz, it is likely that autonomy for Santa Cruz will not benefit all parties to the same extent. Autonomy for Santa Cruz would significantly constrain the redistributive capacity of Bolivias central government in the department, and would therefore disadvantage the non-elite actors in Santa Cruz (Eaton 2007, 74). An extensive grant of autonomy to Santa Cruz will probably frustrate MAS reforms, designed to divide and redistribute economic and political power. On the part of cruceos elites, there exists a hostility to lower levels of government within the department, such as the municipalities. In addition, the present-day departmental political power lies in the hands of right-central conservative parties (Eaton 2007, 92). Considering the above mentioned prospects for the non-elite population of Santa Cruz in the case of autonomy, it is not surprising this group has offered strong support for the highland indigenous mobilisation against the concentration of wealth in the upper class of Bolivia. Andean settlers in Santa Cruz were part of the electorate that voted for Morales in the 2005 elections, as is indicated by Map 2. Moreover, the indigenous population of Santa Cruz participated in protests against President Gonzalo Snchez de Lozada in October 2003 (Gustafon 2006, 361).


Map 2: Elections results of 2005 in Santa Cruz. Source: Observatorio DDHH

Cruceo elite
Indigenous cruceos participating in the protest marches in Santa Cruz against the Snchez de Lozada government in October 2003, as mentioned above, were brutally attacked by right-wing youths affiliated with the Santa Cruz autonomy movement (Gustafon 2006, 361). These acts of violence demonstrate the highly tense situation in the department as well as how much the gap between indigenous groups and elites in Santa Cruz is widening lately. As previously described, indigenous cruceos are frustrated by large landholders in Santa Cruz. Nevertheless, these same large landholders are in their turn restricted in their possibilities of expanding their territories by land-demanding peasants. Additionally, these cruceo elites are the main victims of the central reform politics and therefore rightly fear losing their rich and privileged positions. The fact that many of the MST members are recent migrants from the Bolivian highlands polarises the two groups in Santa Cruz even more and inflames the (land) conflict with ethnic and regional connotations (Ballv 2004). In order to sustain the present-day cruceo economic model and to defend its interests against those of the avasallamiento 35 of Andean indigenous peasants, the cruceo elites gathered together in the Federacin de Empresarios Privados de BoliviaSanta Cruz 36 (FEPB-SC). This FEPB-SC consists of the main business and agro-industrial elite alliances and confederations, such as the Cmara Agropecuaria del Oriente 37 (CAO), the Federacin de Ganaderos 38 , the Cmara de Hidrocarburos 39 , and the Cmara de Industria y Comercio 40 (CAINCO)(Eaton 2007, 86). In the past, these confederations were each integrated separately into their respective national organisations due to conflicting interests, such as struggle over land between expanding soy farming and cattle ranging. However, the growing threats to private property in Santa Cruz casted a shadow on the conflicts that had divided the cruceo upper class for decades. As a response Santa Cruz business groups decided to
35 36 37 38 39 40

Invasion, a term recently used indicating migrants from the Andean highlands. Federation of Private Entrepreneurs of BoliviaSanta Cruz Eastern Agricultural Chamber Cattle Ranchers Federation Hydrocarbons Chamber Chamber of Industry and Commerce

overlook differences that otherwise divided them and to unify around the demand for autonomy of the departments natural and productive resources (Eaton 2007, 85). As business confederations in Santa Cruz had closed ranks, they in addition withdrew from their class counterparts in other parts of the country. For instance the FEPB-SC withdrew from Bolivias national business association Confederacin de Empresarios Privados de Bolivia 41 (CEPB). The decision to withdraw from national business associations was firstly based on the perception, living among cruceos elites that economic elites in other parts of the country did not provide enough effective protest against the political reforms. Secondly, Santa Cruz business elites were discontent with the fact that their position within the national business association did not reflect their supramatic position within the national economy. (Eaton 2007, 89). Finally, some say that this strategy of detaching their confederations from the national ones, have helped Santa Cruz business elites to reframe their personal and class interests as territorial interests (Eaton 2007, 90). In this line of argumentation it is understandable that Santa Cruz elites have been trying to build alliances with nonelite groups in order to bolster their legitimacy and to claim the autonomy movement represents the department as a whole (Eaton 2007, 91). Although the CPSC, which is financed and directed by Santa Cruz business groups has tried to close the gap between elite and non-elite Santa Cruz by integrating non-elites into the CPSC, still the Central Obrera Departmental 42 (COD) and the transport workers union are the only non-elite members within the CPSC (Gustafon 2006, 363). This demonstrates Santa Cruz is still strongly divided along the same class- and ethnic- cleavages as the rest of Bolivia.

From the first part of this chapter it has become clear that the rise of the autonomy demand in Santa Cruz has mostly been a response to the indigenous mobilisation and political power gain at the end of the 20th century. In the past the crucens have always managed to secure their economic interests by influencing the central politics in La Paz. By assuring this control in the central government, Santa Cruz has for decades been able to guarantee themselves of economic favourable politics. However, when at the beginning of the 21st century the political power balance changed in favour of the lowland indigenous classes of Bolivia, the Santa Cruz population was no longer assured of central politics favourable to their department. Understandably, the Santa Cruz population started to fear for their privileged economic position. This fear was even more increased by the radical redistributive discourse used by the newly elected President Evo Morales in 2005. Considering the high concentration of landholdings in the Santa Cruz department as well as the presence of over 22 per cent of Bolivias total gas reserves makes Santa Cruz one of the richest departments of the country. The cruceo population felt threatened in their interests by the proposed redistributive reforms and the nationalisation politics. Fearing that the leftist reform politics would deteriorate Santa Cruz business environment and would leave the department under compensated for its work as a gas-producing province, the Santa Cruz population felt at the end of 2005 they were left with little alternatives for re-establishing their power in the national government than the road to stimulate autonomy. Concluding, it can be said the conflict over Bolivias natural resources as well as the fear of losing their privileged economic position has motivated certain groups from the resource-rich Santa Cruz to call for more departmental autonomy. However, this brings us to the second question of this chapter, whether the autonomy quest turns out to be primarily important for cruceo elites or whether it is also wished for by the non-elite cruceo population. Throughout this chapter it has become clear this is a complicated question to answer. On the one hand, the respectively 72 per cent and 82 per cent of Santa Cruz population voting in favour of autonomy during the 2006 and the 2008 autonomy referenda, appears to demonstrate an exceptionally broad demand for autonomy in the department. Nevertheless, the enormous differences within the department should not be overlooked. Concerning the gas revenue
41 42

Confederation of Private Entrepreneurs of Bolivia Departmental Labour Union

distribution one could argue a larger departmental share, due to autonomy would be profitable for all segments of Santa Cruz society. However, when turning to the question of land distribution, one has to admit the interests of non-elite and elite cruceos are two worlds apart, and therefore autonomy would not benefit all Santa Cruz parties to the same extent. Autonomy for Santa Cruz would significantly constrain the redistributive capacity of Bolivias central government in the department, and would consequently disadvantage the non-elite actors in Santa Cruz The fact that the departments wealth is spatially and socially concentrated among the middle and upper classes of Santa Cruz, makes that cruceos elites do not only face the threat from the MAS government redistributive reforms, but also have to face opposition to their autonomy agenda from within their own department. This great differences in interests within Santa Cruz society are illustrated by the significant participation of cruceo indigenous population in the October 2003 protests as well as by the 2005 departmental election results which show a large support for the leftist redistributive politics of MAS within the Santa Cruz population. Although the Comit Pro- Santa Cruz (CPSC) has tried to close the gap between elite and non-elite Santa Cruz by integrating non-elites into the CPSC, the Santa Cruz society remains as strongly divided along class- and ethnic- cleavages as the rest of Bolivia.

Assies, Willem (2006) La media luna sobre Bolivia: Nacin, regin, etnia y clase social, Amrica Latina hoy, Vol. 43, No.8, pp87-105. Bolpress (2 February 2009) Evo promulga el sbado la primera Constitucin aprobada en referndum popular, online report, (accessed on 2 February 2009) Corte National Electoral (2006) Resultados Departamentamentales - Referndum Nacional Vinculante 2006, online data, (accessed on January 28 2009) DeShazo, P (2008) The politics of confrontation in Bolivia, Hemisphere Focus(CSIS) Vol.16, No. 1. Eaton, Kent (2007) Backlash in Bolivia: Regional Autonomy as a Reaction against Indigenous Mobilization, Politics & Society, Vol. 35, No. 1, pp71-102. Eaton, Kent, (2008) Conservative autonomy movements: Bolivia and Ecuador in comparative perspective, American Political Science Association (APSA) Prepared for delivery at the 2008 Annual Meeting of the APSA Gustafson, Bret (2008) Spectacles of Autonomy and Crisis: Or, What Bulls and Beauty Queens have to do with Regionalism in Eastern Bolivia, Journal of Latin American Anthropology, Vol. 11, No. 2, pp 351 379. Hylton F. and S. Thomson (2007) Revolutionary horizons. Past and present in Bolivian politics London and New York.

Lehoucq, Fabrice (2008) Bolivias constitutional breakdown, Journal of democracy Vol. 19, No. 4, pp 111-124. Narco News (2004) Teo Ballv, A tale of two Bolivias. Behind the ongoing gas wars, a geographic rift between rich and poor, online report, (accessed on 14 November 2008). Observatorio DDHH, Elections results in Santa Cruz 2005, online data, (accessed on 26 January 2009). Open Democracy (2007) John Crabtree, Bolivia: a tale of two (or rather three) cities, online report, e_cities (accessed on 18 December 2008). Proyecto de las Naciones Unidas para el Desarrollo en Bolivia (PNUD), online report, (accessed on 13 November 2008). Quak, Evert Jan, (2006) Bolivia in de wurggreep, online report, d=42 (accessed on 13 November 2008). Stanley, Leonardo (2008) Natural resources and foreign investors: A tale of three Andean countries, Working group on development and environment in the Americas No. 16, online report, (accessed on 27 September 2007). Velasquez-Donaldson, Christian (2007), Analysis of the Hydrocarbon Sector in Bolivia: How are the Gas and Oil Revenues Distributed?, Institute for Advanced Development Studies, Working Paper No. 6, online report, (accessed on 27 September 2007). Weisbrot, Mark and Luis Sandoval (2008), Distribution of Bolivias most important natural resources and the autonomy conflicts, Centre for economic and policy research, No. 7, online report, (accessed on 27 September 2007). World Bank (2006) Incidence of Poverty and Extreme Poverty by Income, online data,, ,contentMDK:21310720~pagePK:1497618~piPK:217854~theSitePK:322279,00.html (accessed on 21 December 2009). World Bank (2001) Share of Indigenous Peoples to Total Population by Various Indicators, online data,, ,contentMDK:21310720~pagePK:1497618~piPK:217854~theSitePK:322279,00.html (accessed on 21 December 2009).



Pacha Mama's Belly: An analysis of indigenous discourse in modern Bolivia

Julia McCall

Abstract: This chapter discusses the development of indigenous discourse in Bolivia over the past decades. By looking at the rise of indigenous discourse, indigenous discourse in the context of recent political protest on natural resources, and indigenous discourse used by MAS and Morales, I will try to demonstrate how indigenous discourse has changed over time, is used differently for varying causes and is influenced by external factors. Keywords: discourse, ethnicity, political indigenous movement, discrimination, MAS protest,

Bolivias indigenous movement

Latin America has seen a wave of left-wing movements rise and gain strength in the last decade. Most prominent may be the case of Hugo Chavezs anti-US rhetoric in Venezuela, but all across Latin America left-wing governments have come to power. Argentina, Bolivia, Brazil, Chile, Ecuador, Nicaragua and Uruguay have all recently elected left-wing governments pushing for change in the socio-economic policy of their countries. These governments tend to take a stand against neo-liberal economic policy, globalisation and especially exploitation of the countrys poor as a result of these policies. A major aspect in the majority of these left-wing movements is the combination of social reform with the struggle for indigenous rights. This is especially prominent in areas with high indigenous population rates such as Ecuador, Guatamala, Bolivia and Chiapas in Mexico. Bolivia is an example of a country where poverty is strongly linked to the indigenous majority and where these struggles interact and are interwoven. This struggle has become very prominent since the election of the first indigenous president in Latin America, Evo Morales. Morales stunned the country and the world in 2002 when his newly founded party Movimiento al Socialismo (MAS, Movement towards Socialism) came second place in the presidential elections, just one per cent behind the leading party (Postero 2004, 190). The elections were followed by a series of massive protests against the government and its policies in which Morales actively participated. In 2005 Evo Morales was elected president with a record number of votes. Various authors have explored the reasons for this surge in indigenous protest in recent years. Why have we seen such a growth in indigenous movements and what has made this possible? Yashar (2005, 29) has argued that the challenge to local indigenous autonomy structures in the second half of the twentieth century and pre-existing social networks has led to, and made possible, the successful indigenous movements of today. Others argue that the weakness of the political left in Latin America and the institutional reforms put through in the form of municipal decentralisation, helped the indigenous movement to gain strength (Van Cott 2005, 95-97; Van Cott 2003). This paper however will not focus on the why-question, but on how indigenous discourse has been used and is being used within the political battles of the last decades in Bolivia. Very much related to this is the question by whom these various discourses are being used. How has indigenous discourse been used within other political, social or economic issues? Are there certain discourses which are used by all

indigenous members of the political protests, or are there variations? Have the discourses changed over time? These are important questions to ask in light of the recent policy changes under Morales on natural resources. First of all it is important to understand how indigenous discourse played a role in reaching these policies on nationalisation. Has indigenous discourse influenced this policy making? Secondly, it is important to understand what the impact of these policies will be for the indigenous movement. The nationalisation of natural resources may partly have been made possible through protests in which indigenous demands were tied to these other issues, yet will the nationalisation bring the results the indigenous movement hoped for?

Theoretical framework
My way of understanding the protest movements is through a post-modern lens. This is contrary to the primordial analysis which argues that identities are fixed and natural. The identities remain through time and are the primary forces of mobilisation. This theory is for example strongly advocated by Huntington in his famous Clash of Civilization theory. However this view does not answer the question when and why ethnicity becomes mobilised. In the case of Bolivia for example ethnicity did not become politicised in such a way until recently, yet the country has been inhabited by various ethnicities for centuries. Moreover the political movement led by politicians such as Evo Morales and Flipe Quispe in Bolivia seek political and social rights for all Indians, yet Indians never existed until the arrival of the Spanish in the sixteenth century. The various different tribes have forged a joint, indigenous identity (Yashar 2005, 10). Post-modernist theories dispute the natural state of identities and underline the constructed state of identity. This does not necessarily mean identities are chosen for personal gain, such as rational choice theory would have it. Rather the construction and development of identities is a process. Eric Hobsbawms thesis on the invention of tradition (Hobsbawm & Ranger 1983) states that historical and cultural narratives are created in light of the present situation. For example it has been claimed by (western) historians that the concept of Mother Earth (as highlighted in chapter six by Emilie Fokkelman) was in fact an invention of European Americans who used the concept to support a range of social, economic and political relationships. The power of this image was so strong that it was internalised by indigenous communities and the concept is nowadays used in claims for land rights and access to natural resources (Briggs 1996, 436). These histories become the history as it is taught in school books, visualised in statues and street names and remembered through cultural traditions. These created identities are often part of a nation-state building process, creating a unified state. However the process is also seen within minority emancipation movements. In this paper I will try to argue the dynamics found in the ethnic discourse used within the indigenous movement in Bolivia. Ethnicity can be tied up with political, economic and social battles. In this way movements are a complex process played out at different levels within which ethnic discourse can play a part. This does not in any way undermine the importance of the ethnic arguments being given. Nor do I try do deny the truth about certain arguments. The reality understood by the protesters is therefore not true or untrue, but simply important. The point I try to make is to understand how ethnic arguments are used in different ways, at different times, by different people. It is important to note that this paper is looking at the protests therefore from an abstract level. Protesters who are daily fighting for the livelihoods and against discrimination are not solely occupied by the discussion on the indigenous discourse that is being used. Yet the interesting thing about discourse is that it exists without officially being created by a single actor for only rational reasons. Many different economic, political or personal reasons can exist for an individual to join a movement or protest, yet they will be fighting together for a general cause which is part of a discourse. This paper discusses three aspects of the use of indigenous discourse in modern Bolivia. First of all I will give a short overview of the rise of indigenous mobilisation in Bolivia. It will become clear that it has arisen for different reasons and in different groups. Secondly, I will look at modern political protest in Bolivia that has focused on natural resources. Again, it is important to understand who has used indigenous arguments and for what motives. External factors also play a role in this

process. Finally I will turn to the popularity of Morales and the MAS party. I will ask how the MAS has managed to make use of indigenous arguments without alienating too much of civil society to lose the elections. Finally in the conclusions, apart from reflecting on the three aspects discussed earlier, I will offer a reflective vision on this paper. The reflection discusses what the effect is of external researchers doing research on social constructivism of other cultures.

A brief history of indigenous uprising

For centuries indigenous culture in Bolivia has been represented as backward and slowing down modernity. It is now increasingly being represented as the heart of the nation. Yet there is still a phase of emancipation to be passed. Whilst indigenous culture is becoming more valued, there is still a large distinction in class. For example indigenous languages have become appreciated in such a sense that it is an advantage for politicians or social workers to speak both Spanish and an indigenous language. However rural peasants speaking only the local indigenous language will still be seen as socially inferior compared to an urban businessman who only speaks Spanish (Canessa 2006, 244). The same goes for other cultural markers such as traditional clothing or the chewing of coca leaves. There are different social and class levels at which indigenous culture can be lived. Indigenous culture may be becoming more popular, but it has not become equal in perception of class yet. In this sense the indigenous activity very much resembles the trajectory often seen in minority emancipation, whereby certain elements of the culture and individuals reach the top of society before the mass becomes accepted and gains rights. The difference in Bolivia is of course that the indigenous population has never been a minority in the country but constitutes at least 60 per cent of the population. However culturally, socially, politically and economically, the indigenous population has been treated as a minority for centuries. How has the position of the indigenous population and indigenous identity developed over the past century?

Dual republics and forced integration

The colonial hierarchy between Bolivias indigenous communities and white/mestizo elite put in place by the Spanish continued after Bolivias independence in 1825. According to Postero (2004, 193-4) the indigenous community has always served as the other. The Spanish established a dual republic, separating the indigenous community from the Spanish rulers in an exploitive manner. As in many nations in the nineteenth century, the political elite believed the indigenous communities should be civilised and integrated into modern society. It was believed that indigenous cultures were weak and needed to adapt to modern society if they were not to become extinct. However, this argument was similarly used in the practice of occupying lands that belonged to indigenous communities, with the claim that private property was the only legal form of property-holding (Postero 1994, 194). At the beginning of the twentieth century there were a few indigenous uprisings that were crushed, but most of the indigenous population supported the 1952 revolution in which the Movimiento Nacionalista Revolucionario (MNR) came to power. Under MNR rule however specific indigenous demands were not addressed. After the revolution indigenous culture was respected, but as something out of the past, not the contemporary world and certainly not the future. As part of national state formation traditional folkloric festivals were sponsored for example, but this was emphasised to be tradition and history not part of the modern state that Bolivia had become. The main aim of the state was to integrate and assimilate the indigenous population into this modern, Spanish-speaking, mestizo nation (Canessa 2006, 245). The educational system was used as an instrument to build a unified Bolivian nation, which was based on political and cultural objectives of the governing elite. The objective was to erase ethnic differences and this was done through rural education plans. Primary education in Spanish was made compulsory for indigenous children and indigenous languages were discouraged. The result has been a loss of traditional knowledge, skills and languages over the past forty years (Salinas & Nez 2000, 107-8).

An important aspect of the states policy was the replacement of ethnicity with class distinction (Salinas & Nez 2000; Postero 2004; Canessa 2006). Indigenous communities were reorganised into state-sponsored peasant unions. The communities were thereby integrated into state society and became full members of the nation. However distinct indigenous identity claims were not addressed. Highland indigenous groups were renamed campesinos (peasants) and their organisations were transformed into sindicatos (peasant unions). The syndicalist structure made peasants identify more with campesinos than indigenos. Labour organisation also thought and worked along class lines, not ethnic ones (Postero 2004, 193-195; Canessa 2006, 245). Symbolically, the Ministry of Indian and Peasant Affairs, set up to deal with these reforms, was soon renamed the Ministry of Peasant Affairs, an indication of the MNRs attempt to turn Indians into peasants (Yashar 2005, 159). According to Salinas & Nez (2000, 108), this is why even today most indigenous peoples in Bolivia prefer to be known as 'farmers', than as members of a particular group. Class politics did however not have the results the poor had hoped for. Especially in the regions where this system was very different from the traditional collective land-holding system and its institutions, the reforms gave rise to a sense of exclusion. It was in these regions that an important cultural and political movement arose in the 1970s and 1980s, the Katarista movement (Postero 2004, 193-195; Canessa 2006, 245). The Bolivian state had first dealt with the indigenous communities by creating a dual nation in which the mestizo/white class had nearly all economic and political power. The 1952 revolution sought to integrate the indigenous communities into the modern Bolivian nation state through political and educational programmes. The new state was to be a state culturally determined by the mestizo/white culture however, not a pluralistic state with many identities. The ruling elite pushed for class identity over indigenous identity. This was something that would change in the next decades as indigenous identity gained more strength.

From Kataristas to cocaleros

The Katarista movement was initiated by young Aymara men who had migrated to La Paz for their education. The group proclaimed the importance of indigenous culture, identity and cosmology. The Kataristas didnt just want to remember their past, but also use it for the contemporary and future Bolivian state. Through words and actions the Kataristas tried to underline the importance of being Aymara. For a large part, the movement focussed on peasant communities. They thereby fought to replace the class distinction with a stronger sense of indigenous identity. (Yashar 2005, 154-155). The organisation of indigenous movements was a reaction to a loss of local autonomy and indigenous authority structures due to new policies taken by the military government from 1964 onwards and the resulting Military-Peasant Pact. The Pact limited the autonomy of indigenous communities, but also limited resources to these communities. The military imposed union leaders on communities, choosing leaders who supported the regime or responded to payments or threats 43 . In short the Military Peasant Pact decreased the power of the peasant unions as the link between the state and the peasant communities and turned the unions into organisations representing the military more than the local communities. Secondly, the land reforms started during the MNR government did not turn out to be as beneficial to small farmers as promised, as large landholders actually profited from many economic policies. It was to these threats of the loss of autonomy and unfavourable economic policy that the Kataristas came into action. The movement started in an area where the government had in fact had less grip on the indigenous communities and where union structures had not displaced community integrity so strongly. This was in the area around La Paz. (Yashar 2005, 154-167). The Kataristas were successful in capturing the union networks of the countryside. Although the Kataristas focussed on indigenous culture, they also emphasised the complex reality in which ethnicity and class were mixed up. Both indigenous communities and peasants had been discriminated against for the past centuries in Bolivia. The mobilisation of the Kataristas was therefore based on both class and ethnicity which they tried to promote from within local unions. A lot of active students

Interview with Jenaro Flores who would later become a leader of the indigenous movement, quoted from Yashar 2005, 164.

returned from the city to their communities after finishing their education and gained leading positions in their local union organisations. They sought to gain greater autonomy for the community and more access to resources. Within this process they also created a space to express their indigenous heritage and culture. Indigenous culture was expressed in symbolic practices such as the use of the wiphala (the multi-colour flag), commemorating indigenous martyrs and playing traditional instruments at public events (Yashar 2005, 167-170). The symbolism centred on the historical figure Tupak Katari, an indigenous hero from the eighteenth century. Yet by no means all communities had remembered Katari prior to this modern social movement, nor was he an accepted symbol of heroism for all indigenous communities (Hurtado 1986, 230). The historical challenge fought by Katari was linked to the struggle these communities faced now. The Katari movement made use of various ways to engage people in the movement. Soccer leagues were created and extended to involve the youth in the movement. Kataristas made a lot of use of the radio as medium to transmit their message. By re-telling Aymara history in radio programmes for example, the Kataristas tried to emphasise the broader scope of the issues being fought. In other words they were trying to move away from local action to create a larger community (Yashar 2005, 173-4). The Katarista movement never grew big enough to become a national movement. Nevertheless, the movement had a profound effect on later political movements. The indigenous community in Cochabamba, as noted, was less organised and did not join in the Katarista movement. Yet it was from the lowlands that major mobilisation started in the 80s and 90s and it was here that Morales gained popularity, already by the nineties becoming the undisputed leader of the movement. In this second-generation movement (Yashar 2005, 181) the left-wing movement and indigenous movement joined forces. Since the 1950s, the heart of the traditional leftwing movement in Bolivia had been formed by miners and their unions. Once the price of tin dropped and the government closed down many mines in accordance with the New Economic Policy (NEP) of 1985, the mining unions also lost their political influence. Large numbers of miners moved to the Chapare region to become coca farmers (Yashar 2005, 182-185), and with them the frontline of the left movement moved to the cocaleros (coca leaf growers). The traditional Marxist-leftist movement of the miners became mixed with other components and their demands changed. First of all, the cocalero movement focused on the legalisation of the production and consumption of the coca leaf. The growers claimed that they were serving the indigenous community as coca is sacred and used for rituals as well as for daily consumption. Due to the US war on drugs that collided with the interests of the coca farmers, the cocaleros developed an anti-imperial ideological orientation. They criticised the involvement of the US in Bolivian internal politics. In fact, the battle against coca production, fought by the government under pressure from the United States, strengthened the coca farmers support. Secondly, the movement was influenced by the more traditional lifestyle of the peasant farmers (Webber 2005; Yashar 2005, 185-186). In this way various movements and goals were linked together and indigenous arguments became part of this. The symbol of the coca leaf would become an important symbol of indigenous strength. The cocaleros made use of the ethnic discourse created during the Katarista movement, to form a new discourse on cultural right, autonomy and neoimperialism (Yashar 2005, 185). The second-generation movement was fighting the neo-liberal policies in the form of the NEP that had led to unemployment, reduction of social services and privatisation. Within this movement the cocaleros played a large role. The cocaleros particularly focussed on the involvement of international powers trying to undermine their livelihoods. The Kataristas however had started out by defending a different goal, namely local autonomy. Both movements had felt economically disadvantaged by the government. It is interesting that both movements adopted an ethnic discourse in their battle. The cocaleros in fact partly made use of the earlier discourse created during the Katarista movement a few decennia earlier (Yashar 2005, 187). Both movements used symbols and rhetoric to revive the feeling of indigenous identity. This was a definite break with the governments push to integrate indigenous communities into the modern Bolivian state by accepting only class identity over indigenous identity.

The protests of the nineties

Throughout the eighties and nineties indigenous movements grew, many supported by NGOs and church funding. In 1982 a regional federation of indigenous groups was founded: CIDOB (Confederacin de Indginas del Oriente de Bolivia, Confederation of Indigenous Peoples of Eastern Bolivia) (Postero 2004, 195). CIDOB unified various indigenous communities and in a way symbolised the beginning of what has been called the indigenous awakening (Canessa 2006, 242). Indigenous identity gained prominence during the next two decades as people became more likely to identify themselves as indigenous, and indigenous leaders took up important positions in national politics (Canessa 2006, 242). According to the World Bank in 2001 61 per cent of the population identified as indigenous, whereas only 53 per cent of people over six spoke an indigenous language (World Bank). In the following section I will discuss the role of indigenous discourse in three major protests since the nineties: the March for Territory and Dignity in 1991, the Water Wars and the Gas Wars. Protesters made use if indigenous discourse in each of the protests, be it for different reasons. Interesting to note is that indigenous discourse is not only an internal matter, it influences and is influenced by external factors. In the previous section it was discussed that the US anti-coca policy may have strengthened the indigenous movement among the cocaleros. In these protest marches it becomes clear that the (inter)national media, institutions and NGOs can also play a role in the development of indigenous discourse.

The protest marches

The protest in March 1991 brought indigenous issues onto the political agenda. The March for Territory and Dignity received a lot of national and international attention. It was a march of lowland indigenous communities protesting to protect their territory against the incursion of loggers and other colonists. According to Canessa (2006, 246) only a few indigenous peoples identified themselves as Aymaras or Quechuas and most highlanders had an ambivalent identification with lowland indigenous groups. The protesters presented the issues of cultural rights, values and identity. Also these political demands were linked to environmental issues. The political demands were seen as what was best for nature too. The symbiosis of indigenous and environmental issues is something that is used more often and is often supported by international NGOs. Indeed NGOs also played a significant role in organising the protest of 1991 (Canessa 2006, 247). The outcome of the protest was the adoption of a law on the protection of indigenous lands. On the longer term however the protest sent a signal to the Bolivian elite that the indigenous population was able to mobilise for its demands, and that the population had not been completely assimilated into the modern nation state as had been the policy for the last half century (Canessa 2006, 247). One of the first major protests against the neo-liberal policy of the 1980s and 90s were the so-called Water Wars in Cochabamba from February to April 2000. Various different interest groups formed a coalition against the governments decision to privatise the water company which also brought increased water tariffs. Peasant farmers who needed water for irrigation joined hands with the urban poor and the cities' water committees to successfully turn around the privatisation and oust the international water company. The success of the protests brought a severe blow to the existing government and governing elite (Webber 2005). During the Water War the main rallying point was the defence of the traditional use and distribution of water as a collective cultural right based on usos y costumbres (Albro 2006, 393). However there were not many groups who identified themselves as indigenous (Canssa 2006, 248-9). Although the region is predominantly Quechua speaking, what existed was a strong regional and class identity, especially among the peasants and the coca growers. The use of indigenous language during the protest was however useful for two reasons. First of all the protest leaders hoped to engage other Quechua speakers in Cochabamba valley. Secondly, and very importantly, such language also attracted the international press. Many NGOs, international organisations and press agencies are accustomed to, and interested in, the link between environmental issues and indigenous culture. During the protests symbolic language was used about traditional indigenous deities such as Pacha Mama, Wiracocha and Tata Dios. In this way an almost mystical connection between indigenous culture and water was suggested. Interestingly enough none of these deities was mainly associated

with water as such. For example Pacha Mama was associated with the earth, not particularly with the bringing of water. The traditional water gods however were not mentioned prominently at all (Canessa 2006, 249). The deities that were mentioned in the protests are the most famous and those most familiar to urban Spanish speakers. The discourse of the protest became increasingly indigenous. However the impetus for this seemed to stem more from the urban mestizo class, than from the indigenous community (Canessa 2006, 249). It is most interesting to see how indigenous discourse has in a way become a tool to mobilise internal cohesion as well as (inter)national attention. Three and a half years after the Water Wars, Bolivia again became the scene of widespread protest. This time people came to the streets to protest the new governments plans to export natural gas through a Chilean port. The rules of hydrocarbon exploitation were such that international firms were to benefit a lot from the deal, whereas the national state was to receive just a minute percentage of the royalties (Perreault 2006, 160). The Water War had been primarily a local struggle, fighting for a resource that is directly necessary for ones livelihood and survival. The Gas War was by contrast a more national and nationalistic uprising (Perreault 2006, 165). Some also see the Gas War as the culmination of indigenous radicalism (Spronk & Webber 2007, 35). A major demand made during the Gas War was the recuperation of the countrys national patrimony. The term patrimony is often used by Bolivias indigenous community. Patrimony refers to the inherited legal rights over land. The state grants local control over the exploitation of the patrimony. This multi-cultural legislation has however also been criticised for in fact limiting indigenous political participation to the recognised patrimonies only (Albro 2006, 393). During the Gas War the movement spoke however of the recovery of the countrys patrimony, meaning the country as a whole. This argument is linked to the argument of territorial sovereignty of indigenous peoples land holdings which is promoted by among others politician Felipe Quispe. Quispe endorses a traditional concept of land use in which there is a relationship between the people and the land (soil, water and subsoil resources) (Albro 2006, 394). Another example of indigenous discourse in the Gas War was the way Quispe described the gas as coming out of Pacha Mamas belly (Canessa 2006, 254) 44 . The Gas War was different to the Water War in that the protest was lead by indigenous political groups who had formed coalitions with other sectors of society, however the indigenous groups held the chief position. Yet in contrast to the Water War, the Gas War was a national battle, fighting for the control over the countrys resources (Canessa 2006, 254; Perreault 2006). Indigenous discourse was connected to a national cause.

External factors
What is interesting about these three protests is the fact that indigenous arguments were in all three cases used in combination with political and socio-economic arguments. Each protest was in fact about different subjects, yet environment, land rights or natural resources could all be linked to the indigenous cause. In the case of the Water War especially these indigenous arguments have seemed to be used as a binding factor between the various factions of the otherwise precarious coalition. This is not the only interesting fact though about the protests. What is most remarkable is the influence the outside world has on the protests. This works both ways round. The protesters seek recognition and attention from the outside world and adapt their policy towards achieving this attention. The outside attention however can also influence the local protests. The fact that the emancipation of indigenous communities, a process that entails underlining people's cultural values as equal to those of the dominant culture, is in fact simultaneously influenced by outside factors is a paradox. As Andrew Canessa (2006, 242-3) points out the concept of indigenous peoples is in itself a product of globalisation. The fact that indigenous communities from North-America, Australia, Scandinavia and East Asia are joined in such organisations as the United Nations Permanent Forum on Indigenous Issues (UNPFII) and meet at many international conferences is a sign of the international context in which the Bolivian indigenous movement is working. Often

Interview with Felipe Quispe with Andrew Canessa.

leaders are better linked to these international networks than they are to local ones. These leaders form general ideas on indigenous peoples, which can lead to a gap in the language used by the global indigenous network and that at the local level (Canessa 2006, 242-3). Indeed globalisation has not only stimulated indigenous groups to re-embrace their identity as it contrasts with modern way of life, it has also in practical ways aided the indigenous movements. Modern modes of communication for example have helped movements to gain support. The radio was already used by the Kataristas as an instrument to inform people of the indigenous past and values. But also during the Water War and Gas War the protesters were fully aware of the media covering the issue. Maybe more importantly international ideas and concepts can influence the way discourses are formulated. For example as Spronk and Webber point out, there was a lot of international attention for the Water War. The privatisation of water is seen as something that goes against the idea that water is a human right, belonging to everyone. There are numerous international protests on the immorality of privatising water (2007, 43-44). Another example is the discourse commonly supported by NGOs in which ethnic issues are associated and environmental issues. Many NGOs and international organisations promote this link between indigenous culture and environmental protection. For example the United Nations Environment Programme reports on indigenous peoples: Over the course of history, indigenous peoples and their communities have developed lifestyles and cultures that are intricately linked to nature. The areas of high biodiversity in which they commonly live are deeply embedded in their productive activities and spiritual lives(United Nations Environment Programme). In short, there exists an international paradigm on indigenous culture and that has the ability to influence the local indigenous movements. This can be through international networks in which the leaders of movements meet and share thoughts. It can also be through the fact that by re-affirming the existing international discourse on indigenous culture, the local movements have the ability to attract international media attention and NGO support. In each of the protests covered in this chapter - The March for Territory and Dignity, the Water War and the Gas War an indigenous discourse was developed in some form. The March for Territory and Dignity strongly forged a link between indigenous and environmental issues attracting the support of several NGOs. The Water War emphasised the traditional values and customs of indigenous culture in order to retain control over water. In the Gas War indigenous values were connected to the national battle for managing the countrys natural resources. Within all of these battles it is important to realise the influence external factors, such as international organisations and the media, can have on the way the discourse is formulated.

Political system
Evo Morales has stunned the world with his electoral success in Bolivia. The popularity of Evo Morales as an indigenous leader of a party in which indigenous rights play a key role in the programme, must be attributed to his popularity among the broader spectrum of the electorate. How does Morales advocate indigenous rights without alienating the rest of the electorate? It is important to ask this question as the popularity of Morales and MAS is part of the development in the demand for indigenous rights, and as such part of the development of the indigenous discourse in Bolivia.
Evo Morales and the MAS party do not shy away from pleading for indigenous causes. The MAS most definitely makes use of indigenous arguments for various reasons. Morales for example describes himself as being of Aymara nationality (Canessa 2006, 250). Many of the partys leaders are of indigenous descent. Also the party has close ties with a number of indigenous organisations, such as CIDOB and the main peasant federation CSUTCB (Confederacin Sindical Unica de Trabajadores Campesinos de Bolivia). Furthermore, MAS makes use of various symbolic references to the indigenous heritage of Bolivia. This is done through speaking indigenous languages at times, the use of indigenous clothing and banners and underlining the historical achievements of the indigenous civilisations. Finally, MAS also fights for some of the most important traditional demands of the

indigenous movements such as agrarian reform, indigenous autonomy, bilingual education and against coca eradication programmes (Madrid 2006, 13-14). However Morales does deliberately try to not exclude other groups from his party and the partys positions. MAS came forth from the cocaleros movement, a movement that strongly focused on indigenous rights and the peasantry. The party however changed direction in the last years of the previous decade. Between 1999 and 2002 MAS ceased to be solely peasant and indigenous (interview Dionisio Nuez with Madrid 2006, 14-15). The leaders avoided exclusionary rhetoric. Also many white and mestizo candidates were recruited for the 2002 elections, including the vice presidential candidates. Finally MAS established ties with various organisations which were predominantly run by whites or mestizos, such as professional associations, industrial federations and organisations of small businessmen. This gave MAS a base outside the rural peasant areas of Cochabamba (Madrid 2006, 15). This attitude is different to that of Felipe Quispe, another important and popular indigenous politician of this time. Quispe has his base among the Aymara-speaking regions of the La Paz altiplano. Quispes language in contrast to that of Morales is much sharper, more focussed on racial issues and very exclusionary. The MAS in the eyes of Quispe is not an indigenous party because it allows non-indigenous members to join the party. Quispes electoral support is also based much more strongly in one region, namely the Aymara altiplano where Quispe grew up. Quispes language creates much more alarm to non-supporters than Moraless words. The politician speaks of the need to change the state, the need for mestizos and whites to live as indigenous communities in this state. Most importantly Quispe talks of an indigenous revolution that needs to take place (Canessa 2006, 250251). Unlike Quispe, Morales has a much broader base of support. This does not only mean he manages to reach out across to non-indigenous social groups. Morales is also supported by a wide range of indigenous groups, both by Aymara-speaking community from the highlands where he grew up and Quechua-speaking communities from the lowlands. Morales therefore has a much more inclusive appeal than Quispe. Whereas Quispe talks of a revolution, Morales objective is to protect the state. The focus of Morales is on globalisation and international exploitation of Bolivias wealth. In this battle he uses indigenous arguments too. As such instead of changing the state upside down, he tries to make indigenous concerns into national concern. MAS combines criticism on neo-liberal policies, with ethnic and class discourse (Canessa 2006, 250-252). What occurs is a paradigm in which US, capitalism, imperialism, globalisation etc. belong to one group and countering this are social concerns, indigenous and ecological issues. All of the latter concerns fall under one header creating a broad opposition. As Madrid (2006, 7-9) argues, MAS is not an indigenous party with exclusionary policy, but an ethno-populist party. Ethnic polarisation in Latin America has traditionally been low and the boundaries between ethnicities relatively fluid. The inclusiveness of MAS therefore has potential in Bolivia. To gain support from various different social groups MAS has formulated a broad populist appeal by criticising the contemporary political elite and neo-liberal economic policy. In that sense MAS resembles traditional populist parties, in the way that MAS is also anti-elitist, nationalist and is dominated by a charismatic leader for example. Madrid (2006, 19-25) argues that MAS resembles a populist party for three reasons: Firstly, MAS used the critical attitude of the population towards the old political parties. The major political parties had failed to bring socio-economic progress and that had undermined their support. The three main parties (MNR, ADN and MIR 45 ) started losing support after 1989. In 1989 together they had still accounted for 65.3 per cent of the vote. By 2002 this figure had dropped to just 39.0 per cent. The MAS had consistently protested against the ruling parties and various policies. Apart from anything else most of the MAS candidates came from the union world, rather than the political arena. MAS scored especially high in areas where traditionally there had been low levels of voter turnout. Secondly, MAS used the economic situation to gain support. It was not only the political elite that was distrusted, but also the neo-liberal reforms that had been implemented since the 1980s. By the late 1990s however Bolivia was facing serious economic problems and poverty and unemployment had grown. Finally, MAS made use of a nationalist sentiment. MAS criticised the large political parties of betraying the country and handing over national patrimony to

MNR, Accin Democrtica Nacionalista, Movimiento de la Izquierda Revolucionaria.

international capital. MAS also made the national gas issue a large part of its campaign, as well as opposing the coca eradication plan. Both these policies were popular especially among left-of-centre voters (Madrid 2006, 21-25). Although Morales does emphasise indigenous culture he has done this without alienating the whole non-indigenous population. Partly MAS has made use of populist strategies to gain support, by criticising the old elite, neo-liberal policies, globalisation, neo-imperial behaviour and emphasising nationalist sentiment. Yet, unlike for example Quispe, MAS has managed to reach out beyond the radical indigenous groups. Importantly, MAS and Morales have turned indigenous issues into national concerns. Indigenous discourse has become part of the battle to protect the Bolivian state from neoliberal policy and neo-imperialism.

It has become clear that Bolivia has experienced an indigenous awakening in the past two decades. Indigenous communities have become more likely to identify as indigenous. But also recent political protests have used an indigenous discourse in their struggles whilst fighting for a variety of causes. Morales and MAS also use indigenous discourse to a certain extent, yet in such a way not to alienate the non-indigenous population. This paper has looked at how indigenous discourse has been used over the past decades. By looking at three main subjects, namely the rise of indigenous discourse, indigenous discourse in the context of recent political protest and indigenous discourse used by MAS and Morales, I have tried to show how indigenous discourse has changed over time, is used differently for varying causes and is influenced by external factors. For centuries since the Spanish invasion indigenous culture has had a second rate position in the Bolivian state despite the majority of indigenous peoples. From the 1950s onwards the state in fact tried to assimilate indigenous culture into the new Bolivian nation-state, which was to be culturally determined by white/mestizo culture, through education and economic programmes. The MNR government strived to turn ethnic difference into class distinction. Following this period two separate movements developed, the Katarista and the cocalero movement. Each movement fought new government policy for their own reasons, in the case of the Kataristas this was mainly loss of autonomy, in the case of the cocaleros this was mainly the harsh neo-liberal reforms and fear of loosing their livelihoods. Yet in both movements an indigenous discourse was developed that regenerated the indigenous identity over class identity. The movements actively made use of symbols and language to underline indigenous identity, even if had not existed previously in that form within certain communities. From the nineties onwards a string of political protest marches brought people in masses to the streets of Bolivia. Each of the three main protests discussed in this paper was supported by an indigenous discourse, yet for different causes and at different levels. The March for Territory and Dignity changed the mind sets of the political elite in Bolivia who realised indigenous culture had not fully been assimilated and would play a role in the future. The protest itself was about a territorial issue. The protesters made a strong link between environmental issues and indigenous issues, reaffirming the common (international) idea that these issues belong together. The support given by NGOs to such causes played a role in the created discourse. The same happened during the Water War in Cochabamba. The indigenous discourse there seemed to be formulated more by the urban mestizo middle-class than the indigenous peasants. The water issue received a lot of (international) media attention and again was supported by many NGOs. Partly this is because globally there is a lot of criticism about water privatisation, as water is seen as a human right, something belonging to everyone. The indigenous discourse developed during the Water War underlined the ancient use of water as a common good which very much related to the global understanding of water. Finally, also during the Gas War an indigenous discourse was formulated, yet not to the same extent as the previous two protests. At least the indigenous aspect did not receive as much attention. Rather the Gas War focussed more on gas as a national good being stolen by international powers. The effect of external factors such as international indigenous forums, NGOs and media can have on the development of local discourses cannot be underestimated. Yet it is something that needs to be

researched more. Not only could one ask what the effect is of NGOs and international organisations on the development of indigenous discourse in Bolivia. As mentioned in the introduction, all over Latin America, indigenous movements have arisen in recent years. In what way has the Bolivian indigenous movement been influenced by these parallel movements? Finally Morales use of indigenous discourse was discussed. Although Morales and MAS do support indigenous issues, they do not do this exclusively. It has been argued that the MAS has formulated a broad populist appeal by criticising the old political elite, neo-liberal policy and imperialistic behaviour of international states and institutions. Within this criticism indigenous culture has become a symbol of the country. Morales has thereby made indigenous issues national ones. Thus one could say progress has been made in indigenous emancipation within Bolivia. From being treated as a second rate culture of the Bolivian state, the indigenous culture has become a symbol of unity and national pride. Yet as stated in the introduction there still exists a class difference that links the overwhelming majority of indigenous people to poverty. Finally, it is important to note that Morales has partly been able to bring indigenous culture to the forefront because Morales is respected by various indigenous communities in Bolivia. He is therefore also a symbol of indigenous unity. What impact do Morales policy changes and nationalisation of resources have on the indigenous population and the indigenous issue? As discussed a large part of Morales discourse is based on criticism of neo-liberal policy, globalisation and neo-imperial practices. Morales very much emphasises the national right to resources and their wealth. Part of the policy is the redistribution of the resources to poorer parts of the population. By making resources a national issue, rather than an indigenous one, he is in fact reducing the possibility that the indigenous movement may become more radicalised. However the indigenous issue is not just about the symbolic acceptance of having the right to live and practice ones own culture, it is mainly about fighting against economic and political discrimination. By nationalising the countrys resources and pledging to redistribute wealth, Morales has promised a lot. One can wonder whether Morales will be able to meet the expectations of many impoverished Bolivians, even by making the radical changes he has done. I believe the policy changes are positive for the indigenous population in the sense that they have the potential to empower indigenous communities politically and economically, and because the changes are a symbol that the indigenous movement has reached something. However Morales walks on a thin line as people may become disillusioned by his policies if they do not fulfil the promises he has made.

Final reflection
Ethnic discourses, indigenous emancipation and unifying rhetoric are always controversial issues to be discussed. This paper has attempted to analyse indigenous discourse within a movement that is fighting centuries of oppression. As discussed in the introduction, discourse is an abstract subject that maybe does not do justice to the daily struggles thousands of Bolivians face and their reasons to join the protests. Discussing the way in which ethnic discourse can be used in such struggles can be controversial, especially done by an outsider. Briggs has discussed this problem of outside scholars studying social constructivism in other cultures. He points out that terms such as invention and authenticity can seem critical, especially when these terms are circled outside the academic world. The problem however is not that indigenous scholars and activists do not understand the outside scholars implication, rather they feel the scholarship undercuts the meaning of lived experience and membership to a certain group (Briggs 1996, 461-462). I think this is an important thing to keep in mind when writing on discourse analysis. While discourse analysis may provide answers to many questions on the rise of social movement, as well as offer a way to analyse these movements critically, one must be aware of how far these analyses are from the daily reality of individual members of such movements.


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General conclusion
This section will provide an answer to the research question that has been central to this volume: what is the meaning of Bolivia's new natural resource policy in the light of present internal and external perspectives? Since each of the chapters studies a specific topic related to the new resource policy, the conclusions together provide diverse views on the implications of Bolivia's recent resource politics. Therefore, an answer to the central question of the book is formed by a composition of the multiple conclusions that can be drawn from the separate chapters. The result is a multi-faceted answer, demonstrating both positive and negative sides of MAS new resource policies. Some of the research that has been done in this volume indicates that the new natural resource policy is, or is expected to become, a positive development for Bolivia. The way in which the new resource policy has come into existence can be regarded as a positive development for Bolivia, due to the renewed popular participation in political decision-making it was based on. The water war of 2000 in Cochabamba can be seen as the turning point with regard to this renewed popular involvement. The water war indicated a victory over neo-liberal policies, pacted democracy and the marginalisation of indigenous rights. The water war showed Bolivias population that countering these long-existing mechanisms was possible. Therefore, it has been argued by some scholars that the popular resistance during the water war has been an inspiration for further popular uprisings in Bolivia. In addition, after decades of strong foreign involvement, Bolivia now seems to be on its way towards self-determination. The package of neo-liberal measures adopted under the Washington Consensus, despite all its good intentions to alleviate poverty and reduce debts, has not led to a structural improvement of Bolivias economy. With Evo Morales rise to power, Bolivia regained control over its economy and the hydrocarbons sector. A positive effect of the implementation of the new natural resource policy on Bolivias economy, is for example the augment of earnings from mining and hydrocarbons exports in 2008. This increase in exports pushed the account surplus to 9.4 per cent of GDP and after years of large deficits, the higher royalties on gas even produced a fiscal surplus. However, the changes with regard to Bolivias economical situation are not the only ones that can be drawn from the analyses in this book. The new natural resource policy has also had various effects on the indigenous population and the indigenous discourse. On a positive note the chapter about indigenous rights shows that the new policy is a symbol of the achievements of the political protest of recent years, which for a large part was tied up with the indigenous movement. The new policies have the potential to bring political and economic empowerment to the indigenous community through redistribution of royalties. On top of this, there seems to be an additional focus on the socioenvironmental side of oil and gas mining. Morales new government partly bases its policies on the ideas of Pacha Mama: the integrated approach of humans and nature. The newly announced Ministry for the Environment will surely help to execute this integrated and more environment-friendly strategy. Bolivias remarkably advanced system of natural parks and indigenous reserves will thereby be strengthened. Other research and analyses however also present critical remarks with regard to the new natural resource policy. A reflection on the history of mining in Bolivia shows that previous nationalisation projects have not been successful in changing Bolivia's dependent position in the international economy. This is partly due to factors that go beyond economic paradigms that have remained influential, such as the lack of both adequate infrastructure and processing capacity as well as the lack of access to the sea. Additionally, and perhaps even more important, it seems that Bolivia's dependent position will not be resolved by placing resource extraction and exportation under state control. Even with a nationalised or state controlled mineral and hydrocarbon production, the country will still be dependent on international market prices, for example, perhaps even more so now that the state budget has become dependent for a large part on resource income. It is risky for Bolivias economy to depend exclusively on its hydrocarbon sector, especially since the current global crisis has decreased international oil and gas prices by more than two thirds. Moreover, some fear Bolivias business environment has deteriorated in such a way by the measures taken by the Bolivian

government since 2005, that foreign investors might abstain from new investment in the Bolivian gas sector and other sectors. Hence, it can be argued that nationalisation should not be regarded as an instant or unique solution for Bolivia's economic problems. Regarding Bolivias economic relations with other Latin American countries, the conclusion may be that Bolivias new natural resource politics has had its impact on the countrys international relations as well. Argentinean and Brazilian gas import for example, have reportedly been decreasing since the nationalisation of Bolivias gas sector. This decrease in gas import has a negative impact on Bolivias national income. Moreover, due to the fact that Bolivia is landlocked and therefore very much dependent on the cooperation of its neighbouring countries for the export of gas and oil, it is in Bolivias very best interests to maintain good Latin American relationships. Another aspect of concern is that despite the increased attention for socio-environmental issues of hydrocarbon mining, Bolivias environmental law is still underdeveloped due to the lack of priority it received during neo-liberalism. Its provisions have not been very effective in binding companies to consider socio-environmental consequences of both exploration and exploitation. The limited financial resources of the state oil and gas companies also make it hard to ensure cleaner production. Inadequate institutional resources also restrict the controlling agencies such as the current Ministry for Sustainable Development from better enforcement of socio-environmental protection. A fourth anxiety concerns Bolivias society that has been strongly destabilised by the new natural resource policies. For the indigenous, poorer population of Bolivia, the new resource policies are perceived as a great opportunity for improving their precarious situation. However, the question remains whether the results of MAS redistributive programmes will live up to the expectation of Bolivia's poor. The Cochabamba popular management system of the water supply for example has not yet fulfilled its expectations. Consequently, we can ask ourselves what might happen if MAS policies turn out not to have the expected positive results. Possibly, disappointing results might turn into an opportunity for the more radical indigenous movements to gain strength. In addition, the richer white/mestizo population in the Eastern departments has become afraid losing its privileged position due to those same new resource policies and has demanded more autonomy. Hence, it can be said that the new resource policy has certainly not improved Bolivias internal security situation. Bolivias society has become more polarised than ever since the reforms of 2005. Looking at these positive aspects of Bolivias new resource policy as well as at the critical remarks on this policy, we have come to conclude that only time can tell what impact these new resource politics will have on Bolivias future. What will be the effect of declining oil and gas prices on Bolivias economy and internal stability? Will Bolivia still be able to attract foreign investment in the future? And above all, will the expectations and hopes of the Bolivian population be fulfilled? The meaning of the new natural resource policy will have to be re-evaluated in the near future.