Bolivia's hydrocarbons controversy

Bolivia’s canal?

by Joel Inwood

After weeks or protests and roadblocks, the resignation of President Mesa and the swearing in of Eduardo Rodríguez, and the call for new elections, Bolivia may be closer to the partial or total nationalization of its hydrocarbon wealth. During Panama’s social security protests the international media have been focused on this Andean and paying little attention to this country.

While some business interests cry foul over every inch of ground nationalized, taxed, or otherwise taken from the free market, some leftist groups want to “nationalize the government,” and take complete control of the hydrocarbons. Between those two poles there are ideas and positions racing across the gambit. Here in Panama is one of Latin America’s largest nationalized industries --- the canal. Perhaps making a statistical comparison could help shed some light on the subject.

At almost nine million people Bolivia is nearly three times more populous than Panama, though less densely so (all numbers heretofore are from the CIA World Fact Book, unless otherwise noted). At over $20.5 billion, however, Panama’s gross domestic product for 2004 almost parallels Bolivia’s $22.33 billion. For the individual citizens that puts Bolivia’s average annual gross income per person at around $2,600 vs. Panama’s $6,900.

According to the Panama Canal Authority statement from last year, the canal grossed slightly over a billion dollars, and represents almost three billion dollars in assets for Panama. That means that if you divided that gross among Panama’s citizens you would have around $330 a year. If you divided up the net profit, however, it would look more like $120.

In July of 2004 the Kevin G. Hall in the Washington Post estimated that 52.3 trillion cubic feet of gas reserves, which at that time was worth around $120 billion. Divide that up among the population and it comes out to over $13,000 a piece --- five years income.

67 percent of Bolivians live below the poverty line, where as only 37 percent of Panamanians have to survive under those conditions. So, the hydrocarbons do represent a substantial potential for Bolivians.

The problem with nationalization frequently noted by people from all over the political map is that mismanagement of public enterprises often wastes resources and costs the people of the country both through loss of revenue from the enterprise and a slowing of development that can come when investors have less confidence in their ability to operate and profit freely in an open market. Venezuela’s recently nationalized oil industry is trying to combat the later effect by launching an advertising campaign to promote the social improvements that purchasing their oil brings the nation’s poor. The Panama Canal is often cited as an excellent state run enterprise as well.

Evo Morales of Bolivia’s Movement Towards Socialism (MAS) has proposed that the hydrocarbons be managed by private enterprise, but be taxed at 50 percent of their income. The Cuban Prensa Latina news agency reports that Bolivia’s new Hydrocarbons Minister, Jaime Dunn, has plans to follow through with participation in an energy association whereby Bolivia will supply neighbors Argentina, Brazil, Chile, Peru and Uruguay.