26 Apr Ten years after the so-called “nationalization” of hydrocarbons in Bolivia
I’ll start this post with two important notes. The first is related to the urgency in its preparation. Indeed, I am aware that starting this weekend, media bombardment on this topic will saturate the kind reader. Therefore, before that happens, I’ll present my ideas. The second relates to a commitment I owe to the friends at Abya Yala TV. Last week, I was unable to attend a kind invitation to debate these issues. Now then, let’s get started.
How time flies! It has been ten years since a measure was implemented that had, as its primary merit, a disconnect between government media and what actually occurred. During these ten years, the process called “nationalization” was widely used in the media; however, its technical implementation remains an enigma. Just remember that during this period, Articles 6 and 7 of Law 3740, promulgated in 2007, were not fully complied with.
I have pointed out on several occasions that the current hydrocarbons sector would not be what it is today without the work of many Bolivians in the past (1974 – 1999) and the notable growth in international oil prices. On this occasion, I want to introduce some figures to reinforce the same idea. I invite you to look at the following figure, where I contrast the total gross sales of the hydrocarbons sector in two scenarios: (1) the first does not consider the natural gas export contract with Brazil (or Argentina) and keeps hydrocarbon prices at the levels observed in the year 2000; (2) the second presents the actual gross revenues of Bolivia’s hydrocarbons sector, including exports and the effect of elevated international oil prices.
Dear reader, had the export project to Brazil not materialized and international oil prices not risen, the total revenue (the size of the pie) would barely reach $400 million annually. Put another way, during the 2006–2014 period, total observed (and harvested) revenue was slightly over $38 billion. Without exports or high prices, that total would barely exceed $3 billion, almost 12.5 times less. Without the Natural Gas Export Project to Brazil and the surge in international oil prices, there simply wouldn’t have been much worth “nationalizing”.
All of the above was aimed at showing that if today we “talk” about billions of dollars, we owe it to previous work (1974–1999) involving the Brazil contract and notably elevated international oil prices.
One of the usual arguments to justify the so-called “nationalization” process is ownership, claiming that this process allowed Bolivians to “recover ownership of hydrocarbons.” Well, let’s see what the figures — those stubborn figures — tell us. In the next two figures, I present the destination of Bolivia’s natural gas production at two points in time. In 2007, 88% of total production was exported as natural gas to Brazil and Argentina; in 2015, this figure was 84%. So, despite the pride we might feel since 2006, in practice, we are still doing the same thing: exporting natural gas as a raw material.
It is also argued that Bolivia’s substantial fiscal revenues (from the hydrocarbons sector) are due to the so-called “nationalization” of hydrocarbons. Once again, let’s see what the data says. The next figure shows the distribution of wellhead revenues (the pie) from the hydrocarbons sector. Dear reader, note that the “bulk” of resources for the Bolivian state comes from the Direct Tax on Hydrocarbons (IDH), a tax created in 2005 (a year before the so-called “nationalization”) and enacted by then-President of the National Congress Hormando Vaca Diez. In fact, this tax is what is “shared” with municipalities, regional governments, indigenous funds, etc. The revenues from the so-called “nationalization” process benefit only YPFB and are also variable; in some fields, the “15%” shown in the graph can decrease to “1%.”
So, is there any merit to the so-called “nationalization” process? Indeed, there is: its neoliberal character. The percentage labeled “15%” in the graph is variable according to market and production conditions. In other words, the more the private company “earns,” the more it pays YPFB, and the reverse is also true. In this sense, the fiscal instrument created with the so-called “nationalization” process is a progressive type applied to the profit of the field’s operation.
This May 1st will undoubtedly be full of promotional spots and impassioned speeches praising the so-called “nationalization” process. I only ask, dear reader, that at that moment, you recall the ideas expressed in this post, so you may perhaps have a more balanced view of the process.
Once again, the dance of billions of dollars will be the centerpiece of this theatrical performance, whose boxes are reserved for a few, while the rest are limited to applauding, ensuring they do not lose that old wooden seat shared with their entire family.
S. Mauricio Medinaceli Monrroy
La Paz
April 26th, 2016
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