Bolivia: Hard Choices
Ever since I was economic advisor to its president in 1960, Bolivia has been dear to my heart. Yet right now roadblocks are set up all over the country, orchestrated by Evo Morales and his Movimiento al Socialismo (MAS) party. La Paz is isolated, and mobs are crying for the government to resign. A friend in Bolivia sent me this email on October 7: "The protesters now have a list of some 60 or 70 demands, completely unorganized and sensationalized. Now it sounds as if they will not stop the blockades until Goni steps down, which is not going to happen, so God knows what is going to follow... the military is at the ready."
First, a little background. A revolution of 1952 had confiscated the land of the great landowners (hacendados) and divided it among the tenant farmers. It had also nationalized the tin mines. But the revolutionary government (MNR for its initials in Spanish) had overspent widely, so when it could not pay its debts it was forced to borrow from the International Monetary Fund and the American government. Both had sent economic "advisors" to see that the government honored its agreement to decrease expenditures annually, until it was solvent. I was the American advisor. One day in the office of the governor of the central bank, I saw the sign (in Spanish): "Don't hesitate to ask for credit; it will be cheerfully refused."
Both presidents (Siles Zuazo and Paz Estenssoro) under whom I served are now dead; the current president, Gonzalo ("Goni") Sanchez de Lozada, was educated at Scattergood Friends School while his father was in exile. He speaks Spanish with an American accent. Goni has strongly favored American investment as a source of finance for Bolivia's development. In 1995 he inaugurated a plan to give state enterprises to the highest bidder among foreign investors who, in exchange for receiving half the shares, would modernize the companies with the funds they had bid, and place the other half of shares into pension funds, to be run by Cititrust Bahamas for the benefit of all Bolivians. The government would get nothing. (I do not have information on how this plan has performed.)
In 2002, huge reserves of gas were discovered. To supply energy-hungry Californians, a consortium of three American companies, calling themselves Pacific LNG (for liquefied natural gas), offered to spend up to $6 billion to drill and export. The IMF estimates that Bolivia's oil and gas sector could add an average 1% to GDP growth over the next five years, if projects to market the gas materialize. Goni saw this project as a godsend to provide his country with jobs, investment, and technology.
But the vast majority of Bolivians are distrustful. First, they distrust the United States, for its coca-eradication plan that has forced many farmers into bankruptcy. The substitute crops suggested by the government (coffee, bananas, heart of palm, etc.) have not provided the farmers with a decent life. Correctly, they sense the hand of the United States, and they also sense, correctly, that Goni is a pawn of the United States. Second, they recall the Bechtel fiasco in Cochabamba (see TQE #53), where the water development is modeled after Bechtel in Bolivia. Third, they remember the Patiño family as owners of the tin mines whose profits they shared with corrupt Bolivian officials, while paying the miners barely enough for subsistence. This treatment led to the revolution of 1952. No, the United States is not very popular in Bolivia.
So, what shall be done with the gas? As an economist, I must say that Goni's plan would be best for Bolivia, if it were allowed by the people. Pacific LNG would not make out like pirates, since they would have to compete with other gas companies the world over. They would have to pay wages somewhat higher than the average for unskilled workers in Bolivia. Why? Because they would seek the best workers (as multinational corporations generally do), and they would train them. In so doing, they would slightly increase the living standards and worker capacities. The government would probably demand taxes from Pacific LNG, with which to work on infrastructure for the country. Do not the people of Bolivia understand all these benefits?
No, they do not. When I was in Bolivia in 1960, I taught an economics course in the University of San Andres (La Paz). The students were mainly Marxist. They did not believe that a world of competition would bring Bolivia any benefits. They felt that multinational corporations would squeeze the resources out of the people. That was then. If anything, the hatred of the United States has worsened.
So, what then? There are several possibilities if Pacific LNG's bid is not accepted. First, the gas may be kept in the ground, for further sale at some future date. Many Bolivians want this. Strikers carry signs, "EL GAS NO SE VENDE." (The gas is not for sale). But keeping the gas in the ground is like keeping money in a mattress; it does no good unless it is used.
Second, Bolivians could build processing plants, to liquefy the gas on Bolivian soil. But there are problems with that. When natural gas is cooled to a temperature of approximately -260ºF at atmospheric pressure it condenses to a liquid called liquefied natural gas (LNG). One volume of this liquid takes up about 1/600th the volume of natural gas at a stove burner tip. LNG weighs about 45% of the weight of an equal quantity of water. So far as I know, the only way to transport large quantities of LNG economically is with ocean-going tankers. Hence, natural gas is gathered from inland fields by pipelines and sent to ports where it is liquefied just before being loaded into tankers. As Bolivia is landlocked, it must export its gas via pipeline through Chile or Peru. It couldn't make use of an LNG plant.
To many Bolivians, exporting through Chile is anathema. The gas would go through the very port that Bolivia lost to Chile in the War of the Pacific (1884). When I was in Bolivia, Bolivians celebrated the "Day of the Pacific" once a year, and a statue of Abarroa, the hero of that war, stood in a prominent park in La Paz. However, the potential investors (Americans) say that if not Chile, they will lose interest. A pipeline through Peru would be more expensive.
Third, Bolivians might establish a government corporation to handle the gas. Most object that the government has always been corrupt and I agree and the "profits" would end up in the pockets of politicians.
To the United States, the most frightful result would occur if Evo Morales were elected president. (He barely lost to Goni in 2001). Evo preaches along the lines of Fidel Castro (Cuba), Juan Perón (Argentina), and Hugo Chavez (Venezuela). Each of these "populists" promised the people much more than he could deliver, and after skimming the cream for himself reduced his country's economy to shambles. Yet the United States is following exactly the policy the drug war that will drive the people to elect Evo, who opposes coca eradication.
Evo has a tremendous following among the poor. What would he be like as president? I suspect like Castro, Perón, or Chavez. The only populist I know of who plays differently is Lula da Silva of Brazil. He promised his people "everything" before he was elected. Now that he is president, he has discovered that he cannot deliver it all, so he is cutting back heavily. Many of his former supporters are now his chief critics. However, a Lula is rare, and if one considers probabilities Evo would probably be more like Castro, Perón, and Chavez than like Lula.
So, should a "democratic" government force a plan upon its people to which they strongly object? My answer is No. I believe that no one should be forced to accept any policy to which most of the population objects, no matter how good it is. I agree with John Dunlop, labor professor at Harvard who died this month, but who told Fortune Magazine in 1973: "Unless you can work out a consensus on a problem, it's not a very good solution."
So, what specifically should Goni do? To avoid civil war he should quit the U.S. coca-eradication policy and ask all U.S. advisors to go home. He should tell the U.S. Ambassador to spend ten days in Washington explaining that the drug problem is to be solved through teaching American children not to use drugs. He should leave the gas in the ground wasteful though that may be for the time being, until tempers die down. Finally, to bring his Scattergood learning up to date, he should subscribe to The Quaker Economist at TQE Home.
Bolivians must learn good policy by their own experience, through trial and error and learning may take centuries of suffering, corruption, and wars. It took centuries for Western society to learn to deal with each other with freedom and democracy (to the extent we have learned), and we are still suffering wars because we force our policies on others. Why not allow Bolivia the same experience?
Sincerely your friend,
I have friends working at Nur University in Santa Cruz Bolivia. It is a school founded by the B'hai faithful and is dedicated to providing an education for the rural poor in that part of the country. They stress democracy, business and running things without corruption. They also have sponsored all sorts of sustainable agricultural programs to try to help increase yields on non-drug crops. I've e-mailed my buddy there to ask about their impressions of what's going on In this issue. Interesting how drug wars affect so many things.
Signe Wilkinson, Chestnut Hill (PA) Friends Meeting
I wish that there were more advocates of the open society who had such a broad experience and an ability to share it so well.
If Goni did tell Washington to stuff their coca mandates, wouldn't he then face threats that Washington would do to him what they did to Allende and Noriega and Hussein? If politicians in Colorado can't even get the courage to tell Washington "No" when the threat is loss of some highway funds, why would we expect Goni to stand up to threats that are presumably much more severe? (I hope he finds a way to do it!) The reality of Goni squeezed between the "drug warriors" in Washington and the marxist idealists in the street leaves me feeling helpless. What can your readers do? Do you feel the Amnesty Intenational model of sending letters has any effect? Should we send letters to the newspapers down there? If we send them in English will they have any chance of getting published? Do any of the Bushies understand?
Dave Meleney, Unitarian Church of Denver (CO).
Although perhaps not an optimal use of stored energy, it is possible for the Bolivians to install their own gas-fired electric power generation capabilities. This allows them to raise the standard of living by producing very inexpensive electricity. The electricity should be cheap since the gas cost is essentially zero, as there appears no other feasible (technically or politically) method to convert the gas into money. The infrastructure can slowly be developed until they are eventually selling electricity to their neighbors. The gas supply would last a long time in this manner, I suspect.
Andrew Hirzel, Kalamazoo, MI
The majority Aymara and Quechua indigenous groups are rightly suspicious of unproven privatization efforts and export policies that they have strong reason to believe will mainly benefit the countryâs economic elites and multinational conglomerates. If Boliviaâs economy is growing, albeit modestly, they can afford to leave their gas reserves in the ground a few more years while they sort out the impasse. In a few years, their reserves will presumably be much more valuable. Why rush to export just to meet the urgent needs of the energy wastrels to the north?
Paul Murphy, Herndon (VA) Friends Meeting.
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