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Hydrocarbons bill again up for debate
Ricardo Herrera Farell
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Corruption and inefficiency plague Bolivia´s key sector.

The new legislature Bolivians will elect on Dec. 6 will be tasked with improving an industry that has fueled political turmoil in the country for years: the hydrocarbon sector.

The lawmakers are expected to debate the current Hydrocarbons Law, the second of the last four years and the fourth in the past two decades for this Andean country, home to South America´s second-largest natural gas reserves after Venezuela.

Even though President Evo Morales´ decision to nationalize the sector in May 2006 has generated more income for the government, analysts warn that his administration has not established a viable long-term plan for the industry, partly because of problems from within his own Movement to Socialism, or MAS, party.

In the three years since the industry was nationalized, the state company Yacimientos Petrolíferos Fiscales Bolivianos, or YPFB, has had six presidents, some of them allegedly involved in corruption or administrative irregularities.

The most notable scandal broke earlier this year. The company´s then-President Santos Ramírez, also a high-ranking MAS member, has been accused of contracted a front company, Catler-Uniservice, for the construction of a liquid gas separation plant for US$86 million and was also allegedly involved in the creation of the Servicios e Industrias Petroleras S.A. (SIPSA), a private gas distribution company that was financed by YPFB. The case led to an overhaul of the leadership and special review of any contracts above $500,000.

Positive impacts
For economist and historian Gustavo Rodríguez Cáceres, the nationalization had many positive effects, most important, the increased gas-generated income for state coffers. According to Morales, before the nationalization, the state only received $300 million a year from the industry, a figure which has increased 600 percent.

"But the problem," says Rodríguez, "is what the regional and local governments are doing with that money."

He pointed to a study he conducted on the regional budget for the city of Cochabamba that showed 90 percent of the hydrocarbon-generated income was spent on infrastructure, such as roads, schools and hospitals.

"Even though these projects are for the public good, they are squandering this income and not investing it on generating other kinds of wealth, such as financial capital or in job creation," said Rodríguez, who co-authored the study "Corporate Responsibility or Social Rights? An Analysis of the Nationalization of the Hydrocarbon Sector in Bolivia," published by the Madrid-based Cooperación con el Sur organization and the Bolivia Center for Documentation and Information.

Part of the money is used for a senior citizens´ welfare program, Renta Dignidad, whose recipients total 600,000 throughout Bolivia.

Rodríguez says that historians who have studied the issue note that neither Morales´ nationalization plan nor did the neoliberal policies for the sector that preceded it "take structural measures to build a viable, long-term model."

Superficial changes?
"I doubt the nationalization has worked because in reality, all the government has done was to buy the shares," said Hugo de Granado, who served as YPFB´s president from 1997-2002. "Industrialization is at zero and it hasn´t advanced even one millimeter since 2005."

De Granado says Morales´ plan has not changed, in essence, from that of former President Gonzalo Sánchez de Losada, who governed Bolivia from 2002-2003.

"Both based their plans on a triangle," he says. "The first was the capitalization, a new hydrocarbons law and the exportation of the gas to Brazil. "Morales´ is based on nationalization, rebuilding the YPFB and industrialization."

The company´s current president, Carlos Villegas, however, in an effort to seek international investment in the country, told the 24th World Gas Conference, held in Buenos Aires in early October, that the country will begin processing gas on Bolivian soil "soon" with an ammonia and urea plant for nitrogen fertilizers, a new refinery and a liquefied gas processing plant.

Bolivia´s Hydrocarbons and Energy Ministry in October invited specialists and oil companies working in the country to participate in workshops before the law is debated next year.

While the oil industry has been rattled by Morales´ policies and worried whether investments will be protected, José Magela, president of the Bolivian Hydrocarbons Chamber, refused to comment on whether the plan to modernize the sector is viable.
—Latinamerica Press.


Bolivia´s new legislature tasked with passing new law for hydrocarbon sector. (Photo: Andrés Unterladstaetter)
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