Bolivia Steps on the Gas

Bolivia's natural gas reserves are estimated to be worth about $100 billion. Still, the nation remains the poorest in South America. Evo Morales, the country's first indigenous president, was elected with record-high support in December precisely because he promised to nationalize Bolivia's natural resources. Ordinarily that means expropriating private property. But in this case, despite the alarms rung by the US press, Morales is demanding something far less radical: He wants oil companies to renegotiate their contracts so Bolivians get a larger share of the profits.

No candidate could have won the election without promising some form of nationalization. Popular protests have led to the ouster of two presidents in the past three years because Bolivia's natural gas industry wasn't doing nearly as much for the country as for the foreign oil companies controlling it. When I traveled to Bolivia this past winter, even energy-industry insiders who'd helped draft the country's privatization plan a decade ago agreed that the deals struck between the oil companies and the government--giving Bolivia only 18 percent of oil and gas profits--were now untenable. "When the law was written, the price of oil was around $15 a barrel," said Mauricio Gonzalez, president of the national oil company and energy minister under President Gonzalo Sanchez de Lozada, who in the 1990s oversaw the industry's privatization. "They focused on generating growth and forgot about redistribution."

Under that 1996 law, urged by the World Bank and IMF, Bolivia sold the bulk of its oil and gas industry to private companies and put production, sales and pricing in their hands. Since then Bolivia's estimated natural gas reserves have certainly grown: Analysts believe the country has ten times as much gas as it once thought--54 trillion cubic feet. World Bank officials now admit the low royalty and tax rates have been a bad deal for Bolivia.

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