Bolivia and ALBA


The decisive numbers of Evo Morales’ election victory in South America’s poorest country give him the legitimacy he needs to redistribute Bolivia’s wealth in favour of the impoverished and excluded majority. But he faces enormous pressure from foreign corporations and international financial instituions to continue promoting superficial economic growth for the benefit of a small elite. Of all the progressive leaders elected in Latin America in recent years only Venezuela’s Hugo Chavez has successfully managed that challenge, defeating savage resistance from the Venezuelan oligarchy and their US and European backers.

The issues of poverty reduction and natural resources management dominate regional arguments about political and economic policy. Local elites parrot corporate propaganda promoting “free markets” and globalization. “Free markets” mean terms of trade dominated by powerful foreign corporations and financial institutions to the detriment of local people. Corporate globalization denies national governments the least vestige of sovereignty necessary to redistribute wealth. But Bolivia’s election result confirms that a large majority of people in the region expect widespread benefits from exploitation of their countries’ energy and other resources.

Even before assuming the Presidency in January 2006, Evo Morales faces conflicting demands from across the domestic and international political spectrum. Workers’ and indigenous organizations in Bolivia want a clear timetable for radical change. Whereas International Monetary Fund chief Paul Wolfowitz threatens to help Bolivia with “mechanisms to ensure, transparent, responsible and intelligent investment”(1) – maybe thinking of the Iraqi model he designed under George W.Bush. The IMF’s recent decision to forgive Bolivia’s foreign debt with the fund hardly changes the country’s overall debt burden. In sometimes obscure ways, Bolivia’s case shows the multiple strands winding into the regional economic and political tug-of-war

Free markets crash…into ALBA

Despite menacing offers of “help” from IMF chief Wolfowitz, Evo Morales seems to be the unintended beneficiary of disastrous “free market” policies that wrecked Bolivia in the 1990s under minority governments overseen by the World Bank and…..the IMF. During that time, publicly owned mining and energy resources were privatized based on arguments that more open market policies would attract foreign investment beneficial for the country. The policy was sold as “capitalisation”.

But Bolivians soon discovered that foreign investors are only interested in capitalising themslves. When Gonzalo Sanchez de Losada became Bolivia’s President, he did so with just 22% of the vote. The US government, so outraged about “undemocratic” Venezuela at the time, welcomed de Losada’s minority win and backed him hard as he tried to force through ever more fierce “free market” policies against popular opposition. De Losada had to flee Bolivia in 2003 after mass protests in which over 80 people were killed by security forces acting under his government.

Neo-colonial “free trade” policies promoted by corporate proxies loyal to the US government, like Sanchez de Losada and his replacement Carlos Mesa are completely discredited. Among the wreckage of those policies, the Venezuelan and Cuban governments are successfully building ALBA, the Bolivarian Aternative for the Americas, inspired by the integrationist vision of 19th century South American Liberator Simon Bolivar. ALBA represents a program of sovereign cooperation and economic integration that prioritises social justice. Venezuela’s recent entry into the Mercosur regional trading bloc should deepen ALBA’s strength and reach by revitalising Mercosur to overcome its recent stagnation. The head of Mercosur’s Representative Commission, Carlos Alvarez, wants Bolivia to sign up soon as well. (2)

ALBA’s fundamental logic is for sovereign governments to redistribute wealth created from nationally controlled natural resources so as to promote equitable development for all the region’s peoples. Nothing could be further from the elitist “free market” trickle-down vision hawked by acolytes of corporate globalization. Evo Morales’ friendships with Venezuela’s President Hugo Chavez and Cuba’s Pesident Fidel Castro place him on their side, against the United States government and its faithful regional allies, Chile, Colombia and Peru.

Within the wider regional and global conflict between corporate “free market” policies and sovereign redistributive economic policies to benefit their countries’ peoples, each Latin American government faces its own set of often very different political and economic problems. In Bolivia’s case the main domestic issues Morales has to face are decisions on future management of energy and mining resources, trade issues and agricultural policy, especially traditional coca production. Impinging on that domestic agenda are pressing concerns relating to foreign policy, the interventionist US government “war on drugs”, the strategic dispute with Chile over a route to the Pacific and future relations with Bolivia’s other neighbours.

Bolivia’s domestic economic trends

Bolivia’s main exports in recent years have been natural gas, soya and soya products, unrefined petroleum, zinc ore and tin. Only around 3% of Bolivia’s land was devoted to arable agriculture in 2004. But that percentage may well increase somewhat as 2005 saw large increases in acreages of soya, wheat, sunflower and sesame. As a leader of the country’s coca growers, Morales is also obviously committed to promoting coca leaf production.

Coca leaf is Bolivia’s most important crop after soya and coffee, despite heavy-handed attempts to criminalize cultivation by the US government and its local allies. Coca is used for a wide variety of legitimate purposes unrelated to narcotics. For a successful agricultural program the Morales administration will need to design agricultural economic policies with the credit, technical support and marketing arrangements necessary to promote more sustainable use of available land. Certainly developing soya production on the Brazilian and Argentinian model is clearly a destructive, short-term export-earnings fix.

Until recently, mining has always dominated Bolivia’s economy, in 2004 tin, zinc, gold, silver, lead, antinomy and tungsten made up over 40% of Bolivia’s export earnings. Foreign mining companies have discovered substantial sources of these metals in Bolivia and will be watching Morales for signs that may tip investment decisions one way or another. Morales will probably try and rebuild Bolivia’s State mining company COMIBOL that was cut back drastically like its state-owned oil and gas counterpart YPF in the “free market” smash-and-grab years of the 1990s But mega-projects like the massive Mutún iron ore mining project near the frontier with Brazil in Santa Cruz raise serious environmental and other policy issues that may affect Morales’ credibility even before he takes over the presidency

In the gas sector, a 2% fall in shares in the Madrid stock market valuation of Spanish energy company Repsol may have resulted from Evo Morales’ electoral win, since Repsol has a big stake in gas production in Bolivia. The drop still left Repsol’s shares trading well within the middle of their range for the year and may have had as much to do with concern about Venezuelan government demands for Repsol to migrate to a new contract for a large Venezuelan field it owns jointly with US energy giant Exxon-Mobil. A more interesting development in terms of corporate reactions to Morales’s win is an apparent decision to sell resources by the owners of Argentina’s Bridas energy group which manages important energy reserves and assets in Bolivia.

Bridas, owned by Argentina’s powerful Bulgheroni family, operates in Bolivia as owners of 40% of Panamerican Energy together with the UK transnational BP-Amoco which owns the other 60% of the company. Bridas is reportedly(3) trying to sell off about US$5bn in energy assets amid fears that its exposure in Bolivia may force it to write down the value of its total reserves. If reports are correct that China’s National Petroleum Company is the main prospective buyer, that will be another major advance into the Latin American energy market by China, consolidating deals it has already reached with Brazil and Venezuela. It is not clear whether Bridas is interested in selling off its reserves and assets as Panamerican Energy or as Bridas, so the extent of any effect on Bolivia is still uncertain.

North American, European and Australian energy and mining corporations have often threatened to cut investments in less developed countries if governments impose high levels of taxation. But access to energy and mining resources is getting harder while competition for those resources from Asian competitor countries like China gets keener every year. Morales’ government will be a beneficiary of that dynamic as US and other corporations find they have to either pay more for the resources or watch them sail away to benefit competitors in Asia. In any case, increased benefits for the State from energy and mining resources is a regional trend. Apart from Venezuela the Brazilian and even the Chilean governments are likely to increase taxation on foreign corporations in those sectors through 2006.

Trade and the regional balance of power

The most urgent trade issue to face Morales early in 2006 will be negotiations with the United States on a “free trade” agreement. The pro-US Toledo government in Peru has already broken ranks from its Andean partners in regional negotiations to sign a bilateral deal with the US government which may be ratified early next year before presidential elections in Peru in April. All the Andean countries face the dilemma of whether or not to sell out their sovereignty in order to sustain benefits from earlier preferential trade deals with the United States. US negotiators make it clear that benefits of earlier trade deals may be in doubt if the current round of “free trade” agreements with the Andean countries fails.

The US government is ruthlessly exploiting its trade advantage in order to recover political ground lost to increasingly assertive popular resistance against its influence in Latin America. Bolivia is relatively well placed to resist that trade blackmail since both its imports and exports with the US represent only around 11% of its total international trade. Its most important trading relationships are with its regional neighbours. While a trade deal with the US is important, Morales can point to his huge majority as a mandate for pacing negotiations slowly. That in its turn will help consolidate resistance to US “free trade” blackmail in Ecuador and also underlines the importance of the clear support Bolivia is getting from the Mercosur countries, which now include Venezuela.

Constituent Assemblies – a chance for radical change

Morales’ election win gives new impetus to regional popular movements demanding radical change. The most important domestic political process Morales has promised is a Constituent Assembly in 2006 to remake Bolivia’s political settlement. The same demand for a constituent assembly in Ecuador has been deliberately frustrated by Ecuador’s political establishment, despite unconvincing attempts by interim President Alfredo Palacios to organize a Constituent Assembly in 2005.

The Constituent Assembly in Bolivia is bound to provoke more urgent demands to free up the stymied process in Ecuador and for more popular participation in countries like Paraguay and Peru. Venezuela’s example in redrafting its constitution in the late 1990s set an empowering precedent for popular movements throughout South America. Bolivia is likely to consolidate that example, throwing the discredited regional model of democracy promoted buy the US government into even greater disrepute than it suffers already.

Evo Morales’ election signals a profound disruption of long-standing regional political arrangements in Latin America dominated by corrupt local oligarchies. Political redefinition is likely to extend not just to Ecuador but also to Peru. There, the upcoming presidential elections in April seem bound to turn into a run off between Lourdes Flores, representative of the conservative pro-corporate oligarchy, and Ollanta Humala, a nationalist former army officer with an anti-corporate agenda. Humala is running a close second to Flores in recent opinion polls with the election still over three months away.

US government concerns about the multiplier effect of radical political change in the region is well founded. Just as Bolivia’s example will encourage popular movements in Peru and Ecuador so feedback from popular resistance in those countries to the current round of “free trade” treaties with the US is likely to affect Bolivia’s own trade negotiations with the US government The close interweaving of popular resistance from one country to another across South America is something the US government seems incapable of unravelling. For the moment, outright use of US military force seems out of the question.

Morales will be president into the next decade. Hugo Chavez is almost certain to win the Venezuelan presidency again in December 2006. Various other countries in Latin America will hold important elections throughout the coming twelve months. 2006 will see a decisive shift in the region against the disastrous influence of the United States government. In Bolivia, explicit resistance to imperial corporate domination is certain to modulate into concrete efforts by the popular majority to ensure that the new government meets its commitments to redistribute wealth and promote profound social improvements for the disinherited majority.

NOTES 1. “Banco Mundial, dispuesto a ayudar al gobierno de Evo Morales: Wolfowitz” La Jornada, at Rebelion 22-12-2005 2. “Chacho Alvarez dijo que propondrá la incorporación de Bolivia al Mercosur” Clarin. December 19th 2005 http://www.clarin.com/diario/2005/12/19/um/m-01110401.htm 3. “Bridas eyes $5bln oil asset sale” LatinPetroleum.com, ARGENTINA news, 28.Nov.2005, Source: NEWSWIRES

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