Bolivia as a Sign of Things to Come

Bolivia, South America's poorest nation, has recently made international headlines due to newly elected President Evo Morales role of seizing and nationalizing its oil and gas sector. It has been quite the habit of the neo-liberal apologists to spout very basic Economics 101 reasons as to why this step will lead to greater hardship to Bolivians, yet this is patently absurd. The reason that these steps garner popular attention is not that these steps will harm poorer Bolivians, whose plight has been pretty much ignored for around 400 years, but rather multinational corporations that have been pillaging and plundering Bolivian natural resources under the cover of "free trade." This trade has not been free nor has it been friendly to Bolivians. When critical thinkers have taken close looks at the Bolivian policies implemented, observations may resemble this:

While the newly privatized industries did make capital investments and increase productivity, overall they eliminated more jobs than they created. Cruz Blanca reduced the combined workforce of the two railroad firms from a pre-Capitalization peak of around 5000 to 900; another 1200 employees were retained at the Empresa Nacional de Ferrocarriles (ENFE) Goods and Services division, charged withresponsibility for track maintenance (Taborga, 1997).13 The national oil company, Yacimientos Petroleros Fiscales Boliviano (YPFB), reduced its workforce from 5000 to 2000 and encouraged another 1300 ex-employees to form independent cooperatives to compete for private oilfield contracts. Employment at ENTEL and LAB has continued to decline (CEDIB, 2001, p. 31).

YPFB, divided into four firms, also increased its productivity through workforce reductions and the use of new technology in the privatized firms.14 Overall production increased as the three privatized firms spun off from YPFB in 1997 brought projects on line. Transredes, a distribution network comprised of a consortium headed by the US multinational Enron, completed a natural gas pipeline to Brazil in 1998 ahead of schedule and has begun the construction of other pipelines. Natural gas exports in the first six months of 2000 were more than 200% greater than a year earlier.

Although firm efficiency has increased, the transfer of ownership carried a net cost to the government in lost revenues of US$255 million during 1997 alone. Government income fell further in 1998 because the oil companies, which had provided nearly half of government revenues, were privatized in the middle of 1997 (La Razo´n, 1997a; Molina, 1998). Even though production of oil and natural gascontinues to rise, government revenues have not increased as regulations lowered taxes and royalties from 50 to 18% in an effort to induce greater exploration and production. An ex-member of YPFB’s board of directors estimated that the drop in royalties will cost the Bolivian government more than US$4 billion over the next 20 years (Alem, 1997).

Workers fired from Bolivian petroleum and railroad industries, for the most part, have been unable to find comparable private-sector employment in Bolivia. Freddy Chavez, General Secretary of the Federation of Railway Workers, estimated that approximately 25% of those who lost their jobs have found skilled jobs, although many at reduced pay. An additional 25% have emigrated to Argentina to look for work, with the remaining 50% either working in informal-sector jobs or unemployed. Chavez also said that the loss of work has had high social costs; rates of alcoholism and violence have soared as families deal with the loss of economic security (Chavez, 1997).

Apart from workers who lost their jobs, the economic restructuring also had a range of other impacts across the board (Villegas Quiroga, 1997a). As basic services are privatized and subsidies removed, prices for energy and water rise. Liquid natural gas, the cooking fuel for urban Bolivians, increased in price by more than 25% in 1997 alone. Electricity and water prices increased by over 50% between 1995 and 1997 even as the poorly paid informal sector provided the greatest source of new jobs. In December 1997, under pressure from the IMF and the World Bank and faced with a US$470 million budget deficit, President Banzer imposed an economic austerity plan that increased gasoline and diesel prices by 25% and reduced public spending (La Razon, 1997a,b). Price hikes and the announcement of reductions in public spending led to strikes and riots in December 1997. Transportation workers first went on a nation-wide strike to protest gas price increases. On returning to work, drivers raised transportation prices by an average of 20%, which led to a round of popular protests. Full Report here.

This move has made him even more popular among Bolivians, though he angered regional powers such as Brazil and the US' money will no longer buy Bolivian hearts and minds.

It is simply absurd to think that the reason international attention has focused on this issue of because of concern to the welfare of Bolivian people. Honest writers clearly recognize that the writing is on the wall, not for Bolivians, but for us Westerners who have profited from the explotiation of the natural resources of poorer countries. And perhaps the biggest long term threat to the continued gravy train of exploitation will come from that reknown terror state Norway, that has been so successful in using its oil prosperity for the betterment of its people that it is seeking to help poorer nations follow this model, piquing the ire of the global elites.

These events represent a truly scary prospect of business relationships to the privileged capitalists: when poorer nations are able to effectively negotiate within the parameters of the global marketplace the consistent pattern of exploitation will effectively be broken, and the countries that consistently preach the gospel of free trade and competition will actually for the first time have to practice it, paying "fair market value" for the goods, services and inputs that they consume. And for a nation such as the United States that has profited quite lavishly through its ability to exploit poorer and weaker nations, particularly in Latin America, this will be a sea change from the parasitic position of privilege that it has enjoyed. And currently seeks to enjoy in its robber barron oil effort in Iraq.

Nothing "free market" about it. Most importantly, the world now fully realizes it, as well.