Watching Government Bolivian controversies

With Patrick Crow
from Washington, D.C.

Bolivian President Gonzalo Sanchez de Lozada is determined to push hydrocarbons bills through Congress to allow:

Partial privatization of state oil company Yacimientos Petroliferos Fiscales Bolivianos (YPFB).
Approval of the Brazilian natural gas sale contract.

Because the government holds a majority, it can pass the measures despite vigorous opposition in Congress.

Objections to the YPFB capitalization bill are not limited to lawmakers. A recent poll estimated 70% of people in the four main cities oppose both measures.

Demonstrators against privatization were clashing daily on the streets with police.

What's planned

The draft version of the privatization bill would sell 50% ownership in and surrender control of YPFB's upstream exploration and production units and its hydrocarbons transport division. Three refineries and sales companies would be 100% privatized.

After the government failed to win support of the Bolivian Workers Confederation (COB) for the measure, it made a deal with the state oil workers union, Federacion Sindical de Trabajadores Petroleros de Bolivia.

Under that pact, the oil union would support the bill and YPFB's refineries, pipelines, and the hydrocarbons wholesale division. A handful of service companies would remain under state control.

YPFB has been used extensively for political patronage in the past, and 85% of its jobs are in the downstream sector. YPFB also provides half of the government's revenues.

COB has begun escalating a general strike to protest the sale and may punish the oil union with expulsion.

Meanwhile, the government has hinted that if civic and labor unrest continue to build, it may declare a 6 month state of emergency, as it did last April following widespread demonstrations for wage increases.

Compounding all those political problems is another. Capitalization Minister Alfonso Revollo, who is responsible for overseeing partial privatization of Bolivia's six main state enterprises, including YPFB, has been accused of extortion and influence peddling.

Pipeline issue

The export pipeline to Brazil also is becoming a political headache.

The public reacted angrily after it was disclosed that the contract YPFB signed in 1994 with Enron Corp. to build the line was subject to the laws of New York State, not Bolivia's. Some opponents think that may be unconstitutional.

Also, the government has promised to pay Enron a $9 million success fee, half due upon closing this year and the rest when gas sales begin.

Separately, the government was considering whether to allow Enron to participate in the Brazil gas pipeline and bid for YPFB's transport division. Such a move could enable Enron to obtain a 70% or larger share in the Bolivian end of the Brazil gas contract.