Bolivia’s Morales makes first slip

By Sam Logan for ISN Security Watch (07/04/06)

Bolivian authorities took control of four Bolivian airports on 31 March after workers with the Lloyd Aereo Boliviano (LAB) airline caused disruptions at Cochabamba's Jorge Wilstermann International Airport the day before. Protesters blocked roads, staged sit-ins on runways, and occupied the LAB offices. Witnesses said Bolivian national police used tear gas and batons to retake control of the airport.

The LAB protests started in February when workers organized a system shutdown. The new administration of President Evo Morales responded by promising to intervene to help the flailing airline pay the salaries and wages it was unable to cover. With that promise, protesters went back to work. But in early March, with the promise unfulfilled, they began to lose faith.

By mid-March, LAB workers staged a hunger strike to draw attention to the fact that LAB had not paid salaries for months. A large group from the Cochabamba airport joined the strike. This time, the Morales administration did not intervene, claiming the situation was out of its hands. Soon after, more joined the strike in Cochabamba, forcing Morales’ hand, which led to tear gas and beatings.

Many of those still gathered in Cochabamba have begun to wonder why the Morales administration has not aggressively intervened to protect some 9,000 Bolivians that rely on LAB by nationalizing the airline and securing the salaries and wages of its employees.

The protest is the first major domestic challenge for Morales, who has so far managed to hold on to a wide base of supporters by talking out of both sides of his mouth.

Elected with over 50 per cent of the popular vote and inaugurated in late January, Morales has an unprecedented mandate. But with that mandate comes heavy pressure to keep a wide constituent base happy.

Well past halfway through his first 100 days, Morales has filled his most radical supporters with doubt, faces legal disputes with international oil companies, and has done little to convince international investors that Bolivia has returned to stability and prosperity - a considerable task considering Morales sits on the region’s most lucrative source of natural gas.

Three factors will determine Bolivia’s future: the nationalization of energy assets, Bolivia’s relationship with the US, and Morales’ ability to keep his broad constituency happy.
Oscillating relations

Good relations with the US are essential for investor confidence in the energy and other sectors of the Bolivian economy. If Morales appears to be too compliant with the US, he will anger the left flank of his support base. The left would rather Morales work more closely with Venezuelan President Hugo Chavez - a relationship that Morales must handle with care if he wants to keep US politicians and investors from suspecting the worst.

On the surface, many analysts speculate that Bolivia will fall into the Venezuelan sphere of influence. In such a scenario, Chavez would pay the bills and dictate policies in line with his regional plans for Socialism in the 21st Century. Morales may be tempted to fall for easy money, taking a route that would lead him away from Washington.

Morales’ openness to dialogue with the US is a sign that he will not be easily swept into the Chavez fold. During a press conference in Chile on 10 March, Morales told journalists that he was “always open to dialogue”.

“We can talk to President [George W.] Bush but we can also talk with [Cuban leader] Fidel Castro - that is our culture of dialogue. We have no fear about talking, we are going to keep talking,” Morales said.

Such statements reveal the careful balancing act Bolivia’s new president must maintain to keep his broad base of support and patrons content and engaged in Bolivia’s future.

However, a recent announcement offers evidence that Morales is willing to strike out and take a strong position that is not in the best interest of his administration.

When a home-made bomb exploded in a La Paz hotel killing two people on 21 March, Morales responded by saying: “There is a battle against terrorism and the government of the United States is sending Americans to do terrorism in Bolivia.”

On 23 March, the US embassy in La Paz released a statement expressing concern over the remarks.

Morales clarified his position on 1 April after dining with the US ambassador to Bolivia, David Greenlee, claiming that “everything has been clarified”.

Nevertheless, such knee-jerk reactions indicate a lack of pragmatism that could harm Morales’ administration in the future.
Powder keg issues

Two of Morales’ most repeated campaign promises spoke of an all-encompassing Constituent Assembly and increased awareness that coca is a leaf, not a drug. Both issues are powder kegs because if Morales does not do what he promised, he will face the power of Bolivian protesters who have a solid track record of removing presidents.

Morales has pushed hard to make his Constituent Assembly a success. He has also been open to dialogue and compromise with the US and the so-called war on drugs underway in Bolivia.

The bill that will legalize the new CA passed through Bolivian Congress in record time, suggesting that many congressional members still remember that Morales was elected with nearly 52 per cent of the popular vote. CA negotiations in Bolivia’s Congress could have been much more difficult than they were. It was a major test for Morales’ young administration.

The CA process is now registering eligible voters, a process that derailed the CA in the past. On 21 March, Morales announced the initiation of the Bolivian National Identity Plan, a US$8 million project to register poor Bolivians to vote so they may participate in the vote for constituents who will represent them in the Constituent Assembly as well as future elections. He will receive Venezuelan technical expertise and financial support to help register at least one million Bolivians.

On the same day, Morales announced the initiation of a country-wide literacy program, making good on another campaign promise. He will receive Cuban and Venezuelan assistance to implement this new program throughout the country.

Concluding his press conference with journalists in Chile, Morales emphasized that the drug issue was a distant second to the commercial and economic ties between Bolivia and the US. However, his position that coca is a leaf, not a drug remains strong.

“We need a real and effective fight against narcotrafficking,” Morales said in Chile.

“We need an alliance, a pact with the US government […] The fight against narcotrafficking can not be a pretext to simply control or recoup political power or control our governments. This must end.”

Morales has allowed the US Drug Enforcement Agency (DEA) to continue operations in Bolivia. He has also showed a willingness to discuss caps on legal coca production set in place by former administrations. Morales knows that the US is in a position to decertify Bolivia for not supporting US-backed drug eradication policies. Decertification leads to a severe cut in annual development funding.

As long as US representatives are careful to treat Morales and Bolivia with due respect, there should be smooth, albeit extended, negotiations between the two countries over issues concerning the so-called war on drugs. Morales’ willingness to travel to Chile to meet with US Secretary of State Condoleezza Rice and the phone call he received from President Bush are both good signs that communication lines are open, both publicly and privately.

In Chile, Morales characterized his meeting with Rice as “historic and very important”. In the wake of this meeting, a new paradigm for relations between the US and Bolivia must now be formed. Morales will remain tough on his coca stance, but will not walk away from a relationship he needs to ensure the long-term success of his country.
Energy negotiations

International companies must negotiate with the Bolivian government because current contracts in place are not attuned to the new legislation enshrined in the country’s latest hydrocarbons law. Morales has the mandate to play hard ball with international energy companies, but he will negotiate with each company one by one, not force feed them as a group. He needs them as much as they need Bolivia.

There are some 26 international energy companies that have contracts in Bolivia, so there are many individuals with whom to talk. However, this time-consuming approach is more likely to deliver compromise and continued stability rather than force oil companies to pull out of Bolivia all together. Spanish-owned Repsol YPF and Brazilian-owned Petrobras - Bolivia’s top investors - are two energy companies Morales will be careful to keep by his side.

Revenue generated from hydrocarbon exports to Brazil and Argentina represented some 38 per cent of total export income in 2004. Losing companies such as Petrobras and Repsol YPF would be damaging to Bolivia's economy. Additionally, Morales knows he needs foreign investment to maintain and improve upon the country’s gas export infrastructure. New pumping stations, pipeline networks, and development of other gas-based products are essential to take advantage of the country’s energy assets.

At current production and export levels, Bolivia has 70 years worth of natural gas reserves, according to the Cambridge Energy Research Associates (CERA). CERA research reveals that at year-end 2004, Bolivia’s proven gas reserves stood at 26.7 trillion cubic feet (Tcf); proven and probable reserves increase that number to 48.7 Tcf. Bolivia exported 735 million cubic feet of gas (MMCF) daily to Brazil and 77 MMcf per day to Argentina in 2004. In 2006, Bolivia is expected to export some 1,200 MMCf per day to Brazil, possibly up to 1,350 MMcf per day in 2008 if current pipeline networks are expanded.

Both Brazilian and Argentine companies know that Bolivia is the best source for natural gas in the region. And the Bolivian government knows it needs these companies to maintain and increase gas exports. Morales knows increased revenue from gas exports is his best bet to maintain a stable Bolivian economy and have some extra money to enact social programs necessary to keep his constituents happy.

Bolivia will remain the region’s top provider of natural gas, despite Chavez’s attempts to muscle his way into the market with plans for a natural gas pipeline that extends from Venezuela to Argentina through Brazil. Pipeline economics dictate that the shorter the pipeline the better. Bolivia is geographically better positioned than Venezuela to feed the Southern Cone markets - Brazil, Paraguay, and Uruguay - with natural gas.
Promise for the future

Morales is on a tight rope. He has many tough decisions ahead for the remainder of his first 100 days as well as the rest of his administration. Chavez represents an easy path, a warm embrace. The promise of US financial support and the embrace of the international investment community is a much harder road to walk.

Two traditional shackles may soon be removed from Bolivia’s future: The International Monetary Fund (IMF) and access to the Pacific. Bolivia will most likely not renew its contract with the IMF when it lapses this year. Morales will be seen as the president who finally released Bolivia from bending to the will of IMF economic policies. It is a perception that is sure to boost his popular ratings at a time well beyond his first 100 days. With all its IMF debt relieved, there will be more money to service other debts, helping to maintain economic stability.

Morales and Chilean President Michelle Bachelet are rumored to have been talking about Bolivian access to the Pacific for over a year. The topic came up again when Morales was in Chile in early March. Bolivian access to the Pacific is a boon that would give a shot in the arm to Bolivian exports. While there is still a long way to go in terms of negotiations and political good will, the fact that Bolivia and Chile are talking to one another at the highest level without popular protest is a good sign.

But many hours of negotiation and persuasion must take place before Chile and Bolivia agree on Bolivian access to the Pacific. Meanwhile, Morales has a growing crowd of supporters that, after the recent LAB airline incident, are ready to break ranks.

One activist at the Cochabamba airport summed up the protesters’ sentiments by telling Jim Shultz, director of the Cochabamba-based Center for Democracy, that “if the Morales government isn’t willing to take forceful action to save a national airline, it is even more sure it won’t stand up to the foreign oil companies”.

Morales knows that protesters in Bolivia are more than just a headache. Bolivia's current president helped organize and implement protests that culminated in the removal of two Bolivian presidents, Carlos Mesa and Gonzalo Sanchez de Lozada. If he continues to make decisions that upset Indians, students, miners, and truckers, he may witness the same fate as his predecessors he helped to oust.