http://nacla.org/blog/2012/5/10/nationalization-bolivian-style-morales-seizes-electric-grid-boosts-oil-incentives Nationalization, Bolivian Style: Morales Seizes Electric Grid, Boosts Oil Incentives Emily Achtenberg <http://nacla.org/nacla-bloggers#Emily> Rebel Currents <http://nacla.org/node/7334> May 10, 2012 [image: Printer-friendly version] <https://nacla.org/print/8123>[image: Send to friend] <https://nacla.org/printmail/8123>
On May 1, President Evo Morales *seized control*<http://www.la-razon.com/economia/Nacionalizada-TDE-ENDE-control-electricidad_0_1606639345.html>of Bolivia’s electric grid from a subsidiary of the Spanish-owned Red Eléctrica de España. In a dramatic ritual now familiar to Bolivians as a hallmark of the Morales government on International Workers’ Day, Bolivian soldiers peacefully occupied the company’s Cochabamba offices and draped the Bolivian flag across its entrance. Coming on the heels of Argentina’s recent move to expropriate Spanish energy company Repsol’s majority stake in its national gas and oil company, the event has generated more than the usual volume of outrage and dire predictions of capital flight from U.S. business interests. “It’s crazy to invest in Bolivia, and this is a perfect example why," says *Eric Farnsworth*<http://www.bloomberg.com/news/2012-05-02/bolivia-following-argentine-takeover-deepens-regional-divide.html>, vice-president of the DC-based Council of the Americas. "He’s taking actions that guarantee that investment will dry up further.” “The left-wing populist strategy of demonizing the investor class has one big drawback: the law of diminishing (investor) returns,” warns *Mary Anastasia O’Grady* <http://online.wsj.com/article/SB10001424052702304749904577384283087523026.html>in the Wall Street Journal. [image: 956] May 1 nationalization. Credit: Fernando Cartagena, La Razón.In reality, far from abandoning Bolivia, foreign companies have remained actively engaged in its post- nationalization energy sector. This is due in no small part to Morales’ increasingly investor-friendly policies, including his willingness to boost private incentives to meet domestic energy needs. The takeover of the electric grid, which was privatized in 1997, is part of Bolivia’s overall strategy to re-nationalize companies that were divested by past neoliberal governments, increasing state control over strategic sectors such as natural resources and basic services. Since 2006, Morales has nationalized the country’s gas fields, oil refineries, pension funds, telecommunications, and main hydroelectric power plants. According to Morales, Red Eléctrica has invested only $81 million in Bolivia’s electric grid since acquiring it in 2002, while drawing around $100 million in cumulative profits. Three of Bolivia’s nine departments remain isolated from the national network. “The government *invested $220 million*<http://articles.businessinsider.com/2012-05-02/news/31526828_1_bolivian-state-president-evo-morales-nationalization>in electricity generation while others profited, so we’re recovering what was ours,” Morales said. Apart from these ideological and economic considerations, domestic politics also played a role in the May 1 event. Nationalizations have been highly popular in Bolivia, and this one may help Morales shore up support from disaffected constituencies at a time of heightened civic unrest. Still, the increase in *power blackouts*<http://www.la-razon.com/economia/Analistas-ven-medida-recurso-politico_0_1606639343.html>since the government took over electricity generation in 2010 serves as a reminder that the move could also backfire politically if the level of service does not meet public expectations. In any case, despite the theatrics of the May 1 announcement, Bolivia’s most recent nationalization has been relatively non-confrontational, especially when compared to Argentina’s move with Repsol. For one thing, the targeted electric company subsidiary generated just *3% of its parent company’s profits* <http://www.economist.com/node/21554216>, while Argentina’s YPF accounted for 21% of Repsol’s. In an effort to minimize negative fallout, Morales gave Spain 3 days’ notice of the takeover, whereas Argentina's President Cristina Fernández refused to meet with Repsol in advance. After its initial criticism, Spain has acknowledged the legitimacy of Bolivia’s nationalization decision, which includes a promise of fair compensation. Red Eléctrica expects to reach a friendly agreement with Bolivia on the value of its investment, and the parties have agreed to retain a *joint appraiser<http://www.reuters.com/article/2012/05/08/bolivia-spain-ree-idUSL1E8G805Z20120508>. * [image: 957] Credit: La Razón.On the same day as the electricity grid takeover, Morales inaugurated a *$600 million natural gas processing <http://www.libremercado.com/2012-05-01/brufau-inaugura-hoy-una-planta-de-gas-en-bolivia-1276457311/> plant* in eastern Bolivia with Repsol that represents the single biggest foreign investment under his government. The plant will triple the amount of gas sold to Argentina. Repsol is one of ten gas and oil multinationals that were forced to renegotiate their contracts with Bolivia in 2006, giving the state majority ownership and vastly increasing taxes and royalties under a relatively modest form of nationalization. “We have a relation of *great trust* <http://en.mercopress.com/2012/04/18/bolivia-s-morales-takes-distance-from-ypf-argentina-conflict-and-praises-repsol>with Repsol,” said Morales, contrasting Bolivia’s situation with Argentina’s. “Repsol respects all Bolivian rules, and its promised investments are going ahead in a good manner.” At the same time, Morales noted, Bolivia’s experience with Repsol shows that nationalization (Bolivian style) can be a success, providing an instructive *example for Argentina. *<http://www.paginasiete.bo/2012-04-18/Nacional/Destacados/Evo--caso-Repsol-demuestra-que-n.aspx> As *Carlos Arze* <http://ipsnews.net/news.asp?idnews=107639>of Bolivia’s Center for Research on Labor and Agrarian Development (CEDLA) points out, 6 years after nationalization of the country’s hydrocarbons reserves, not a single foreign oil and gas company has pulled out of Bolivia. Despite the major shift in revenue splits, the firms’ annual profits have remained about the same in dollar terms ($824 million), due to the vast increase in revenues generated by high commodity prices and natural gas exports. Annual hydrocarbons revenues collected by the state have increased from an average of $332 million prior to nationalization to more than $2 billion today. Still, there have been major setbacks with oil and gas nationalization. A significant one is that while natural gas production has increased, crude oil production has *fallen by more than 20% *<http://ipsnews.net/news.asp?idnews=107639>since 2005*. *With crude oil prices that the state can pay frozen at $27 per barrel (less than a quarter of today’s world price), companies are unwilling to invest in exploration of new reserves. As a result, Bolivia has become increasingly dependent on fuel imports for domestic consumption, with an escalating annual price tag estimated at *$755 million*<http://www.la-razon.com/economia/Gobierno-destina-millones-incentivo-petroleras_0_1604239629.html>in 2012, to subsidize the cost of imported gasoline and diesel to consumers.[image: 959] Repsol gas processing plant. Credit: La Razón. In an effort to reduce this dependency and stimulate energy sovereignty, the government instituted a new policy on April 19, *boosting incentives*<http://www.la-razon.com/economia/triplica-incentivo-produccion-petroleo_0_1599440089.html>for crude oil production from $10 to $40 per barrel (through a $30 tax credit). The new policy effectively repositions the ill-fated December 2010 * Gasolinazo, * <https://nacla.org/node/6903>when the government tried to accomplish the same goals on the backs of consumers by abruptly cancelling the fuel subsidy and dramatically increasing gasoline prices. That policy was revoked after massive protests, sending shock waves through Bolivia’s social and political sectors that continue to reverberate to this day. Critics of the new incentive, including Arze, believe that it’s just another form of *giveaway* <http://www.bolpress.com/art.php?Cod=2012041916>to the oil companies which far exceeds their production costs, and will still be paid by the public through taxes foregone from the national treasury. They question where the funds will come from, since the government claims it can’t afford higher salaries for striking health care workers and other disaffected sectors. According to the government, savings from reduced gasoline and diesel imports will more than offset the tax incentive cost (estimated at $358 million over 5 years). In any case, it’s clear that Bolivian-style nationalization is far from incompatible with continued private investment, and that the Morales government is willing to underwrite the incentives it believes are necessary to accommodate foreign capital. Whether this investor-friendly approach is the best policy for Bolivia remains to be seen, but it’s a far cry from “demonizing” the private sector. Tags: - Bolivia <http://nacla.org/category/tags/bolivia> - Evo Morales <http://nacla.org/category/tags/evo-morales> - nationalization <http://nacla.org/category/tags/nationalization> - Red Eléctrica <http://nacla.org/category/tags/red-el%C3%A9ctrica> - Repsol <http://nacla.org/category/tags/repsol> ------------------ *Another type of protest against the capitalist extraction model and pollution...* Is this anarchy or what? Posted by Bolivian Thoughts <http://bolivianthoughts.com/author/xxxyyy34/> ⋅May 10, 2012 ⋅ Leave a Comment<http://bolivianthoughts.com/2012/05/10/is-this-anarchy-or-what/#respond> *Filed Under* anarchy <http://bolivianthoughts.com/tag/anarchy/>, bad politics <http://bolivianthoughts.com/tag/bad-politics/>, democracy in peril<http://bolivianthoughts.com/tag/democracy-in-peril/>, Mallku Khota <http://bolivianthoughts.com/tag/mallku-khota/>, South American Silver <http://bolivianthoughts.com/tag/south-american-silver/> Unfortunately and progressively, we have become witnesses of the deterioration of our way of life, Los Tiempos reports: The rescue of three people taken hostage by herders of Mallku Khota is difficult; *the villagers want Government authorities and the Bolivian Mining Corporation (Comibol) to be present in the site and also want the rescission of the mining concession granted to the American company South American Silver, arguing that the extractive activity pollutes their territory.* The Governor of Potosí, Félix González, who traveled to the region to manage the release of the retained three; last night at 19: 30, via telephone, reported that he had failed to reach the community by blockades of the unionized transport and the herders of Northern Potosi. As a result, the first departmental authority said that he could not engage in dialogue with the leaders of the community. “If I can enter this evening (for Tuesday), I will address this problem if it is in my hands, what worries me are the people retained”, said Gonzalez in a concise manner via phone. The weekend, a group of 10 policemen went to Mallku Khota, alongside with a Sacaca Attorney, to notify former authorities of that community in the [legal] process followed by the North American company, but villagers were belligerent and in the middle of the clashes with the police, retained one of them. Last Monday – according to the Governor, two others, a driver and a paramedic, which had entered the community to provide medical care to the detained police, were also captured by the herders. According to Erbol News Agency, two policemen were detained: officer José Carlos Maso Escobar and corporal Enrique Guillermo Paillo. The Governor reported that a human rights Commission managed to enter the place and regretted that some media magnified the situation about the threat that they would bury alive two policemen. “It was an exaggeration of some media who are misinforming”, expressed by arguing that there are obviously people retained, but that they are in good health, despite the fact that the police retained the weekend has bruises on the body and lost a tooth. For his part, the Minister of mining, Mario Virreira, over telephone contact, stated that he was working to find a solution to the conflict that arose in the mining area of Mallku Khota. He said that the security situation is not within his competence that, according to him, [he is] working in a structural issue to settle the dispute, taking into account that part of the settlers opposed to the project of the Canadian company South American Silver. Police Mother The mom of José Carlos Maso Escobar, a 20 years old policeman, which is held since last Saturday in the community Mallku Khota, crying, requested the release of his son. Marcelina Escobar, told Erbol Pio XII radio, [when she] reached North of Potosí from Cochabamba, where she resides, to find out the retention of his son. “Don’t do you damage my ‘wawita’ [baby], release him please”, asked the mother in Quechua. http://www.lostiempos.com/diario/actualidad/nacional/20120509/se-dificulta-el-rescate-de-rehenes-en-mallku-khota_170848_359080.html [Non-text portions of this message have been removed] ------------------------------------ --------------------------------------------------------------------------- LAAMN: Los Angeles Alternative Media Network --------------------------------------------------------------------------- Unsubscribe: <mailto:laamn-unsubscr...@egroups.com> --------------------------------------------------------------------------- Subscribe: <mailto:laamn-subscr...@egroups.com> --------------------------------------------------------------------------- Digest: <mailto:laamn-dig...@egroups.com> --------------------------------------------------------------------------- Help: <mailto:laamn-ow...@egroups.com?subject=laamn> --------------------------------------------------------------------------- Post: <mailto:la...@egroups.com> --------------------------------------------------------------------------- Archive1: <http://www.egroups.com/messages/laamn> --------------------------------------------------------------------------- Archive2: <http://www.mail-archive.com/laamn@egroups.com> --------------------------------------------------------------------------- Yahoo! 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