Bolivia redistributing gas wealth -- Disrupts economy

September 18, 2008

Bolivia's President Evo Morales is presenting a national constitutional referendum in January that will redistribute wealth from the gas-producing regions of the country to the poorer indigenous regions. This is in addition to using gas revenues for national projects and universal old age pensions. He has also allowed increased coca growing among local farmers.

As a result, the governors of the eastern gas-producing states have stirred up protests resulting in 30 deaths. The Union of South American States (Unasur) met to intervene in support of Morales.

Morales has expelled America's ambassador, whom he accuses of supporting the governors. In return, the U.S. is threatening declare Bolivia non-compliant in the war on drugs, ending U.S. anti-drug aid. It may also exclude Bolivia from the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which provides duty-free access to the U.S. market for hundreds of Bolivian companies. This would destroy hundreds of jobs in January, when the Act would be renewed.

ordered the 20 foreign oil and gas firms who operate in Bolivia to send production to a state company for processing. This means that these companies could wind up with contracts that pay them to operate the fields, instead of sharing in the profit, as they do now. Bolivia has South America's second largest natural gas reserves.

What it Means:
Morales' actions are another example of Bolivarism, in which smaller, poor countries are realizing their power as owners of natural resources. The resistance by the gas company governors and the U.S. is to be expected, but will not stop the trend.

The most interesting effect is the power struggle within Unasur between Brazil’s president, Luiz Inácio Lula da Silva, and Venezuela’s Hugo Chávez, who offered use military aid if there is a coup against Mr Morales. Most members agreed with Lula's calmer strategy to ease the conflict.  Over the past several years, more Latin Americans are siding with Lula's moderate approach to economic success than Chavez' extreme polarization. Hopefully, Morales will follow Lula's lead, as well. (Source: The Economist, Mediators Step In, September 17, 2008)

Action Steps:
This kind of "pipeline politics" is resulting in higher energy costs throughout the world in the long term - and the long term is what retirement planning is all about.

Cutting back on energy use is not about “conservation” or “saving the planet," although those are good motivations. It is really about learning to adopt a different mind set: on a daily basis, what decisions can you make that will help you rely less on foreign oil, so you can reduce your vulnerability to ever higher costs?

For more on the Bolivia, see the WorldMoneyWatch Top Ten Trend: Bolivarism in the Latin American Economy

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