Bolivian president calls early elections amid gas dispute

March 28, 2005
Bolivia's indigenous and trade union groups opposing the government's natural gas policies have called for new roadblocks and strikes in protest against Bolivian President Carlos Mesa’s natural gas policies, which they say favor multinational oil companies at the expense of the population.

Peter Howard Wertheim
OGJ Correspondent

Bolivia’s indigenous and trade union groups opposing the government’s natural gas policies have called for new roadblocks and strikes in protest against Bolivian President Carlos Mesa’s natural gas policies, which they say favor multinational oil companies at the expense of the population.

Mesa submitted his resignation Mar. 6 during a nationally televised speech when he expressed his inability to control the ongoing nationwide protests by leftist groups that virtually paralyzed the country at the beginning of March. During Mesa’s 17 months in office he has seen more than 820 protests.

Mesa said he would ask Congress to call early elections for August to replace him. Elections had previously been scheduled for June 2007. “They have tied my hands in every way to keep me from going forward,” Mesa said. “We’ve done everything we can.”

Policy changes

Mesa opposes several gas policy changes, which are likely to be passed by the Bolivian Congress due to public pressure, which he feels will alienate foreign investment in the oil and gas sector and force the country to its knees.

Mesa succeeded former President Gonzalo Sanchez de Lozada when he left office in October 2003 amid widespread protests over the government’s gas export policies. Mesa was Lozada’s vice-president.

This year’s protests included calls for holding a referendum on regional autonomy in Bolivia’s wealthiest region, demanding lower oil products prices, and increases in taxes levied on foreign oil companies to 50% from 15% of their sales.

Instead, the government proposes adding a new tax that would be gradually increased, on top of the current 18% royalty. The government wants to respect the shared risk contracts already signed with oil firms.

On Mar. 16, the lower house of Bolivia’s Congress approved a bill adding a 32% tax to the existing 18% royalty on oil and gas production. The Senate was to vote later.

Mesa’s resignation came after Evo Morales, an Indian congressman and leader of the nation’s coca leaf growers, announced a nationwide road blockade unless lawmakers pass a law raising taxes on foreign oil companies. Mesa insisted the international community would not accept the law.

Morales is leader of the left-wing party Movement For Socialism (MAS) and a leading contender for the presidency in 2007. Morales stepped up his campaign for a more radical hydrocarbons law that would make it tougher for multinationals to operate. Since 1996 oil companies have invested more than $3.5 billion to develop Bolivia’s natural gas.

“The MAS wants an unworkable and impossible law because the multinationals will take us to international courts,” Mesa said in his speech to the nation.

After Bolivians approved Mesa’s five-question referendum in mid-2004, he asked the Congress to rewrite the natural gas law to allow the foreign petroleum companies to retain control of their reserves while having to pay higher taxes.

In November, however, the House gave preliminary approval to a Socialist measure that would have the state unilaterally seize control of the natural gas reserves and impose an immediate and much higher tax than Mesa proposed.

Foreign companies and their allies in the international community have said the law would amount to the forced nationalization of the reserves.

Multinationals in Bolivia

Brazil’s state-owned oil company Petroleo Brasileiro SA (Petrobras) is the largest investor in Bolivia. Petrobras sources told OGJ that the company is responsible for 15% of Bolivia’s gross domestic product, owns several natural gas fields and two refineries, and imports 21 million cu m/day of gas.

Natural gas supplies from Bolivia are carried to Brazil by a 3,150 km pipeline operated by Petrobras. The supplies account for 60% of Brazil’s natural gas consumption.

Petrobras plans to step up its natural gas production from Brazilian offshore fields, expecting a rapid increase in natural gas consumption in Brazil in coming years.

Ildo Sauer, Petrobras’s gas director, said that he did not believe Bolivia would cut gas exports through the Bolivia-Brazil pipeline even if the new hydrocarbon law is passed.

Some analysts blame Mesa for these troubles because one of the questions approved by voters called for “nationalizing” the gas reserves. Mesa said it really meant giving the state greater control over the reserves while keeping them under foreign control.

But with polls showing that most voters thought it did mean nationalization, the MAS party and the more moderate and conservative political parties used that to rewrite Mesa’s proposal.