Market Justice : Political Economic Struggle in Bolivia 9781139627924, 9781107030282

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Market Justice Political Economic Struggle in Bolivia Market Justice explores the challenges for the new global left as it seeks to construct alternative means of societal organization. Focusing on Bolivia, Brent Z. Kaup examines a testing ground of neoliberal and counter-neoliberal policies and an exemplar of bottom-up globalization. Kaup argues that radical shifts toward and away from free-market economic trajectories are shaped not merely by battles between transnational actors and local populations, but also by conflicts between competing domestic elites and the ability of the oppressed to overcome traditional class divides. Further, the author asserts that struggles against free markets are not evidence of opposition to globalization or transnational corporations. They should instead be understood as struggles over the forms of global integration and who benefits from them. Brent Z. Kaup is Assistant Professor of Sociology at the College of William & Mary.

Market Justice Political Economic Struggle in Bolivia

BRENT Z. KAUP College of William & Mary

cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao ˜ Paulo, Delhi, Mexico City Cambridge University Press 32 Avenue of the Americas, New York, ny 10013-2473, usa www.cambridge.org Information on this title: www.cambridge.org/9781107030282  C Brent Z. Kaup 2013

This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2013 Printed in the United States of America A catalog record for this publication is available from the British Library. Library of Congress Cataloging in Publication Data Kaup, Brent Z. Market justice : Political Economic Struggle in Bolivia / Brent Z. Kaup. p. cm. Includes bibliographical references and index. isbn 978-1-107-03028-2 (alk. paper) 1. Bolivia – Economic policy. 2. Neoliberalism – Bolivia. 3. Free enterprise – Bolivia. I. Title. hc182.k38 2012 330.984–dc23 2012025693 isbn 978-1-107-03028-2 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate.

Contents

Tables and Figures Acknowledgments

page vii ix

List of Acronyms

xi

Introduction

1

The Death of Neoliberalism? Incorporation, Struggle, and Power in Post-revolutionary Bolivia: 1952–1985

9 31

3 4

The Neoliberal Kharisiri: 1985–1993 Opening Up to the Outside: 1993–2003

55 71

5 6

Popular Struggles against Neoliberal Rule A Redistribution of Riches: 2003–2005

91 109

7 8

The Zombies of Neoliberalization: 2006–2009 Post-neoliberal Possibilities: 2010 and Beyond

127 150

1 2

A Pedagogical Appendix

169

Works Cited

173

Index

191

v

Tables and Figures

Tables 1.1 Neoliberal Regulatory Processes Defined page 12 2.1 Distribution of Agricultural Property before Land Reform 34 2.2 Land Grants of 10,000 or More Hectares in the Department of Santa Cruz by President, 1952–1985 47 3.1 Annual Average Growth Rate by Sector, 1986–1990 63 4.1 Capitalized Segments of YPFB 75 4.2 Annual Average Price of Bolivia’s Natural Gas 80 4.3 Investment in Bolivia’s Hydrocarbon Sector, 1997 to 2005 82 4.4 Bolivia’s Hydrocarbon Reserve Levels, 1997 to 2004 84 6.1 Questions in the Hydrocarbon Referendum on June 4, 2004 112 6.2 Proposals for the New Ley de Hidrocarburos by Political Faction 119 6.3 Distribution of Hydrocarbon Royalties and IDH Following Ley 123 de Hidrocarburos No 3058 in 2005 (in millions of US$) 7.1 Distribution of Seats in the Bolivian Legislative Assembly in 2006 136 Figures 2.1 2.2 3.1 3.2 3.3

No Collas, Damn It Bolivia Tin Production and Global Tin Price, 1900–1978 To neoliberalism, it hurts to spend money to feed a child . . . Mineral Exports by Subsector, 1985–1990 Foreign Direct Investment in Bolivia’s Mineral Sector, 1985–1994 4.1 From the Outside Looking In

30 38 54 63 68 70 vii

viii

Tables and Figures

5.1 El Gas Es Nuestro 5.2 Volume and Average Price of Natural Gas Exports from Bolivia, 1997–2005 6.1 In Order to End Inflation and the Power of the Fascist Right . . . 7.1 Evo = Petrobras 7.2 Hydrocarbon Royalty and IDH Revenues, 1995–2009 7.3 Mineral Royalties and Taxes, 1995–2008 7.4 Distribution of Hydrocarbon Royalties and IDH Revenues, 1995–2007 7.5 Investments in Bolivia’s Hydrocarbon Sector, 1997–2007 7.6 Investments in Bolivia’s Mining Sector, 1990–2008 8.1 Investment in Oil and Gas Exploration and Extraction Activities, 1997–2011 8.2 Volume and Value of Bolivia’s Hydrocarbon Exports, 2000–2010 8.3 Volume and Value of Bolivia’s Mineral Exports, 2000–2010

90 102 108 126 132 133 137 138 141 156 158 158

Acknowledgments

This research has benefited from the financial support of numerous organizations including the Social Science Research Council, the National Science Foundation, and the Fulbright Institute for International Education. The book was made possible by the support of the Social Science Research Council’s IDRF Book Fellowship, with funds provided by the Andrew W. Mellon Foundation. Parts of Chapter Seven appeared in Latin American Perspectives in an article titled “A Neoliberal Nationalization?: The Constraints on Natural-Gas-Led Development in Bolivia.” From the beginnings of this project to its seeming end, I owe too many people thanks. The intellectual origins of this project can be traced to Eugene, Oregon. There Sean Potts, Geoff Sutherland, Adam Blair, Joel Schoening, and Tony Silvaggio planted and fed the seeds of this journey. Tricia Curl and Tricia Dillon also deserve thanks. If they had not convinced me to quit my job and two weeks later hop on a plane to La Paz, Bolivia, I do not think I would have ever left Oregon. Jane Collins helped me to better conceptualize the project in its infant academic stages and provided constant feedback and guidance on numerous versions of this book. Jamie Peck, Leila Harris, and Samer Alatout offered insightful commentary on various pieces of the project and fostered my initial treks into thinking about space. Michael Bell, Ben Kohl, and Rebecca Schewe connected me with several key initial contacts in Bolivia. Jennifer Bickham Mendez, Mara Loveman, and Erik Olin Wright read and provided useful comments on parts of the manuscript. And although only able to see the beginnings of this project, Fred Buttel and Stephen Bunker provided me with support and intellectual inspiration that neither will ever truly know existed. In Bolivia, numerous people generously gave me their time and trust. In particular, I would like to thank Saul ´ Escalera for an introduction to the magical wonders of natural gas, his always useful insights about Bolivia’s hydrocarbon ix

x

Acknowledgments

sector, and the belief that change is always possible. I am deeply indebted to Simon ´ Zurita and Ivan Ajhuacho for introducing me to a number of the key political players working with natural resource–related issues. I would also like to thank a number of other people in Bolivia who have helped with my research and/or have been a friend over the years: Juan Pablo Sejas Solano, Alejandro Zegada, Lorena Vargas, the staff and researchers at Centro de Documentacion ´ e Informacion ´ Bolivia (CEDIB), Fernando Galindo, Fernando Figueroa Solano, Rocio Bustamonte, Paula Pfoeffer, Lee Criland, and ‘el equipo’ in La Paz. In addition, I owe an extra special thanks to Chi-Chi for the gift of speech and her continual interest in my project. Finally, I would like to thank my biggest critic and biggest supporter, Amy A. Quark. We have laughed, cried, and struggled through this voyage together and without her I do not think I could have ever finished.

List of Acronyms

ADN BG CAINCO CAO CBH CEDIB COB CODAEC COMIBOL COMSUR CORDECRUZ DEA FEDECOR FEJUVE IMF LAD LNG LPP MAS MIR MNR MSM NFR NPE OTB SEMAPA

Accion Nacional ´ Democractica ´ British Gas Camara de Industria y Comercio de Santa Cruz ´ Camara Agropecuaria del Oriente ´ Camara Bolivana de Hidrocarburos ´ Centro de Documentacion ´ e Informacion ´ de Bolivia Confederacion ´ Obrera Boliviana Comite´ por la Defensa del Agua y la Econom´ıa Familiar Corporacion ´ Minera de Bolivia Compan´ ˜ ıa Minera del Sur S.A Corporacion ´ Regional de Desarrollo de Santa Cruz U.S. Drug Enforcement Agency Federacion ´ de Regantes de Cochabamba Federacion ´ de Juntas Vecinales International Monetary Fund Ley de Descentralizacion ´ Administrativa Liquified Natural Gas Ley de Particpacion ´ Popular Movimiento al Socialismo Movimiento de la Izquierda Revolucionario Movimiento Nacionalista Revolucionario Movimiento Sin Miedo Nueva Fuerza Republicana Nueva Pol´ıtica Economica ´ Organizaciones Territoriales de Base Servicio Municipal de Agua Potable

xi

xii

TGN WTI WTO YPFB

List of Acronyms Tesoro General de la Nacion ´ West Texas Intermediate World Trade Organization Yacimientos Petrol´ıferos Fiscales Bolivianos

Introduction

On May 1, 2006, newly elected Bolivian President Evo Morales stood above one of the country’s largest natural gas extraction sites, the San Alberto reserve. Since the late 1990s, the reserve had been controlled by a consortium of transnational energy firms that extracted and sold the majority of its natural gas in the Brazilian energy market. Bolivia’s neoliberal turn over the previous two decades had made investment in the country’s natural gas sector highly profitable by significantly decreasing operating costs. Aware of Sao ˜ Paulo’s ever-increasing demand for energy, transnational oil and gas firms had seized upon what appeared to be the perfect market opportunity. But that day in May, in a move that seemingly defied the power of transnational firms and the free-market trends that had swept much of the world over the past thirty years, Morales nationalized the country’s natural gas and boldly announced to the Bolivian people, “El gas es nuestro.”1 Images of Morales making the announcement soon dotted the international and business press. Although an occasional excerpt of Morales’ speech could be found in the newsprint, the most prevalent statements to appear were those of representatives of transnational energy firms and the business community. The Financial Times reported that the “nationalization policy has sent a chilling message to international oil companies that will jeopardize future investments in the country” (Blas et al. 2006). Similarly, the Washington Post quoted a former assistant secretary of the Office of Inter-American Affairs as saying, “The signal it sends is that no foreign investment is safe here [in Bolivia]” (in Mufson 2006). These assertions were backed with comments made by the chief executive of Petrobras – one of the largest transnational investors in Bolivia – who claimed “it is very clear at this moment there is no economic viability of investing any additional money in Bolivia” (in Blount 2006). 1

El gas es nuestro = The gas is ours.

1

Market Justice: Political Economic Struggle in Bolivia

2

Two years to the day after the nationalization, I made my way to the San Alberto reserve. As I traveled over the mountain road from Yacuiba to Carapari, the driver and I talked of Morales’s election to the presidency, the nationalization, and the social movement struggles that helped give rise to both. With the largest protests surrounding Bolivia’s natural gas having occurred far away in the streets of La Paz, the driver had not personally participated in the struggles. However, like many people who lived near Bolivia’s natural gas reserves, he seemed to be supportive of the nationalization and claimed to have voted for Morales. Eventually we reached the crest of the mountain pass and began winding down a narrow dirt road. The driver pointed toward a small flame that could be seen shooting up from the trees in the distance. It was the San Alberto natural gas reserve. We continued down the mountain until we nearly reached the valley floor and then turned in what seemed to be the direction of the flame. Driving along what might have been one of the most well-maintained stretches of dirt road in Bolivia, the driver explained that the transnational oil and natural gas companies had put a lot of money into the road and the surrounding communities. The closer we got to San Alberto, the more apparent this became. All the road signs had Petrobras’s name on them. Even the basketball backboards above the soccer goals in the community playgrounds were tagged with Petrobras’s orange and green logo. As we approached the entrance to the San Alberto reserve, the media images of Morales from the day of the nationalization came to mind. He had been pictured donning a hardhat stamped with the insignia of Bolivia’s state-owned and operated hydrocarbon company, Yacimientos Petrol´ıferos Fiscales Bolivianos (YPFB), while standing victoriously in front of a sign that read “Nacionalizado: Propiedad de los Bolivianos.”2 But as I stood outside the natural gas reserve looking in, the only signs and insignias that dotted the grounds were those of three transnational energy firms: Petrobras, Andina Repsol YPF, and TotalFinaElf. Although the Bolivian state technically owned the natural gas coming from the site and all three of the transnational firms operating the San Alberto reserve had agreed to the terms of the nationalization, the presence of YPFB appeared to be non-existent. Amid the confrontational rhetoric of Morales and the CEOs of the transnational oil and natural gas firms operating in Bolivia, a new alliance had been forged. The Paradox At the crux of the struggles over Bolivia’s natural resource wealth and the nationalization of the country’s natural gas rests a fundamental paradox. Seeking to exit a neoliberal economic paradigm that exacerbated poverty and inequality in Bolivia, the Morales government utilized the very strategies and 2

Nacionalizado: Propiedad de los Bolivianos = Nationalized: Property of the Bolivians

Introduction

3

alliances that generated such poverty and inequality. In other words, although an increased outward flow of minerals and hydrocarbons from Bolivia during its free-market embrace benefitted very few, the Morales government further increased the country’s export of minerals and hydrocarbons as it claimed to shun the free-market policies of Bolivia’s past. In addition, even though transnational extraction firms reaped the lion’s share of the benefits from Bolivia’s natural resource wealth during the country’s free-market turn, the Morales government openly invited transnational extraction firms to invest in the country’s mineral and hydrocarbon industries. This apparent paradox raises a number of critical questions. Who has the power to forge new paths of social and economic development in an era dominated by free-market rule? What makes attempts to create a more just society possible? And how do we understand potential alternatives to neoliberal forms of societal organization? The contemporary conflicts surrounding Bolivia’s natural resources let us explore these questions through three interconnected stories that are crucial to understanding neoliberal processes, their potential contingencies, and who benefits from them. First is the story of transnational investors who encouraged the adoption of purported free-market policies in order to access Bolivia’s rich natural resource reserves. Second is the story of competing national elites who forwarded different economic trajectories in Bolivia that allowed them to enhance their share of the benefits derived from the country’s extractive economy. And third is the story of the Bolivian masses – the exploited and marginalized populations – who had been almost completely excluded from the riches of the country’s extractive economy but nonetheless challenged Bolivia’s neoliberal economic model and successfully claimed a greater share of its resource wealth. Together, these stories allow us to examine how and why neoliberal forms of societal organization were adopted in Bolivia and, more generally, throughout the world. Moreover, they allow us to understand how and why traditionally less powerful actors challenge neoliberal economic paradigms and the potential these actors have to realize alternatives. Through these three stories we see that the contemporary struggles surrounding Bolivia’s natural resources are neither over whether the country should participate in the global economy nor over the presence of transnational corporations in some of the country’s most lucrative economic sectors. Rather, they are conflicts over how Bolivia’s rich natural resource base is integrated into the global economy and who benefits from it. They are conflicts over neoliberal forms of global integration – and potential alternatives – that are embedded in long histories of struggle among transnational corporations, geopolitical allies and foes, local classes and local class factions. Within this context, Bolivia’s leftist social movements are anti-capitalist in the sense that they are against capitalism as it historically exists – as a global system that they believe is unjust and has left the majority of Bolivians continually impoverished. However, they have not sought to exit the capitalist system. Quite to

4

Market Justice: Political Economic Struggle in Bolivia

the contrary, they have attempted to use the system to glean a greater share of its benefits for themselves. The Historical Context Since the Spanish stumbled across the mines of Potosi in 1545, Bolivia’s rich natural resource base has been an object of international desire. For its silver, nitrates, rubber, tin, and now natural gas, Bolivia has continually been exploited by global hegemons, its neighbors, and even by some of its own people. Most Bolivians, however, have seen few benefits from the wealth that lies beneath their soil. Through centuries of plunder, conquest, uneven development, and unequal exchange, the benefits of Bolivia’s natural resource wealth have usually been captured by outsiders and internal elites, have been forcefully taken, and have filled the pockets of the few. However, something happened over the past three decades. As Bolivia moved from being a neoliberal ideological testing ground to part of a new wave of Latin American socialism, the country’s marginalized masses began to capture a greater share of the benefits from the rich natural resource base beneath their soils. In 1985, free-market ideologues gained control of the Bolivian state shortly after its return to democratic rule and used the country’s extreme hyperinflation crisis as a moment of opportunity to turn the country’s rich natural resource base into a private investor’s paradise. Leading this neoliberal charge was Bolivia’s mining elite. Over the previous decade, the country’s military dictators redirected funds from the mineral sector toward the agricultural sector and into the pockets of the landed elite. In an attempt to end this siphoning of funds and enhance their profit-making potential, the mining elite directed the state to loosen regulation on trade and financial flows, end subsidies and price controls, and diminish state intervention in the economy. In the process, the state dismantled the publicly owned and operated mining company – Corporacion ´ Minera de Bolivia (COMIBOL) – and opened up greater swaths of the mining sector to private investment. In the 1990s, the mining elite allied more closely with transnational capital, and the Bolivian state further liberalized its economy. Signing the country on to a number of bi- and multilateral trade agreements, Bolivia enhanced the rights of foreign investors and expanded the free flow of trade and finance. The state also privatized the rest of Bolivia’s publicly owned and operated enterprises, including the country’s highest grossing industry and economic sector: oil and natural gas. Bolivia rapidly became a neoliberal icon depicting the wonders of the free market. After its neoliberal turn, the country’s inflation rates remained relatively low and it began to consistently record positive rates of economic growth. Development economists and international lending agencies in the global north labeled Bolivia’s neoliberal shift a success and lavished the country with praise. Under the auspices that free markets led to economic growth and in turn decreased levels of poverty, they spread the Bolivian neoliberal model throughout Latin America and the developing world.

Introduction

5

In Bolivia, the state did indeed successfully make the country’s natural resource base into an investor’s paradise. By the end of the country’s second wave of neoliberal reforms, the state had attracted investments from some of the world’s largest energy firms, including Enron, Halliburton, Shell, British Petroleum, Repsol-YPF, TotalFinaElf, and Brazil’s state-owned Petrobras S.A. Taking advantage of Bolivia’s neoliberal policy shift and privatized oil and natural gas markets, transnational energy firms signed twenty- to thirty-year contractual agreements to explore, extract, and/or transport the country’s hydrocarbons. Their investments proved quite lucrative. In 2002, a CEO of Repsol-YPF noted in an investors meeting that, “the profits earned in the petroleum industry in Bolivia are incredibly high. For each dollar invested, a company earns ten” (in La Prensa 2002). In the words of another industry representative, “It was a dream.” In 2006, however, the election of Evo Morales seemed to signify an end to this neoliberal dream world. For most Bolivians, the country’s free-market policies had only exacerbated their already impoverished condition. Morales thus rose to power on an anti-neoliberal platform backed by the country’s campesino, indigenous, and union-based social movements. These social movements linked the impoverishment of the Bolivian masses to the country’s neoliberal economic model and questioned the privatization of the country’s natural resources. In what some dubbed a fight between David and Goliath – between poor people and transnational corporations – the social movements pushed to return Bolivia’s natural resource wealth to public hands and forced the resignation of two presidents for failing to address their concerns. Morales was elected president to counter Bolivia’s neoliberal development trajectory with a mandate to alter the distribution of benefits coming from Bolivia’s natural resource wealth. In response to the social movements’ demands, Morales declared that the people would retake “absolute control” of the country’s natural resources and that “the looting by foreign companies had ended” (in Prada 2006). The nationalization of Bolivia’s oil and natural gas was Morales’s first step toward removing Bolivia from its neoliberal economic trajectory. However, the nationalization resembled neither those that spread across the resourcerich regions in the postwar era nor those of the Bolivian past. Transnational oil and natural gas firms were not forced to leave the country and none of their assets were confiscated. Instead, the Morales administration increased royalty and taxation rates on the sale of Bolivia’s hydrocarbons and required that all future extraction activities in the sector be performed solely by, or in a joint venture with, the state-owned and operated oil and natural gas company. Ironically, investment, extraction, and export levels in Bolivia’s hydrocarbon and mineral sectors subsequently rose to levels near or above the highest in the country’s history. In addition, the Bolivian economy experienced exceptional rates of growth. In 2008, the country’s economic growth rate exceeded 6 percent – its highest in more than thirty years. In 2009 and 2010, the global economic downturn tempered these numbers, but Bolivia’s economy continued to grow at a rate close to 4 percent – one of the highest growth rates in the

6

Market Justice: Political Economic Struggle in Bolivia

world during this time (IMF 2010). The resilience of the Bolivian economy under Morales also resulted in an improvement in the country’s international credit rating, and the climate for future investment in the country was deemed positive. The simultaneous success of the Bolivian economy and the ability of the country’s marginalized masses to capture a greater share of the benefits coming from the natural resources beneath their soil represented an unprecedented shift in Bolivian history. However, the means by which this was achieved seemed improbable. As Bolivia’s leftist social movements brought Morales to power, they ousted the local mining elite and free-market ideologues that had controlled Bolivia for the previous two decades. Taking control of the state, Morales and his supporters were able to use the benefits from Bolivia’s extractive activities in an attempt to alleviate the country’s poverty and inequality. However, the transnational corporations that invested in Bolivia’s natural resource sectors continued to participate in – and profit from – the country’s extractive activities. Through their alliance, these two actors provided one another with something neither previously held. The Bolivian masses gained a seat at the table in negotiations with transnational corporations, and transnational corporations gained a level of legitimacy among the Bolivian masses. Finding the Global Past and Understanding the Global Present in Bolivia Bolivia’s extraordinary history, geography, ethnic makeup, and polarized class structure have caused many scholars to see the country and what happens there as sui generis, as more of an exception than the norm. In the sixteenth century, the riches of Potosi made it one of the wealthiest and most populated places in the world. But over the past century, Bolivia has consistently had one of the highest rates of poverty in the world. It is a riches-to-rags story of sorts. Bolivia is a landlocked country that spans the Andes and the Amazon. It has not had access to the sea since the late 1800s. More than 50 percent of the country’s population self-classifies as indigenous. And Bolivia has for centuries had high levels of income inequality. Despite these observed unique characteristics, Bolivia is no exception. Indeed, Bolivia has always been what geographer Doreen Massey (1984) calls a nodal point of interconnection in socially produced space. Each of its perceived differences and historical shifts reflects and is connected to broader global trends. Potosi’s rise was linked to the Spanish conquest and search for the socially constructed riches in precious metals such as silver and gold (Klein 1982). The country became landlocked after British and Chilean entrepreneurs started a war with Bolivia and seized the country’s outlet to the sea in order to secure access to rich guano and nitrate reserves (Sater 2007; Farcau 2000). The percentage of people self-classifying as indigenous has fluctuated, as identity politics have become more or less powerful in Bolivia and throughout the world

Introduction

7

(Gray-Molina 2005; Rivera Cusicanqui 1987). In addition, the high levels of income inequality in Bolivia can be linked to its long history of incorporation into the global economy for its natural resource wealth and its continual subjection to processes of unequal ecological exchange (see Bunker 1984). Within this context, the contemporary Bolivian struggles and conflicts surrounding processes of neoliberalization are not exceptions. Instead, they are magnified flashpoints of what has happened, is happening, and potentially will happen around the globe. This is not to say that differences recognized by others are incorrect or unimportant. Indeed, as many scholars have already shown, claims to indigenous identities and extreme levels of impoverishment and underdevelopment have influenced the shape of Bolivia’s social movements and contemporary processes of socioeconomic change. But this book is not just a story about difference. It is a story about similarity. It is about how the world is interconnected and how these interconnections are embedded in struggle. To tell this story, I utilize what Philip McMichael (1990) calls “incorporated comparison” as a method for developing historical theory and as a means to study global processes as they unfold in relation to and throughout the world. In other words, incorporated comparison is a means to examine “social phenomena as differentiated outcomes or moments of an historically integrated process” (McMichael 1990:392). Social phenomena seen in this way are comparable precisely because they are historically connected and mutually conditioning. What happens in one place and/or at one point in time is affected by what happens in another place and/or at another point in time. Utilizing this method, I analyze how neoliberal ideologies and practices originating in the global north intersect with the competing profit-making strategies of Bolivia’s mining and agricultural elites as well as with the everyday realities of the country’s people. I also analyze the changing composition of Bolivia’s socioeconomic trajectory and the country’s integration into the global economy across three distinct historical periods: during the era of the post-1952 Bolivian revolution, during the era of Bolivian and global neoliberalization from 1985 to the turn of the twenty-first century, and during the era of Bolivian and global postneoliberal possibilities from 2003 to present. Although this book draws from the past, it is an attempt to better understand the contemporary historical conjuncture of global capitalism, the role of Bolivia within it, and the possibility for social change. I thus gathered the data for this book during key years in Bolivia’s counter-neoliberal turn: shortly after the election of Evo Morales and during the initial years of the renationalization of Bolivia’s hydrocarbon sector. Within this context, I collected both historical and contemporary accounts about shifts in the Bolivian economy, the role of natural resources in the economy, and the effects these things have had on relations of power and inter- and intra-class conflict. The data took three primary forms: documentary and archival sources, semi-structured interviews, and event observation.

8

Market Justice: Political Economic Struggle in Bolivia

I gathered documentary and archival data from government documents and hundreds of articles from more than nine different Bolivian newspapers. I conducted interviews with ninety-three informants in Bolivia’s primary commodity sectors. My interview subjects included past and present government officials involved in the mineral and hydrocarbon sectors, representatives of extraction firms, members of social movements engaged in the struggles over Bolivia’s mineral and hydrocarbon wealth, and community members in sites of extraction. I also observed numerous rallies and protests in Bolivia and attended government meetings about mineral and hydrocarbon extraction in the country. Being able to attend both types of events, I saw how decisions were made by Bolivia’s social movements, the country’s elites, and their respective political representatives. Through these different lenses and perspectives, I tell a history of neoliberalization and a history of post-neoliberal possibilities. It is a history not only of Bolivia, but also a history of a changing world.

1 The Death of Neoliberalism?

The zombie is made to eat without salt: salt is dangerous, it could awaken him. – Eduardo Galeano (1997 [1973]:308)

In 1996, a political cartoon by the artist Gallivan appeared in a Bolivian newspaper depicting the state of the country’s political and economic affairs. On one side of the cartoon, military soldiers stood clad in riot gear with guns and shields in front of a row of men in suits and ties. On the other side of the cartoon, seemingly ordinary people – peasants, miners, teachers, and doctors – stood with their arms linked in front of the country’s publicly owned railway, electricity company, and oil and natural gas reserves. The interests battling for control over the future of Bolivia were clearly illustrated. The men in suits and ties represented transnational investors and factions of the local elite looking to access potentially lucrative sites of investment that for years had been monopolized by the state. The ordinary people represented the masses that opposed pending privatization measures that would auction off these publicly owned enterprises to the highest bidder. However, the irony in the political cartoon rested not in the caricatures of the two opposed groups. Instead, it rested with the individual positioned between them. Sitting atop a horse wearing nineteenth-century military attire, then Bolivian president Gonzalo Sanchez de Lozada was pictured holding a ´ gun to his head saying, “Follow me soldiers or I’ll blow my brains out.” The words were not his own. They were spoken by Mariano Melgarejo, the country’s eighteenth president. In 1865, Melgarejo’s presidency was challenged when a populist and former president, Manuel Isidoro Belzu, staged a coup and took control of the city of La Paz. Well known for his attacks on the legitimacy of private property and his resistance to foreign takeovers of Bolivia’s mineral riches, many welcomed Belzu and his coup with open 9

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Market Justice: Political Economic Struggle in Bolivia

arms. Thus, when Melgarejo called for his soldiers to follow his charge and retake the city of La Paz from Belzu, none heeded the order. Only after Melgarejo offered up his “inspiring” words did they follow (Chapman 1939). Although separated by more than a century, Melgarejo and Sanchez de ´ Lozada shared a number of common beliefs. Both presidents promoted free trade, both sought to turn commonly held property into private property, and both actively embraced foreign investment in Bolivia’s natural resource sectors. For Melgarejo, this entailed allowing goods to flow into the country tariff free, taking land from rural indigenous populations and selling it to whites and mestizos, and granting European and North American entrepreneurs rights to the country’s nitrate and guano fields. For Sanchez de Lozada, this ´ meant signing numerous bilateral trade agreements, joining the World Trade Organization (WTO), taking state property held collectively by the Bolivian people and selling it to transnational and local private investors, and granting global entrepreneurs rights to the country’s hydrocarbon and mineral reserves. Placing the words of Melgarejo in the mouth of Sanchez de Lozada was ´ perhaps even more ironic than the artist Gallivan knew at the time he drew the cartoon. In 1871, uprisings by the Bolivian masses against Melgarejo’s free-market policies forced him into exile. In 2003, seven years after Gallivan’s political cartoon appeared in a Bolivian newspaper, uprisings by the Bolivian masses against Sanchez de Lozada’s free-market policies forced him ´ into exile. However, the free-market policies forwarded by both Melgarejo and Sanchez de Lozada would plague Bolivia long after the two leaders fled ´ the country. Whereas the guano and nitrate concessions Melgarejo granted to foreign investors eventually led to the cession of Bolivia’s last stretch of coastal territory to Chile after the War of the Pacific, the oil and natural gas concessions Sanchez de Lozada granted to foreign investors eventually led to ´ the cession of millions of dollars in profits to transnational energy firms such as Petrobras, British Petroleum, and Enron. Indeed, although it could be said that both Melgarejo and Sanchez de Lozada’s embrace of free-market ide´ ology was like putting a gun to their own heads, neither pulled the trigger and their policies continued to lumber zombielike through Bolivia for years to come. The grave was perhaps dug from the day of its birth. As a crisis-ridden form of political and economic organization, neoliberalism in Bolivia – and elsewhere – was resisted from the very beginning. Indeed, spread across the earth for more than four decades by free-market ideologues, it was used to enrich a few at the expense of many. Although some benefitted from access to ever-cheaper supplies of natural resources and human labor, others were removed from their land and homes, lost their jobs, and brought to toil in new workplaces for little

The Death of Neoliberalism?

11

remuneration. Undeniably resilient, however, the lifeblood of neoliberalism ebbed and flowed throughout the global economy with only minor blockages until it slowed around the turn of the twenty-first century. Neoliberalism then seemingly failed and lost its pulse. For people who have suffered from some of its most inhumane manifestations – people in places such as Bolivia – the term “neoliberalism” is part of everyday discourse. It is heard in the speeches of politicians, found in the local newsprint, and debated in central plazas. Despite its pervasive use in some parts of the world, however, the word is foreign to most in the global north. It is rarely heard outside of the halls of academia and even there it has often been inconsistently defined. What, then, is this thing called neoliberalism? In a general sense, the term neoliberalism has most often been used to describe the extension, intensification, and acceleration of market-based forms of competition and commodification to previously excluded or insulated realms of political and economic life. In other words, the term has been used to refer to the expansion of capitalist – in particular, free-market – forms of societal organization across the globe and into greater aspects of our daily realities. But for most who use the term, it is more than just a reference to the global spread of capitalism. Neoliberalism is a reference to a specific type of capitalism. In practice, understanding what neoliberalism is requires an exploration of how it has been advanced – that is, an exploration of what some call neoliberalization. The process of implementing and advancing neoliberal ideology has shaped its content and form. Neoliberalization is thus perhaps best conceptualized as a mutable and flexible process of “market-disciplinary regulatory restructuring” that is “historically specific, unevenly developed, hybrid, [and] patterned” (Brenner, Peck, and Theodore 2010b:330). As such, neoliberalization is a regulatory process through which state and other forms of institutional intervention in the economy have been necessary to make, expand, and protect commoditized forms of societal existence. Although similar to classic liberalization experienced during the nineteenth and early twentieth centuries, neoliberalization is historically specific because it was developed under different geopolitical and economic conditions in the late 1970s and early 1980s and in response to the distinct regulatory and institutional arrangements of Keynesian welfare and developmental states. Neoliberal processes are patterned because neoliberal ideology has been operationalized through similar policy prescriptions – privatization, trade liberalization, financialization, labor market flexiblization, and monetary reform – and had similar effects across the globe (see Table 1.1). However, the diffusion of such policies is not uniform. They are unevenly developed as they are implemented in a piecemeal fashion on top of already existing uneven institutional and spatial arrangements. Neoliberalization can thus result in the reification of old and the creation of new spatial inequalities. The patterned yet uneven

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Market Justice: Political Economic Struggle in Bolivia

table 1.1. Neoliberal Regulatory Processes Defined Neoliberal Regulatory Processes

Definition of Process

Examples

Privatization

Assigning private property rights to previously state-owned, unowned, or communally owned goods

Marketization

Subjecting goods previously unpriced or insulated from full-fledged market competition to the logics of supply and demand

Trade Liberalization

Lowering or removing tariffs and/or other protection barriers (such as subsidies) that may inhibit the competitive flow of goods across borders

Labor Market Flexibilization

Eliminating or lowering wage and labor protections in order to more fully subject laborers to global market competition and reduce the necessity for employers to provide workers with benefits and raises

Neoliberal Monetary Reform

Adjusting how a places currency is valued in the international market place so that it is determined by market demand

The sale of state hydrocarbon or mineral firms (such as in Bolivia or Ecuador) to transnational companies (such as TotalFinaElf or Barrick Gold) The sale of public utility companies (such as electricity or water) to private companies (such as Enron or Bechtel) The creation of carbon markets through the Kyoto Protocol The creation of gene markets after Diamond vs. Chakravarty in United States Signing onto bi- or multilateral trade agreements or joining organizations that bind places to adopt policies of free trade (NAFTA, WTO, etc.) Not increasing minimum wage at rates greater than inflation (such as in the United States) Implementing right-to-work laws that weaken unions Making it possible for employers to hire people temporarily, in continually part-time jobs, or as piece-rate workers Eliminating pegged or fixed exchange rates in favor of a floating exchange rate

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means through which this unfolds is why neoliberal processes take on hybrid forms. Neoliberalization only emerged as a seemingly viable means of regulation in the late 1970s and early 1980s. The success of Keynesian and developmental state economic policies – in which the state played an active role in the market – at facilitating economic growth and prosperity in the postwar era effectively silenced the voices of those wanting to advance neoliberal forms of societal organization. However, as places across the globe began to experience crises of stagflation and debt, Keynesian welfare and developmental state forms of societal organization became increasingly subject to scrutiny and were deemed by some to have failed. In response, proponents of free-market forms of societal organization advocated for places to embrace neoliberalization as a solution to their economic ills (Peck 2010a; Bello 1994; George 1988). Seen as the necessary tonic, neoliberal policies that functioned to diminish state intervention in the economy and open borders to the free flow of goods and capital became the prescribed cure of the era by international lending agencies and their supporters in the global north. Such policies were first tested in Chile under the dictatorial oversight of Augusto Pinochet. Although deemed a success by its proponents, Chile’s first decade of neoliberalization was plagued by erratic growth, persistent unemployment and poverty, and a series of bank failures that eventually required government bailouts. Such results created widespread discontent among the Chilean masses, but those who opposed Pinochet were forced into exile or disappeared (Collins and Lear 1995). Despite such ill effects, Chile went on to serve as a “successful” model of neoliberalization. As stagflation hindered growth in the global north in the late 1970s and the debt crisis wreaked havoc on greater swaths of the global south in the early 1980s, free-market advocates, international lending agencies, and their supporters in the United States and Europe sought to advance neoliberal policy prescriptions through structural adjustment and austerity programs (Peet 2009; George 1988). Indeed, processes of neoliberalization were rolled out across the globe in patterned yet uneven ways. In many places, the implementation of neoliberal policies made it more difficult for people to put food on their plates. The opening of borders under the auspices of “free” trade only enhanced the plights of the previously middle class and the already disadvantaged, as people across the world were pitted against one another in struggles to be the most competitive producers. Farmers and peasants in places as disparate as Angola, Brazil, Ghana, and Mexico found it difficult to produce crops that were competitive with those subsidized in the global north (Mosely and Gray 2008; Otero 1996; McMichael 1995). Similarly, for workers in places such as the United States and United Kingdom, trade liberalization made it difficult to create manufactured goods that were competitive with those produced with cheaper labor in the global south (Collins 2003; Peck 1996). Moreover, the privatization of state industries and

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Market Justice: Political Economic Struggle in Bolivia

the systematic weakening of labor regulations and unions put people across the globe out of work and into more precarious forms of employment. In places like Bolivia, many people who had worked in state-owned mines were forced into the informal sector cultivating coca or producing cocaine (Healy 1997; Sanabria 1997). In places like the United States, people went from working full-time jobs making goods in factories to working part-time or temporary jobs in distribution centers where they shipped and labeled goods made in factories overseas (Collins and Quark 2006). As in Chile, discontent with neoliberalization was often met with repression. In 1977, protests against the removal of food subsidies in Egypt were met with military repression and resulted in approximately two dozen deaths. In 1981, protests against the removal of food subsidies in Morocco brought thousands into the streets. The army and police quelled the riot with force and hundreds were reported killed (Peet 2009:100). In 1984 and 1987, protests against austerity measures in the Dominican Republic were met with brutal police repression that resulted in hundreds of wounded, nearly 100 deaths, and an estimated 5,000 arrests. In 1989, protests against austerity measures in Venezuela resulted in 300 deaths, more than 2,000 wounded, and nearly as many jailed (Walton and Seddon 1994). As similar protests continued to spread across the globe, they were silenced and met with similar forms of repression. Such initial responses to neoliberal policies were not confined to the global south. In both the neoliberal epicenters of the United States and United Kingdom, workers took to the streets and picket lines to protest free-market forms of rule. However, as elsewhere throughout the world, resistance was not tolerated. In the United States, Ronald Reagan worked to actively undermine the power of labor unions. Most notably, after the Professional Air Traffic Controllers’ Organization (PATCO) went on strike in 1981, Reagan declared the strike illegal, dissolved the union, and dismissed those who refused to return to work (McCartin 2011; Bello 1994). Similarly, Margaret Thatcher broke the back of organized labor by repressing and outlasting the National Union of Mineworkers (NUM) strike from 1984 to 1985. Although the mechanisms of repression were not as violent as those used against protesters in the global south, clashes between mineworkers and riot police were frequent (Winterton and Winterton 1989; Beynon 1985). In both the global south and the global north, these initial resistance movements were cast aside as the costs of adjustment to the latest global free-market turn that would purportedly bring about extraordinary economic growth and prosperity. When the side effects of the global south’s rapid insertion into the global economy became glaringly apparent, international lending agencies provided emergency loans and other forms of aid as temporary solutions to bandage the neoliberal bloodletting occurring among the most disadvantaged segments of society. Most often, the World Bank provided aid to create

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short-term jobs in infrastructure projects or worked with international nongovernmental organizations (NGOs) to provide social services that states cut when implementing austerity programs (Ferguson and Gupta 2002; Hanlon 2000). In the global north, similar adjustments were made. As states eliminated their social safety nets, they increased rates of imprisonment and put into place job programs that provided people with the necessary skills to work in the burgeoning low-wage service sector (Collins and Mayer 2010; Peck 2001). Perhaps the most notable connection can be drawn in the United States during the 1980s between Reagan’s free-market policies and increasing rates of poverty, drug trafficking, and incarceration rates among the poorest segments of American society (Wacquant 2009; Parenti 2008). Although these measures enabled the continued spread and survival of what had become hybrid processes of neoliberalization, they did little to heal the wounds of the disadvantaged and the resistance to global free-market rule grew. In 1994, the Zapatista movement in the southern Mexican state of Chiapas catapulted onto the global stage. The largely indigenous insurgency rose up to challenge the implementation of the North American Free Trade Agreement (NAFTA) and the elimination of legal protections that prevented the sale of communally held ejido lands (Morton 2011; Gilbreth and Otero 2001). In 1999, social movements shut down the meetings of the WTO in Seattle, Washington, as protesters gathered from around the world to question the democratic representation of global institutions and the distribution of benefits from the global neoliberal turn (Wainwright 2006; Seoane and Taddei 2002; Smith 2001). From the late 1990s through the turn of the century, conflicts over the privatization of water broke out in Bolivia, India, South Africa, and a number of other places throughout the world (Mirosa and Harris 2011; Bakker 2010; Barlow 2007). At the same time, conflicts over the privatization of subsoil rights and the effects of natural resource extraction on local communities emerged across the globe (Bebbington 2012). Overall, as neoliberal forms of societal organization intensified inequalities, so did global discontent. Whereas the winds of war and discourses of terror temporarily detracted from the momentum of neoliberal resistance movements in the global north, resistance movements in some parts of the global south moved from controlling the streets in front of parliamentary palaces to controlling the seats inside presidential suites. This shift was perhaps nowhere more apparent than in Latin America (Levitsky and Roberts 2011; Weyland, Madrid, and Hunter 2010; Silva 2009). In what was once seen as the world’s neoliberal ideological testing ground, the leaders of anti-neoliberal movements became democratically elected heads of states. In 1998, Hugo Chavez – an ex-coup leader – won ´ a landslide victory in Venezuela’s presidential election. In 2002, Luiz Inacio ´ Lula de Silva of Brazil’s Workers’ Party was elected president of the country. In 2005, Evo Morales – an indigenous coca grower and member of the

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Movement Toward Socialism – won the Bolivian presidential election. These three social movement leaders were joined by an anti-neoliberal coalition of leftist presidents including Rafael Correa of Ecuador in 2006, Nestor and ´ Christina Kirchner of Argentina in 2003 and 2007, respectively, Daniel Ortega of Nicaragua in 2007, Fernando Lugo of Paraguay in 2008, and Humberto Humala of Peru in 2011. The uprisings and political shifts in the global south proved to be just the initial signs that cracks in the resilience of neoliberal forms of political and economic organization were widening. While the global neoliberal shift failed most people from the beginning, the 2008 financial collapse on Wall Street spread the costs of such policies onto even greater swaths of people and deepened the negative effects already experienced by the poorest segments of society (Harvey 2010; Foster and Magdoff 2009). As former U.S. Federal Reserve Chairman and perceived financial guru Alan Greenspan testified before the U.S. Congress in wake of the meltdown, it seemed as if the last straw of neoliberalism had been broken. Responding to a question about whether his free-market ideological worldview was flawed, Greenspan flatly stated, “Absolutely.” The death of neoliberalism as the dominant form of global political and economic organization was seemingly imminent. Or was it? As politicians and intellectual pundits alike began to etch the letters on the tombstone of neoliberalism, its associated forms of political and economic organization remained quite resilient. In the global south, the leftist leaders who rose to power found it difficult to exit the neoliberal trajectories their countries had followed for close to three decades (Weyland, Madrid, and Hunter 2010; Kohl 2010; Bond 2009). They took significant strides to resolve some of the long-existing inequalities that had worsened during their countries’ neoliberal turns and had some success. In Venezuela, Ecuador, Argentina, and Bolivia, leaders went as far as nationalizing segments of their economies in attempts to capture and more equitably distribute greater shares of their countries’ productive wealth. However, these leaders still operated within the constraints of a globalized world dominated by neoliberal forms of regulation. They were dependent on export-oriented, natural-resource-based economies dominated by transnational corporations. As a result, they were forced to use some of the very tactics – and uphold some of the same alliances – that had enhanced inequalities within their countries during their neoliberal turns. In the global north, leaders found it difficult to use non-neoliberal strategies to stimulate growth after the global financial collapse. States took a half page from John Maynard Keynes and injected comparatively small sums of money into their economies, but it largely went toward rescuing neoliberal giants of finance such as J. P. Morgan Chase, Citigroup, Wells Fargo, Bank of America, and Morgan Stanley in an attempt prevent a total collapse of the capitalist system (Harvey 2010; Foster and Magdoff 2009). After such efforts

The Death of Neoliberalism?

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proved insufficient and merely led to economic stagnation, countries such as the United Kingdom, Spain, and the United States subsequently adopted austerity measures that in many ways resembled those implemented through neoliberal structural adjustment programs in the global south during the late 1970s and 1980s (Peck et al. 2012). The neoliberal padlocks thus appeared to constrain leaders in global north and south alike. From this view, assertions that neoliberalization was derailed or that we began to enter a post-neoliberal era after the global financial collapse of 2008 must be viewed with a healthy level of skepticism (see Brand and Sekler 2009; MacDonald and Rupport 2009). Despite endemic failures that led to increased levels of inequality from the United States to China and continual handouts to bankers (aka bailouts) from Chile to Europe, the crises of neoliberalization led to the “continuous reinvention of neoliberal policy repertoires rather than their abandonment” (Brenner et al. 2010b:333; see also Peck 2010b). The mutable and flexible manifestations of neoliberalization undeniably made it quite resilient and the variegated assortment of institutional apparatuses set up to maintain and advance it remained intact. As Peck, Theodore, and Brenner argue, neoliberalization entered a “zombie phase, animated by technocratic forms of muscle memory, deep instincts of self-preservation, and spasmodic bursts of social violence” (2009:105). In this zombie phase, the intellectual impetus underpinning neoliberal ideology may have weakened. Some regulations were put in place to check the most egregious aspects of free-market forms of rule. For example, policies – albeit weak – were implemented to constrain practices of predatory lending, limit certain forms of financial speculation, or insulate some aspects of life from the harms of the free market. However, neoliberalized forms of political and economic organization, deeply embedded in global and local institutional frameworks, remained dominant and “social and economic policy agendas continue[d] to be subordinated to the priority of maintaining investor confidence and a good business climate” (Brenner et al. 2010b:340). The death of neoliberalism was thus slowed at best. Proponents of neoliberalization seemingly followed the lead of Melgarejo and Sanchez de Lozada and put the gun ´ to their own heads and to the free-market ideas of the day, but the trigger was not pulled. The grave of neoliberalization thus still lay empty. The neoliberal project perhaps lost its pulse, but its lifeblood continued to flow through the system. After what seemed like moments of catastrophic collapse, how are we to understand this lumbering corpse of a project, whether it will fall or be resuscitated, and what might replace it? Scholars have usefully detailed the underlying processes and resulting effects of the global spread of free-market ideology, but they have only begun to explain the opportunities and constraints that actors face when seeking to exit a neoliberal economic paradigm. To understand any sort of post-neoliberal possibilities, it is first necessary to understand the

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Market Justice: Political Economic Struggle in Bolivia

contested landscapes on which neoliberal crises occur and counter-neoliberal resistance movements arise. This, however, means more than attempting to recognize the global and local experiments, policies, and institutions that underpin and are used to advance processes of neoliberalization (see Brenner et al. 2010a). It also means attempting to recognize how and why people and places incorporate and are incorporated into the global economy through processes of neoliberalization and how and why they may actively seek out alternatives. The Landscapes of Neoliberalization What does a world shaped through processes of neoliberalization look like? How can we understand the differences and links between the endless blocks of factories in special economic zones in Shanghai, the giant strip-mined holes dotting the earth in Carajas ´ in the Brazilian Amazon, and the torches flaring excess natural gas above the tops of trees outside of Carapari in Bolivia? All of these places are what photographer Edward Burtynsky would undoubtedly refer to as “manufactured landscapes.” But why are these places manufactured where they are, how are they connected, and in what ways have processes of neoliberalization been used to shape them? The answer to these questions requires a basic understanding of the workings of the capitalist system, the spatial differences created within it, and the ways in which processes of neoliberalization have been used to affect both. As a form of capitalist organization, neoliberalization is a means to satisfy the imperative of continual accumulation and economic growth that underpins the capitalist system. As echoed in the speeches of contemporary politicians from the United States to Europe, economic growth is seen by some as a barometer of societal well-being. The principle means through which this has been achieved in advanced capitalism is by gleaning and reinvesting the profit accrued from a worker’s surplus labor. In other words, accumulation and growth occurs when a capitalist exploits workers by getting more from the fruits of their labor than he or she actually pays the workers, and in turn, reinvests those earnings in new and greater numbers of laborers, inputs, infrastructures, and technologies. Such a process is what Karl Marx (1867) called expanded reproduction. With the worldwide spread of market-based forms of economic organization, capitalists have enhanced their ability to accumulate capital and achieve economic growth through expanded reproduction by incorporating greater numbers of people into the global labor supply (see Robinson 2008; Emmanuel 1972). Capital accumulation and economic growth have also been achieved in another way. Instead of profiting from the products of a worker’s labor, capitalists can also profit through a process known as primitive accumulation. Primitive accumulation is most often conceptualized as the process through

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which peasants were forced off the lands upon which they subsisted. Divorced and dispossessed of their own means of production, these peasants moved from being primary producers to wage workers. In the words of Marx (1867), such a process transformed “the social means of subsistence and of production into capital” and turned “immediate producers into wage laborers.” The enclosure and privatization of land provided capitalists with their initial stock of capital and the removal of peasants from the land provided capitalists with an initial labor supply. Marx theorized that expanded reproduction would eventually supersede primitive accumulation as the dominant form of accumulation. Indeed, the ever more intensive and expansive penetration of capitalist forms of organization around the globe has resulted in people continually being dispossessed of their own means of production and, in turn, made into wage workers. However, there is no necessary reason to perceive primitive accumulation and expanded reproduction in such a linear manner. Capital can be accumulated through primitive accumulation with or without the people such a process dispossesses. In practice, both expanded reproduction and primitive accumulation have continually been deployed throughout the longue dur´ee of capitalism. Taking this into account, some people have pushed to conceptualize primitive accumulation more generally as a way to accumulate capital without the use of wage labor – through “extra-economic” means (Glassman 2006; Harvey 2003; Perelman 2000). As per Marx, capital can be accumulated through the capture and enclosure of the means of subsistence and other previously noncommoditized assets. For example, a peasant’s previously held communal land on the outskirts of Shanghai can be made into a valuable asset for the Chinese state or a local township if Nike needs to produce more shoes and their contracted factory owners need to expand their operations (Webber 2008). However, seeing primitive accumulation as accumulation through extra-economic means also allows for capital to be accumulated in another way. Accumulation can occur by expropriating and/or de- and revaluing already commoditized assets. For example, the sale of a state hydrocarbon or mineral company at the behest of an International Monetary Fund (IMF) or World Bank loan can give private investors access to lucrative but previously closed oil or ore reserves. And in places such as Bolivia, Indonesia, and Russia companies such as Enron, Newmont Mining, and British Petroleum have made millions buying state companies at depressed values (Bury 2005; Sawyer 2004; Villegas Quiroga 2004). Primitive accumulation is thus ongoing not only because of the continual expansion and intensification of capitalist forms of societal organization, but also because it is a dynamic process through which opportunities for accumulation by extra-economic means are continually created. As David Harvey asserts, ongoing forms of primitive accumulation – or what he prefers to call “accumulation by dispossession” – function to “release a set of assets (including labor

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Market Justice: Political Economic Struggle in Bolivia

power) at very low (and in some instances zero) cost. Overaccumulated capital can seize hold of and immediately turn them to profitable use” (2003:149). In other words, accumulation by dispossession functions as a means to create new sites of investments – as a way to de- and revalue commodities that can then be bought and sold by those with excess capital. Recognizing that expanded reproduction and accumulation by dispossession can continually occur as distinct forms of capital accumulation provides a basis for a spatial understanding of neoliberalization and the capitalist system more generally. On one hand, there can be spaces of expanded reproduction – spaces like the factories in Honduras where dresses are made for Kathy Lee Gifford’s line of clothing or in Shenzhen City, China where hair dryers and toaster ovens are made and sent to the United States (Lee 2007; Bonacich and Appelbaum 2000). On the other, there can be spaces of accumulation by dispossession – spaces like the gold mines held by Barrick in Lagunas Norte, Peru and Bulyanhulu, Tanzania (Emel et al. 2011; Himley 2010). Of course, such spaces never truly exist outside of the other. A certain amount of labor is always required in an act of dispossession and someone often must be dispossessed to provide the labor and material basis of expanded reproduction. That said, a long history of spatial differentiation exists between spaces of expanded reproduction and spaces of accumulation by dispossession – in particular, between spaces of production and spaces of extraction. Indeed, the factories that produce Apple’s iPhones are usually located very far from the mines in which the products’ rare earth metal and other mineral components are collected. In a global economy operating under the auspices of a purported free market, the spatial divisions between spaces of production and spaces of extraction have intentionally been intensified. Underlying the neoliberal creed is the belief that exercising some sort of comparative advantage in a “free” and open global market will optimally lead to greater economic growth and prosperity for all. People and places are thus encouraged – often coerced – to incorporate and compete in the global economy by specializing in the production, extraction, and trade of what they seemingly excel at, relative to other people and places, based on the availability of human and natural resources. This specialization frequently fosters spatial differentiation. Some places have been incorporated into the global economy for their seemingly cheap and plentiful labor supplies. Others have been incorporated into the global economy for their natural resource supplies. Proponents of free markets would like us to believe these landscapes of neoliberalization and the divisions between spaces of production and spaces of extraction are the work of an “invisible hand.” This invisible hand organizes society as it responds to the free market’s purported “natural” tendency to achieve the most beneficial and efficient means of distribution for all. But there is nothing natural about a free market. All markets are socially constructed and embedded in complex sociospatial relations of power. In other words,

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attributing an invisible hand to a market ignores who can create and change it. There are many pairs of hands that mold markets, each of which is differentially positioned to create, disrupt, and change processes of neoliberalization. Promoting and Contesting Processes of Neoliberalization While advocates of neoliberalization frequently claim that exercising a comparative advantage under the conditions of a purported free market is good for all, it has long been illustrated that the benefits arising through such strategies are far from equal (see Bunker 1984; Shaik 1979; Emmanuel 1972; Prebisch 1949). Embedded in processes of unequal exchange, unequal ecological exchange, and uneven development, processes of neoliberalization have been used to create a comparative advantage for some and a comparative disadvantage for others. The question thus becomes: Who benefits from – and who might actively seek to disrupt – processes of neoliberalization? The most-told story is that belonging to transnational corporations. Facing falling rates of profit amid the global economic downturn in the 1970s, corporations sought to access cheaper supplies of labor and rich natural resource reserves, frequently in places with fewer or less stringent labor and environmental regulations. Corporations whose profits were dependent on manufacturing encouraged places with seemingly plentiful and cheap labor supplies – potential spaces of expanded reproduction – to utilize their purported comparative advantage by keeping wages low, keeping workers flexible, and adopting trade liberalization policies. Often successfully doing so, clothing companies such as Liz Claiborne moved their production centers from Pennsylvania to Taiwan (Collins 2003; see also Bonacich and Appelbaum 2000). Car companies such as Ford outsourced the creation of auto parts from Detroit to Japan, to Mexico, and then to China (Sit and Liu 2000; Sadler 1994). Even tobacco companies such as Phillip Morris and R. J. Reynolds moved their primary tobacco-growing operations from Kentucky and North Carolina to places such as Argentina, Brazil, and Turkey (Benson 2012). Corporations whose profits were dependent on extractive activities encouraged places with rich and/or rare raw material reserves – potential spaces of accumulation by dispossession – to utilize their purported comparative advantage by privatizing their natural resource sectors and adopting trade liberalization policies. Often successfully doing so, corporations such Shell, TotalFinaElf, Rio Tinto, and Vale – many of which had long been transnational – were able to increase their profits by gaining greater access to untapped or previously publicly monopolized natural resource reserves in disparate places across the globe such as Nigeria, Zambia, and New Caledonia (Horowitz 2009; Watts 2004). All of these corporations – and many others like them – became transnational to increase their profits by producing or extracting goods in places cheaply and shipping them to other places where people who made more money would buy them at higher prices.

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Market Justice: Political Economic Struggle in Bolivia

This is not to say that these powerful transnational corporations have wielded their power at will and reshaped the earth as if they were gods. For some, the neoliberal creed has undeniably gained canonical status, but the power of those benefitting from processes of neoliberalization has neither been wielded without help nor gone unchecked. Transnational corporations undeniably bolstered their ability to accrue profits through processes of neoliberalization by creating regulatory bodies, trade agreements, and sourcing regimes that allowed them to hold and exercise power with a global reach. However, from the mines of Potosi to the special economic zones of Beijing, colonial empires and transnational corporations alike have always been dependent on local interlocutors to secure their power and profits. Seeking to improve their own lot, these interlocutors have helped external actors access local markets and procure labor and natural resource supplies. As Stephen Bunker asserts, “local classes reorganize modes of production and extraction in response to exchange opportunities and political actions in the world system” (1984:1022). The story of transnational corporations is thus tied to the story of these local interlocutors. Domestic capitalist elites have most often played the role of these interlocutors. They provide external actors with a face and negotiator that knows the political and economic terrain of a region, nation, or locale (Szymanski 1981; Evans 1979; Poulantzas 1975; Frank 1966). Some of these interlocutors are capitalist elites who are already transnationally oriented. They actively promote processes of neoliberalization and occasionally enter into joint ventures with transnational corporations in order to enhance their power and profit-making potential by gaining better access to global commodity circuits, additional finances, and technology. They are what some people have called the internal bourgeoisie. In Brazil during the 1970s and 1980s, they were represented by the owners of capital-intensive industries such as auto parts manufacturers (Evans 1996). In South Africa during the 1990s, they were represented by the owners and executives of companies such as JCI Limited and Rand Mines who did not want to lose their privileged position in the mining sector when apartheid ended and the African National Congress took power (Bond 2000). In Bolivia during the 1980s and 1990s, they were represented by the private mining elite who only had limited access to the sector because of state involvement (Kaup 2012). Other interlocutors are capitalist elites who, in some way, indirectly benefit from a place’s arrangements with external actors. They facilitate processes of neoliberalization and the activities of transnational corporations in order to glean a kickback through a tax, rent, or some other form of remuneration. They are what some have called the lumpen or comprador bourgeoisie. They are perhaps most emblematically represented by (but not limited to) the dictators of the world who are quite cozy with transnational investors – people like Hosni Mubaraks of Egypt, the Muammar Gaddaffis of Libya, and the Hugo Banzers of Bolivia.

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Not all local capitalist elites benefit from these arrangements, however. Capitalist-elite interlocutors benefitting from processes of neoliberalization occupy distinct positions in local class structures and have often been at odds with other capitalist-elite factions (Schrank 2008; Paige 1997; de Janvry 1981). On the one hand, capitalist elites favoring neoliberalization have clashed with more nationally oriented capitalist-elite factions whose interests lie in the protection of national industries and the development of national capitalism. For these nationally oriented capitalists, liberalizing trade, cutting government subsidies, and opening borders to transnational investment has often eliminated their competitive edge in both internal and external markets. Such has been the case with a number of Indian manufacturers who have been insulated from external competition through state protections (Chibber 2003; Evans 1995). On the other hand, capitalist elites favoring neoliberalization have clashed with capitalist elites tied into traditional rentier state activities, patronage networks, clientelism and similar forms of local and national political and economic organization. These elites often historically benefited from the presence and investment of transnational corporations, but their links to such investments and corporations were disrupted as state enterprises were privatized and tariff and taxation rates were altered or diminished. Such was the case with the Bolivian agricultural elite in the 1980s (Conaghan and Malloy 1994). Pre-existing capitalist-elite links within dominant economic sectors, the state, and the global economy have thus often become points of elite contestation in processes of neoliberalization, as transnationally oriented interlocutors have sought to reconstruct comparative advantages to work in the interests of transnational corporations and themselves. However, the construction and maintenance of a comparative advantage affects more than the power and profits of transnational corporations and contesting capitalist elites. Indeed, how the global economy is constructed and how a place is incorporated into it has distinct effects on everyday livelihoods and struggles. In other words, processes of neoliberalization have not only been used to create new and reify old spaces of expanded reproduction and accumulation by dispossession, but also to create and reify spaces of oppression – spaces of exploitation and marginalization. The stories of transnational corporations and local capitalist elites are thus tied to the stories of everyday people. In spaces of expanded reproduction and accumulation by dispossession, the production or extraction of different commodities requires different amounts and types of labor and land use that lead to more or less inclusionary and exclusionary forms of incorporation of people into the global economy. A worker who sells his or her labor for a wage in a special economic zone of China, India, or Mexico is incorporated into the global economy through exploitation. Their surplus value is captured by a transnational firm and/or a capitalist-elite interlocutor. They are included in global circuits of production as their labor

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Market Justice: Political Economic Struggle in Bolivia

is needed to create the value of the end commodity. In contrast, a peasant who farms the land above a mineral or oil and natural gas reserve in Bolivia, Peru, or Indonesia does not necessarily have their labor incorporated into the global economy in the same way. A transnational firm may find their land and what lies beneath it to hold extraordinary use and exchange value, but the peasant his/herself is not usually needed to create the value of the end commodity and can thus be excluded from global circuits of production. This is not to say that people are always fully included or excluded from global circuits of production (de Janvry and Ground 1978; de Janvry and Garramon ´ 1977), but that the different means in which places and people are incorporated into the global economy result in different levels of exploitation and marginalization. As Denis O’Hearn (2001:16) suggests, people and places can move “from more to less proletarian social relations of production” as they affect and are affected by local and global economic shifts. Whether neoliberalization results in proletarianization or dispossession, exploitation or marginalization, shapes the power and struggles of the oppressed. Workers exploited through processes of neoliberalization hold and exercise power in the work process – in what control they have over their own labor, the tools of production and extraction, and to a lesser extent, the site of production and extraction. Such was evident in the PATCO strike in the United States and NUM strike in the United Kingdom during the 1980s. Such was also evident in the strikes at Apple’s supplier Foxxconn in both China and India in 2010. In all of these incidents, the workers’ power rested in their knowledge of their bodies, the means of production, and the conditions of production. Using this power, these workers and others like them most often struggle for higher wages, better working conditions, and/or job security through work slowdowns or strikes. They are in some way included in the global economy. Their objective class interests are thus linked to the global economy and they are more likely seeking to improve it. In contrast, workers marginalized through processes of global integration struggle to get a wage and to work. They are excluded from the global economy. Within this context, their objective class interests are not necessarily linked to the global economy. Their power lies not in the work process, but in preventing the global economy from working – in disrupting supply chains at sites of production or extraction, sites of transport, and sites of sale. Such has been evident in indigenous struggles from Bolivia to Ecuador to Brazil where people have blockaded roads and transport lines, closed down capital cities, and occupied financial centers. Although the marginalized may struggle to be included in the global economy, they may also seek to create radically divergent forms of global integration or to exclude the places in which they live. In the contested landscapes of neoliberalization, the power of transnational corporations, local capitalist-elite factions, and everyday people coalesce and

The Death of Neoliberalism?

25

collide. Individually, these actors are largely unable to construct, maintain, and disrupt neoliberalization both across space and within place. The landscapes of neoliberalization are thus both global and local, as actors rearrange, resist, and alter the variegated sociospatial relations in which processes of neoliberalization are embedded. Over the past thirty years, processes of neoliberalization have largely been used to uphold the interests of transnational corporations and their associated local capitalist-elite interlocutors. But there is no reason why actors with divergent interests could not potentially alter – or even put an end to – such processes. People construct both a place’s comparative advantage and the distribution of benefits coming from it. In other words, people construct markets and the spatial differences bred through different types of market organization. The question becomes whether they can escape or alter the forms of market organization constructed through processes of neoliberalization and potentially enter a post-neoliberal reality. Neoliberalization and “Post-”neoliberalization in Bolivia Emerging from the cracks on the landscapes of neoliberalization, the story herein is told in three acts. In act one, I provide a history of the driving forces behind neoliberalization in Bolivia. I show how processes of neoliberalization did not originate merely as some sort of external imposition forced on the country by transnational corporations and powerful states, but were strategically orchestrated by local externally oriented elites – in particular the mining elite – as they sought to enhance their own profit-making potential and undermine the power of both the landed agrarian elite and the popular classes. In act two, I explore the effects of neoliberalization on the Bolivian masses. I illustrate that the widespread social uprisings in Bolivia around the turn of the twenty-first century were neither anti-capitalist nor against globalization. Instead, the uprisings were against the intensified exclusion of the Bolivian masses from the global economy resulting from processes of neoliberalization. And in act three, I examine how these struggles in Bolivia affected the power and profits of transnational investors, the country’s various elite factions, and the popular classes. In Bolivia’s contested landscapes of neoliberalization, I show that the country’s externally oriented elites suffered the biggest losses as a new class alliance emerged – an alliance between transnational corporations and the popular classes. Act one unfolds in three parts. In Chapter 2, I lay the historical foundations for understanding the origins of neoliberalization in Bolivia by detailing the dominant interests and points of power prevalent in the country after the revolution of 1952. The revolution resulted in the eventual nationalization of Bolivia’s largest mines and a process of land reform. However, neither the private mining elite nor the landed elite completely disappeared and they eventually regained control over the state. By the 1970s, however, the interests

26

Market Justice: Political Economic Struggle in Bolivia

of the mining and landed elite began to clash. The power and profits of the mining elite were constrained by the control the state held over the majority of Bolivia’s mineral reserves and the mining sector more generally. The power and profits of the landed elite were bolstered by a preferential distribution of public resources coming partially from the state’s control over the mining and hydrocarbon sectors. This conflict of interest led the mining elite to begin to push for the implementation of processes of neoliberalization – processes that would open up Bolivia’s mining sector to greater private investment, liberalize trade, and thus increase the mining elite’s power and profits. Processes of neoliberalization in Bolivia thus emerged out of internal elite conflict. In Chapters 3 and 4, I detail how the mining elite implemented processes of neoliberalization in Bolivia and eventually opened the door for transnational corporations to enter and take control of Bolivia’s natural resource sectors. Drawing on Harvey’s ideas about accumulation by dispossession, I illustrate how processes of neoliberalization were used to produce new sites of investment through the tacit privatization and de- and reregulation of both Bolivia’s mining and hydrocarbon sectors. In the 1980s, Bolivia’s state-owned mining firm was the primary target. Thousands of miners working for the state firm were put out of work and eventually the state-owned mines were opened up to private investment. This allowed the mining elite access to previously closed mineral reserves in Bolivia and enhanced their profit-making potential. In the 1990s, Bolivia’s state-owned hydrocarbon firm became the primary target. Without a local hydrocarbon elite, transnational energy firms promoted and took advantage of the basement bargains and backroom handshakes to take control of what eventually proved to be the crown jewel of Bolivia’s free-market embrace. As they did, Bolivia’s role in the global economy shifted from being merely a mineral provider to also being a natural gas provider. Act two unfolds in Chapters 4 and 5. In these chapters, I examine how processes of neoliberalization affected the popular classes and led to widespread social uprising. Doing so, I attempt to explain why the Bolivian masses were able to overcome the traditional worker-peasant divide that has plagued popular class social movements since the dawn of capitalism. Accounting for how processes of accumulation by dispossession affect workers and peasants alike, I show that the Bolivian masses were brought together as their ability to satisfy their everyday livelihood needs diminished and they increasingly became marginalized from both the Bolivian and the global economy. This increased marginalization occurred as control over Bolivia’s most lucrative economic sectors shifted from public to private hands and the dominant industry moved from mineral to hydrocarbon extraction. Shifts in who controlled Bolivia’s natural resource sectors diminished the power of the popular classes and their links to the country’s primary profit-making activities. Under state control, both Bolivia’s public mineral and hydrocarbon industries gleaned

The Death of Neoliberalism?

27

higher percentages of rents and taxes for social programs. In addition, Bolivia’s public mineral and hydrocarbon industries employed larger numbers of people and afforded them higher levels of worker protections. Although the revenues were not always distributed in the most equitable manner and wages and benefits in the industry were far from ideal, both the Bolivian masses and the workers in the two industries were in some way linked into the country’s primary profit-making activities. However, as both the mineral and hydrocarbon industries were tacitly privatized, this link and what benefits the masses gleaned from it disappeared. These links also partially disintegrated as the way in which Bolivia was incorporated into the global economy changed. Whereas mineral extraction requires a constant supply of labor until a natural resource reserve taps out, hydrocarbon extraction requires minimal levels of labor after oil or natural gas reserves are found and the necessary infrastructure is in place. As Bolivia’s dominant economic sector moved from minerals to hydrocarbons, the country moved from being a mixed space of exploitation and marginalization to primarily a space of marginalization. And in this space of marginalization, Bolivia’s popular classes emerged to resist processes of neoliberalization. In act three, I explore how the different actors engaged in struggles over Bolivia’s rich natural resource base – in particular, the country’s hydrocarbon reserves – both understood and sought to resolve the problems surrounding the country’s extractive industries. Drawing on Jeffrey Haydu’s (2010; 1998) notions of turning points, recurring problems, and processes of reiterative problem solving, I show how Bolivia’s neoliberal past affected the ways in which conflicting actors sought to protect or alter the country’s socioeconomic trajectory. Doing so, I show how the struggles in Bolivia at the turn of the twenty-first century were not over whether the country should remain a natural resource provider in the global economy, but over who should benefit from the country’s natural resource wealth. To understand these struggles, I pay particular attention to the origins, emergence, and spatial reach of the power exercised and held by transnational corporations, Bolivia’s elite factions, and the country’s popular classes. I illustrate that as each of these actors sought to secure a greater piece of Bolivia’s hydrocarbon wealth, the varying means and points through which they exercised and held power provided them with differential opportunities and constraints. I explore these struggles between and among these actors and their results in three parts. In Chapter 6, I detail what happened internally in Bolivia when the traditionally marginalized masses increasingly entered the formal political arena. The popular classes successfully brought the externally oriented mining elite to its knees and the ownership over the country’s rich natural resource base to the forefront of political debate. As the mining elite’s control of the state faltered, the popular classes and the landed elite became the dominant actors struggling over Bolivia’s natural resource wealth. However, the struggles and internal debate in Bolivia were not over whether control of the country’s natural

28

Market Justice: Political Economic Struggle in Bolivia

resource wealth should rest in public or private hands. The popular class social movements made it clear that grave inequalities surrounded the extraction and transport of Bolivia’s oil and natural gas and the general populous overwhelmingly supported a nationalization of the hydrocarbon sector. The popular classes and landed elite thus struggled over the form of the nationalization and how the riches gleaned from it would be distributed. Through these struggles, the Bolivian state as a whole did secure an increased take of the rents coming from the oil and natural gas extraction occurring within its borders. However, the landed elite secured themselves the largest share of these rents by pushing for them to be redistributed to the places in which they held the most power. In Chapter 7, I examine the constraints faced by Bolivia’s popular classes as they took control of the state, attempted to use the country’s natural resource wealth more equitably, and sought to exit from a neoliberal trajectory. I show how those who implemented processes of neoliberalization in Bolivia set the country on a trajectory that was difficult to escape. These difficulties not only shaped how Bolivia was integrated into the global economy during its neoliberal turn, but also the very understandings of how potential post-neoliberal possibilities could be achieved. In Chapter 8, I examine how the Bolivian state has attempted to overcome some of these constraints and put forward ways in which it could plausibly exit its neoliberal paradigm. I illustrate that the Bolivian state has been able to glean greater profits from its rich natural resource base, but this has primarily occurred through what could be deemed an unholy alliance. Seeking to overcome the constraints of its past and the realities of raw material extraction and transport, the Bolivian state under the control of the popular classes has been forced to reconcile with those it originally appeared to oppose – transnational extraction firms. This alliance allowed the Bolivian state to rearrange the power structures surrounding its natural resource wealth, but did not seriously alter how Bolivia was incorporated into the global economy. After the popular classes took control of the state, Bolivia’s role in the global economy as a natural resource provider dramatically increased. Not only did the Bolivian state seek to solidify its role as a hydrocarbon producer through this alliance, it also sought to revitalize the mining sector as an instrument of accumulation in a global economy with ever increasing raw material needs. The Bolivian state justified its action and this alliance as a necessity to enhance its profits and thus its ability to create social change. In so doing, however, it remained subject to many of the same powerful actors and global forces that controlled its economic trajectory for more than 400 years. Within this context, Bolivia found itself stuck in a zombie phase of neoliberalization. This does not mean that the Bolivian state did not diverge from its neoliberal path. Despite the contradictory nature of the alliance between the populist state and transnational corporations, such a strategy could potentially

The Death of Neoliberalism?

29

work; but failing to change how the Bolivian state is incorporated into the global economy will not relieve its people from the ailments of marginalization and the grave inequalities that have long plagued the country. Indeed, if the story herein thus teaches us anything, it is that struggles for justice may always be incomplete.

figure 2.1. “No Collas, Damn It”1

1

In Bolivia, “colla” is a term used to refer to the indigenous peoples of the Andean highlands. When used in eastern Bolivia, it is often said with a negative connotation.

2 Incorporation, Struggle, and Power in Post-revolutionary Bolivia: 1952–1985

On May 24, 2008, Evo Morales intended to honor the anniversary of Bolivia’s initial declaration of independence from Spain in the city of Sucre. Morales was to meet fifty rural political representatives and give each of their municipalities an ambulance and increased amounts of local funding. Many supporters were planning to travel to the city from the surrounding countryside to catch a glimpse of the President. In the weeks leading up to the event, however, segments of the eastern elite had begun to more vocally express their discontent with Morales and his largely indigenous supporters. Indeed, derogatory slurs could be heard in the plazas throughout Bolivia’s eastern departments and in some places, were even painted on the walls. On the morning of the independence ceremony, anti-Morales gangs rounded up several dozen campesinos on the outskirts of Sucre and herded them toward the central square. As the campesinos arrived in the plaza, they were greeted with derision and bombarded with insults. The anti-Morales mobs situated the campesinos in front of the building where the declaration of Bolivia’s independence from Spain had originally been pronounced nearly two centuries prior – in front of the Casa de la Libertad.2 The campesinos were stripped of their shirts, pushed to their knees, forced to publicly denounce Morales, and told to apologize for entering the city. This dehumanizing spectacle of violence and humiliation stood in contrast to the symbolic backdrop of the Casa de la Libertad and the country’s recent left turn. However, the scene was more of a stark remembrance of how the country’s past continually haunted the present than any sort of contradiction in the contemporary historical conjuncture. Indeed, Bolivia has a long history of exclusion and conflict that can almost be heard echoing through the halls of the Casa de la Libertad itself. From its origins as a place of education for the 2

The House of Liberty.

31

32

Market Justice: Political Economic Struggle in Bolivia

Spanish gentry in the seventeenth century, to the declaration of independence signed inside its walls in 1825 that liberated the creole elite but not the Bolivian masses, to the scorn cast on the campesinos outside its gates that day in the twenty-first century, the Casa de la Libertad has long been a site of freedom for some, but not for all. However, the lines of exclusion and conflict within Bolivian history have never merely been drawn between the elite and the masses. As the battles for independence in the nineteenth century stemmed from the creole elite’s inability to wrest power over Bolivia’s economic trajectory away from the Spanish aristocratic elite, the clashes in Sucre on May 24, 2008 stemmed from the eastern agricultural elites’ inability to wrest power over Bolivia’s economic trajectory away first from the mining elite and later from the popular classes. To understand the events that unfolded in the streets that day thus requires an understanding of both the continual oppression of Bolivia’s popular classes and the elite conflicts in which such oppression has often been embedded. Inter- and intra-class conflicts and alliances are nothing new. They rest at the very foundations of capitalist forms of societal organization. At the basis of Marx’s (1867) conceptualization of capitalism is conflict between capitalists and workers. In addition, some of the earliest promoters of free markets – a strand of European merchant and manufacturing elites – pitted themselves against feudal aristocracies and the landholding elite (Peet and Hartwick 1999). In the process, the merchant and manufacturing elites tacitly aligned with segments of the popular classes in order to gain more widespread legitimacy, take control of states, and redirect economic policy (Moore 1966). While inter- and intra-class conflicts and alliances have varied across time and space, they have been a constant feature of capitalism. However, the friends and foes in such conflicts and alliances have usually been temporary at best. Different classes and class factions on occasion conspire against a common enemy, but seeking to satisfy their individual class interests often results in the fragmentation of their solidarity. In Bolivia’s long history, this can be seen in the continual convergence and divergence of miner and campesino popular class factions (Hylton and Thomson 2007). In addition, it can be seen in struggles among conflicting elites and their strategic alliances with popular class factions as they have sought to take control of the state (Conaghan and Malloy 1994). Indeed, stories of class conflict and alliance can be found all throughout Bolivian history, but telling traces of their most recent incarnations can be found in the origins and aftermath of the country’s revolution in 1952. Prelude to a Revolution Although Bolivia achieved independence from Spain in the nineteenth century, the decades preceding the revolution of 1952 in many ways resembled those of the country’s colonial past. The majority of Bolivians lived in rural areas

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

33

and partook in subsistence forms of agriculture, land ownership was highly concentrated, and mining – in particular for tin – served as the lynchpin of the Bolivian economy. Urban populations in Bolivia nearly doubled in the first half of the twentieth century, but more than 70 percent of the population lived and worked in the countryside (Klein 1982:227–228). The majority of the rural population owned less than ten hectares of land. They worked their land fairly intensively, cultivating more than 50 percent of it in order to feed their families and secure some surplus. However, the majority of the land in rural Bolivia rested in the hands of a few large landholders, mostly in form of haciendas of 500 or more hectares. Indeed, 8 percent of landholders owned approximately 95 percent of arable land in the country. These hacienda owners cultivated only 0.8 percent of their land (Rivera Cusicanqui 1987:63–64). The concentration of land ownership, combined with rural population numbers, provided hacienda owners with access to a cheap, and often free, labor supply. Whereas some people migrated to urban centers or went to work in the mining sector, many remained in the countryside. In order to feed themselves and their families, landless campesinos often obtained sharecropping, tenant, or usufruct rights to small parcels of land. Under these arrangements, the campesinos worked hacienda owners’ land three to five days a week and/or gave them a large share of the harvest from the land they used. Many of these land arrangements also included a personal service obligation – known as the pongaje and mitanaje – under which the campesinos and their families had to work in the manors of hacienda owners for two or more weeks a year (Dunkerley 1984:21). The agricultural goods from small and large landholdings alike were mostly sold in local markets. Landless and small landholding campesinos often produced more goods than necessary for basic subsistence and sold their surpluses. Hacienda owners sold the goods they procured from landless campesinos in exchange for land use. Although some agricultural goods – in particular coca – were produced in one region of the country and sold in another, Bolivia’s rugged Andean terrain and poor transportation network made it difficult for agricultural producers to sell their goods beyond their local markets (Klein 2003:228–229). The organization of Bolivia’s agricultural sector prior to the revolution shaped the associated land use patterns. For hacienda owners, inexpensive labor and the geographically constrained nature of Bolivia’s agricultural markets provided them with little incentive to invest in more intensive agricultural technology. For campesinos, intensive agricultural technology was often expensive. In addition, the size of the campesinos’ landholdings and the scale of their production limited the returns that could be made from investing in agricultural technology. As a result, only rudimentary technology was used in the Bolivian agricultural sector, large-scale agricultural production was rare, and, on occasion, not enough food was produced to satisfy internal needs. Despite these

34

table 2.1. Distribution of Agricultural Property before Land Reform

Farms Size of Farms (hectares)

No.

Less than 10 From 10 to 500 More than 500 total

59,988 19,437 6,952 86,377

Total Area of Farms %

69.4 22.5 8.1 100.0

Ha. 132,964 1,467,488 31,149,398 32,749,580

% .41 4.48 95.11 100.0

Total Cultivated Area

Ratio of Cultivated Area/Total Farm Acres

Ha.

%

%

65,981 344,385 243,892 654,258

10.2 52.6 37.2 100.0

49.6 23.5 0.8 2.0

Source: Department of Planning and Coordination of the Republic of Bolivia (1970:410) in Rivera Cusicanqui (1987:64).

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

35

problems, agriculture was still Bolivia’s principle economic activity during the first half of the twentieth century (Dunkerley 1984:5). Bolivia’s link to the global economy rested further beneath the ground. From 1905 onward, close to 20 percent of the global tin supply came from Bolivia and the country’s tin sales composed between 60 and 70 percent of its total export value (Griess 1951:247; Ayub and Hashimoto 1985:11). However, as in the agricultural sector, ownership over – and thus profit from – the mines was concentrated in the hands of a few. Three mining corporations – known as the Rosca – controlled most of the mines and accounted for 95 percent of Bolivia’s foreign exchange receipts (Eckstein and Hagopian 1983:66). Forced and obligatory labor in the Bolivian mines was eliminated in the 1800s, but as with those working in the countryside, the everyday lives of miners had changed very little since colonial times. Miners lived and worked in remote locations under deplorable conditions, and for very little money. Mine shafts lacked even minimal safety standards and mine owners failed to provide workers with protective gear. In addition, according to a 1943 report done by United States’ and Bolivian labor experts, the real wages of mineworkers had steadily declined and mining families and communities were largely unable to satisfy even their most basic nutritional needs (Dunkerley 1984:14). The grave inequalities in Bolivia’s agricultural and mineral sectors brought the country’s campesinos and miners into frequent struggle with latifundia owners and tin barons over wages, working conditions, and access to land. Although neither Bolivia’s campesinos nor miners held much sway in the formal political arena, the organization of the two sectors afforded them a certain level of power in the country. For Bolivia’s campesinos, the organization of the agricultural sector gave them power over an important aspect of life – food. As increasing numbers of Bolivians migrated from rural areas to urban and mining centers, the demand for food in local markets increased. Due to the nature of agricultural production and transport in Bolivia, any form of protest by campesinos that slowed or halted agricultural production potentially threatened internal food security. For Bolivia’s miners, the organization of the mining sector gave them the ability to impact the country’s export economy. In particular, the nature of mining in Bolivia made it easier to impact tin production through work stoppages and slowdowns. Whereas much of the world’s tin was extracted through alluvial mining practices, most of Bolivia’s tin was extracted through lode mining practices. Alluvial tin mining is done above ground through the panning or dredging of rivers or other bodies of water. Lode mining is done underground with picks and explosives. In Bolivia, lode mining made direct oversight by mine owners and managers dangerous and difficult. Miners thus had a fairly high level of autonomy during the actual extraction process, enhancing their ability to stop work or delay access to mineral veins.

36

Market Justice: Political Economic Struggle in Bolivia

The power campesinos could exercise over Bolivia’s food supply became evident as they began to protest their lack of access to land and the obligatory work arrangements. In the early 1940s, Bolivia’s indigenous populations, the majority of which were campesinos, began to organize collectively in order to more forcefully express their demands. Starting in 1942, indigenous campesino groups met annually at the Trade Union Confederation of Bolivia, and in 1945 the first formal Indigenous Congress was held (Rivera Cusicanqui 1987:48). These meetings propelled indigenous campesinos to increasingly partake in sitdown strikes and other forms of resistance as they sought land rights and the elimination of the pongaje and mitanaje. These everyday forms of resistance led to decreases in internal food production and increases in food imports. In the 1920s and 1930s, food imports made up only 10 percent of imports. In the 1940s and 1950s, food imports made up close to 20 percent of imports (Klein 1982:239). By the 1950s, these food imports were not only used to satisfy demand in Bolivia’s urban and mining centers, but also to satisfy demand in places where local food production had traditionally been sufficient (see Gallo 1991:51). The power miners could exercise over the Bolivian economy became apparent as strikes in mines increased in the late 1930s. Bolivian mine owners had long recognized the power of the miners and convinced the Bolivian state to set up military garrisons close to the mines starting in the 1920s. However, as strike activity increased, the mine owners worked more closely with the military to ensure extraction activities continued uninterrupted. By the 1940s, the military often had a constant presence in many mining camps and mining companies were providing military officers with monetary and other incentives to quash labor unrest. Most notably, the Bolivian state violently repressed and killed dozens of miners after a strike at the Catavi mine in 1942 (Dunkerley 1984:14–15). The unrest in both the countryside and the mines coincided with a rise in discontent among a burgeoning segment of the upper and middle classes that were excluded from the most profitable parts of the Bolivian economy. Under the political party banner of the Movimiento Nacionalista Revolucionario (MNR), they sought to ally with the campesinos and miners in order to increase their political power. After the Catavi massacre, the MNR openly condemned the military’s actions, and two years later supported the formation of the national miners union, the Federacion ´ Sindical de Trabajadores Mineros de Bolivia (FSTMB). In addition, the MNR also came out in support of the FSTMB’s call to nationalize Bolivia’s mines. The MNR also sought to ally with Bolivia’s campesinos. However, it was largely unable to directly incorporate them into their struggles. Although the mutual repression of Bolivia’s miners and campesinos created a common foe, their struggles in some ways remained separate (Rivera Cusicanqui 1987:59– 60). Indeed, the two popular class factions in the country had different objects of struggle. Whereas the miners sought to exercise greater control over the

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

37

state, the campesinos sought greater autonomy from the state. The struggles by Bolivia’s campesinos were thus not against the state per se, but against infringements by the state – and those whose interests it upheld – on their livelihoods. Despite only a tacit level of support from Bolivia’s campesinos, the MNR made gains in the political arena in the democratic elections of 1947 and 1951. However, the winners of the elections went unrecognized by the military government at the time. Having secured a powerful ally in the miners, however, the MNR staged a revolutionary insurrection. In April 1952, armed insurgents supporting the MNR stormed the city of La Paz and ceased control of the state (Klein 1982:225). After the Revolution Bolivia’s miners made considerable gains after the revolution. The FSTMB served as the backbone of the national labor union, the Central Obrera Boliviana (COB), which formed shortly after the MNR took control of the state. Although the COB remained an autonomous entity, the MNR gave several union leaders positions in the government, including the Minister of Mines and Petroleum (Klein 1982:232). Nationalizing Bolivia’s largest mines, the state formed the publicly owned Corporacion ´ Minera de Bolivia (COMIBOL) and gave it control of more than 80 percent of the country’s mineral reserves. In its initial years of operation, the COB and FSTMB secured a level of worker control in COMIBOL, through which union representatives served on COMIBOL’s board and made the majority of decisions over how the mines and mining camps were run (Dunkerley 1984:58; 63). For Bolivia’s campesinos, their lack of representation within the MNR and low levels of participation in the revolution in some ways marginalized their demands for land reform. Initially, the MNR deemed the redistribution of land impossible (Dunkerley 1984:66). However, the social unrest in the countryside that began in the 1940s continued even after the revolution. As the MNR failed to address the campesinos’ demands for a redistribution of land, the campesinos began to oust hacienda owners from their estates and expropriate the land. Fearing their revolutionary gains may be threatened by the uprisings in the countryside and facing potentially catastrophic food shortages in urban areas, the MNR was forced to address the campesinos’ demands. On August 3, 1953 – more than a year after the revolution – the MNR implemented a process of agrarian reform. However, both the nationalization of the mines and implementation of land reform proved to be bittersweet. The power wielded by Bolivian miners was far from stable. Based in tin, their power was subject to the sociomaterial realities surrounding the mineral’s extraction and use. Although the miners controlled most of the country’s mineral extraction through COMIBOL, Bolivia’s tin barons had not invested in the sector since the 1930s and the tin content of

Market Justice: Political Economic Struggle in Bolivia

38 50000 45000 40000 35000 30000

Bolivian Tin Producon (in metric tons)

25000 20000

Global Tin Price (per metric ton in 1998US$)

15000 10000 5000 1900 1902 1904 1906 1908 1910 1912 1914 1916 1918 1920 1922 1924 1926 1928 1930 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978

0

Year

figure 2.2. Bolivia Tin Production and Global Tin Price: 1900–1978. Source: USGS (2009) & Ayub and Hashimoto (1985).

the country’s mines had been declining for decades (Conaghan and Malloy 1994:40; Klein 1982:230). In addition, Bolivia was unable to process and use its tin internally; it had no smelter and its manufacturing sector was limited (Klein 1982:238). As the Bolivian intellectual Sergio Almaraz wrote at the time, the people who give their lives for the mineral “do not own it. They never did, neither before nor after 1952. For tin has no immediate value except in ingots. The mineral, a heavy, earthy powder, serves no purpose except to be thrown into a smelter” (in Galeano 1997[1973]:149). The miners’ power was also subject to the changing global political and economic conditions surrounding tin. After the revolution, Bolivia had difficulties finding a buyer for its nationalized minerals. The most immediate reason for these difficulties can be attributed to country’s dispossessed mine owners, who worked with smelters throughout the world to stop accepting raw minerals from Bolivia until they were properly remunerated. Without a way to benefit from its top export, the Bolivian state agreed to compensate the mine owners for their nationalized assets in June 1953 (Klein 1982:238), but afterward, the country’s tin still proved difficult to sell. In the early 1950s, the United States began to release tin into the global market from its strategic war stockpile. In addition, the Southeast Asian tin mines that were cut off from the global market during World War II had reopened (Ayub and Hashimoto 1985; Fox 1974). From 1951 to 1955, the flood of tin in the world market led to price decreases of 25 percent (USGS 2009). The lower than average tin content in Bolivia’s ore and the lode mining practices necessary to get it out of the ground further dampened the country’s tin sales (Fox 1974:57–71). Although lodemining practices afforded Bolivia’s miners a certain level of power, they were much more labor intensive, and thus more expensive, compared to the alluvial mining practices used to extract tin in much of the world. This combination

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

39

of events made Bolivia the highest-cost producer of tin in the world and led to nearly a 50 percent decrease in annual tin production between 1952 and 1958 (Fox 1974). The MNR’s economic policy also proved to be detrimental to the miners’ long-term economic viability and power. In a failed attempt to diversify the Bolivian economy, the state took money from COMIBOL and directed it toward private industry through the national development agency, the Corporacion ´ Boliviana de Fomento (CBF) (Klein 1982:238). To do this, the state obligated COMIBOL to sell the U.S. dollars it gained from its mineral exports to the central bank at significantly depressed rates. In 1953, COMIBOL received 230 bolivianos for every U.S. dollar whereas the international market price was 683 bolivianos for every U.S. dollar. In 1955, the rates were even worse. COMIBOL received 570 bolivianos for every U.S. dollar whereas the international market price was 2,979 bolivianos for every U.S. dollar. If COMIBOL would have been able to exchange the dollars it earned at the international market price, it would have made US$103.8 million between 1952 and 1955. According to a U.S. mineral consulting firm, COMIBOL only needed US$2.25 million in investments to update its infrastructure and potentially bring new reserves into production (Dunkerley 1984:62). The power of Bolivia’s tin miners thus proved to be short lived. Four years after the nationalization of Bolivia’s mines, what little power the miners gained looked to be decreasing. The sociomaterial realities surrounding tin extraction, the boom and bust cycles of the global mineral trade, and the problems faced by COMIBOL made it difficult for miners to turn the power they held over Bolivia’s tin economy into any sort of real gains. Miners’ real wages fell by 42.5 percent between 1950 and 1955 and working conditions did not improve (Dunkerley 1984:60). After the 1956 election, COB representatives and its mining contingent were pushed out of the government. Although the MNR remained in power, it was re-elected in the midst of an escalating economic crisis. In addition, its more conservative factions had obtained greater voice within the party. As a result, the MNR began to pursue a more state-capitalist model of development that appeased its upper and middle-class constituencies, private business, and the United States. For Bolivia’s campesinos, land reform temporarily appeased their demands. From 1952 to 1964, the state redistributed around five million hectares of land (Soruco et al. 2008). However, more than 70 percent of Bolivia’s cultivatable land remained untouched by the agrarian reform measure. In addition, grave inequalities continued to exist in the amount of land people held. In the Bolivian highlands, many beneficiaries of the agrarian reform measures were granted rights to less than a hectare of land. In the Bolivian lowlands, hacienda lands were largely unaffected by the agrarian reform measures. Where the agrarian reform measures were implemented in the lowlands, they often provided hacienda owners who lost land in the highlands with large swaths of

40

Market Justice: Political Economic Struggle in Bolivia

previously unclaimed land in the lowlands as a means of compensation. As a result, large landholders kept control of the majority of cultivated land in the country. Although in some ways the agrarian reform measures perpetuated inequality in Bolivia, the newly formed MNR government redistributed enough land to previously landless campesinos to legitimate its power. In addition, the state successfully convinced campesino leaders – in many cases, through clientelistic relationships – that it would take years to fully implement the agrarian reform measures (Dunkerley 1984:74). Thus, the MNR successfully quelled social unrest in the countryside, as it removed itself from the ire of rural protest and provided campesinos with somewhat autonomous spaces through which they could pursue their own livelihood strategies. Over the following twenty-five to thirty years, this informal truce allowed the state and its allies to focus on diminishing the power of the COB. Inside the U.S. Geopolitical Sphere of Influence The United States began to wield its influence in post-revolutionary Bolivia shortly after the MNR took power. The continual unrest in the countryside resulted in a temporary food shortage, as campesino producers were engaged in active struggle and hacienda owners were unable to glean any surpluses from agricultural production on their lands. In July 1953, the Bolivian government staved off the food shortages by accepting US$5 million in food shipments from the United States under Public Law 480 (Klein 1982:240). After giving this initial support, the United States began to pressure the Bolivian state to distance itself from the COB, repay debts it defaulted on in the 1920s, and introduce laws giving U.S. businesses preferential treatment in the country. Most notably, the United States insisted that Bolivia sign on to the Codigo ´ Davenport, an agreement to let private oil companies invest in the country. Oil extraction in Bolivia totaled less than 2,000 barrels a day in 1953, an insignificant amount compared to the 6.47 million barrels of oil being extracted in the United States at the time (INE 2011a; US EIA 2011). However, the Bolivian state oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB), had held a monopoly over oil and natural gas extraction in the country since 1937 when it nationalized the assets of Standard Oil. Even though the Codigo Davenport technically opened up the country’s oil and natural gas ´ sector to all potential investors, the Bolivian government denied Brazil’s state operated Petrobras’ concession request while granting concessions to ten U.S. companies (Klein 1982:240). Over the following decade, Gulf Oil became the largest transnational energy firm in Bolivia and was able to extract oil at highly favorable rates, paying royalties and taxes that totaled less than 20 percent of their profits (Dunkerley 1984:128).

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

41

The delivery of food aid proved to be only the first of many U.S. interventions in post-revolutionary Bolivia. Between 1956 and 1964, the U.S. financial commitments to the country totaled more than US$327 million (Dunkerley 1984:85). The first wave of this money came in 1956. Facing declining revenues from its tin mines and rampant inflation, Bolivia accepted a US$25 million stabilization package from the International Monetary Fund (IMF). Seeking to stave off the communist undertones of the Bolivian revolution and promote the U.S. liberal economic agenda, the IMF made the stabilization package contingent on a reduction in government spending, the elimination of food subsidies and price controls for state-owned enterprises, a unified exchange rate, and limits to wage increases (Dunkerley 1984:87; Klein 1982:242). The second wave of money came in 1961 after the Soviet Union offered Bolivia a low interest loan to build a tin smelter and an additional US$150 million in loans and aid to develop the country’s road, railways, and state oil company (Dunkerley 1984:106; Eder 1968). The United States responded by working with West Germany and the Inter-American Development Bank (IADB) to offer Bolivia more than US$30 million to “rehabilitate” COMIBOL under what was called the Triangular Plan (Dunkerley 1984:105; Fox 1974:65; Wilkie 1971:225). The Triangular Plan required COMIBOL to reduce the size of its workforce, end worker control in the mines, limit raises, and prohibit strikes. The United States also directed more than US$200 million in aid to Bolivia between 1961 and 1964 under the Alliance for Progress. From this aid, an increasing amount went to reequipping, modernizing, and training the Bolivian military (Mitchell 1977:85; 91; Eder 1968). The large influx of U.S. currency and a portrayal of fiscal discipline allowed the Bolivian state to stave off its trending inflation in the late 1950s and early 1960s. However, the conditions attached to accepting the U.S. funds had detrimental effects on Bolivia’s miners and resulted in increased strike activity. Ending subsidies on food after the implementation of the IMF stabilization package made it difficult for miners to live off of their already low wages. In addition, cuts to COMIBOL’s labor force after the implementation of the Triangular Plan put several thousand miners out of work. The acceptance of the Triangular Plan made strikes by COMIBOL workers illegal, but the miners paid no regard. From 1956 to 1964, miner work stoppages made production erratic. From 1961 to 1963 alone, it is estimated that 355,000 hours of work were lost each year to miners’ strikes, resulting in millions of dollars in losses for COMIBOL (Ayub and Hashimoto 1985; Dunkerley 1984:109). In 1964, discontent with the MNR led to a general boycott of the presidential election by all sides of the political spectrum. After opposition parties collectively agreed not to run a presidential candidate, the MNR ended up being the only party on the ticket. After the election, widespread protest ensued. In November, a military coup led by General Rene´ Barrientos took control of the state amid general unrest. Although the U.S. State Department seemed to favor

42

Market Justice: Political Economic Struggle in Bolivia

the MNR, it made a recommendation less than a month after the coup that President Lyndon Johnson should recognize the Barrientos government (U.S. Department of State Office of the Historian 2010a; 2010b). After taking control of the state, Barrientos immediately sought to undermine the power of Bolivia’s labor unions, in particular the tin miners. He sent the military to occupy the mines, banned non-government controlled worker organizations, and forced the majority of Bolivia’s labor union leaders into hiding or exile. Several of the most prominent union leaders were assassinated (Dunkerley 1984:124–125). The United States aided Barrientos’s actions against the miners with both monetary and military aid. According to U.S. State Department documents: [U.S.]AID [Aid for International Development] had authorized approximately $1.8 million in special financial support for planned military intervention in COMIBOL mines. The [State] Department authorized Ambassador Henderson to commit all funds requested and communicate this to the GOB [Government of Bolivia]. In addition, the Department instructed Henderson to look into arranging for emergency military supplies and equipment, including ammunition and planes (U.S. Department of State Office of the Historian 2010c).

Barrientos’s acts of physical repression extended beyond military intervention. In the first six months of 1965, he instituted a government policy that reduced miners’ wages by 40 to 50 percent (Dunkerley 1984:125). With the majority of miners already unable to afford even a modest level of nutritional intake, the wage cut made maintaining an adequate level of daily sustenance increasingly difficult (Mitchell 1977:100). Barrientos maintained his legitimacy within Bolivia by cultivating the support of the country’s campesinos. Although the MNR had sought to incorporate the campesinos more fully into the Bolivian economy, the agrarian reform measures in some ways kept the campesino population separate from the rest of the society. Granted small plots of land, the campesinos were appeased after the revolution but remained relatively marginalized. Barrientos was able to gain campesino support by upholding this divide and fostering clientelistic relationships with the campesino leaders. Barrientos’s support in the countryside allowed him to be democratically elected in 1966. Although his opponents contested the validity of the vote, its results stood and Barrientos maintained power (Dunkerley 1984:131). Obtaining internal stability through the support of Bolivia’s campesinos and the repression of the country’s labor union, Barrientos was able to strengthen the role of private investment through a “policy of openness to free enterprise” (Barrientos in Mitchell 1977:101). In particular, the Barrientos government continued to cater to the foreign investors, granted oil and natural gas concessions in the 1950s, and opened up the mining sector to private investment. In the hydrocarbon sector, Gulf Oil surpassed YPFB as the largest producer

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

43

of oil in Bolivia. During the Barrientos regime, the company increased its annual investments from around US$7 million (1957–1963) to US$16.7 million (1965–1968) (Burke and Malloy 1974:54). Gulf Oil also increased its oil production from 134,123 barrels in 1963 to 11.8 million barrels in 1967 (INE 2010a). In the mining sector, the Barrientos government increasingly granted concessions to private investors and provided them with highly favorable tax and royalty rates. In addition, it freed private firms to sell the minerals they extracted in the global marketplace, ending the monopoly Bolivia’s state mining bank – the Banco Minero – had previously held over the commercialization of the country’s minerals (Contreras and Pacheco 1989:17). These policies laid the foundations for two decades of rapid growth in the private mining sector and what Gonzalo Sanchez de Lozada, future president and then ´ owner of the Bolivian private mining firm the Compan´ ˜ ıa Minera del Sur S.A. (COMSUR), called “the golden epoch” for private mining (in Contreras and Pacheco 1989:17). However, the resurgence of private investment in Bolivia’s natural resource sectors fell into question after Barrientos died in a helicopter crash in 1969. He was succeeded by two populist dictators, General Alfredo Ovando and General Juan Jose´ Torres. Although Ovando and Torres were anti-communist and opposed the socialist leanings of Bolivia’s labor-based political parties, they promoted a state-capitalist model of development and believed that the government and public industries should play a role in the economy (Malloy and Gamara 1988:47; Dunkerley 1984:163). In the process, they sought to renew state ties with Bolivia’s working class by legalizing organized labor unions and re-establishing the national workers union, the Central Obrera Boliviana (COB). Ovando and Torres also took strong nationalist and antiimperialist stances. Most notably, Ovando nationalized Gulf Oil’s assets in Bolivia in October 1969, stating that Bolivia would not accept “either dependence [upon] or blackmail [by]” transnational companies (cited in Dunkerley 1984:164). In 1971, Torres also expelled the Peace Corp from the country. In addition, both leaders established stronger trade relations with Soviet bloc countries as they sought to disrupt the dominance the United States had over Bolivian trade (Dunkerley 1984:166). The United States expressed immediate concerns about the changes in Bolivia. In a memo to President Richard Nixon, Henry Kissinger saw Ovando and Torres as a threat to U.S. interests and classified the Bolivian government as having “fallen into the hands of young radical civilian nationalists who were invited into the ‘Revolutionary Government’ to popularize it, and some key military figures who share and exhibit this same nationalist sentiment” (U.S. Department of State Office of the Historian 2010d). In response to nationalization of Gulf Oil’s assets, the United States demanded proper remuneration for the company. It also significantly cut bilateral aid from US$21.5 million a year to US$8.0 million a year during Ovando and Torres’ rule (Dunkerley 1984:166).

44

Market Justice: Political Economic Struggle in Bolivia

The actions of Ovando and Torres concerned more than just the United States, however. During the Barrientos regime, a resurgent Bolivian elite had begun to gain power. The opening up of new spaces of investment in the mining sector not only provided an entry point for transnational firms, but also a way for the Bolivian mining elite whose assets were not nationalized after the revolution to expand their operations. To advance and protect their interests, this private mining elite formed the Asociacion ´ de Mineria Mediana (ANMM).3 In addition, they worked with the Confederacion ´ de Empresarios Privados de Bolivia (CEPB), a group representing western Bolivian elite interests, to develop a cohesive private business strategy in the country. After the nationalization of Gulf Oil, the new mining elite and the CEPB expressed concern over Ovando and Torres’ state capitalist mode of development and worried that the government might nationalize other economic sectors. They also opposed Ovando and Torres’ policies to reform the Banco Minero and again place the commercialization of Bolivia’s minerals under state control. In addition, they criticized the government for undermining the private sector by not putting forward clearly defined rules to protect private investment (Dunkerley 1984:166). Eastern landed elites were also concerned about Ovando and Torres’ policies. Since 1937, Bolivia’s hydrocarbon producing departments received an 11 percent royalty on the extraction of oil and natural gas within their territories, and all of Gulf Oil’s reserves were in the eastern Department of Santa Cruz. Gulf Oil’s hydrocarbon extraction activities had thus resulted in a dramatic increase in royalties, with around US$1.3 million a year going to the Department of Santa Cruz after Gulf’s increased production (INE 2010b). However, when Bolivia nationalized Gulf Oil’s assets, the company organized the world’s oil giants to embargo the purchase and refining of Bolivia’s crude. In addition, Gulf halted the financing of a natural gas pipeline being built to Argentina (Malloy and Gamara 1988:50). Unable to export its oil or natural gas, the Bolivian state lost US$14.4 million in gross income (Mitchell 1977:112). The Santa Cruz elite thus saw the nationalization as a direct affront to their interests and regional development strategy. In August 1971, the concerns of the U.S. government and Bolivian elites aligned in support of opposition movements seeking to oust Torres. According to U.S. State Department documents, the Central Intelligence Agency (CIA) sent US$410,000 to “an ex-military figure involved in coup plotting, and another dissident officer” in “response to a White House request for a political action program to arrest the leftward trend of the Torres regime” (U.S. Department of State Office of the Historian 2010e). Although the documents note the money was “meant to discourage a reportedly imminent coup,” they also report that Attorney General Jon Mitchell stated “that a coup was inevitable, and thus 3

The Association of Medium Miners – although the members of the ANMM usually operated large mining operations, most were smaller than COMBIOL and thus were classified as “medium.”

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

45

covert support should be targeted, as soon as possible, to pro-U.S. individuals or groups” (U.S. Department of State Office of the Historian 2010e). Conversations between President Richard Nixon and Henry Kissinger suggested similar action. kissinger: We are having a major problem in Bolivia . . . I told Karamessines [a director at the U.S. Central Intelligence Agency] to crank up an operation, post-haste. Even the Ambassador there, who’s a softy, is now saying that we must start playing with the military there or the thing is going to go down the drain . . . nixon: What does Karamessines think we need? A coup? kissinger: . . . I don’t know whether we can even think of a coup, but we have to find out what the lay of the land is there. I mean, before they do a coup, we would – nixon: Remember, we gave those goddamn Bolivians that tin. kissinger: Well, we can always reverse that. Then we – nixon: Reverse that. (U.S. Department of State Office of the Historian 2010f)

On August 21, 1971, General Hugo Banzer Suarez from the Department of Santa Cruz took control of the Bolivian state in a coup. Nine days later, the Nixon administration recognized Banzer’s government. From Fostering Internal Elite Interests to Fomenting Elite Divisions Banzer’s rise to power represented a return to the development trajectory begun by Barrientos. Although he put together a military-civilian coalition to initially help him govern, the civilian representatives came from the Bolivian elite. Labor was notably absent. Like Barrientos, Banzer employed a number of repressive tactics to subvert the power that Bolivia’s labor unions gained under Ovando and Torres. Although he did not ban unions, he restricted their organizing activities by making strikes illegal and replacing locally elected union leaders with “labor coordinators” chosen by the government (Mitchell 1977:126). When labor unrest occurred, Banzer persecuted union leaders and frequently sent in the military to end strikes and occupy work sites. During his regime, he placed more than 14,750 people in jail for offences against the state, sent 19,000 people into exile, and left hundreds killed or disappeared (Dunkerley 1984:208–212). With the civilian elite incorporated into his ruling coalition, Banzer took a pro-private business stance that proved to be popular with both the U.S. government and the Bolivian elite. Within the government, he afforded the CEPB a significant amount of influence over economic decision making in the country. Banzer even helped to fund the CEPB through a ‘voluntary’ 1 percent donation or tax on state salaries (Dunkerley 1984:204). He also instituted a number of policies intended to attract foreign investment. He opened Bolivia’s borders to the free movement of capital, removed tariffs on both produced and primary materials, and lowered taxes on private firms (Dunkerley 1984:219; 226). Banzer also increased the remuneration going to transnational investors

46

Market Justice: Political Economic Struggle in Bolivia

negatively affected by the nationalizations during Ovando and Torres’ rule. In particular, he increased Gulf Oil’s compensation (Dunkerley 1984:204). The U.S. government supported Banzer’s policies by dramatically increasing the amount of aid it sent to Bolivia. During his first year and a half in power, Banzer’s government received US$32 million from the U.S. to assist with “administrative and government” expenses. Over the previous thirty years, Bolivia had cumulatively received in total only US$6.7 million from the United States to support similar expenses. The U.S. complemented this largess of funds with more than US$50 million in loans from USAID and a tripling of military assistance (Dunkerley 1984:205; Mitchell 1977:123). Among the Bolivian elite, those involved in the private mining sector made considerable gains during the Banzer regime, as the mineral concessions granted to them under Barrientos came into full-fledged production. Banzer bolstered the ability of the private mining elites to profit from these concessions by putting into place preferential tax policies for private mining firms. From 1973 to 1976, the private mining sector reported a 76 percent increase in export revenues and a 26 percent increase in its taxes. By comparison, COMIBOL experienced a 55 percent increase in export revenues and a 99 percent increase in its taxes (Dunkerley 1984:226). Although both the private mining elite and COMIBOL benefitted from increasing global mineral prices, differential taxation rates favored the private mining sector. In addition, the Bolivian state’s practices of directing COMIBOL’s revenues away from reinvestment in the sector inhibited its profit-making ability (Mayorga and Gorman 1978:115). During the initial years under the Banzer regime, the private mining sector’s profit rate thus increased by 27 percent while COMIBOL’s profit rate fell by 107 percent (Dunkerley 1984:226). Banzer’s policies proved to be the most beneficial to those from his home constituency of Santa Cruz, in particular the landed agricultural elite. Previous governments had already directed a disproportionate amount of state funds to the department to quell discontent by eastern factions calling for greater autonomy and to ensure that Bolivia would not cede any of its less populated territory to its eastern neighbors (Whitehead 1973). Banzer further increased the amount of money going to Santa Cruz’s landed agricultural elite by providing them with easy access to agricultural credit and guaranteed revenues through state instituted price controls. Prior to 1970, the Banco Agr´ıcola de Bolivia (BAB) directed 43 percent of its credit to Santa Cruz. After Banzer took power, the BAB increased the department’s share of agricultural credit to close to 70 percent (Arze Cuardos1979:269; 281). Nearly all of this money went to largescale agricultural producers (Gill 1987:52; Eckstein 1983:111). The ability of the eastern agricultural elite to turn this credit into profit was buoyed by the boom of international agricultural commodity prices in the 1970s and by state subsidies that ensured producers were able to recover their costs (Dunkerley 1984:222; Eckstein 1983:112). In addition, the landed agricultural elite took advantage of the lax collection policies surrounding government credit. Santa

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table 2.2. Land Grants of 10,000 or More Hectares in the Department of Santa Cruz by President, 1952–1985

President

Year

Number of Recipients

Victor Paz Estenssoro Hernan ´ Siles Suazo Victor Paz Estenssoro Rene´ Barrientos Alfredo Ovando Juan Jose´ Torres Hugo Banzer Suarez ´ Juan Pereda Asbun ´ Alberto Natusch Busch Luis Garc´ıa Meza Hernan ´ Siles Suazo

1952–1956 1956–1960 1960–1964 1964–1969 1969–1970 1970–1971 1971–1978 1978 1979 1980–1981 1982–1985

1 1 4 51 7 8 171 11 3 25 16

Total Land Going Toward Recipients Granted 10,000 or More Hectares 29,897 16,568 80,078 996,519 127,768 142,340 3,272,471 154,354 38,854 347,367 248,954

Total Land Granted to All Recipients 98,415 825,872 4,188,865 3,844,144 962,002 1,729,089 17,947,495 609,549 732,779 772,255 1,779,943

Data compiled by author from Soruco et al. 2008.

Cruz’s large-scale agricultural producers registered the largest amount of delinquent loans in the country, totaling more than US$666 million and contributing to the eventual bankruptcy of the BAB in 1979 (Dunkerley 1984:222). As Conaghan and Malloy (1994:57) note, the means in which the BAB extended credit looked more like a system of government handouts to eastern elites than a means to promote equitable development. Banzer also aided the landed agricultural elite through generous land grants. Utilizing Bolivia’s agrarian reform measures that were originally intended to break up the country’s latifundias (largest landholdings), Banzer oversaw the distribution of approximately six million hectares during his regime. Previously in Bolivia, the state had distributed a total of 9.1 million hectares since the agrarian reform measures had been put into place in 1953. Even though numerous peasant farmers received small parcels of land during Banzer’s rule, the amount they received paled in comparison to the amount received by the landed agricultural elite. As Leslie Gill (1987:57–64) has shown in the Department of Santa Cruz, most benefactors from agrarian reform under Banzer received land grants for parcels of fifty hectares or less. However, a limited number of people obtained parcels of more than 10,000 hectares.4 Banzer’s generous land grants and the distribution of BAB credit directed toward the Department of Santa Cruz also positioned Bolivia’s landed eastern 4

Soruco et al. (2008) provide an in-depth analysis of the agricultural elite in Santa Cruz. They detail recipients who received more than 10,000 hectares from 1953 to 1994, the list of which is much too long to include here.

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Market Justice: Political Economic Struggle in Bolivia

elite to become prime players in one of the country’s most rapidly ascending economic sectors in the 1970s – the international cocaine trade (Painter 1994; Gill 1987; Healy 1986). Raw coca had been grown and consumed for centuries by many Bolivians as a mild stimulant and appetite suppressant. However, the increasing popularity of cocaine in the United States and Europe during the 1970s created a growing market for processed coca that had been soaked in kerosene or gasoline and eventually turned into a white powder.5 With access to land and money, the Bolivian eastern landed elite had the means to make this white powder into an international commodity. On the one hand, they were strategically located close to a coca supply. Although the coca preferred by most Bolivians for everyday consumption was grown in the Yungas region of northern La Paz, an increasing amount of coca was being grown in the Chapare region of eastern Cochabamba. Close to the Department of Santa Cruz and connected both by road and water transit routes, the coca grown in the Chapare was easily incorporated into eastern landed elites’ cocaine supply chains (Gill 1987:183). On the other hand, the landed elite had the means to get cocaine out of the country. The credit the BAB lent to large landholders in the Department of Santa Cruz provided the eastern landed elite – perhaps inadvertently – with the capital to construct the infrastructure necessary to participate in the international drug trade (planes, airstrips, bribes, etc.). In addition, the large plots of land granted to the eastern elite provided them with ideal places to ship cocaine out of the country from remote personal airstrips (Painter 1994:27; Bascope´ Aspiazu 1982). The eastern landed elite in the Department of Santa Cruz also benefitted from the increasing royalty revenues from oil and natural gas extraction activities in their department. Although the volume of oil extracted in Bolivia during Banzer’s regime actually decreased and the volume of natural gas extracted remained relatively constant, the country’s hydrocarbon industry was buoyed by the dramatic increase in international oil and natural gas prices. From 1972 to 1978, the sale price for Bolivia’s oil experienced more than a five-fold increase. The sale price for the country’s natural gas experienced close to an eight-fold increase. These price increases garnered the Bolivian state oil and gas company YPFB a five-fold increase in gross profits (Dunkerley 1984:223– 224). For the department of Santa Cruz, this resulted in a significant increase in royalty payments. Since the Bolivian revolution in 1952, Santa Cruz had received on average approximately US$625,000 a year in royalites. During the international oil boom in the 1970s, the department received on average close to US$14.6 million a year in royalities (INE 2010b). The royalties were intended to be used for development projects that benefitted all departmental residents. However, the money was funneled through 5

It is important to note that coca in its raw form is not addictive. Many people in the Andes chew coca or drink coca tea daily as people in the global north drink coffee. Apart from being a mild stimulant, it also has a number of medicinal characteristics.

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

49

the Corporacion ´ Regional de Desarrollo de Santa Cruz (CORDECRUZ), the regional development group that was largely controlled by the landed agricultural elite. As a result, the distribution of funds by CORDECRUZ was far from equal (Gill 1987:45). Upholding the interests of the department’s agro-industrial elite, CORDECRUZ directed the majority of its funds toward agricultural and infrastructural development projects near the city of Santa Cruz (Rivero et al. 2007:3). Although Banzer initially enjoyed the support of both the private mining and landed agricultural elite, a divide among this ruling bloc slowly began to develop. After two years of being in power, Banzer ceased cooperation with the CEPB and enhanced the power of the military and individual private business representatives. Banzer still upheld the interests of the landed agricultural elite, but under this new arrangement, private business as a whole lost representation within the government while individuals with personal ties to Banzer flourished. By 1974, it had also become apparent that Banzer’s taxation policies were more favorable for the landed agricultural elite than the private mining elite. In October 1972, Banzer had implemented an export tax to take advantage of rising global prices on minerals and agricultural goods (Conaghan and Malloy 1994:63). Originally the state intended to levy the tax for a year. In October 1973, budgetary constraints led to its renewal. Over the following year, the state gradually lifted the export tax on most products. However, both minerals and hydrocarbons remained subject to the tax (Gillis 1978:201). This resulted in the mineral and hydrocarbon sectors continually contributing a disproportionately large amount to the central government’s coffers. In 1973 and 1974, close to 12 percent of Bolivia’s GDP came from the mining sector. However, 37 percent of the central government’s tax revenue came from the mining sector. In contrast, 83 percent of Bolivia’s GDP came from sectors not directly associated with mining and hydrocarbons. Cumulatively, these other sectors accounted for only 40 percent of the central government’s total tax revenue (Gillis 1978:215–216). The agro-industrial elite made out even better. From 1970 to 1976, agriculture accounted for close to 20 percent of Bolivia’s GDP. During this time, the sector’s contribution to the central government’s tax base never rose above 5.15 percent and some years was as low as .12 percent (Eckstein 1983:121). As Banzer diminished the power of private business groups in his government in favor of personal ties and disproportionately worked in the interests of the eastern agro-industrial elite, the mining elite became increasingly discontented. As another representative of private mining sector noted:

There was a time when someone from our group was the minister of finance. And there was a matter that we were having problems with, but we could never talk to that minister. He would not talk with us. I have here a black book of actions taken against our sector when members of our sector participated in the government. The famous

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Market Justice: Political Economic Struggle in Bolivia

additional tax that Banzer created came with the signature of Carlos Iturralde on it, a well-known miner. So we did not have influence under Banzer. (quoted in Conaghan and Malloy 1994:67)

Although some people within the sector were able to foster clientelistic relationships with Banzer that worked to their advantage, as a whole, the private mining sector gradually saw the regime as detrimental to their profit-making capacities. In addition, as Bolivia’s tax dollars and government funding flowed east, the private mining elite saw the taxes levied upon the industry as a “confiscatory” means through which it subsidized the activities of the landed agricultural elite (Conaghan and Malloy 1994:63). By the late 1970s, Banzer’s grip on power began to falter. Through his clientelistic practices, Banzer had divided the ruling bloc and created a bloated state bureaucracy that proved to be detrimental to the interests of private business. As Conaghan and Malloy note (1994:82), highland business elites began to view the growing state as a “type of Frankenstein – a lumbering uncontrollable force whose expansion threatened the private sector.” As early as 1977, the CEPB demonstrated this as it began to express concerns about state-centric economic planning and the need for greater private sector participation in national economic decision-making processes (Conaghan and Malloy 1994:87). This, combined with U.S. President Jimmy Carter’s new push for human rights and democracy, led Banzer to call for elections in 1978. Shifting Power Banzer’s call for elections did not result in an immediate return to democracy. After rampant voter fraud, the National Electoral Board refused to declare a winner and the military remained in control of the state (Dunkerley 1984:247– 248). New elections were held in 1979 and again in 1980. A center-left coalition, known as Union Popular (UDP), won both times. How´ Democratica ´ ever, it did not immediately assume power. Instead, from 1978 to 1982, the Bolivian state changed hands thirteen times and remained primarily under military rule. During this four-year stint, however, the business elite – in particular the mining elite – recognized opportunity within Bolivia’s instability. As it did, it instrumentally turned its back on Banzer, supported seating the democratically elected UDP as the legitimate political party to control the state, and began to more actively promote “free” and “open” markets as the solution to Bolivia’s problems. The mining elite’s discontent with Banzer and the subsequent carousel of military regimes that followed after he formally left power escalated as the international economic crisis began to wreak havoc on the country’s primary economic sectors. As global commodity prices fell, the price of tin dropped by nearly 40 percent and the price of oil by nearly 20 percent between 1980 and 1984 (USGS 2009). This dramatically affected the state’s profit-making

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

51

capacities and thus its ability to both maintain its clientelistic relationships with the elite and satisfy its obligations to Bolivia’s strong miner and public employee unions. For the business and mining elite, seating the democratically elected UDP was a possible way to prevent full-scale class war and remove the agrarian elite from power. The business and mining elite also supported seating the UDP in order to save their traditional protector – the military. For the business and mining elite, Bolivia’s revolving door of military regimes and their continual repression of the popular classes not only stoked further unrest, but also potentially undermined the military’s own legitimacy and its ability to protect the elite when necessary. As a CEPB representative blatantly noted in the 1980s: We always looked at the military as an important means of saving us from the extreme left in the country. And the less prestige they had, the less we could count on them. . . . And we knew this meant that the longer [the military] stayed, the greater the chances the extreme left would take over the country in a coup. And if that happened, it would be hard for us to remove them. (in Conaghan and Malloy 1994:90)

To Bolivia’s business elite, the refusal by the military to allow the UDP to assume control of the state threatened its long-term ability to exercise power and potentially to protect elite interests. Perhaps most importantly, however, was that the business and mining elite supported seating the UDP because it believed it would fail. Indeed, in some ways it could even be said that the business and mining elite set the UDP up to fail in order to create the space necessary for a radical abandonment of state-led development in favor of some form of free-market rule. In the early 1980s, inflation rates in the country were rapidly increasing and whichever party took power would have little to no access to international credit markets (Morales 1988). Indeed, both the World Bank and the IMF stopped lending to the country (Sachs 1987:279). In addition, CEPB proposals for a democratic transition favored recognizing the elections of 1980. Although the UDP had won the election with a plurality of the vote, it did not secure a simple majority of legislative seats. By 1982 when the CEPB came out in support of democracy, Bolivia’s political and economic crisis had escalated. As a result, the UDP believed that if new elections were held, they could gain more seats. However, the opposition parties opposed the idea and eventually the UDP accepted the CEPB proposal. As the UDP took power, the opposition parties and the CEPB knew that it would only hold a minority share of seats within the legislature and largely be powerless to implement any sort of radical political or economic change. In the words of a CEPB representative, “We had to let them govern, even though we knew they couldn’t do it” (in Conaghan and Malloy 1994:96). When the UDP assumed power, it inherited a state in dire economic straits and faced mounting and continual pressure from external and internal actors

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Market Justice: Political Economic Struggle in Bolivia

on all sides of the political spectrum to find some sort of resolve. Annual inflation rates sat at approximately 300 percent and both the World Bank and IMF demanded that the UDP institute a series of economic stabilization programs that would “redress the economy” and “give priority to the repayment of foreign debt” before they would agree to lend the Bolivian state more money (Sachs 1987; World Bank 1983:16). At the same time, the labor groups that helped bring the UDP to power refused to fully work with the party. Both the COB and FSTMB sought to maintain their autonomy and refused to accept posts within the government. Both also adamantly opposed the acceptance of stabilization programs that offloaded social costs onto the popular classes, pushing instead for the UDP to implement populist policies that redistributed the earnings from Bolivia’s major industries to broader segments of the population (Malloy and Gamara 1988). In addition, taking advantage of the negative effects felt from the international economic crisis, the profligate amount of debt accrued during Banzer’s regime, and the inability of the UDP to make change, the CEPB stepped up its anti-statist rhetoric and avid promotion of free markets (Conaghan and Malloy 1994:83). Without majority control of the legislature and an opposition unwilling to compromise, the UDP could do little to halt the continued downward fall of Bolivia’s economy. In an attempt to solve the state’s fiscal crisis, the government decided to adopt a form of quantitative easing and increased the money supply. The results proved disastrous. Combined with already high inflation rates and decreasing GDP, inflation rates toppled 11,750 percent and per capita GDP declined from US$590 to US$440 (Grindle 2003; Morales 1988; Sachs 1987). The effects of increasing prices and decreasing liquid capital only made the financial hardships faced by most worse. And in this moment of compounding crisis, the CEPB found even greater traction upon which to promote the virtues of private business and free-market ideology (Conaghan and Malloy 1994:124– 125). Facing mounting pressure from both the Bolivian masses and the CEPB, the UDP agreed to hold early elections in 1985. Familiar names and parties filled the ballot. Post-revolutionary President Victor Paz Estenssoro ran for the MNR and Banzer ran as the candidate for his newly formed party, Accion ´ Democractica Nacional (ADN). Banzer received a plurality of the vote but did ´ not secure the absolute majority necessary to return to power. Paz Estenssoro came in second. After a series of political bargains, Paz Estenssoro garnered enough support from the legislature to gain control of the presidential post.6 Banzer’s acceptance of defeat laid the foundation for a post-inaugural pact

6

In the Bolivian political system, a simple majority is required to win the presidency. When a simple majority is not achieved, parties need to form a coalition government. The coalition government then needs to be approved by the Chamber of Deputies, an elected body similar in structure and function to the U.S. Congress.

Incorporation, Struggle, and Power in Post-revolutionary Bolivia

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between the MNR and the ADN that became known as the “pacto por la democracia.”7 The Seeds of Neoliberalization Sown Although a number of the old post-revolutionary and dictatorial faces were present within the coalition and it looked as if Bolivia’s fractious elite may share power, it soon became apparent that the mining elite would have the dominant voice. Linking free-market ideology to notions of democracy, the mining elite was able to tacitly align itself with segments of the popular classes and slowly began to undermine the power the agricultural elite held over the state. At the same time, the mining elite’s promotion of free-market ideology would separate it from the more radical factions of the popular classes such as the COB and FSTMB and set the stage for the privatization of Bolivia’s state-owned industries – in particular, COMIBOL. Through this strategy, the mining elite sought to take greater control over how Bolivia was incorporated into the global economy in order to glean the majority of benefits coming from the county’s mineral-based economy. In the process, the foundations for Bolivia’s neoliberal shift were put into place.

7

“Pacto por la Democracia” = Pact for Democracy.

figure 3.1. To neoliberalism it hurts to spend money to feed a child . . .

3 The Neoliberal Kharisiri: 1985–1993

Our defeat was always implicit in the victory of others; our wealth has always generated our poverty by nourishing the prosperity of others – the empires and their native overseers. In the colonial and neocolonial alchemy, gold changes into scrap metal and food into poison. Eduardo Galeano (1997[1973]:2)

In Aymara and Quechua, two of Bolivia’s highland indigenous languages, there is a word sometimes used to describe those who deceive others in order to obtain something – kharisiri. Historically, the word kharisiri was used to describe feared outsiders such as priests and doctors as well as other representatives of modernity. Literally, the word kharisiri is used to describe a mythical figure that sucks the fat out of its victims while they sleep or even through hypnosis. Afflicted by a kharisiri, victims weaken and slowly die (Fernandez Juarez 2008; ´ ´ Canessa 2000; Rivi`ere 1991). In 1985 with the unveiling of a policy package known as the Nueva Pol´ıtica Economica (NPE), a new type of kharisiri emerged in Bolivia – the invisible ´ hand of a purportedly free market. Like a priest, this neoliberal kharisiri proclaimed to bring salvation. Like a doctor, this neoliberal kharisiri supposedly brought a cure. And like the priests and doctors of old, the promises brought by this neoliberal kharisiri were illusory. Although the redemptive properties and healing powers of this neoliberal kharisiri proved to be mythical, the hardships its most ardent believers inflicted on the everyday livelihoods of many Bolivians were not. For many people in the global north, the free market is equated to opportunity and prosperity. The tenets of free-market ideology largely go unquestioned. For many people in the global south, however, the promises of the free market were long ago demystified. Sit on a plaza bench paid for by Coca-Cola in any Bolivian city and one can see the wonders of the free market at work as children 55

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Market Justice: Political Economic Struggle in Bolivia

swarm toward businessmen and tourists to earn a couple cents shining their shoes. Take a walk down a rural dirt road and one can see the benefits of the free market in homes that have no access to electricity or running water but are located directly beside energy-producing natural gas extraction facilities. Open a Bolivian newspaper and one can find political cartoons and editorials depicting the elite and transnational corporations together ravaging the countryside in search of raw materials. Observe a Bolivian protest and one can hear slogans placing blame for the country’s problems on transnational investment. Glance at the graffiti throughout the country and one can see that a different perception of free markets exists than that held by many in the global north. As the tag on the side of one Cochabamba wall read in 2008, “al neoliberalismo, le duele gastar plata en un nino bien alimentado” – to neoliberalism, it hurts to spend money to feed a child. In David Harvey’s conceptualization of accumulation by dispossession, he asserts that the capitalist system must have something “outside of itself” – an “other” – that can be used as a latent reserve or investment sink through which to circulate stagnant capital and thus resolve crises of over-accumulation (Harvey 2003:140).1 Harvey identifies two primary forms that this “other” can take. First, it can be pre-existing and brought into the capitalist system. This occurs as something that was previously perceived as a public or non-commoditized good is brought into the global marketplace. For example, commonly held land and public or non-commoditized assets can be captured as private property and brought into the capitalist system as vehicles of accumulation. Such a process can be seen with the enclosure movement in eighteenth- and nineteenth-century England, the end of the ejido in Mexico in 1991, the ongoing privatization of water throughout the globe, and the pricing of air and carbon through the Kyoto Protocol and other forms of cap and trade at the turn of the twenty-first century. The “other,” however, can also be produced. According to Harvey, “capitalism perpetually creates its own ‘other’ in order to feed upon it” (2003:151). This occurs through processes of de- and revaluation. For example, something that was already incorporated into the capitalist system can be pushed into apparent disarray or left derelict, bought at a low price, and then returned to the market in an “improved” form. Such a process can be seen through the gentrification of inner cities throughout the global north over the past few decades, the privatization of state-owned productive enterprises throughout the world, 1

To say that capitalism must have something “outside of itself” goes against the ontological foundations of some world historical perspectives and theorizations of what has been called the socionatural or sociomaterial. In regard to the former, in some way everything is inside the capitalist world system. As a result, it may be better to say that capitalism creates an “other” inside of itself. In regard to the latter, I do not intend to detach nature from society. As a result, I accept this idea as an empirical, rather than an a priori, theoretical claim.

The Neoliberal Kharisiri: 1985–1993

57

and the ongoing transfer of devalued assets (i.e., land, houses, retirement funds, etc.) from the general masses to the rich after the global financial crisis of 2008. As Harvey notes, if “empty land or new raw material sources, do not lie to hand, then capitalism must somehow produce them” (2003:143). Over the past thirty years, the processes underpinning accumulation by dispossession were tried, trued, and tested in the global south – in places like Bolivia. In the early 1980s, the global economic downturn led to a dramatic devaluation of mineral prices and thus of Bolivia’s top-grossing commodity and state-owned enterprise – tin and COMIBOL. Shortly thereafter, the neoliberal kharisiri emerged in Bolivia. Many of the country’s publicly owned and operated industries were privatized, labor regulations were made non-existent, and the country’s borders were opened up to unabated flows of commerce and finance. Ushered in during a moment of economic crisis, Bolivia’s neoliberal turn was championed by its supporters as a move toward fiscal discipline and economic growth. After the move brought the country’s hyperinflation problems under control, Bolivia would go on to serve as an iconic model of the wondrous workings of neoliberal ideology for international lending agencies and other believers in the “natural” corrective power of free markets. For most Bolivians, the observations made by critical scholars of neoliberalization and accumulation by dispossession proved to be truer to form than the promises made by free-market ideologues. In the words of Jamie Peck and Adam Tickell, processes of neoliberalization and accumulation by dispossession most often result in “deleterious social consequences and perverse externalities” (2002:399). Indeed, as austerity measures and free-market policy reforms became the prescription for Bolivia’s political and economic plights, the country’s people were dispossessed of the riches beneath their feet, their jobs, and their rights. And as their everyday livelihood strategies were thrown into disarray, many Bolivians found it difficult to make ends meet. Although the negative effects of this dispossession – of the neoliberal kharisiri – in Bolivia have been well documented, the full line-up of its proponents has not. Academics and anti-neoliberal social movements alike have aptly pointed to transnational corporations, international financial institutions, and their associated representatives as the implementers and benefactors of Bolivia’s neoliberal turn. However, another protagonist actively promoted the wonders of an unabated free market in the country – the domestic mining elite. For decades the domestic mining elite found their profit-making potential plagued by the presence of COMIBOL, a strong national labor union, and a clientelistic state that worked in the interest of the agricultural elite. Through processes of neoliberalization, however, the domestic mining elite sought to alter the power relations in Bolivia. In particular, the mining elite took control of the state and tacitly privatized Bolivia’s mineral sector to produce new sites of investment, ended preferential subsidies and tariffs to counter the power of the agricultural elite, and eliminated labor protections to weaken the power of workers. In Bolivia’s neoliberal turn, the domestic mining elite thus sought

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Market Justice: Political Economic Struggle in Bolivia

to diminish the power of their key rivals by taking control of the state and reconstructing who controlled the primary means through which the country was incorporated into the global economy. Macroeconomic Stability and Neoliberal Reform In 1985, Bolivia took its first neoliberal plunge as the newly elected government implemented a policy package known as the Nueva Pol´ıtica Economica (NPE).2 ´ The government promoted the NPE as a corrective measure intended to end hyperinflation and economic stagnation and implemented its policies quickly through a method that eventually became known as “shock therapy.” As newly elected MNR senator, mining magnate, and future president Gonzalo Sanchez ´ de Lozada noted when speaking about Bolivia’s “condition” during the 1980s and the “healing powers” of such a technique: You have to cure the patient. Shock treatment means you have a very sick patient [and] you have to operate before the patient dies. You have to get the cancer out, or you have to stop the infection. That’s why we coined the phrase that inflation is like a tiger and you have only one shot; if you don’t get it with that one shot, it’ll get you. You have a credibility that you have to achieve. If you keep to gradualism, people don’t believe you, and the hyperinflation just keeps roaring stronger. So shock therapy is get it over, get it done, stop hyperinflation, and then start rebuilding your economy so you achieve growth. (Sanchez de Lozada in PBS 2001) ´

Although many Bolivians were indeed shocked by the NPE, the therapy seemed to only work to advance the interests of the doctors – the interests of the mining elite. The NPE was formed behind closed doors under the guidance of Sanchez de ´ Lozada. He was joined by Minister of Planning Guillermo Bedregal, Roberto Gisbert from the Treasury, Juan Cariaga as an independent economist and banker, and Fernando Romero from the business community. Both Sanchez de ´ Lozada and Romero were prominent members of the CEPB (Conaghan and Malloy 1994:126). Many accounts of Bolivia’s neoliberal turn credit Harvard economist Jeffrey Sachs, the IMF, and World Bank with designing and implementing the NPE. However, Sachs himself has fully attributed the “genius” and “brilliance” behind the plan to Sanchez de Lozada (Sachs in PBS 2000:7). ´ In addition, the IMF and the World Bank were initially skeptical of the plan (Jenkins 1997:312). As Sachs argues, the IMF and World Bank nearly “torpedoed” the “success” of the NPE by demanding that the Bolivian government immediately resume payments on the international loans it inherited from the military governments of the 1970s (Sachs 1998:19; 1987:281). Although Sachs, the IMF, and World Bank would later play crucial roles in aiding and abetting 2

Nueva Pol´ıtica Economica = New Economic Policy. ´

The Neoliberal Kharisiri: 1985–1993

59

processes of neoliberalization in Bolivia, their direct influence in designing the NPE was limited. Sanchez de Lozada and his team drew inspiration for the NPE from Ludwig ´ Erhard’s weekend “economic miracle” in post-World War II Germany (Sachs in PBS 2000:8). Erhard, West Germany’s postwar Minister of Economic Affairs, stopped hyperinflation in his country in a matter days by implementing a new monetary regime through which the prewar Reichmark was converted to the postwar Deutschmark at a 10:1 rate. Through the policy, Erhard reduced the West German monetary supply by 90 percent and increased the market value of the country’s currency. At the same time, Erhard ended price and wage controls and slashed taxes on incomes and capital. Free-market ideologues credited the latter policies for a “generation of ‘miraculous’ growth” in West Germany, conflating the solution to the country’s monetary crisis with the solution to its economic crisis (Peck 2008:19). In Bolivia, Sanchez de Lozada adopted and ´ implemented Erhard’s model through the NPE and the state implemented a new monetary regime while simultaneously laying the foundations for a purportedly free-market economy. Under the new monetary regime, the state sought to stabilize Bolivia’s currency. To do this, the state stopped printing money and implemented a managed flexible currency exchange rate that pegged the Bolivian peso to the dollar at the going market price (Morales 1988; Sachs 1987). This led to an immediate devaluation of the Bolivian peso, but provided it with a level of stability. With the dollar having already replaced the Bolivian peso in the black market, the peg made the two currencies more easily exchangeable. In addition, it allowed the Bolivian peso to be seen as legitimate in everyday commerce. In order to further facilitate this exchange and make daily operations and transactions easier, the state also replaced the Bolivian peso with the boliviano at the rate of a million to one.3 To further stabilize the boliviano, the state also sought to increase its monetary reserves at the Banco Central de Bolivia (BCB).4 It did this in two primary ways. First, the state made it legal for dollars to be used and maintained as legal tender at the BCB. Whereas previously deposited dollars were converted to Bolivian pesos, the NPE made it possible for people to deposit dollars and hold dollar accounts. Legalizing dollar accounts allowed people to make dollar deposits without having to worry about the devaluation of their money. The central bank also allowed people to deposit dollars with no questions asked. As a result, those participating in Bolivia’s booming cocaine industry were able

3

4

Although this change drastically reduced the amount of money in circulation, its effects on stabilizing Bolivia’s hyperinflation are debatable. Because the Bolivian peso was already connected to the value of the dollar, the value of Bolivia’s currency did not drastically change when the boliviano was introduced (see Morales 1988). Banco Central de Bolivia=Bolivian Central Bank.

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Market Justice: Political Economic Struggle in Bolivia

to legally launder their earnings through the BCB (Andreas 1991:51; Kohl and Farthing 2006:71; Farthing and Villegas 1991:27). Second, the state ended subsidies on the internal sale of petroleum products and redirected the earnings of YPFB – the state owned oil and natural gas company – to the central bank’s coffers. Ending subsidies, the state priced its oil and oil derivatives slightly above the going international market rate. This led to a sevenfold increase in the price of domestic petroleum products. The state then prohibited public investment in new capital goods in the hydrocarbon sector, obligating YPFB to send all of its earnings to the BCB (GOB 1985a). As an engineer and ex-government official from the time described the effects of the changes: YPFB was a self-sufficient business. It was autonomous, independent of the decisions of the government. Then the government intervened . . . They began to utilize the funds, the money, the resources generated by YPFB in order to stop inflation . . . Then they established that all of the funds of YPFB would be utilized for the monetary stabilization. They closed the accounts of YPFB and actions practically bankrupted it.

Although starving YPFB would eventually lead to the public company’s demise, in the short run, doing so allowed the state to bolster its revenues. Siphoning funds from YPFB and making changes to the country’s monetary policy, the state did increase the BCB’s monetary reserves, help stabilize the boliviano, and end Bolivia’s hyperinflation crisis. By 1987, inflation rates fell to a relatively low 14.6 percent (Farthing and Villegas 1991:27). However, designed after Erhard’s weekend economic miracle, the changes that came with the NPE extended beyond monetary policy. Through the NPE, the Bolivian state also altered the regulations surrounding trade, finance, and labor. In particular, the state eliminated restrictions on imports, implemented a uniform import tariff of 20 percent, loosened rules surrounding capital flows, terminated subsidies and price controls, and made labor more “flexible” by guaranteeing the right to free contract (Jenkins 1997:314; Morales 1988:321). For most Bolivians, such changes worsened the everyday problems they faced. After the implementation of the NPE, employment levels and real wages decreased. The state’s shift to guarantee the right to free contract allowed employers to freely discharge workers, eliminated minimum wage provisions, and made wage negotiations the responsibility of individual employees. The changes made both public and private employers less subject to the power of collective bargaining and effectively undermined Bolivia’s historically strong labor movement. With the new regulations in place, the state eliminated 10,000 public administrative employees and close to 25,000 public school teachers (Kohl and Farthing 2006:71). In Bolivia’s small manufacturing sector, employers shed around 30,000 jobs after the introduction of the NPE – approximately 20 percent of the manufacturing sector’s workforce (Jenkins 1997:317). Similarly, the mining sector experienced large cuts. Between 1984 and 1986,

The Neoliberal Kharisiri: 1985–1993

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employment in the mining sector as a whole decreased from 83,681 employees to 49,187 employees. At COMIBOL alone, employment decreased from 27,631 to 8,919 (Contreras and Pacheco 1989:145). Those who were able to maintain their jobs or find new work found their wages cut or worth less, as real wages dropped by more than 30 percent (Kohl and Farthing 2006:71). Rural communities and campesinos were also affected by the NPE. On the one hand, state policies that liberalized trade and eliminated import restrictions on agricultural goods allowed cheaper imports from neighboring countries to flow into Bolivia. Prior to the NPE, tariff rates on agricultural products averaged 28.1 percent and import restrictions made the effective rate of protection close to 32 percent (Morales 1990), but decreasing import tariffs to 20 percent and lifting restrictions on the imported quantities of agricultural goods pushed down the prices that campesinos received from small-scale agricultural production. On the other hand, some workers who lost their jobs and were unable to find new employment returned to their rural communities of origin (Yashar 2005:184). With a lack of available land and no jobs to offer, the influx of people merely stressed Bolivia’s rural regions both economically and ecologically. Seeking to eek out a living, many of these people wound up working in the country’s most lucrative informal sector – coca and cocaine production (Healy 1997). Among the manufacturing elite, the elimination of protective tariffs and subsidies made it difficult to compete internally with cheap imports and externally in the global market (Farthing and Villegas 1991:25). Although primary commodities had dominated Bolivia’s export economy for centuries, tariffs and subsidies had protected a small yet significant manufacturing sector that marginally diversified the economy. Prior to the NPE, manufactured goods on average held close to a 50 percent tariff rate. Combined with import restrictions, the effective rate of protection for manufactured goods was more than 90 percent (Jenkins 1997:315). However, between 1984 and 1987, decreasing import tariffs led to increases in consumer goods imports of nearly 250 percent (CEPALSTAT 2010). In 1988, the manufacturing sector made a mild recovery, as exports of semi-processed manufactured goods increased (Jenkins 1997:320). However, the production of processed manufactured goods remained relatively stagnant and consumer goods imports continued to increase. The NPE also negatively affected Bolivia’s eastern landed agricultural elite, who for decades had benefitted from generous credit arrangements, government subsidies, and preferential import and export tariffs. As the state cut government credit programs and ended agricultural subsidies, the eastern agricultural elite’s business organization – the Camara Agropecuaria del Oriente (CAO) – ´ vocally opposed the liberalization strategies of the NPE and labeled them as “unfair and destructive” (Conaghan and Malloy 1994:156). The CAO argued that the termination of subsidies gave agricultural producers from neighboring countries – where subsidies still existed – an unfair advantage over Bolivian agricultural goods in both the internal and global market. In addition, the

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Market Justice: Political Economic Struggle in Bolivia

eastern agrarian elite suffered from the elimination of differential tariffs and increases in fuel prices. Having previously benefitted from preferentially low tariff rates on the import of capital goods, the implementation of a unified 20 percent import tariff raised the costs of machinery and agricultural inputs such as tractors, combines, fertilizers, and pesticides. In addition, because large amounts of diesel fuel were used to plant and harvest their crops, the end of fuel subsidies increased their production costs. However, some segments of Bolivian society did benefit from the NPE. Written by Gonzalo Sanchez de Lozada – one of Bolivia’s largest private mining ´ magnates – the NPE unsurprisingly benefitted the internal mining elite. As COMIBOL suffered from the continuing fall of global tin prices and decades of insufficient funding, the state and its private mining constituency was able to portray the public company as economically unviable and thus implement policies through the NPE that opened up the mining sector to greater levels of private investment. Prior to the introduction of the NPE, COMIBOL had been legally guaranteed exclusive rights to 80 percent of Bolivia’s mineral reserves. However, Supreme Decree No 21398, implemented in 1985 shortly after the NPE, ended this state-sponsored monopoly and provided private investors access to some of the country’s more proliferative mineral supplies. Although the state remained the legal owner of Bolivia’s mineral reserves, private firms gained increasing access to minerals through new joint ventures and lease arrangements (Morales and Espejo 1994:21–22; GOB 1985b). In addition, the state again granted investors the right to freely commercialize and export the minerals they extracted without having to work through the Banco Minero (GOB 1985a). In the five years after the implementation of the NPE, the mining sector as whole experienced a 19.7 percent average annual growth rate in production. The majority of this growth resulted from the private mining elite’s increases in investment, extraction, and exports. Between 1986 and 1990, private investment in the mining sector grew by 26.6 percent annually, production by privately owned firms grew by 29.3 percent annually, and exports by private mining firms increased from US$61.3 million to US$158 million (Ministerio de Miner´ıa y Metalurgia 2010:28; 94–96). As private investors increasingly took control of COMIBOL’s mines and production activities, the state company went from producing 58 percent of Bolivia’s minerals to less than 20 percent of Bolivia’s minerals. By 1990, the total value of the public firm’s mineral production was less than a third of the total value of private firm’s mineral production (World Bank 1997:15; Pacheco Torrico 1989:30). Firms producing zinc and gold made out particularly well. Between 1986 and 1990, zinc and gold were two of the only major minerals produced in Bolivia that increased in value in the global marketplace. The price of zinc exported from Bolivia increased by 46 percent and the price of gold increased by 6 percent during this time. Zinc production experienced more than a threefold increase and gold production experienced more than a sevenfold increase (Ministerio de

The Neoliberal Kharisiri: 1985–1993

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table 3.1. Annual Average Growth Rate by Sector, 1986–1990 (by percent as contribution to GDP) Mining Manufacturing Hydrocarbons Agriculture GDP

19.7 3.7 2.7 0.5 2.4

Source: World Bank (1992: Annex Table 1.1).

Miner´ıa y Metalurgia 2010:45–46). Controlling more than 80 percent of the zinc extracted in Bolivia at the time, Sanchez de Lozada’s Compan´ ´ ˜ ıa Minera del Sur S.A. (COMSUR) gleaned substantial profits. Controlling more than 95 percent of the gold extracted in the country at the time, the Empresa Minera Unificada S.A. (EMUSA) also did quite well. Together, the two companies went from controlling 47.6 percent to 68.8 percent of private mineral production in Bolivia (Contreras and Pacheco 1989:52). Despite the mining elite’s advocacy for and obvious gains from the implementation of processes of neoliberalization in Bolivia through the NPE, it neither immediately promoted the wholesale privatization of the state’s public industries nor flung Bolivia’s doors wide open to the unabated flow of foreign investment. Instead, it instrumentally produced spaces of accumulation in which it could directly benefit while simultaneously pushing the state to utilize the revenues of public firms such as YPFB to stabilize Bolivia’s economy. Indeed, the private mining elite would not openly embrace transnational capital nor push for a full-fledged privatization of Bolivia’s public industries until it had successfully staked out its position as the dominant actor in Bolivia’s mining sector, drained its own investment potential, and undermined the power 180 160 Millions of $US

140 COMIBOL

120 100

Private Mining Firms

80 60

Cooperaves and Arsinal Mining

40 20 0 1985

1986

1987

1988

1989

1990

Year

figure 3.2. Mineral Exports by Subsector, 1985–1990. Source: Ministerio de Miner´ıa y Metalurgia (2010).

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of its largest internal opponents to accumulation strategies – labor and the agricultural elite. Protests and Pacts The mining elite’s ability to produce new spaces of accumulation through the NPE proved to be easier than its ability to secure them. The negative effects of the NPE made what support existed for Bolivia’s neoliberal turn relatively short lived among most segments of the population. Labor never supported the program and the landed agricultural elite soon noticed their access to state resources had nearly disappeared. When Bolivia’s workers attempted to resist the waves of dispossession, the tide against them proved to be too strong. The COB frequently staged largescale protests after the implementation of the NPE. However, the government repeatedly suppressed public discontent by declaring states of siege and utilizing military intervention. It also continually sought to undermine protests and legitimate its own repressive tactics by declaring the actions of opposition groups to be subversive attempts to destabilize the government (Conaghan and Malloy 1994:195). By the end of the 1980s, the government’s continual use of military force to quell unrest made it strikingly similar to its dictatorial predecessors. The power of the labor movement was also undermined as the government used the NPE to gut its most powerful constituency – the miners. Mass layoffs in the mining sector, the diminishing role of COMIBOL, and the changing form of mining in the country led to a severing of the visceral link between the veins of miners and the veins of Bolivia’s mineral wealth. Those who were unemployed were forced to express their grievances in the streets. Outside of the mineral shafts, they no longer had easy access to the jugular of the Bolivian economy and could not bring the country’s primary profit-making activities to a halt through work stoppages or slowdowns. Those who managed to remain employed faced both changing and unstable work conditions. On the one hand, employment was tenuous at best. The right to free contract guaranteed that a miner could be fired at any time. On the other hand, the very means of extraction were changing. Whereas COMIBOL utilized relatively more laborintensive underground lode mining practices to extract tin, private firms began to use less labor-intensive alluvial and aboveground mining practices. Through these changes, the primary means of contestation shifted from organized collective action to individual livelihood struggles and from the individual within the earth to the machine upon the earth. The traditional points of power held by the country’s miners thus proved to be less viable and largely ineffective. Discontent not only arose among the popular classes, however. Segments of the elite – in particular, the landed agricultural elite – also eventually opposed the NPE. Cuts to agricultural subsidies and increasing fuel prices adversely affected the landed agricultural elite’s profits (Conaghan and Malloy 1994:199; Kohl and Farthing 2006:70). In addition, the landed agricultural

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elite saw their most accessible pot of state money – departmental hydrocarbon royalties – diminish. As the global prices of oil and natural gas fell and the starving of YPFB led to decreasing rates of hydrocarbon extraction, Bolivia’s eastern hydrocarbon-producing departments experienced declining royalty returns from the oil and natural gas extraction in their departments (INE 2010a; 2010b). In addition, as divisions among Bolivia’s elite fractions began to foment, the “pacto por la democracia” began to erode shortly after its formation. Fissures within the ruling bloc became apparent when the landed agricultural elite called for increases to the levels of state funds being directed to departmental coffers. In particular, the landed agricultural elite began to push for greater regional remuneration from the diminishing quantities of oil and natural gas being extracted from their soils. However, the government’s negotiating team led by Sanchez de Lozada adamantly refused. According to Sanchez de Lozada, ´ ´ granting regions greater concessions would violate the “no compromise position” he upheld surrounding the use of state funds. In response, the regional civic committees began to lobby their representatives, largely of the Accion ´ Democractica Nacional (ADN), to put forward a congressional censure of the ´ central government’s cabinet in an attempt to get rid of people like Sanchez ´ de Lozada who refused to satisfy their demands. Although the censure passed, the central government argued that there was no legal mandate requiring a change to the cabinet. After negotiations between the party leaders of the MNR and ADN who originally negotiated the “pacto por la democracia,” the central government cabinet remained intact and the hydrocarbon-producing regions received a one-time compensation payment for the hydrocarbon riches beneath their soils (Conaghan and Malloy 1994:156; 192). However, the divide between Bolivia’s elite factions and the MNR and ADN proved to be irreversible. In 1989, then MNR presidential candidate Sanchez de ´ Lozada broke the pact his party held with the ADN. In the election, Sanchez de ´ Lozada received a plurality of the vote with Banzer coming in second and Jaime Paz Zamora of the centrist Movimiento de la Izquierda Revolucionaria (MIR) finishing third. Attempting to rebuff Sanchez de Lozada and the MNR’s power ´ grab, the ADN and MIR worked together to form the Acuerdo Patriotico ´ and take control of the state.5 Consolidating their congressional votes, the coalition made Paz Zamora president but granted representatives of the ADN a significant amount of seats within his cabinet. According to James Dunkerley, this allowed Banzer to indirectly control the state while Paz Zamora “attended football matches and signed agrarian reform titles” (1992:241). An Opening Invitation The defeat of the MNR proved to be only a minor deterrent to the implementation of processes of neoliberalization in Bolivia. By the late 1980s, the mining 5

Acuerdo Patriotico = Patriotic Accord. ´

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Market Justice: Political Economic Struggle in Bolivia

elite had already positioned itself to benefit from – and began to advocate for – a full-fledged free market insertion into the global economy. Bolivia’s labor movement was no longer a viable opponent to their accumulation strategies. The landed agricultural elite seemed to be temporarily appeased by the Acuerdo Patriotico. And the mining elite had successfully gained control over the major´ ity of Bolivia’s mineral wealth. As the new ruling coalition thus focused on pursuing temporary gains to satisfy its constituents, the MNR and mining elite continued to expand the neoliberal path they had paved since the late 1970s. Upon taking power, the ADN and MIR coalition most directly helped their friends and constituents by putting them on the government’s payroll. As old patronage networks of the Banzer era reemerged, the size of the government increased substantially. The coalition government created three new ministries and more than a dozen subministries. In the process, they added an estimated 20,000 jobs to the public sector (Conaghan and Malloy 1994:230). The ADN and MIR coalition also revived Banzer’s tendency to provide preferential treatment to eastern agriculture elites. In particular, the ADN and MIR coalition began to mirror the development strategies of Banzer’s government in the 1970s by providing eastern agricultural elites with easy access to credit. For example, in 1990, the government accepted a US$35 million loan from the World Bank to develop a land use plan in the eastern lowlands, increase the production and export of soy and wheat, develop sustainable credit sources for agricultural producers, and price publicly held land (World Bank 1998:ii). CORDECRUZ – the regional development corporation in the Department of Santa Cruz – was designated as the initial agency responsible for overseeing the project (World Bank 1998:8). The World Bank later deemed the project a success, with agricultural production in Santa Cruz increasing by 400 percent between 1990 and 1996. However, a noted failure of the project was its inability to extend credit to small landholders (World Bank 1998:3–4). Given the dominant role played by eastern agricultural elites in CORDECRUZ, such a failure was far from surprising (see Chapter 2). Additionally, as occurred in the 1970s, the government took on debt as CORDECRUZ coordinated the extension of cheap credit to promote large-scale capital-intensive agricultural activities and thus the profit-making activities of the landed agricultural elite. However, changes made by the ADN and MIR coalition did not seriously derail the processes of neoliberalization introduced by the MNR and the mining elite. Indeed, in some ways the ADN and MIR coalition can be credited with helping to push such processes forward. Prior to losing control of the state, the MNR introduced a law to make the investment environment in Bolivia more attractive, secure, and lucrative to private firms – the Ley de Inversiones.6 As written in Article 1 of the Ley de Inversiones, the objective of the law was “to stimulate and guarantee national and foreign investment in order to promote and increase the economic and social development of Bolivia through 6

Ley de Inversiones = Law of Investments.

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a normative system that applies equally to investments by national and foreign [entities]” (GOB 1990a). The law guaranteed the free movement of capital and capital goods, assured equal rights for foreign and national firms to own private property, and formally recognized bi- and multilateral forms of dispute arbitration. In addition, the law set up norms for joint ventures, both between the state and investors and among private investors themselves. Although the law was written prior to the ADN and MIR coalition assuming control of the state, it did not receive legislative approval until 1990 and was made official with the signature of Paz Zamora. The legal changes represented a shift in the mining elite’s primary accumulation strategy. Since 1985, the mining elite had largely derived its profits from their own investments. However, by the late 1980s, the fruits of their investments were already tapping out and the average annual growth rates of their extraction activities began to decline (see Miner´ıa y Metalurgia 2010). Thus, for the mining elite, the Ley de Inversiones not only secured their investments, it also provided a means to more easily find transnational partners and investments to bolster their declining extraction rates and profit margins. And through the law, Bolivia opened its doors to an expanding transnational extraction industry. The legal changes worked in the interests of both the mining elite and transnational firms. Operating in joint ventures, the mining elite enhanced the amount of capital invested in their projects and transnational corporations found partners to help them navigate a traditionally difficult country for investment. Formally recognizing bi- and multilateral forms of dispute arbitration, both the mining elite and transnational mineral firms were also legally able to better protect their investments. As a lawyer who worked with private investors in Bolivia’s natural resource sector stated: There are two [arbitration] options if you have a dispute that cannot be amicably resolved: a contractual agreement and a trade agreement. If there is an arbitration clause in a bilateral investment treaty, then an investor [from the country the agreement is with] is just as free to apply that clause as they are the contract arbitration clause. And usually that puts the arbitration case in a neutral site, outside of the country where the dispute is, and obviously that is much more convenient and much more attractive for the investor.

For transnational corporations, the law thus allowed them to bring investment disputes to ‘neutral’ sites located outside of Bolivia where they were more familiar with the rules of the game. For the mining elite, entering a joint venture with a company based in a country that fell within the jurisdictions of a bi- or multilateral trade agreement allowed them to avoid Bolivian courts that were at times less favorable to business. As the mining elite entered into joint ventures with transnational extraction firms, the foreign direct investment into Bolivia increased. Since the revolution of 1952, few transnational firms had shown interest in Bolivia’s lucrative

Market Justice: Political Economic Struggle in Bolivia

68 140

Millions of US Dollars

120 100 80 60

FDI in US$Millions

40 20 0 1985

1986

1987

1988

1989 1990 Year

1991

1992

1993

1994

figure 3.3. Foreign Direct Investment in Bolivia’s Mineral Sector, 1985–1994. Source: UNCTAD 2004.

mineral reserves and foreign direct investment was limited. However, after the introduction of the Ley de Inversiones, transnational extraction firms slowly entered the Bolivian mineral industry. From 1990 to 1994, foreign direct investment in mining experienced nearly an eightfold increase and transnational extraction firms went from contributing around 10 percent of total investments in the sector to close to 40 percent (see Figure 3.3). As they did, transnational mineral firms such as U.S.-based Battle Mountain Gold Company and Apex Silver, as well as UK and Australian-based Rio Tinto became major players in the extraction, transport, and sale of the mineral wealth beneath Bolivia’s soil. Through the Ley de Inversiones, the path to open up Bolivia’s other major extractive industry to private investment was also paved. Complementing the Ley de Inversiones was the Ley de Hidrocarburos No 1194, also passed in 1990.7 The Ley de Hidrocarburos No 1194 did not radically alter any legal precedents not already changed through the Ley de Inversiones. However, the law made it clear that Bolivia was seeking to invite transnational investors into its energy sector (GOB 1990b). Although investment in the sector remained largely stagnant until the mid-1990s, more than a dozen transnational firms including Esso, Texaco, Phillips Petroleum, Chevron, Petrobras, and Enron signed on to joint venture agreements with YPFB after the law was passed (World Bank 1994:3). Accumulating Mineral Riches for the Few by Dispossessing the Many In Bolivia’s initial neoliberal turn, the mining elite promoted processes of neoliberalization to enhance their own power and employed tactics of accumulation by dispossession to produce a new site of accumulation. Prior to the 1980s, the state monopoly over the majority of Bolivia’s richest mineral 7

Ley de Hidrocarburos = Law of Hydrocarbons.

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reserves, the political dominance of a clientelistic landed agricultural elite, and strong labor unions limited the profit-making potential of the mining elite. However, by tacitly privatizing the mining sector, eliminating the subsidies, credit lines, and other patronage networks, and promoting the right to free contract, the mining elite took control of Bolivia’s most lucrative economic sector and weakened the ability of its major opponents to alter the country’s neoliberal path. The changes had detrimental effects on many segments of Bolivian society and led to the eventual electoral defeat of the MNR in the late 1980s. However, the MNR and mining elite had already put into motion a series of laws that further opened up the Bolivian economy to free-market rule. These laws would eventually allow them to take advantage of their dominant position in the country’s mineral sector by aligning with transnational extraction firms and dramatically increasing the flows of raw materials leaving the country. However, the legal changes would have several unexpected consequences. Opening up the country’s hydrocarbon sector to transnational investment would prove to alter not only the power relations within Bolivia, but also how the country was incorporated into the global economy. Although Bolivia would remain primarily a space of accumulation by dispossession, its dominant profit-making activities would become centered on the extraction and transport of natural gas. And as this shift occurred, Bolivia would increasingly become a space of marginalization in which greater swaths of its population would be excluded from participating in the global economy.

figure 4.1. From the Outside Looking In

4 Opening Up to the Outside: 1993–2003

There is one peculiarity about the history of the Latin American states, which I am sure they are keenly aware of. You hear of “concessions” to foreign capitalists in Latin America. You do not hear of concessions to foreign capitalists in the United States. . . . States that are obliged, because their territory does not lie within the main field of modern enterprise and action, to grant concessions are in this condition, that foreign interests are apt to dominate their domestic affairs, a condition of affairs always dangerous and apt to become intolerable. . . . The dignity, the courage, the self-possession, the self-respect of the Latin American states, their achievements in the face of all these adverse circumstances, deserve nothing but the admiration and applause of the world. They have had harder bargains driven with them in the matter of loans than any other peoples in the world. Interest has been exacted of them that was not exacted of anybody else, because the risk was said to be greater; and then securities were taken that destroyed the risk – an admirable arrangement for those who were forcing the terms! – Woodrow Wilson (1913)

In the 1980s CBS television series Dallas, the fictional character J. R. Ewing successfully made millions in a seemingly cutthroat and competitive oil industry. In many ways, he embodied the popular perceptions of everything that is Texas. J. R. had a larger-than-life personality, sported a Texas-size cowboy hat, and spoke with a deep southern drawl. He came from a wealthy ranching and oil family. His father was a self-made man, a Texas wildcatter who started Ewing Oil in the 1920s. His mother married his father to save the family ranch during the Great Depression. Starting at the age of five, J. R. was groomed to maximize profits and be the heir apparent of Ewing Oil. He eventually served as the president of the family oil company while his brothers primarily took care of the ranch. Although Ewing Oil faced its ups and downs, J. R. continually 71

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Market Justice: Political Economic Struggle in Bolivia

helped the company through economic troubles by investing in overseas offshore oil and manipulating oil prices by trying to induce war in the Middle East. If J. R. Ewing had been Bolivian, he would have undoubtedly lived in the Department of Santa Cruz. After all, many see Santa Cruz as the Texas of Bolivia. It is the largest department in the country. The wealthiest residents work for hydrocarbon companies and are ranchers or hacienda owners. It is the birthplace of a fair share of Bolivia’s presidents and dictators. Subtle threats of succession are always in the air. The people even have their own regional dialect of sorts. Although oil industry representatives, ranchers, and hacienda owners are often popularly conceptualized as part of a common elite in Texas and Santa Cruz alike, there are no J. R. Ewings in Bolivia. A powerful internal elite faction whose interests are directly tied to the actual profit-making activities within Bolivia’s hydrocarbon sector – to the extraction, transport, and sale of oil and natural gas – has historically not existed. And in Bolivia’s second round of neoliberalization in the 1990s, the landed elite and transnational hydrocarbon firms had somewhat contradictory interests. Indeed, if J. R. Ewing would have wanted to operate in Bolivia, he would have needed to find some friends among those who were already powerful within the country – among the mining elite. The means through which accumulation by dispossession occurs is often predatory by nature, steeped in a type of fraud that could easily be seen as a looting of the assets of the already poor by the already rich. In the global north, this became readily apparent in the Ponzi schemes and shadowy derivatives markets that contributed to the global financial collapse in 2008. In what turned out to be a game of blackjack with a stacked deck dealt by the purportedly invisible hand, fictitious prices were put on imaginary goods that yielded incredible profits for the lucky friends of the dealer. However, when the dealer reached the end of the deck, there was a near collapse of the capitalist system. The losers were not those who directly contributed to the cause. Instead, those who stacked the deck acquired the discounted goods of the relatively innocent sitting next to them – those who lost their jobs, homes, and retirement savings (see Harvey 2010; Foster and Magdoff 2009). As Andrew Mellon once put it, “In a depression, assets return to their rightful owners” (in Harvey 2003:151). In 1993, the Movimiento Nacionalista Revolucionario (MNR) and the mining elite returned to power. The game of blackjack and the Ponzi schemes were laid out in what was called the Plan de Todos.1 The invisible hand belonged to one of the original orchestrators of Bolivia’s initial embrace of neoliberal 1

Plan de Todos = Plan for All.

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ideology, newly elected President Gonzalo Sanchez de Lozada. His friends – ´ the “rightful owners” – were transnational extraction firms and the discounted goods were Bolivia’s remaining publicly owned enterprises; in particular, the state-owned oil and natural gas company, Yacimientos Petrol´ıferos Fiscales Bolivianos (YPFB). Through the Plan de Todos, Sanchez de Lozada sought to further Bolivia’s ´ free-market turn by ending state participation in “productive enterprises and direct financial investment” (in Kohl and Farthing 2006:86). In many ways, the Plan de Todos made Bolivia’s hydrocarbon sector and other state-owned industries into near textbook examples of producing an “other” through accumulation by dispossession. Many were lucrative state assets sold well below their expected values and their buyers immediately turned them to profitable use. In addition, the Plan de Todos resulted in many of the observed effects of such processes: increased levels of foreign direct investment, increased gross domestic product, and of course, a transfer of wealth and power from the already poor and powerless to the already rich and powerful. However, the Plan de Todos was not merely an economic measure. To cloak the looting of one of the country’s most lucrative economic sectors, the Bolivian government implemented a series of democratization measures that purportedly decentralized state power. Although the measures were promoted as a response to local communities’ demands for greater autonomy, the real power local communities obtained was limited. Indeed, as Jamie Peck and Adam Tickell (2002:386) note, “in the asymmetrical scale politics of neoliberalism,” local institutions and actors are “given responsibility without power, while international institutions and actors were gaining power without responsibility.” And in Bolivia, this – at least temporarily – undoubtedly proved to be true. At the local level the Plan de Todos functioned to alter power relations within Bolivia in more ways than one. Not only did Bolivia’s democratization and decentralization measures affect the traditionally less powerful, they also affected the traditionally powerful – in particular, the landed agricultural elite. In other words, the Plan de Todos did not result in a uniform transfer of wealth and power to Bolivia’s rich. Instead, the Plan de Todos functioned to solidify the power of the mining elite as it aligned itself with transnational oil and gas firms. Without a powerful internal elite directly linked into the hydrocarbon sector, further opening up Bolivia’s hydrocarbon sector to private investment allowed the mining elite to build a coalition with transnational oil and gas firms. Both favored a neoliberal development model that was based in the extraction and export of natural resources. Within this context, the mining elite used the Plan de Todos to simultaneously localize the demands of less powerful actors while undermining the power of the landed elite. Although enhancing the investment opportunities for transnational oil and gas firms in Bolivia could have worked in the interest of the landed elite,

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the mining elite made sure that it secured and received the majority of benefits that would arise from enhanced investment in the sector. And through the Plan de Todos, the J. R. Ewings of the world thus became friends with the powerful in Bolivia and shifted how the country was incorporated into the global economy. Power without Responsibility In early 2008, I began to frequent a stretch of road on the outskirts of the city of Santa Cruz de la Sierra. The road was one of the main arteries running out of the ever-increasing peri-urban rings of one of Bolivia’s largest growing urban centers. It passed through the flat semitropical flood plains of eastern Bolivia before eventually scaling the breathtaking mountainous ravine that split the arid Chaco region from the humid Chapare. I would become all too familiar with kilometers two to twelve of this road, where the headquarters of some the most powerful transnational firms operating in Bolivia were located. At kilometer 3.5 was Petrobras, Bolivia’s largest transnational investor. Next was global powerhouse Halliburton S.A. A little ways further and a block off the highway was the Camara Boliviana de Hidrocarburos (CBH), the Bolivian hydrocarbon ´ business group. And another kilometer or so down the road was Transredes, at the time a Shell and Ashmore Energy hydrocarbon transport consortium that was previously owned in part by Enron. Inside these companies’ ten-foot walls, armed security gates, and finely manicured lawns, I began to learn how the hydrocarbon sector in Bolivia truly operated. In January of 2008, I found myself behind these walls for the first time. Walking through the front door after passing through security, I felt as if I had stepped out of Bolivia and into a Houston office building. Eventually I made my way to the office of the company’s CEO. Once I was seated on the plush black leather sofa, the CEO and I began to chat. I asked him a bit about the office and how long the company had operated in Bolivia. After a few minutes of casual conversation, he began to talk about the 1990s when he first showed up in Bolivia. Tucking back a grin while fondly reflecting back on the times, he made it clear that things were easier then. Explaining why, he bluntly noted: The producer explored, found, took, and received the resource. It was a dream. . . . A business would sell it [the gas]. It would set the prices. It would find the clients. It developed the market. And the state didn’t get into it. . . . Under this arrangement, those who managed the cash, the cash flow, were the businesses.

And in this neoliberal dreamland, transnational energy firms entered the country and dispossessed the Bolivian masses of their oil and natural gas wealth.

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table 4.1. Capitalized Segments of YPFB Value of Capitalized Firm (US$ millions)

Firm

Responsibility

Shareholders

Country of Origin

Petrolera Chaco Empresa Petrolera Andina

Exploration and extraction Exploration and extraction

Amoco

USA

306.7

Repsol-YPF

264.8

Transredes

Transport

Spain/ Argentina Argentina Spain USA Holland

Perez Pluspetrol Enron Shell

263.5

Source: Data compiled by author from Villegas Quiroga (2004) and Kohl and Farthing (2006).

The Economics of the Plan De Todos I: The Ley De Capitalizacion ´ 2 The funneling of funds away from state-owned enterprises in the 1980s to cover the costs of the government’s operations and debts all but wrote their eventual demise on the wall (see Chapter 3). With no funds, state-owned enterprises like YPFB were unable to advance and upgrade their operations. By the 1990s, this led to a growing critique that Bolivia’s state-owned enterprises, and YPFB in particular, were inefficient, corrupt, and merely served as rentier arms of the state. As a representative from the Camara Bolivana de Hidrocarburos ´ (CBH) who upheld this notion stated, “The problem with YPFB in the 1980s and 1990s was that it was utilized to finance the state. YPFB was a business that brought in resources, and the state took the resources.” Such perceptions made YPFB a ripe target under the Plan de Todos, through which Bolivia’s oil and natural gas sector was effectively devalued and revalued – produced as an “other.” The most direct means through which YPFB served as a mechanism of accumulation through dispossession under the Plan de Todos was through the Ley de Capitalizacion. ´ Seeking to extend Bolivia’s neoliberal reforms into the country’s hydrocarbon sector, Sanchez de Lozada and the MNR put forward ´ the Ley de Capitalizacion ´ in 1994 to partially privatize Bolivia’s five largest public enterprises: hydrocarbons, airlines, railroads, electricity, and telecommunications. The law resulted in the division and transfer of 50 percent of each enterprise to a private investor or investment consortium. The remaining shares were reallocated to the state pension system (48 percent) and former employees of state operated enterprises (2 percent). YPFB was divided into three parts – two for oil and natural gas exploration and extraction and one 2

Ley de Capitalizacion ´ = Law of Capitalization.

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for pipeline transport and storage. Although World Bank (1996) reports estimated the value of YPFB at close to US$961 million, its parts were collectively sold for a total of US$835 million. The sale of YPFB took a peculiar form that illustrated Sanchez de Lozada’s ´ and the MNR’s belief in the power and redistributive “good” of free enterprise. Those who acquired part of YPFB were not required to pay for their newly obtained assets. Instead, they were obligated to reinvest the money they would have paid into the companies they bought over the following seven years. According to its proponents, this plan would double the net worth of each capitalized hydrocarbon company. In turn, this would provide the companies with the financial means to pursue new exploration and extraction activities and thus purportedly create more job opportunities while contributing to Bolivia’s overall economic growth and stability (Ewing and Goldmark 1994; Kohl and Farthing 2006). The lucky winners of YPFB’s neoliberalized assets included Enron, Shell, Repsol-YPF, Perez, Pluspetrol, and Amoco. Although the Bolivian state technically maintained minority ownership in the capitalized segments of YPFB, control over the state’s shares in these firms was given to two private pension fund administrators that served as holding companies generating money for the Bolivian retirement system. Through this arrangement, the primary shareholders of the capitalized segments of YPFB held all decision-making power. Holding such power, a number of the transnational oil and natural gas companies that purchased segments of YPFB satisfied the obligatory reinvestments into their newly acquired assets by creatively manipulating the costs they paid for certain exploration and extraction services. As an ex-executive from one of the investing transnational oil and natural gas firms stated: After the capitalization, there were a lot of irregularities. . . . Repsol was the dirtiest. . . . It did whatever it could and eventually it slowly filtered out what they were doing and then everyone did it. And what they did was radically over-value the price of exploration services such as of magnetometry, gravitometry, seismic acquisition, seismic reprocessing, and exploratory perforation.

An ex-YPFB employee who tracked investment numbers after the company’s capitalization further explained: “They [transnational oil and natural gas firms] unburdened themselves of their obligations with inflated costs for gravitometry and magnetometry. The country has been deceived. There were investments in these activities that we [YPFB] would have said were US$40 million, and that they reported to the state to be US$400 million.” Utilizing such tactics, the transnational oil and natural gas companies that acquired parts of YPFB skirted their reinvestment responsibilities without any immediate repercussion. In addition, they devalued and revalued YPFB in a way that cushioned their profit margins.

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The Economics of the Plan De Todos II: Las Leyes De Hidrocarburos No 1689 and No 17313 Sanchez de Lozada and the MNR deepened the neoliberalization of Bolivia’s ´ hydrocarbon sector with the passage of the Ley de Hidrocarburos No 1689 on April 30, 1996, and the Ley de Hidrocarburos No 1731 on November 22, 1996. The two laws redefined the role of YPFB in the sector and changed the royalty rates paid by hydrocarbon extraction firms. The entrance of private transnational oil and natural gas companies into Bolivia’s hydrocarbon sector and the dismantling of YPFB did not completely result in the state-company’s death. Instead, YPFB was reduced to a regulatory entity meant to uphold the goals of the Plan de Todos – to create “the conditions to allow the smooth operation of markets” (in Kohl and Farthing 2006:86). Initially, through the Ley de Hidrocarburos No 1689, the government reassigned what remained of YPFB five primary tasks: signing contracts with interested oil and natural companies on behalf of the state; administering Bolivia’s refineries and commercializing the processed hydrocarbons for the wholesale market; managing the national oil and natural gas map database; ensuring that the natural gas supply contracts the Bolivian state held with Argentina and Brazil were upheld; and working as a service company for interested investors (GOB 1996a). However, most of these tasks were eliminated or rendered irrelevant shortly after the passage of the law. The Bolivian state sold the refineries operated by YPFB to Petrobras less than two years later. Very few investing transnational hydrocarbon companies used YPFB as a service company, as most already had their own workers or established service contracts. And no longer holding the decision-making power within the country’s hydrocarbon sector, YPFB could do very little to ensure that Bolivia’s existing supply contracts were met. As a result, YPFB was relegated to managing Bolivia’s hydrocarbon database and tracking the quantities of oil and natural gas extracted and exported by transnational investors. In many ways, transnational investors benefitted as much, if not more, from YPFB’s changing role in Bolivia’s hydrocarbon sector as they did from the actual sale of its assets. With YPFB relegated to basically aiding the profitmaking capacities of investors, transnational oil and natural gas firms were given access to the exploration archives of one the longest-standing stateowned and operated hydrocarbon companies in the world. As an added bonus, YPFB in its new residual role distributed this information to investors at no cost. As an ex-YPFB employee who worked for the company both before and after the capitalization explained: “We handed it over to them . . . all the information we had gathered over the last 50 years, tons of photocopies and reports. They ordered us to and we gave them the reports we had. They took 3

Ley de Hidrocarburos = Law of Hydrocarbons.

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the photocopies and we armed them with a great deal of information for free.” This give away of decades worth of knowledge saved transnational hydrocarbon firms millions in exploration costs and pointed them directly toward Bolivia’s most lucrative sites of oil and natural gas extraction. Additionally, in less than five years after the implementation of the Ley de Capitalizacion, ´ the majority of oil and natural gas extracted in Bolivia was not extracted by the capitalized segments of YPFB. Instead, transnational firms extracted the hydrocarbons from purportedly “new” oil and natural gas reserves. Investors not only enhanced their earning potential by gaining access to inexpensive assets and free data. Sanchez de Lozada and the MNR incentivized ´ investment to find and extract oil and natural gas from these “new” reserves by lowering royalty and taxation rates on the sale of oil and natural gas from 50 percent to 18 percent. These lowered royalty and taxation rates were initially intended to spur investment in traditionally underexplored and more difficult areas of extraction. The rates were thus only supposed to be applied to newly found reserves. According to the Ley de Hidrocarburos No 1689, the government classified all proven reserves as existing and subject to the longstanding 50 percent royalty and taxation rate. All probable reserves, either in existing areas of extraction or in underexplored areas of extraction were classified as new and subject to the discounted 18 percent royalty and taxation rate (GOB 1996a). Although the classification of “new” under the law was already fairly generous, two months after its introduction, Sanchez de Lozada and the ´ MNR put forward the Ley de Hidrocarburos No 1731 and further loosened the restrictions around which reserves could be classified as new. In the second law, only proven reserves that were already in production at the time of the sale of YPFB were classified as existing and subject to the 50 percent royalty and taxation rate. All other reserves were classified as new and subject to only the 18 percent royalty and taxation rate. To sweeten the deal just a little bit more, the law also rewarded oil and natural gas extraction firms for investing in these purportedly new reserves by allowing them to deduct 100 percent of their spending in exploration, development, extraction, and environmental protection activities from their taxes (GOB 1996b). Under the royalty and taxation classification scheme put forward in the Ley de Hidrocarburos No 1731, investors were able to legally classify many of the oil and natural gas reserves detailed in YPFB’s extensive database as new and thus benefit from a greatly reduced taxation rate. As an ex-director of statistics who worked for YPFB explained: The Camiri reserve was classified as new, but it was discovered by Standard Oil. In 1927 they discovered it . . . The San Alberto reserve was classified as new . . . but you see, we [YPFB] discovered San Alberto in 1967, and in 1990 we went into Huamampampa [a deep rock formation that contains natural gas]. These are two big discoveries that we [YPFB] made.

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The Camiri reserve was the first place from which hydrocarbons were extracted in Bolivia for commercial purposes. The San Alberto reserve was one of the most productive – and most lucrative – natural gas reserves in Bolivia during the late 1990s and early 2000s. At the time of the capitalization, segments of the Camiri reserve were not in production and plans to extract natural gas from Huamampampa formation in the San Alberto reserve were in their initial stages. As a result, both reserves and others like them were already discovered yet still subject to the 18 percent royalty and taxation rate intended for new reserves. The 18 percent royalty and taxation rate was more than generous. Even representatives of the transnational oil and natural gas firms who helped write the Ley de Hidrocarburos No 1731 and lobbied for lower royalty and taxation levels were surprised by the 18 percent rate. As an ex-executive director of one of the firms that invested in the capitalized segments of YPFB explained: We [the transnational hydrocarbon firms] all sat down before the law was made and came up with a number that would be beneficial to us, a number that could be used to start the negotiations. We suggested the new royalty and taxation rate to the government but never thought we would get it . . . A 50 percent return rate is acceptable. 82 percent is unheard of. It is robbery. In our company, we had a bottom line. Our minimum [return rate] was 15 percent, but 50 percent was standard.

The profits earned from these lowered royalty and taxation rates were buoyed by the reserve classification system put forward in the Ley de Hidrocarburos No 1731. By the end of the decade, 94 percent of the oil and natural gas extracted in Bolivia came from purportedly new reserves and were thus subject to the lower 18 percent taxation and royalty rate. The profit-making potential of transnational investors was also enhanced as legal changes to the ownership rights of extracted hydrocarbons in Bolivia created further opportunity for the de- and revaluation of the country’s oil and natural gas. Complementing the Ley de Capitalizacion ´ and following through on the goals of the Plan de Todos and the Ley de Hidrocarburos No 1689, Sanchez de Lozada gave investing oil and natural gas firms the rights to use ´ and commercialize the hydrocarbons they extracted as they pleased through Supreme Decree No 24806. Previously, the Bolivian state held inalienable control of the nation’s hydrocarbons and determined the price and locations of their sale. This allowed the state to increase or decrease the price of its oil and natural gas, often subsidizing internal sales to aid growth in other economic sectors. However, Supreme Decree No 24806 gave investors control of Bolivia’s hydrocarbons at the point of extraction. Although technically the hydrocarbons remained in the possession of the Bolivian state when they were in the ground, the law gave investors the rights to the reserves for twenty or more years and the oil and natural gas extracted became theirs once it was removed from the ground and entered the pipeline. These changes allowed energy firms to set and seek out higher prices for the oil and natural gas they extracted, be it by selling

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table 4.2. Annual Average Price of Bolivia’s Natural Gas Annual Average Price

1997 1998 1999 2000 2001 2002 2003 2004

To Argentina 1.22 0.99 0.81 NA NA NA NA NA To Brazil NA NA 1.07 1.62 1.74 1.55 2.02 2.15 Henry Hub Spot in United States 2.49 2.09 2.27 4.31 3.96 3.38 5.47 5.89 Source: INE (2011b) and US EIA (2011).

the oil and natural gas internally, exporting it to foreign markets, or sitting on the reserves until a more profitable market was found. With burgeoning regional energy demands in neighboring countries, the ability to commercialize Bolivia’s oil and natural gas with limited restriction was perhaps the greatest draw for transnational oil and natural gas firms that invested in the country. Chile had a strong desire to import natural gas to its energy-starved mining regions in the north and Argentina had long purchased natural gas from Bolivia. By the time Sanchez de Lozada and the MNR ´ introduced the Plan de Todos, however, Brazil had become the most attractive market for Bolivia’s natural gas. Although Brazil expressed interest in importing Bolivia’s natural gas as early as the late 1970s, such interest did not progress until Brazil signed a natural gas purchasing agreement in 1988. Over the following years, the two countries began to meet with international lending agencies to develop a plan to finance a pipeline from Bolivia to Brazil. In 1992, after the money for the pipeline was nearly secure, the two states signed an accord in which Bolivia agreed to send eight million cubic meters (MMm3) per day of natural gas to Brazil for twenty years with the quantity eventually doubling. When the Plan de Todos was introduced in 1993, the market for Bolivia’s natural gas was already secure. As it became apparent that control over Bolivia’s hydrocarbon sector would be given to private investors, this secured market nearly doubled as Brazil increased the amount of natural gas it would import to 30MMm3 per day. Shortly thereafter, Enron began construction on a pipeline that could carry this amount of natural gas from Bolivia to Brazil. By 1996, when the Ley de Capitalizacion ´ and Ley de Hidrocarburos No 1689 were introduced and Bolivia’s hydrocarbon sector was opened up to private transnational oil and natural gas firms, it was thus nearly guaranteed that investors would gain a profit. With the Brazilian market yielding the highest returns on investment, it became the primary destination of Bolivia’s natural gas and eventually absorbed close to 87 percent of the natural gas being extracted in Bolivia (INE 2008b). Being able to commercialize the hydrocarbons they extracted as they pleased, investors were also able to profit in another way – by selling the oil and natural gas they extracted to themselves at discounted rates. Although a number of companies entered Bolivia’s hydrocarbon sector in the 1990s, the largest investors were Petrobras – Brazil’s state-owned hydrocarbon firm – and Repsol-YPF – a private Spanish and Argentine company. Operating in a number

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of countries in South America, both companies had an interest in Bolivia’s natural gas for export and from 1997 to 2005, each invested more than a billion dollars in the country’s hydrocarbon sector (Campodonico 2007). Free to com´ mercialize the natural gas they extracted in Bolivia as they wished while also having a large presence throughout the continent, Petrobras and Repsol-YPF were able to be producers, sellers, and buyers of the country’s natural gas. In this role, they priced the natural gas they extracted in Bolivia below market value, shipped it across the border to Brazil and Argentina, and then sold the natural gas to themselves at cut-rate deals. As an ex-CEO of a transnational energy company put it when speaking about Repsol-YPF: “It was Repsol selling gas to Repsol. They aren’t going to give themselves a bad price. They didn’t want to pay high taxes on the Bolivian side or the other side of the border, so the lower the price, the better for them.” From 1997 to 2004, the price of Bolivia’s natural gas sold to Argentina fluctuated between an annual average price of US$0.81 and US$1.30 per thousand cubic foot. The price of natural gas to Brazil fluctuated between the average annual price of US$1.07 and US$2.15 per thousand cubic foot (INE 2011b). During this time, the going rate for natural gas in the United States fluctuated between the average annual price US$2.08 per thousand cubic foot and US$5.89 per thousand cubic foot (US EIA 2011).4 Selling natural gas to themselves also provided transnational hydrocarbon firms with some extralegal – and potentially illegal – benefits. Controlling sites of extraction, separation, and sale allowed some companies to skirt Bolivia’s legal regulations. For example, Petrobras overlooked the fact that the natural gas they were exporting to Brazil contained high levels of liquid petroleum gas (LPG). According to Bolivian law, no more than 12 percent of the total volume of exported natural gas could be composed of liquids. In order to satisfy these requirements, Petrobras built separation plants next to their major reserves to sort out and sell the liquids in Bolivia. Nevertheless, as a hydrocarbon industry advisor who aided the government with its audits of several transnational energy firms stated: It didn’t have to be pure, but it had to be less than 12% liquid. We found that the gas that went through two pipelines to Brazil, to Sao Paulo, was close to 15% liquid . . . It was basically all contraband, 3% of it. Liquids in gas aren’t all water and nitrogen. There is a lot of liquid petroleum gas in there. And the price of LPG in Sao Paulo, well, it’s a lot higher than here. Basically we figured out that over ten years, Petrobras had illegally taken $US6,000,000 worth of liquids. Three percent adds up.

Controlling the extraction, transport, and sale of Bolivia’s hydrocarbons may have also allowed some firms to underreport the quantity of natural gas 4

Although natural gas prices are regionally specific, U.S. natural gas prices set the baseline global norm. In addition, the United States became a possible market for Bolivia’s natural gas in the early 2000s (see Chapter 5).

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table 4.3. Investment in Bolivia’s Hydrocarbon Sector, 1997 to 2005 (in US dollars) 1997

1998

1999

2000

2001

2002

2003

2004

2005

Exploration 130.38 374.56 372.2 256.79 168.99 113.47 94.13 86.66 45.54 Extraction 140.42 230.25 208.55 185.33 237.38 231.31 171.96 149.26 153.72 total 270.8 604.81 580.75 442.12 406.37 344.78 266.09 235.92 199.26 Source: YPFB (2006).

they were selling. In the 1990s, large quantities of hydrocarbons occasionally went “missing” somewhere between the point of extraction and point of sale. Describing the cases of missing gas, an ex-YPFB employee who recorded the quantities of hydrocarbons extracted and sold noted: There is a difference of thousands of cubic feet a month in some departments. In Santa Cruz . . . 11 million and a fraction cubic feet went into the separator . . . and 7.8 million cubic feet were sold. The production is more than the sales. Cochabamba had produced 4 million and a fraction and had sold 3 million. In the month of September, look, 5 million [produced] . . . and 2.7 million sold. This is nearly 50 percent. Where is the gas?

By underreporting the volume of LPG and potentially the quantity of natural gas sold, firms could pay less in taxes and royalties in Bolivia and profit from the eventual sale of both LPG and the “missing” methane in the higher-priced markets of Brazil and Argentina. The deck of cards dealt to distribute the profits from Bolivia’s oil and natural gas were undoubtedly stacked in favor of transnational hydrocarbon firms and how these firms played their hands further bolstered their winnings. The systematic defunding of YPFB since the 1980s made the company look inefficient and led to a general devaluation of Bolivia’s hydrocarbon sector. With the financial capacity and necessary technology for extraction and transport, transnational energy firms quickly took advantage of the capitalization bargains and low taxation and royalty rates. In addition, as YPFB’s role with Bolivia’s hydrocarbon sector diminished, transnational oil and natural gas firms were able to easily skirt the rules of the game. According to official records, after the regulatory changes in Bolivia, investment in the hydrocarbon sector more than doubled in the initial years after the capitalization and by 2005, firms had invested close to US$3.435 billion. Such investment supposedly increased proven and probable gas reserves from 5.69 TCF in 1997 to 54.86 TCF in 2003. Proven and probable oil reserves were also reported to have increased from 200.9 MMBbl in 1997 to a peak of 956.9 MMBbl in 2003.5 By 2000, oil and natural gas extraction made up a larger proportion of Bolivia’s GDP than minerals and had become the country’s number one export. And industry representatives 5

TCF = trillion cubic feet; MMBbl = million barrels.

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saw such increases as a success. In the words of one transnational oil and natural gas company CEO, “We multiplied by 10 the amount of gas that was being sold in 1996. In many places of the world, people would be building statues to industry for that kind of development.” However, the means in which these increased investments and, in turn, increased reserve levels were achieved took on many of the characteristics observed in processes of accumulation by dispossession. Through both extralegal and illegal means, numerous transnational oil and natural gas firms manipulated their contracts, shirked some of their legal responsibilities, and seemingly bootlegged millions of dollars worth of hydrocarbons and hydrocarbon derivatives. Predatory in nature, the regulatory changes and increases in investment in Bolivia’s hydrocarbon sector seemed to be steeped in fraud and resulted in the looting of the assets of the already poor by the already rich. As the ex-executive vice president of operations for one transnational hydrocarbon company summed it up: “We [the transnationals] made out well after the capitalization.” Responsibility without Power The Plan de Todos was implemented to more than bolster the earnings of the J. R. Ewings of the world. It was also intended to solidify the political gains made by Sanchez de Lozada, the MNR, and the mining elite in the 1980s. The means ´ in which this was done resembled many of the decentralization measures that were promoted by the World Bank and the burgeoning NGO sector across the globe at the time. Seen as a way to enhance “democracy,” these measures were implemented to circumvent the seemingly corruption-plagued and overly centralized states of the developing world by putting power in the hands of local people. Although some scholars have argued that such decentralization measures have indeed enhanced democracy in places throughout the world (Baiocchi 2003; Heller 2001), other scholars have argued that such decentralization measures played a crucial role in the implementation, extension, and stabilization of free-market ideology over the past three decades (Kohl 2002; Peck 1994). In February 2008, I saw some of the results of such measures as I sat in a makeshift office for a local municipal oversight committee in one of Bolivia’s hydrocarbon-producing regions. In the office were a few desks stacked with papers and the occasional full-color pamphlet put out by a foreign nongovernmental organization (NGO). The pamphlets were supposed to help the people in the community understand how to participate in their local government according to their own country’s laws. As I waited to talk with the local community member working there that day, I leafed through some of the pamphlets. The majority provided an overview of the decentralization process that unfolded in Bolivia during the 1990s, praising it and the state for its efforts to implement more participatory forms of governance.

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table 4.4. Bolivia’s Hydrocarbon Reserve Levels, 1997 to 2004 1997 Natural Gas (in TCF) Proven Probable total Oil (in MMBbl) Proven Probable total

3.75 1.94 5.69

1998 4.16 2.46 6.62

1999

2000

2001

2002

2003

2004

5.28 18.31 23.84 27.36 28.69 27.62 3.3 13.9 22.99 24.93 26.17 24.73 8.58 32.21 46.83 52.29 54.86 52.35

116.1 141.9 151.9 396.5 440.5 477 486.1 462.3 84.8 74.8 88.6 295.5 451.5 452.1 470.8 446.5 200.9 216.7 240.5 692 892 929.1 956.9 908.8

Source: YPFB (2006b).

After a few minutes, the community member came in and we started to talk about the pamphlets and the changes made with the Plan de Todos. He initially voiced his support for the changes, noting that many communities had never seen a boliviano from the government before decentralization. However, as we continued to talk, his tone changed when speaking about how the decentralization measures worked in the initial years after their implementation in the 1990s. The oversight committee was designed to represent the interests of the people in the community . . . to tell the politicians that they are not the owners of the municipality’s money, of the municipality’s resources . . . But it [the oversight committee] was not originally protected by the law. The law said it was, but there was a lot manipulation and abuse by the politicians and the committee did not have a lot of power.

For most people in Bolivia, the decentralization measures put forward in the Plan de Todos initially did little to solve their increasing problems. Opposed factions of Bolivian society, from local indigenous communities to the mining elite, to Bolivia’s landed agrarian elites all supported some form of decentralization at the time. However, as an eastern landed elite bluntly put it to me, “The government of Sanchez de Lozada, through the Plan de Todos, put forward a ´ decentralization of deceit.” And as it did, it sought to fortify its power in Bolivia and over the country’s economy by reconstructing the country’s political arena. The Politics of the Plan De Todos I: The Ley De Partcipacion ´ Popular6 In 1994, the Bolivian state introduced the Ley de Participacion ´ Popular (LPP). Continually plagued by calls for enhanced autonomy from indigenous groups and departmental elites alike, the state rolled out the law as a democratizing decentralization measure. Although the popular participation measure opened up new political spaces to underrepresented segments of the population, its short-term effects were twofold: 1) it decentralized the state’s problems and 6

Ley de Partcipacion ´ Popular = Law of Popular Participation.

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inefficiencies by handing them off to local municipalities and 2) it redirected the locus of class struggle from the national to the local level. The popular participation reform focused on recreating the municipality as a political space. Prior to its implementation, much of Bolivia had no municipal governance. In addition, a disproportional amount of state revenues went to the three largest of Bolivia’s already existing municipalities: La Paz, Santa Cruz de la Sierra, and Cochabamba (Kohl and Farthing 2006:131). Implementing the popular participation measure, the state made three primary changes to the municipal system. First, it expanded the system to cover the entirety of the Bolivian territory by formally recognizing 184 new municipalities. This brought the total number of municipalities to 308 in 1994 (Gray-Molina 2002).7 Second, the state changed the way it distributed its revenues by increasing the amount of money sent to municipalities from 10 to 20 percent of the national budget. It distributed these funds on a per capita basis. Third, the state legally recognized new and pre-existing community and indigenous organizations as valid political entities known as Organizaciones Territoriales de Base (OTBs).8 From 1994 to 1997, the Bolivian state recognized nearly 15,000 OTBs (Kohl and Farthing 2006; Postero 2006). According to the new laws, these organizations were intended to help formulate and oversee municipal budgets and development plans. The Bolivian state promoted the popular particpation measure as a means of democratization, but it failed to make the new municipalities easily accessible to most. Although many rural and indigenous communities in Bolivia had long histories of participatory forms of governance, the popular participation measure was designed off of western models of democracy and organization and did not attempt to incorporate previously existing and more familiar ways of participatory decision making. As a result, many representatives from rural and indigenous communities had difficulties navigating government bureaucracies and understanding the terminology used in the creation of popular participation budgets and development plans (Postero 2006:153). The necessity of having or being able to obtain these skills in order to participate in municipal governance operated as barriers to entry. The ways in which popular participation funds were distributed and the rules about their use also led to a number of problems. The new laws stipulated that municipalities must use the funds to build and maintain schools, health clinics, secondary roads, plazas, micro-irrigation systems, and sports facilities. However, because the state distributed funds on a per capita basis, it was more difficult for less populated municipalities to fund large-scale infrastructural

7

8

Over the following years, several additional municipalities formed as local communities began to fight over the distribution resources and sought to capture a greater share of the funds being distributed by the LPP. Organizaciones Territoriales de Base = territorial grassroots organzations.

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projects (Postero 2006; Kohl and Farthing 2006). Whereas larger municipalities had the funds to construct hospitals and proper sewage facilities, smaller municipalities were left using their funds to build plazas. Even when municipalities were able to construct new facilities, the distribution of popular participation funds was not set up to ensure their long-term sustainability. According to the law, 85 percent of funds had to be spent on construction whereas only 15 percent were allotted to cover maintenance (Kohl and Farthing 2006:131). In addition, funds could not be used to staff or supply newly constructed schools or health clinics. Although the government decentralized public investment in the construction of infrastructural projects, they did not decentralize the provision of the social services themselves. As a result, a lack of coordination between municipal, departmental, and the central governments at times left newly constructed schools and health clinics without teachers and doctors (Gray-Molina 2002). Beyond its structural problems and inefficiencies, the popular participation measure also functioned to recreate the terrain of social struggle within Bolivia. As the state directed funds and responsibilities into municipal spaces, it also directed political contestation to the municipal level. As Laserna (2002) notes, the popular participation law led to the creation of a normative institutional framework that redirected the demands of civil society away from the central state. Historically, nationally organized groups such as campesino and workers’ unions used marches, strikes, and road blockades to negotiate with the state (Postero 2006). By creating new municipalities and recognizing campesino and indigenous groups as OTBs, the state removed itself as the focus of struggle. Organized at the municipal level, OTBs directed their demands toward local officials. Within this context, they often fought among themselves over the small amount of money that their respective municipalities received (Kohl and Farthing 2006). Because popular participation funds could only be used for infrastructural construction and maintenance, it limited the ways in which people could be involved in local governance. In addition, the limited amount of funds received – particularly in smaller municipalities – left a number of places debating whether to build a road, a school, or a potable water supply. Although most municipalities did need and welcome funds for such projects, restricting the ways the funds could be used under the auspices of popular participation separated the economic from the social and cultural – something that was foreign to many Bolivian communities. As Nancy Postero (2006:160) notes, “the things that were important to the local people – the forest, the flora and fauna, ritual relations with the lands – were invisible.” Even in communities where indigenous leaders held municipal seats, the budgets they put forward to use the popular participation funds did not reflect indigenous values or customs. As a result, a number of people reported that they were not interested in participating in the budget decision-making process.

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The Politics of the Plan De Todos II: The Ley De Descentralizacion ´ Administrativa A year after the MNR implemented the popular participation measures, it rolled out another reform that restructured state power, the Ley de Descentralizacion ´ Administrativa (LAD). The popular participation reform was designed to rearrange the role of the municipality within politics and the economy, however, the decentralization measure focused on the role of the department. During the 1990s, landed agricultural elites in the east had increased their pressure on the state to decentralize some of its authority to the departmental level. However, the implementation of the decentralization law actually did the exact opposite – it consolidated central state power over Bolivia’s nine departments and thus limited the power of departmental elites. According to the new law, “executive power” was decentralized to the department level to facilitate the technical and administrative actions of the central state (GOB 1995). As a presidential minister at the time noted years later, decentralization set the departments up to be “appendixes of the central government” (in Rivero et al. 2007). At the department level, the law delegated responsibility to two principle actors: a prefect and a departmental council.9 As had been the case prior to the law, the prefect remained appointed by the President. However, although elected representative assemblies once had a voice within departmental prefects, the new law eliminated these assemblies and formed departmental councils whose representatives were chosen by municipal governments (Eaton 2007). In the power hierarchy of each department, the departmental council held very little power and the prefect was largely able to act without its approval. The decentralization law also changed who controlled how departmental revenues were used. Prior to its implementation, regional development corporations based in each department decided how to use a significant portion of departmental revenues. In the eastern departments where the majority of oil and natural gas was extracted, the state gave these development corporations the responsibility to decide how departmental hydrocarbon royalties would be used (see Chapters 2 and 3). In one of Bolivia’s largest hydrocarbon-producing departments of Santa Cruz, the development corporation CORDECRUZ had access to more than US$30,000,000 a year by the mid-1990s (INE 2008c). However, as an ex-CRODECRUZ representative recalled: [CORDECRUZ] determined the politics of development and the politics of budgeting in the region. We had autonomy over the management of the money . . . This lasted until ’95. Then came the government of Don Gonzalo Sanchez de Lozada . . . The Cor´ poration for Regional Development disappeared and we returned another time to the prefects. 9

A prefect is the equivalent of a non-elected governor in the United States.

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In other words, the decentralization law placed control of departmental revenues in the hands of the central state-appointed prefects. Although the MNR perhaps did this to prevent regional fragmentation within Bolivia (Eaton 2007:80), such a design may have actually ended up doing the opposite. Designing the decentralization reform in this manner, the MNR eliminated the ability of eastern landed elites – who controlled CORDECRUZ – to use the rents their department generated to advance their own interests. Through the decentralization measure, the mining elite thus undermined the power of the landed agricultural elite by ending the easy access the landed agricultural elite once held to departmental development funds and hydrocarbon rents. Decentralization thus served as a means to advance and secure the interests of one elite faction over another and eventually be the target of separatist and autonomy movements in eastern Bolivia. Legalizing Fraud that Sinks Most Boats Rosa Luxemburg once noted that in profiting from processes such as accumulation by dispossession, “force, fraud, oppression and looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process” (in Harvey 2003:137). In the Plan de Todos, the MNR and transnational energy firms looted the riches of Bolivia’s hydrocarbon sector by de- and revaluing YPFB and producing a new site of investment, by producing an “other.” Although many of the deals and transactions surrounding the privatization of Bolivia’s state enterprises appeared shady, there was not much attempt to hide what was going on. Indeed, most of the changes were seemingly legal and approved by the state. Embedded in the belief that the free market is the “rising tide that lifts all boats,” the Plan de Todos was legitimized by the idea that it would be beneficial for Bolivia and all its people. The Plan de Todos also legitimated the actions of the MNR and transnational investors in another way – by neutralizing the struggles of potential opponents. On the one hand, the popular participation measures appeased the calls of Bolivia’s marginalized masses for greater local autonomy. Although this led to a redistribution of state funds to some places that had seen very little state support in the past, the funds remained minimal. As a result, the popular participation law gave local communities “responsibility without power” as it essentially functioned to direct the demands of local communities to local governments and thus somewhat insulated the MNR-controlled state and its allied transnational investors from direct critique and confrontation. On the other hand, the decentralization measures undermined the power of the landed agricultural elite by eliminating their control over public funds. Free from direct

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internal contestation, the MNR and its transnational allies did indeed seem to have “power without responsibility.” The rising free-market tide in Bolivia thus did not lift all boats. Instead, it only lifted the boats of those who had them. Indeed, as the tide swept through Bolivia, many were left swimming, and some began to sink.

figure 5.1. El Gas Es Nuestro

5 Popular Struggles against Neoliberal Rule

The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources. . . . The looting by foreign companies has ended. – Evo Morales (in Reel and Mufson 2006)

In April 2008, I stood alongside an eight-foot tall fence topped with barbed wire in the heart of the Chapare – one of Bolivia’s coca growing regions. On one side, well-manicured lawns surrounded the electrified buildings, well-lit pathways and the state-of-the-art oil and natural gas separation technologies of Chaco S.A., a subsidiary of British Petroleum. On the other side, plots of coca surrounded the stick-walled and palm-thatched roof homes and temporary shelters of local residents. In the Chaco S.A. complex, the torches that burned the uncaptured natural gas seemed to spout from trees, beckoning one to look in awe at the one to two meter flame shooting into the sky. In the coca plots, the plants’ lush green leaves seemed to sprout effortlessly from the soil, allowing one to partially understand how coca had become the region’s crop of choice. Although the production of these two commodities seemed equally magnificent, the social inequality between their producers could not have been much greater and the fence clearly symbolized hundreds of years of Bolivian history. Standing among the coca plants, the exclusion was all too apparent. As it started to rain, the campesino whose field I stood in pointed me toward a three-walled shelter at the end of his coca plot. As we sat down on a wobbly bench and waited for the rain to lighten, he talked about when he first came to the Chapare as a child in the 1980s. His father was a miner who lost his job when the state-owned mining firm was dismantled during Bolivia’s first neoliberal turn. I asked how things had changed since then. He smiled and began to talk about politics: 91

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We [coca growers] began to enter politics in the late 1990s . . . We brought the first indigenous diputado,1 Evo Morales. Then they kicked Evo out . . . And in 2002, we had a hunger strike and we told them, if you kick Evo out – a campesino – there will be 30, 40 Evos. But there will never again be just one Evo.

As the coca-grower continued to talk, it became apparent that the movement for social change in Bolivia was about more than natural gas. During the previous ten years, the historically marginalized and exploited peoples of Bolivia had converged and began to enter the formal political arena. As they assumed greater amounts of power, their demands both in the legislature and in the streets began to grow. At the heart of these demands was who had the right to control the country’s socioeconomic trajectory. Although the country’s natural gas became a focal point in these social movement struggles, it was merely the latest commodity that represented hundreds of years of oppression. In conceptualizations of social struggle, a divide often exists between the struggles of peasants and the struggles of wage workers (Marx 1867; Thompson 1963; Paige 1997). In the most basic sense, peasants and wage workers have different objects of struggle. Peasants are frequently seen as struggling to maintain a level of individual or community autonomy. They are struggling to be free from the infringements of actors seeking to dispossess them of their land, tax the fruits of their labor, or in some way disrupt the usual means through which they subsist. Wage workers are frequently seen as struggling to obtain greater autonomy or control over the means of production and the benefits of the fruits of their own labor. They are most often struggling to improve their wages or working conditions. The divide between worker and peasant struggles also has historically had a subjective component. In particular, for Marx (1867), the most revolutionary types of struggle were those of workers over who would glean the lion’s share of the benefits from the fruits of their labor. Although Marx recognized the brute violence that often accompanied processes of primitive accumulation, he was less than sympathetic to the peasant way of life. He saw struggles against primitive accumulation as regressive attempts to cling to livelihood strategies that he believed had little ultimate potential to ease the everyday trials and tribulations of human existence. They were struggles to maintain a past. In contrast, struggles over the fruits of workers’ labor could potentially be liberating. Such struggles could lead to higher wages and better working conditions. And on occasion, Marx believed such struggles could lead to the usurpation of the capitalist class, as workers fought to take control over the means of production and thus their own surplus labor. They were struggles to obtain a better future. 1

Diputado = congressman.

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But these objective and subjective differences perhaps create a false – and unnecessary – dichotomy between peasant and worker struggles. If accumulation by dispossession is indeed an ongoing and dynamic process that releases both resource and labor assets into the marketplace, those affected by and driving such a process should also be seen as occupying ongoing and dynamic positions within processes of neoliberalization. In other words, whereas Marx saw primitive accumulation as largely only removing peasants from the means of production, accumulation by dispossession – as a continual and dynamic process – can function to remove peasants and wage workers alike from the means of production. As a result, there is no reason to see accumulation by dispossession as necessarily leading to the creation of wage workers out of peasants. Such a process can just as easily create peasants out of wage workers. Indeed, ongoing forms of primitive accumulation often force people to move back and forth between being proletarianized, semi-proletarianized, and non-proletarianized – between being exploited and being marginalized. Throughout Bolivian history, a divide has often existed between its radical miners’ union and its peasant groups (see Chapter 2). Bolivia’s miners come from a lineage of dispossessed peasants, but mining in Bolivia dates back hundreds of years. As a result, many of Bolivia’s miners have come from mining families. Even though many times throughout history Bolivia’s miners and peasants seemed to be struggling in common battles against common foes (see Hytlon and Thomson 2007), the objects of their struggles have in reality frequently differed. Whereas the miners often sought to exercise greater control over the state in order to improve their wages and working conditions, the peasants often sought greater autonomy from the state in order to insulate themselves from the undesirable aspects of wage labor (see Dunkerley 1984; Klein 1982). In Bolivia’s neoliberal turns, however, the separation between Bolivia’s miners and peasants slowly began to diminish. With the introduction of the NPE in the 1980s, large segments of the Bolivian population increasingly became marginalized as processes of accumulation by dispossession proved to be detrimental to peasants and wage workers alike. Bolivia’s shifting role in the global economy from being primarily a mineral provider to being a natural gas provider did little to change the lots of peasants or workers. As both segments of the Bolivian population thus found themselves removed from their livelihood strategies, they migrated to places where they seemed most likely to be able earn a living and satisfy their everyday needs. Still excluded from Bolivia’s major economic sectors, however, they forged a common front against a common foe. In this process, the migrant places became spaces of marginalization, and eventually, spaces of resistance. In the Wake of Dispossession As the Bolivian public was dispossessed of its mineral and hydrocarbon wealth, many Bolivians found themselves unemployed. As occurred after the introduction the NPE in the 1980s (see Chapter 3), the Plan de Todos put many Bolivians

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out of work in the 1990s. The state declared the Plan de Todos would create 287,000 new jobs. However, Bolivian economists spanning the political spectrum predicted that the Ley de Capitalizacion ´ alone would put an additional 12,000 people out of work (Kohl and Farthing 2006:108–120). Some workers believed their salaries and working conditions would improve, but the results for most were negative. Speaking about the effects of the Plan de Todos, a union representative at YPFB stated: We thought that there would be an injection of money that favored the Bolivian state, the business, and the workers. But lamentably, the only ones that it favored were some people in the government and the transnationals. And those who were really affected by the capitalization were the workers. Many, thousands, ended up in the streets. So in this sentiment, for us, for the workers, the capitalization was not beneficial. Lamentably, I have to say that the transnationals took the most benefits.

Investing transnational firms also had a tendency to bring in their own people to run their operations within Bolivia. As another YPFB employee noted: “It [the Plan de Todos] was damaging. . . . The capitalized companies came with their own people. Many people were left out and the capitalization was not as the government of Sanchez de Lozada said. They said there would be more jobs and ´ that better things would come.” This replacement of workers was particularly true in the upper echelons of these companies’ operations in Bolivia, with foreigners often occupying positions with the most power and highest pay. Not all workers were left completely unemployed in Bolivia’s neoliberal turns. Instead, many found themselves in highly unstable work arrangements. In the mining sector, a number of workers moved from working for COMIBOL to working for small cooperatives (see Contreras and Pacheco 1989). However, as private investors were given the mineral rights to the most lucrative mines, the cooperatives were often left mining low-grade ore. In addition, they often mined this ore with inferior equipment. Although COMIBOL did not utilize the most modern mining technologies, the cooperatives had even less capital than COMIBOL to invest in technological upgrades (Fox 1985). Many of the cooperatives thus operated mines that required large amounts of labor and turned minimal profit. In addition, the cooperatives provided miners few – if any – of the benefits they previously received from COMIBOL. In the hydrocarbon sector, the entrance of private firms led to a proliferation of sub-contracting service companies working in Bolivia. A twenty-five-year YPFB employee in one Bolivia’s hydrocarbon producing regions explained: “Before, Yacimientos [YPFB] had 1800 people here. There were 200 people in perforation [drilling], 200 in production, etc. But what happened? The new businesses that entered, they didn’t do perforation and if they had to perforate they got somebody else to do the job.” This made the daily earnings of many wage workers contingent on fickle demand. As a CEO of one service company remarked: “One of our technicians ran a chicken farm. He came and worked for us whenever we had a job because the money was really good, but chickens

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are a bit more stable.” As with the miners, workers in Bolivia’s oil and natural gas sector often ended up in precarious employment situations. The effects of the NPE and the Plan de Todos were not only felt by wage laborers. Bolivia’s peasant populations were adversely affected by policies that liberalized trade. As cheap imports from neighboring countries flowed into Bolivia, the prices peasants received for their surplus agricultural production decreased. In addition, some workers who lost their jobs and were unable to find new employment returned to their rural communities of origin. With a lack of available land and no jobs to offer, the influx of people further stressed Bolivia’s rural regions both economically and ecologically (see Chapter 3). This mass marginalization of wage workers and peasants alike resulted in large-scale migration to places with perceived economic opportunity. Of those who could, many migrated from Bolivia to places such as Spain, Argentina, and the United States,2 but most migrated internally. Bolivia’s mining regions experienced net population losses or growth rates well below the national average. Despite a 40 percent increase in Bolivia’s population from 1976 to 1992, the Department of Potosi experienced a 2 percent decrease in population and the Department of Oruro experienced only a 10 percent increase in population. However, places with perceived economic opportunity experienced huge population booms. In particular, migrants sought out opportunities in Bolivia’s largest cities. Urban areas such as La Paz, its adjoining city of El Alto, the city of Cochabamba, and Santa Cruz de la Sierra all nearly doubled in size (INE 2011a). Some rural areas with available land or economic opportunity also experienced population increases. Most notably, migrants relocated to one Bolivia’s coca-growing regions in the Chapare and Carrasco provinces within the Department of Cochabamaba. In the 1980s and 1990s, the population in these provinces more than tripled, increasing from around 83,525 to 300,000 (INE 2011b; Painter 1995). In Spaces of Marginalization Employment in many of Bolivia’s migrant destinations was tenuous at best. In urban migrant hubs, the only work to be found was in the informal economy. In rural migrant hubs, employment was a bit more stable, but far from guaranteed. Many people found work producing coca and its more lucrative derivative – cocaine. However, peasants engaged in and profiting from coca production found themselves victimized in the United States’ War on Drugs. Amid continued difficulty satisfying their livelihood needs and in these new

2

World Bank estimates put Bolivian immigration around 7 percent of the population, or 700,000 migrants. Bolivian government estimates are much higher (World Bank 2011; Ferufina et al. 2007; Ronken and Forsberg 2007).

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spaces of marginalization, the interests and actions of Bolivia’s miners and peasants slowly converged. In the 1970s and 1980s, the booming demand for cocaine in the United States made coca into one of Bolivia’s most stable commodities. As Bolivia’s masses were continually dispossessed from legitimate forms of work, the coca and cocaine production industry provided viable employment for many struggling Bolivians. As the industry grew, the Chapare region of Cochabamba became a prime migrant destination in the wake of Bolivia’s neoliberal turns (Painter and Bedoya Garland 1991). In some ways, coca was the ideal crop to be grown in the Chapare. On the eastern downslopes of the Bolivian Andes between the cities of Cochabamba and Santa Cruz de la Sierra, steep hillsides, a subtropical climate, and relatively poor soil fertility made it difficult to grow much else on a profitable scale. Fruits and vegetables could be grown in the area on subsistence levels, but the tropical monocultures that were often promoted as alternatives to coca production by international development agencies were highly susceptible to insect infestations. The roads through the region were also fairly rugged, making it difficult to transport most fresh produce to urban or foreign markets unblemished and unspoiled. These sociomaterial conditions made the production and sale of fresh produce both expensive and difficult. Coca thus proved to be the ideal cash crop. Dried when harvested and not easily bruised, coca has a relatively long “shelf- life” and is easier to move from the point of cultivation to point of use. The thick forests of the Chapare also make an excellent place to construct – and hide – makeshift cocaine production facilities. And with cocaine being far from a cheap commodity, the return on coca was often much higher than on other crops (Leons and Sanabria 1997; Healy 1991). As one coca grower stated: ´ “Coca gave us life. With coca, we were able to raise our children. With yucca we got nothing. It doesn’t cost anything and you cannot harvest it as much. Coca can be harvested every three months and with it you get more money. In the Chapare, coca was easier to grow and simply more profitable.” However, with coca serving as the raw compound in the production of cocaine, coca growers in Bolivia and elsewhere in the Andean region were targeted by the U.S. Drug Enforcement Agency (DEA) as one of the root causes of the cocaine problems throughout the world. Receiving large amounts of money and training from the United States, the Bolivian military worked with the DEA to eradicate coca through the use of an array of repressive techniques intended to coerce coca growers into “voluntary” eradication projects (Leons ´ and Sanabria 1997; Healy 1991). But with coca providing local inhabitants with a stable means to earn a living, eradication projects did little to deter continued cultivation of the plant and in many ways served as just another means of dispossession. Indeed, although thousands of hectares of coca were eradicated each year, coca producers continued to plant new crops and, in the 1980s and 1990s, coca cultivation increased annually (Sanabria 1997:187). In the process, this space of marginalization became a space of resistance.

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In the Chapare, miners’ union activism merged with peasant livelihood struggles to combat coca eradication projects. The convergence of interests could be seen in the discourse and mix of tactics employed by the cocaleros and the coca growers union. On the one hand, the cocaleros sought autonomy from the state and from external interventions of the United States. In addition, they used historically and culturally resonant themes to mobilize people inside and outside of their constituency. In Bolivia, coca was used for hundreds of years as a stimulant, appetite suppressant, and ceremonial offering. Many Bolivians chew coca leaves daily or use it in tea. The historical use of coca, combined with the country’s long history of occupation by outside powers, allowed coca growers to portray themselves as protectors of Bolivian culture fighting for national sovereignty. In the words of one cocalero: “The tropics of Cochabamba [the Chapare] is a coca producing zone. It has been a victim of imperialism under the pretext of fighting against drugs. . . . Coca production is one thing, cocaine production is another. . . . The production of the leaf in its natural state is not harmful to your health. It is medicinal, traditional.” On the other hand, the cocaleros adopted tactics traditionally employed by Bolivia’s miners’ union. As another cocalero stated when speaking of the actions taken after the passage of a law to enhance coca eradication: The organizations, the communities, and the federations, we began to organize ourselves. We became more united in order to resist the forces of repression . . . we would not accept a law that was unconstitutional. . . . In 1988, we rejected the law. Then we blockaded roads, started mobilizations, marched, and had hunger strikes in La Paz with the COB [the workers union]. . . . Different movements united to defend the coca leaf in its natural state.

In their protests, the cocaleros both took to the streets and built a widespread coalition with other organizations and unions to support their cause. Urban migrant hubs also offered promise to those facing economic hardships in Bolivia’s mining and rural regions, but in these places, migrants found little relief. El Alto, the sprawling high plateau city that looms over La Paz, became a beacon to many of the mining and rural “outcasts” of Bolivia’s neoliberal restructuring (Arbona 2007). Migrants, however, found a city overflowing with displaced workers and few sustainable employment opportunities in Bolivia’s small and stagnant industrial sector. With a plethora of surplus labor, loose labor regulations, and the weakening of Bolivia’s labor unions, employers with jobs offered low wages with little to no security or benefits (Arze and Kruse 2004). Many workers also ended up in the informal sector. By the early 2000s, reports estimated that close to 70 percent of the economically active population in El Alto worked in the informal economy (Rojas and Guaygua 2002). The influx of migrants to El Alto, combined with poor city planning and a lack of funds, forced many residents into precarious living conditions. Developers took advantage of the rapid sprawl by constructing neighborhoods that had little or no access to basic services. In 2001, 65 percent of El Alto’s residents

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reported that they lived in homes without indoor plumbing and 94 percent of roadways were unpaved (Arbona 2007). In addition, developers often failed to follow zoning regulations that required leaving spaces for schools, churches, and parks (Farthing et al. 2006). To address some of these local community needs and problems, the diverse array of El Alto residents converged in neighborhood organizations known as Juntas Vecinales. The first of these groups formed the Federacion ´ de Juntas Vecinales (FEJUVE) in 1979. By 1989, El Alto’s expanding population had formed 166 juntas. By 2005, the number of juntas had more than doubled (Kohl and Farthing 2006:160). The juntas worked to address the basic living demands of their constituencies, often struggling for basic services such as electricity, sewage, and water but also to secure land titles and other social services (Gill 2000:160). Focusing on common needs and common forms of oppression, FEJUVE and similar groups in other urban migrant communities overcame the traditional peasant-worker divide in Bolivia. Initially, groups such as the coca growers’ union and FEJUVE largely focused their struggles on local issues resulting from accumulation by dispossession. In other words, there were attempts to stave off the negative effects of accumulation by dispossession, not necessarily to stop or reverse these processes. FEJUVE struggled to improve community residents’ everyday needs as more people migrated to the city in search of work. The cocaleros struggled to be able to grow coca, the production of which proliferated as people lost their jobs in other sectors. Once peasants and workers began to struggle together in these spaces of marginalization, however, they began to more directly challenge processes of accumulation by dispossession and to be repossessed of what was once theirs. This became apparent in Bolivia’s social-movement struggles to take control of the country’s water, hydrocarbon reserves, and eventually the state itself. Mobilizing against Accumulation by Dispossession – Take One: Water Water access and rights had long been an object of struggle for Bolivia’s peasants, in particular around the city of Cochabamba. Since the 1970s, peasants had continually resisted efforts by the municipal water service, Servicio Municipal de Agua Potable (SEMAPA), to dig deep wells in the countryside near the city to supply urban residents with a more stable supply of water. In the early 1990s, efforts by SEMAPA to dig such wells increased as a drought pushed the city toward a water shortage. However, using the water both for irrigation and everyday purposes, the peasants saw the actions of SEMAPA as an infringement on their water rights (Perreault 2006; 2005; Crespo Flores and Orellana Halkyer 1999). Although the peasants were unable to stop SEMAPA’s projects, their long-held concerns about water rights led them to create a regional irrigators’ association, the Federacion ´ de Regantes de Cochabamba (FEDECOR), in 1997. Even though the peasants originally created FEDECOR to protect rural

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water rights, the focus of their struggles shifted as the rights over Bolivia’s water was transferred to private hands. As the Bolivian state sought to withdraw itself from as many sectors as possible with the introduction of Plan de Todos, it was enticed to privatize water and water provision services throughout the country. In many places, increasing populations and deteriorating infrastructure made upgrades to water provision services a necessity. With little money to fund such improvements, the state was forced to work with international financial institutions to secure the necessary funds. In 1996, the World Bank agreed to help by granting the Bolivian state more than US$600 million in loans and debt relief. However, this help was contingent on the privatization of water supplies and services throughout the country (Schultz 2003). In 1999, the state created the legal framework necessary in order to obtain the World Bank’s help with the passage of the Ley de Agua No 2029.3 The law made it legal for the state to sell the water and water concessions in cities of more than 10,000 people (GOB1999). The water of Cochabamba was some of the first affected by the legal change. In September 1999, the state signed a contract with Aguas del Tunari, a subsidiary of one of the world’s largest water companies, Bechtel. The contract granted the company the rights over Cochabamba’s water and water provision services.4 Included in these concessions were the irrigation systems and wells in the rural and peri-urban communities surrounding the city. However, many residents of Cochabamba and the surrounding areas immediately opposed the contract between Aguas del Tunari and the state. In the months preceding its signing, FEDECOR had formed an alliance with various urban water committees, the Cochabamba segment of the national workers’ union, and other local social movements called the Comite´ por la Defensa del Agua y la Econom´ıa Familiar (CODAEC). CODAEC speculated that the privatization of the city’s water would lead to rate increases of more than 175 percent (Spronk 2007:16; Schultz 2003). In early November 1999, FEDECOR staged the first protests against the contract, asserting that payment of irrigation water would bankrupt between 15,000 and 20,000 farmers (Assies and Salman 2003:23). Later that month, the CODAEC alliance formed the Coordinadora de Defensa del Agua y de la Vida. As the rate increases came to fruition, the strength of the Coordinadora grew. Over the following months, the Coordinadora led a series of protests and general strikes that effectively shut down the city of Cochabamba. Refusing to address the Coordinadora’s demands, the state continually sent in police to break up protests. But as violence escalated, the coca growers in the Chapare and FEJUVE in El Alto staged simultaneous protests of support. In April 2000, the state finally gave in to the demands 3 4

Ley de Agua = Law of Water. The contract for Cochabamba’s water was signed in September 1999 (Schutlz 2003). The Law of Water was signed in October 1999 (GOB 1999). The law retroactively made the contract legal.

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of the Coordinadora, rescinded the contract, and repossessed the people of Cochabamba with their water. In the Midst of Protest The interests of peasants and workers not only converged in the street. As Bolivia’s marginalized masses became a more united front, they slowly began to enter the formal political arena. Ironically, the rise of Bolivia’s marginalized masses in politics was perhaps bolstered by the means intended to remove them from power – in particular, through the popular participation measures. Although the measures redirected the locus of struggle to the local municipal levels (see Chapter 4), this scale of governance overlapped with Bolivia’s burgeoning spaces of marginalization – and spaces of resistance. In these spaces, groups such as the cocaleros and FEJUVE gradually began to see the limits of local politics and local autonomy. The popular participation law first opened the formal political arena to these local groups in a limited capacity through the creation of new municipalities and recognition of local organizations as viable political entities – as Organizaciones Territoriales de Base (OTBs) (see Chapter 4). The creation of new municipalities extended formal forms of governance to places where none previously existed. OTBs gave local organizations some say and legitimacy in the municipal political decision-making process (Gray-Molina 2002). Although the power within these spaces was limited to deciding how funds for local infrastructural projects would be used, in Bolivia’s first direct municipal election in 1995, representatives that identified as peasants or indigenous won 28.6 percent of the municipal council seats. In these spaces of marginalization, the limits of local municipal power gradually became apparent and representatives of local organizations such as the cocaleros and FEJUVE began to enter the national political arena. In 1997, this resulted in the election of four peasant and indigenous representatives to the national Camara de Diputados.5 These initial diputados all came from the ´ coca growing regions of Cochabamba and among them was Evo Morales who represented six of the seven coca growers’ organizations (Van Cott 2003:756). In 2002, the gains made in the formal political arena by Bolivia’s marginalized masses continued to grow. Morales’s party, the Movimiento al Socialismo (MAS), had begun to gain a national presence and won eight seats in the Senate and twenty-seven seats in Congress (Van Cott 2003:753). In addition, 5

The Bolivian political system is bicameral and consists of a Chamber of Senators and a Chamber of Deputies. Through the 2002 election, the total number of deputies was 130. In 1997 and 2002, sixty-eight represented the number of voting districts. The deputies representing voting districts are directly elected. The other deputies are elected by proportional representation. There were also twenty-seven Senators, three from each of Bolivia’s nine departments. The senators were elected by proportional representation.

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Morales himself nearly won the presidential ticket after a sudden increase in popularity. As a leader among Bolivia’s coca growers, Morales often joined his constituency in protests. In January 2002, a protest against a presidential decree closing the last remaining legal coca market in the Chapare spilled over into violence. Two police officers were killed. As a thorn in the side of traditional parties that still held the majority of seats within the Camara de Diputados, ´ Morales was blamed for the incident and expelled from his elected position (Kohl and Farthing 2006:171). However, the incident caused many Bolivians to see Morales more as martyr in opposition to U.S. imperialism than as a rabblerouser. Morales used his image to draw significant support from Bolivia’s marginalized masses. Four days before the election, the U.S. ambassador bolstered Morales’s image and popularity by issuing a less-than-subtle warning when publicly stating: “As a representative of the United States, I want to remind the Bolivian electorate that if you elect those who want Bolivia to become a major cocaine exporter again, this will endanger the future of U.S. assistance to Bolivia” (in Van Cott 2003:773). Morales narrowly lost the presidential election, garnering only 2 percent less of the Bolivian vote than the winner – longtime MNR stalwart and neoliberal icon Sanchez de Lozada. ´ Sanchez de Lozada pulled off the minor victory with the help of U.S. polit´ ical consultants James Carville, Stan Greenberg, and Bob Shrum – all three of whom helped U.S. President Bill Clinton get reelected in 1996. Although Morales lost the presidential race, he did regain his congressional seat. Mobilizing against Accumulation by Dispossession – Take Two: Hydrocarbons As the power of Bolivia’s marginalized masses grew, so did the focus of their struggles. Moving beyond responding to accumulation by dispossession to directly struggling against it, the marginalized masses began to call for the nationalization of the country’s most lucrative economic sector – oil and natural gas. The privatization of Bolivia’s hydrocarbon sector had yielded exceptional profits for transnational investors. Increases in extraction and export coincided with increases in the global price. In particular, transnational energy firms propelled a near tenfold increase in natural gas exports between 1997 and 2004. During this time, the average price of natural gas nearly doubled. Despite extraordinary returns, investing energy firms sought to get more out of Bolivia’s hydrocarbons. In the process, they drew the eye and ire of the country’s marginalized masses. In early 2003, the political problems with organizing a country’s energy sector under the auspices of free-market policy became apparent to even Bolivia’s most ardent supporters of neoliberal ideology. As transnational energy firms began to quarrel among themselves over the internal price of crude petroleum

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figure 5.2. Volume and Average Price of Natural Gas Exports from Bolivia, 1997– 2005. Source: INE 2011.

in 2003, Bolivia’s energy security came under question. Attempting to exercise the power it held from its monopoly over refining in Bolivia, Petrobras told petroleum producers that they were going to lower the price it paid for their crude petroleum. Having the right to commercialize the hydrocarbons they extracted, a number of petroleum producers threatened to ship their crude petroleum elsewhere. As a representative who worked in the office of the Superintendent of Hydrocarbons during this time explained: The petroleum producing companies in Bolivia decided not to bring their [crude] petroleum to the refineries because the refining company, it was a monopoly, it was Petrobras, it decided to lower the price of petroleum, the buying price. It was going to buy petroleum at US$5 under the West Texas Intermediate6 and the [producing] companies had been selling at approximately US$3 under the WTI. So they decided not to sell to the refinery and to instead export all of their production.

But such a move threatened to undermine Bolivia’s internal oil, gasoline, and diesel markets and placed the state in a difficult position. As the representative further explained: The Bolivian refineries are designed for the type of crude petroleum that exists in Bolivia. No other type of petroleum is able to be refined because Bolivian petroleum does not have [a lot] of sulfur, because the Bolivian petroleum is very light, and this does not exist [elsewhere] in the world. What the businesses did was make it impossible to satisfy the Bolivian market.

Attempting to rectify this problem, the Bolivian state implemented an accord that required transnational firms to receive permission from the state to export crude hydrocarbons. Ironically, Sanchez de Lozada, the primary orchestrator ´ 6

The West Texas Intermediate is a global measure used to set the price of certain types of crude petroleum.

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of Bolivia’s neoliberal experiments in the 1980s and 1990s, signed the first accord to re-regulate the country’s hydrocarbon sector. Transnational energy firms also sought to increase their profits by seeking out new export markets. In particular, Repsol-YPF, British Gas (BG), and PanAmerican Energy created a business consortium known as Pacific LNG to send the natural gas they extracted in Bolivia to the United States and Mexico (El Deber 2001; La Prensa 2001).7 The plan entailed constructing a pipeline from Tarija, Bolivia’s largest natural gas-producing region, to the Pacific Ocean. It also entailed building a cryogenic freezing facility on the Peruvian or Chilean coast, where the natural gas would be turned into liquified natural gas (LNG), making it into a more viable transoceanic commodity by reducing the volume of the natural gas by 600 times. Pacific LNG and the government promoted the project as a means to bring investment to Bolivia, increase the price of the country’s natural gas, and expand its market potential. According to Pacific LNG, investments in the project would total more than US$2 billion (La Prensa 2001). This investment would allow Bolivia not only to sell its natural gas overseas, but also to new markets in western Bolivia and potentially northern Chile where the demand for natural gas in mining and electricity production was increasing.8 According to several industry experts, increasing the market potential for Bolivia’s natural gas would increase its competitiveness in the Brazilian market, the primary buyer of the country’s natural gas, and thus lead to better prices for Bolivia (La Razon ´ 2002). Although Pacific LNG’s project would have increased the potential demand for the country’s natural gas, Bolivia would have received significantly less from the sale of the natural gas sold to the United States and Mexico than it received from the sale of the natural gas sold to Brazil and Argentina. As a representative of YPFB explained to me in 2006: The selling price for Bolivia was going to be only US$0.70 per million BTU. And we’re getting US$5 with our neighbors. So why should we sell all the way to the United States for peanuts? There’s a funny thing about the oil industry, especially with natural gas. Do you know how they calculate the selling price? They discount all the transport costs and infrastructure built. . . . So you’ve got to put a cryogenic plant at the seacoast of Peru or Chile. So you discount that cost. And then you discount the re-gasification plant in Mexico. And you discount all the transport costs. And you discount all the investments. Then they tell you that you have to sell it for US$0.70. . . . They take the selling price and then go back. They call it netback. . . . It is 8,000 kilometers from Bolivia to the

7 8

Total had also been discussed as a potential partner. Natural gas can be used as a reduction agent in mining processes. At the time, the San Cristobal ´ mine in western Bolivia was drawing international interest and investors were seeking to secure a share of Bolivia’s natural gas to further develop the mine.

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seacoast of the United States. If it was much further they would have told us that we had to pay them so we can export our gas.

Within this arrangement, Bolivia would have received approximately US$67 million a year by selling 25mm3d of its natural gas to the United States (El Deber 2002). However, for every US$1 received by the Bolivian state, Pacific LNG would have received US$24, or approximately $US1.608 billion a year (Opinion ´ 2003b). However, another critical issue surrounded Pacific LNG’s plan. To export Bolivia’s natural gas, it would somehow need to reach the Pacific coast. Seeking out a port, Pacific LNG opened negotiations with both Chile and Peru. Although both countries provided Pacific LNG with favorable offers, shipping the natural gas to the proposed Peruvian port would require an additional 300 kilometers of pipeline (Indacochea & Associates 2002). The selection of the Chilean port was the most economically viable. The port would require less sunk capital in the construction of transport infrastructure. In addition, it would provide Bolivia’s natural gas producers with access to markets in northern Chile, an energy-starved region of South America. As a result, in June 2003, Pacific LNG chose to export Bolivia’s natural gas through Chile (Opinion ´ 2003a). However, Pacific LNG failed to see the political implications of their decision. Exporting Bolivia’s natural gas through northern Chile, the company would move it through a stretch of land that the Bolivians and the Chileans fought over during the War of the Pacific in 1879. Losing the war, the Bolivians lost their last remaining stretch of coastal territory on the Pacific. Although the War of the Pacific ended more than 100 years ago, strong nationalist resentment still existed among Bolivians toward Chileans. With Bolivia’s marginalized masses already questioning the country’s neoliberal turn, social movements began to use this resentment to mobilize the Bolivian population against the government and Pacific LNG’s project. By September 2003, public protests against Pacific LNG’s project and the proposed Chilean transport route led President Sanchez de Lozada to ´ declare that the Peruvian port option would again be explored (La Prensa 2003). But according to the regulatory changes in the hydrocarbon sector put forward during Sanchez de Lozada’s first presidential term in the ´ 1990s, investing energy firms were free to commercialize the hydrocarbons they extracted as they pleased. As a result, the government had no power to challenge Pacific LNG’s choice, and the company publicly declared that it already decided to use the Chilean route (Opinion ´ 2003b). Unable to alter Pacific LNG’s plans, the Bolivian state, controlled by the internal mining elite, found itself in the midst of contradiction and crisis. Orchestrating Bolivia’s neoliberal turns, they had benefitted mightily from a liberalized mining sector. However, the actions of transnational energy firms in the

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liberalized hydrocarbon sector threatened their ability to maintain control of the state. Invoking notions of resource sovereignty and calling into question who was benefiting from the capitalization reforms that had placed the country’s hydrocarbon sector into private hands, Bolivia’s social movements began to mobilize their constituencies and allies to oppose Pacific LNG’s plan in what eventually became known as the Guerra del Gas. As the export of Bolivia’s natural gas to the United States seemed like a foregone conclusion, social movement leaders formed the Coordinadora Nacional por la Defensa del Gas in July 2002 with a goal to “recover gas for Bolivians” (Kohl and Farthing 2006:173). The group consisted of a diverse array of actors from twenty-one organizations, including Evo Morales, military leaders, anti-globalization activists, neighborhood organizations, union representatives, highland campesinos, and the coca growers. By 2003, the Coordinadora was staging protests and road blockades throughout the country against the Pacific LNG project on a regular basis. In September, the Coordinadora’s demands coalesced with those of a number of highland Aymara social movements. Most notably, Felipe Quispe – one of Bolivia’s most well-known Aymara intellectuals – led a roadblock near the city of Warista in the Altiplano to protest the arrest of an Aymara community leader accused of killing two cattle rustlers. The road blockade coincided with the Coordinadora’s day of national gas protests. Although Quispe refused to formally join the Coordinadora’s coalition, the Coordinadora added the release of the Aymara leader to the long list of demands compiled by the assortment of social movement participants. The events in Warista ended up being a crucial factor in the mobilizations to repossess Bolivia’s natural gas. Severing the tourist town of Sorata from La Paz, the blockade stranded 200 foreign tourists. Attempting to “rescue” them, Sanchez de Lozada and defense ´ minister Carlos Sanchez Berza´ın led a military escort through the blockade ´ with busloads of tourists. The incident resulted in the death of three civilians and two soldiers and served as a catalyzing factor that brought more people into the Coordinadora’s coalition against the government (Kohl and Farthing 2006:174; Cabezas 2007:206). Among the varied list of more than seventy demands put forward by Bolivia’s social movements in the Guerra del Gas, one of the key issues was how the country’s natural gas should be used as a mechanism for development. As Thomas Perreault (2006:162) notes, community organizations and union leaders were able to mobilize peasant groups and give broader meaning to their struggles by highlighting how they used animal dung for cooking while the government and transnational energy firms wanted to export Bolivia’s natural gas abroad. This, combined with a long history of resource exploitation, allowed many Bolivians to link the country’s natural gas to national patrimony as well as to their everyday experiences and hardships. As a result, social movement

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leaders were able to use Bolivia’s natural gas as a crucial discursive tool to bring people into the streets. Even though many of the Bolivians involved in this struggle lived hundreds of miles from the country’s natural gas reserves and had no actual daily access to the gas, this discursive construction of the country’s natural gas led them to feel as if the gas was, or at least should be, theirs. After nearly a month of social unrest that resulted in more than seventy deaths and 400 wounded, President Sanchez de Lozada resigned and fled ´ the country on October 17, 2003 (Kohl and Farthing 2006:174; Cabezas 2007:206). Although the push by Bolivia’s transnational investors to enhance their own profits had forced Sanchez de Lozada to begin to re-regulate the ´ hydrocarbon sector, such re-regulation merely staved off the possibility of internal scarcity and failed to account for the broader demands of Bolivia’s social movements. Within this context, Bolivia’s hydrocarbons and the distribution of their rents became a focal point within social movement struggles, representing years of uneven development exacerbated by the regulatory changes that occurred in the 1980s and 1990s. From Elusive Spaces of Marginalization to Elusive Spaces of Political Power Economic oppression within the capitalist system can occur in two primary forms: exploitation and marginalization. Exploitation occurs when 1) people or places are incorporated into global circuits of production through the sale of their labor or 2) when surplus value is accrued through wage labor at the point of production or through the appropriation of differential labor values across regions in forms of unequal exchange. Marginalization occurs when 1) people or places are excluded from global circuits of production or 2) when their labor is left out or not wanted in the production or extraction of a commodity. In processes of exploitation, the oppressor needs the exploited in order to profit. In processes of marginalization, the oppressor’s profit does not depend on the marginalized and, if marginalized people threaten to disrupt profit making, the oppressor would rather have them disappear. Since the first round of neoliberal policies were rolled out in Bolivia during the 1980s, increasing numbers of Bolivians were excluded from the country’s most profitable economic activities. As the country’s incorporation into the global economy shifted toward hydrocarbon extraction and export in the late 1990s, little changed. Indeed, if anything, the Bolivian masses became increasingly marginalized. However, they did not simply disappear. Converging in spaces of seeming opportunity – in spaces of marginalization– peasants and wage workers alike began to come together in attempts to make ends meet. Unable to eek out a basic livelihood, however, their struggles shifted from resisting the infringements on their lives occurring as a result of processes

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of accumulation by dispossession to directly challenging processes of accumulation by dispossession themselves. As they did, Bolivia’s marginalized masses sought not only to take control of Bolivia’s rich natural resource base, but also the state. As Bolivia’s marginalized masses ousted the MNR and the traditional mining elite from power, however, their ability to take control of the state did not immediately follow. In addition, their ability to capture the wealth beneath their soils and repossess themselves of the goods of which they were dispossessed would prove to be elusive.

figure 6.1. In Order to End Inflation and the Power of the Fascist Right . . .

6 A Redistribution of Riches: 2003–2005

The old is dying and the new cannot be born: in this interregnum there arises a great diversity of morbid symptoms. – Antonio Gramsci (1992[1930]:33)

In the wake of Sanchez de Lozada’s exit in 2003, his vice president Car´ los Mesa Gisbert ascended to the presidential post. Mesa was a prominent Bolivian historian and journalist who owned one of the country’s news production agencies. Not directly involved in politics prior to his vice presidency, Mesa portrayed himself as an independent, removed from Bolivia’s clientelistic and corrupt traditional party lines. Upon becoming president, he put together what he called “a government of citizens” and filled his cabinet with lawyers, academics, and technicians from outside the country’s traditional political sphere. Nevertheless, the ability of Mesa’s cabinet to operate within Bolivia’s political climate proved difficult. In May 2008, I sat with one of the members of Mesa’s cabinet in his office at a Bolivian university. As a professor, he seemed more comfortable working in the laboratories of scientific inquiry than the laboratories of political experimentation. Indeed, he had retreated back to the halls of academia after his short stint in politics. Although he moved only briefly through the halls of presidential palace and Bolivian legislature, he witnessed the crumbling of a decades-old power structure built to uphold the interests of the mining elite. And as he did, the ability to govern became difficult. As the member of Mesa’s cabinet put it: If you have the presidency but you do not have the congress, the parliament, you are not able to govern . . . It was impossible because evidently the opposition, all of the traditional parties and MAS, did not want us to govern. All of the political parties were butchers and utilized the hydrocarbon law in order to make the government fall. 109

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Market Justice: Political Economic Struggle in Bolivia

Indeed, amid an internal struggle over who could hold power over and glean the benefits of the Bolivian economy, Mesa and his cabinet struggled to stay in power. From October 2003 to December 2005, Bolivia was stuck between the old and the new. The old consisted of the country’s traditional parties who were aligned with the falling internal mining and the traditional landed agricultural elites. The new consisted of MAS and its aligned worker, indigenous, and campesino social movements. As each sought to secure and expand their power, their struggles centered on how the millions of dollars coming from Bolivia’s hydrocarbons should be used and within this interregnum, Mesa’s government of citizens became a government without power. At certain moments in time, turning points occur in which less powerful actors are able to alter their positions within the dominant power structures in which they exist. These moments are neither the result of historical accidents nor are they free from historical constraints. These turning points and their outcomes are embedded in preexisting historical and sociospatial relations. In the words of Jeffrey Haydu, the turning points and their outcomes “are themselves products of past” (1998:354). For Haydu, actors can create social change through processes of reiterative problem solving. In other words, actors often face recurring problems over time. Moments of social change – turning points – can occur when actors put forward contrasting solutions to recurring problems. These turning points are often rife with conflict, as those benefitting from and seeking to uphold previous solutions clash with those putting forward alternatives. However, proposed solutions do not emerge outside of historical circumstance. Conflicting actors seek to uphold or propose different solutions to recurring problems because they have been differentially affected by – and can differentially affect – such problems. In other words, different actors propose different solutions based on how they are incorporated into the global economy, their positions within global and local power structures, and the means through which they participate in and/or challenge both. In Bolivia, how to best use the country’s natural resource wealth has long been a recurring problem. Since colonial times, foreign empires, transnational corporations, and local elites have held and exercised the most power over the country’s raw material reserves. Most often, they have deemed the solution as to how to best use Bolivia’s natural resources to rest in the export of unprocessed minerals and hydrocarbons. They have then used the profits from such exports to fill their own coffers. Throughout Bolivian history, multiple turning points have occurred in which the power relations surrounding the country’s natural resource wealth have been altered. From the 1781 indigenous insurgencies led by Tupaj Katari to ´ Simon ´ Bol´ıvar’s declaration of independence from Spain, to the revolution of

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1952, to uprisings at the turn of the twenty-first century, Bolivia’s natural resources have long been an object of struggle. At each of these points in time, less powerful actors have put forward contrasting solutions to the recurring problem of how to best use Bolivia’s natural resource wealth. However, the outcomes have most often merely redistributed the riches of the country’s natural resource wealth from one segment of the already rich to another. In 2003, the less powerful in Bolivia were perhaps in a position for the first time in more than 400 years to successfully put forward an alternative that would truly benefit the masses. With a united popular class front, a significant share of seats within the formal political arena, and social movements still echoing their demands for the nationalization of the country’s natural gas, the less powerful in Bolivia seemed poised to put forward a solution that resulted in a more equitable distribution of the wealth coming from the riches beneath their soils. As Haydu notes, however, the conflicts surrounding contrasting solutions often cause the end resolutions to diverge from those originally forwarded by rival actors (Haydu 1998:357). In the Bolivian context, the question thus became whether the turning point that emerged would give birth to a new form of social and economic organization or a re-legitimized form of neoliberalization – whether neoliberalism would die or reemerge in a zombie-like state. In the Aftermath . . . Once appointed president, Mesa responded to the demands of Bolivia’s marginalized masses and leftist social movements by agreeing to put forward a referendum vote about the future trajectory of the country’s hydrocarbon sector, to increase the rent received by the state from the sale of natural gas, and to create a constitutional assembly that would “reinvent” the country (Kohl and Farthing 2006:179). On June 4, 2004, he fulfilled the first of his promises and put forward a five-question referendum about the hydrocarbon sector (CNE 2004). Voters supported all of the measures and more than 85 percent voted in favor of repealing the Ley de Hidrocarburos No 1689, placing Bolivia’s hydrocarbons back into the hands of the state, and refunding YPFB (IFES 2004). However, the referendum was one of Mesa’s few successes. As his administration tried to legally implement the referendum, it found itself constrained by both external and internal pressures. This pressure came in three primary forms. First, international lending agencies, investors in the energy sector, and Bolivia’s trading partners continually cautioned Mesa to uphold the agreements signed in the country’s natural gas sector during the 1990s. Second, Bolivia’s traditional political parties worked to undermine Mesa’s agenda as they attempted to maintain their own power. And third, the country’s leftist social movements began to push Mesa for more rapid and radical socioeconomic reform.

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table 6.1. Questions in the Hydrocarbon Referendum on June 4, 2004

Do you agree that the Law of Hydrocarbons 1689 approved by Gonzalo Sanchez de Lozada ´ should be repealed? Do you agree that the state should recuperate ownership of all of its hydrocarbons in the well? Do you agree that YPFB should be refunded and that its capitalized shares should be recuperated so that it can participate in all stages of hydrocarbon production? Do you agree with President Carlos Mesa’s policy to utilize Bolivia’s natural gas as a strategic resource to recover useful and sovereign access to the Pacific Ocean? Do you agree that Bolivia should export gas under a policy framework that guarantees internal demands, encourages internal industrialization, earns 50 percent of the projected profits through taxes and/or royalties, and uses the revenues from the gas to primarily fund projects for education, health, roads, and jobs?

Yes

%

No

%

Total

1,788,394

86.64

275,742

13.36

2,064,436

1,913,642

92.19

162,130

7.81

2,075,772

1,793,594

87.31

260,610

12.69

2,054,204

1,055,529

54.80

870,772

45.20

1,926,301

1,179,893

61.74

731,021

38.26

1,910,914

Source: CNE 2004 (translated by author).

Securing the Supply and the Market External actors began to pressure Mesa about changing the regulations within Bolivia’s hydrocarbon sector before the referendum even passed. Almost immediately after Mesa came to power, investing energy firms stated that they

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would bring the Bolivian state to international arbitration if their contracts were breached. In December 2003, a general director of Repsol publicly noted: “If at some given moment there is no possibility for negotiation, without imposition, we will utilize the international resources we have, such as international arbitration” (Correo del Sur 2004). Mesa’s administration also reported that such threats were reiterated by a number of other investing energy firms. On the day of the referendum, Mesa spoke of the pressure he was also experiencing from international financial institutions and their supporting countries. As he sought to assure investors and the international community that the government was not going to nationalize private assets, he stated: A nationalization would signify a declaration of war against the world and terminate the cooperation and help of international organizations. . . . Are we going to tell the transnationals to leave, that we are going to appropriate their investments and not even give them a cent because they have done harm to Bolivia? This would be to declare war on the world without a doubt because it would end the cooperation, it would end the help, not only of the United States, but of the European Union and the World Bank (Mesa in Opinion ´ 2004).

Given that international assistance made up approximately 9 percent of Bolivia’s GDP and another 28 percent of the country’s GDP went to paying off its external debts (Kohl and Farthing 2006:182), threats to terminate aid placed Mesa in a precarious predicament. The primary purchaser of Bolivia’s natural gas exports, Brazil, also attempted to deter Mesa from changing the regulations surrounding the country’s hydrocarbons. After the referendum passed, Brazil took a strong stance against the proposed rent increase. In July 2004, the Brazilian ambassador to Bolivia stated: If the idea is to raise the royalties to 50 percent, the business is finished. . . . It is necessary to end the illusion in this regard. . . . To think that foreign investors are able to pay any quantity of royalties or taxes is an illusion. Now if the people want this, it is their sovereign decision and I suppose we would have to respect it. . . . But I hope that they [the Bolivian people] will be thoughtful and not rupture the relationship with Brazil (El Diario 2004).

With Bolivia sending the majority of its natural gas to Brazil and its 2004 natural gas sales making up close to 40 percent of the value of the country’s total exports, the Brazilian market was crucial to the country’s economy. Securing Traditional Lines of Power Mesa’s rise to the presidency and his declaration to satisfy the demands of Bolivia’s marginalized masses and social movements posed a direct threat to

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the already declining power of the country’s traditional political parties and their elite constituencies. Although Bolivia’s traditional political parties had maintained power in the central government for more than fifty years, the rise of MAS and other popular class-political parties slowly began to erode elite control over the state. Sanchez de Lozada won the presidency in 2002 by less ´ than 50,000 votes and needed to put together a “mega-coalition” to receive the requisite support from the Camara de Diputados and the Senate to assume ´ the presidency (CNE 2006). The mega-coalition guaranteed the country’s different elite factions, and their traditional political parties, some representation within Sanchez de Lozada’s cabinet. When Mesa became president, however, ´ he formed a government without the direct participation of political parties. Ascending to the presidential post through constitutional law, Mesa did not need to form a coalition to obtain congressional and senate approval. Seeking to avoid the clientelism and corruption that plagued past governments, Mesa filled his cabinet with individuals who had no direct political party affiliation (Assies and Salman 2003:66). The country’s traditional political parties saw the move as an affront to their power. Unable to secure positions within Mesa’s cabinet and viewing the rise of MAS as a political threat, they consolidated their power in August 2004 through a formal alliance to take majority control of the parliament. The alliance named Mario Coss´ıo of Movimiento Nacionalista Revolucionario (MNR), the party of Sanchez de Lozada, to be the leader of the Camara de ´ ´ Diputados,1 and Hormando Vaca Diez of the Movimiento Izquierda Revolucionario (MIR) to be president of the Senate (La Prensa 2004a).2 Coss´ıo and Vaca Diez were from the departments of Tarija and Santa Cruz, Bolivia’s largest oil and natural gas-producing departments and home to some of Bolivia’s largest agricultural landholders. Gaining control of parts of the government, the coalition enhanced the power of their elite constituencies at the national level. Nevertheless, the ability of Bolivia’s traditional parties to maintain their power continued to decline. In the municipal elections of December 2004, two indigenous and campesino parties took the largest percentage of votes. MAS won the largest number of municipal council seats, taking 18.4 percent of the vote. The Movimiento Sin Miedo (MSM) won the second-largest number of municipal council seats, taking 8.7 percent of the vote. The traditional party winning the largest number of municipal council seats was the MIR, taking 7 percent of the vote. The MNR took 5.4 percent of the vote, a 17 percent decrease from the previous municipal elections in 2002 (La Prensa 2004b; La Razon 2004b) ´ 1 2

The Camara de Diputados is the equivalent of the Congress in the United States. ´ Historically, the MNR and MIR were in opposition to one another. However, the mega-coalition formed by Sanchez de Lozada brought them together against a common foe, MAS. ´

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Recognizing their losses at the municipal level and their dwindling power at the national level, Bolivia’s landed elite in the east and their representatives in parliament began to press Mesa more fervently to enhance departmental autonomy. In the municipal elections of 2004, the elites had maintained their power within the urban centers of the east, both under new and traditional party names. In the city of Tarija, the MIR aligned with the Nueva Mayoria to take more than 50 percent of the municipal vote. In the city of Santa Cruz de la Sierra, the Alianza Siglo XXI took the most votes followed closely by Frente Amplio and Movimiento Unidad y Progresso (CNE 2004). All three of these parties ran candidates once associated with the country’s traditional parties of the MNR, MIR, and the Accion Nacional ´ Democractica ´ (ADN).3 Having kept their power within the most populated regions of the eastern departments, the eastern elites figured they could enhance their power by pushing the state toward a more federalist type of political system. To do this, they capitalized on the long-standing regional and separatist sentiments and began to organize rallies and protests in favor of greater departmental autonomy. The Power of the People without the Power of the Parliament In contrast to Bolivia’s traditional political parties, the country’s new political parties offered tacit support to Mesa when he initially came to power. Even though Mesa was not elected by popular vote, Bolivia’s marginalized masses and social movements did bring him to power indirectly by forcing the resignation of Sanchez de Lozada. Although no formal political alliance existed, MAS ´ came out in support of Mesa and expressed a willingness to see if he could implement the social movements’ demands to which he publicly committed when taking office. However, the political alliance between Mesa and MAS was tenuous at best, with neither having enough power in the Senate or Camara de Diputados to ´ follow through on the demands of the country’s social movements. Within this context, a specter of Bolivian history seemed to be rising against their agenda. In the 1980s, the MNR and the ADN formed a parliamentary coalition that derailed the gains made by Bolivia’s union-led social movements and forced the resignation of UDP president Hernan Siles Suazo, the only other non-traditional political party candidate to hold Bolivia’s presidential post (Assies and Salman 2003; Conaghan and Malloy 1994). Recognizing the potential for a similar response from Bolivia’s traditional political parties in 2004, a MAS senator publicly stated: “We will impede any attempt of the MIR, MNR, and NFR to use their parliamentary majority to screw Carlos Mesa” (in Assies and Salman 2003:67).

3

The ADN was Hugo Banzer Suarez’s party.

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However, the dilemma faced by Bolivia’s non-traditional political parties and leftist social movements was perhaps worse than that faced in the 1980s. Whereas the resignation of Siles Suazo led to early presidential elections, the constitution deemed Vaca Diez and then Coss´ıo next in line as president if Mesa resigned. Representing Bolivia’s eastern elites and the country’s traditional political parties, either could have potentially undermined the progress made by the country’s marginalized masses and social movements. Bolivia’s new political parties thus found themselves wanting a more rapid and radical response from Mesa but facing the possibility that, if Mesa resigned, the traditional political parties would regain power at the national level. (Recon)Verging on Unrest As the traditional parties and eastern elites tried to secure their power enclaves, MAS and its aligned leftist social movements vacillated in their support of Mesa. However, in December 2004, Mesa provoked the ire of both as he responded to IMF pressure to raise domestic fuel prices closer to international market value. This move solicited a response from a wide array of social movements and allowed Bolivia’s eastern elite to regain some power within the country’s political arena. Putting forward Decreto Supremo No 27959, Mesa took steps to increase fuel prices in Bolivia. In November 2004, the IMF informed Mesa that it would suspend its negotiations to extend Bolivia loans until it saw the state taking concrete steps to end its fuel subsidies and put forward a new law of hydrocarbons (La Razon ´ 2004a). From 2000 to 2004, the Bolivian state spent more than US$390 million on fuel subsidies, which the IMF argued were contributing to the government’s continual budget deficits (La Prensa 2005b). Following the IMF’s prescriptions, cutting fuel subsidies would lower the state’s deficit by decreasing the amount of money the government paid to gasoline and diesel producers while simultaneously increasing the amount of money the government earned from taxes on fuel. As Mesa followed through on the IMF’s request, fuel prices increased and social movements across the country and spanning the political spectrum responded to the decree. In Cochabamba, the Coordinadora Nacional por la Defensa del Gas staged mobilizations against the decree because it believed that the state deficit could be significantly decreased if the government would implement the mandate it was given through the referendum vote in 2004 to increase the government’s take of hydrocarbon rents (El Diario 2005a). In El Alto, neighborhood organizations protested the government’s renewal of the city’s water contract with Aguas del Illimani, a subsidiary of the French transnational Suez Lyonnaise des Eaux, and tacked on the reversal of Decreto Supremo No 27959 to their list of demands (Ramos Andrade 2005).

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Additionally, in Santa Cruz, the elite-led Comite´ pro Santa Cruz and Comite´ C´ıvico used the decree to mobilize the city’s population against the increased fuel costs and to push for departmental autonomy (La Prensa 2005b). The pressure from Bolivia’s various political actors brought the stability of Mesa’s government under question as some began to call for the president’s resignation. The protests spanned the political spectrum. However, the political fractions asking Mesa to step down largely represented the interests of eastern elites and included Santa Cruz’s agricultural and industry-lobbying groups the Camara Agropecuaria del Oriente (CAO) and Camara de Industria y Comercio ´ ´ de Santa Cruz (CAINCO), the president of the Comite´ C´ıvico of Tarija, and several representatives from the country’s traditional political parties. Amid the calls for Mesa’s resignation, MAS came out in support of the president and accused the eastern elite of trying to destabilize the country in order to derail the gains made by Bolivia’s marginalized masses and leftist social movements (V 2005a). In an attempt to quell the protests, Mesa’s government made a number of concessions. On January 14, 2005, the government agreed to cancel the contract with Aguas del Illimani and assured El Alto that control over their water would be returned to a public company (La Prensa 2005a). On January 19, 2005, Mesa adjusted the fuel subsidy cuts by lowering the price of diesel by 7 percent. By the end of the month, Mesa also publicly declared that he would initiate a process to give greater autonomy to all of Bolivia’s departments by making departmental prefects or governors democratically elected rather than state-appointed posts through Decreto Supremo No 27988 (El Deber 2005a; GOB 2005a). Even though a wide array of organizations demanded the reversal of Decreto Supremo No 27959, Bolivia’s fuel subsidies largely benefited the eastern landed elite. As large-scale agricultural producers, the eastern elites garnered approximately 60 percent of fuel subsidies through their consumption of diesel (La Prensa 2005b). In addition, the eastern elite had long called for increased departmental autonomy and elected departmental prefects. Having lost access to central government resources after the introduction of the NPE in the 1980s (see Chapter Two) and the Plan de Todos in the 1990s (see Chapter Four), the loss of power at the municipal level in the December 2004 elections provided just another reason to push for a rescaling of power to the departmental level. The End of the Informal Alliance and the Ley De Hidrocarburos 3058 As eastern elites and traditional ruling parties carved out new places of power, MAS and its aligned social movements slowly began to withdraw their informal support of Mesa. Shortly after Mesa had conceded to the demands of the eastern elites, MAS began to push the opposition and the Mesa government to

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follow through on the measures supported in the 2004 referendum vote and to establish an assembly to rewrite the Bolivian constitution. In early 2005, this manifested in a struggle over the proposed new law of hydrocarbons. Bolivia’s various political factions put forward three proposals for the country’s new hydrocarbon law. MAS and the centrist Nueva Fuerza Republicana (NFR) formed the Economic Commission of the Parliament and proposed increasing royalties from 18 percent to 50 percent on Bolivia’s oil and natural gas gross production value (CEDIB 2006). Within this proposal, the royalty was charged on the volume and value of hydrocarbons exiting a reserve at the wellhead. Transnational energy firms had a long history of abusing Bolivia’s tax and legal loopholes and the Economic Commission wanted to ensure that the firms could not decrease their rents by deducting inflated operating costs from their reported revenues or by claiming to have “lost” a significant portion of their extracted hydrocarbons during production or separation prior to transport (La Prensa 2005c). A MNR and MIR coalition supported a second proposal in which the state would maintain an 18 percent royalty and add a 32 percent tax, the Impuesto Directo de Hidrocarburos (IDH). Both the royalties and the tax would be charged at the fiscal point, or where the hydrocarbons were sold. This would allow producing firms to avoid charges for the hydrocarbons they had lost in the production or separation processes prior to transport (La Prensa 2005c). Mesa and his cabinet put forward a third proposal. Instead of instituting an immediate flat 32 percent taxation rate, Mesa wanted to institute a flexible and progressive taxation rate that would gradually increase to 32 percent over twelve years and that varied based on selling price and reserve size (CEDIB 2006; Zarratti and Torres 2008). In the second and third proposals, the MNR, MIR, and Mesa wanted to ensure that the new Ley de Hidrocarburos would not deter future investment or investment in smaller reserves (La Prensa 2005c). In March 2005, MAS and the NFR put the first of these proposals to a vote in the Camara de Diputados. The vote on the measure tied. Following ´ parliamentary rules, the session leader was the tie-breaker. This fell to the vice president of Camara de Diputados, a Santa Cruz representative of the ´ MIR, who voted to turn down the measure in order to promote the MNR and MIR plan to put forward a hydrocarbons law with an 18 percent royalty and 32 percent tax (La Razon ´ 2005). In opposition, MAS leader Evo Morales immediately formed an alliance with the Coordinadora Nacional por la Defensa del Gas and Bolivia’s leftist social movements that had been pressuring Mesa to follow through on the referendum results from the streets. Soon thereafter, the social movements began to organize protests and road blockades throughout the country (V 2005b). The following day, Mesa submitted his resignation to the Bolivian parliament in order to avoid the type of conflict and violence that forced his

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table 6.2. Proposals for the New Ley de Hidrocarburos by Political Faction The Economic Commission Proposal (led by MAS and NFR) Royalties

Taxes

50 percent based on gross production value at the wellhead 0 percent

The MNR & MIR Proposal

Mesa’s Proposal

18 percent of the value at the fiscal point

18 percent of after-expense revenues

32 percent flat and immediate – value at the fiscal point – applies to all reserves equally – implemented from date of approval

32 percent flexible and progressive – after-expense revenues – moves up to 32 percent over twelve years – based on sale price and reserve size

predecessor from power. In his resignation speech, Mesa (2005) clearly demonstrated what he felt were the difficulties of attempting to govern a country stuck between international law and the demands of social movements, stating: The Ley de Hidrocarburos put forward by the honorable Evo Morales the leader of MAS, is unviable and impossible. . . . It is a law that the international community will not accept and that the oil companies will take to arbitration. . . . Just or unjust, this is up for discussion and debate. But it is clear, everyone has told us, Brazil has told us, Spain has told us, the World Bank, the United States has told us, the International Monetary Fund has told us, Great Britain has told us and the entire European Community has told us that Bolivia needs to approve a law that is viable for the international community.

Those next in line to assume the presidency were hesitant to accept Mesa’s resignation, however. With the country’s leftist social movements preparing to put pressure on the state in support of MAS and to form a constitutional assembly, the MNR and MIR brokered a compromise with Mesa. On March 8, 2005, Mesa agreed to remain president and the MNR and MIR coalition agreed to work with him to put into place a new Ley de Hidrocarburos and a referendum about departmental autonomy. For Mesa, however, the agreement proved futile. In response to Mesa’s newly brokered alliance with Bolivia’s traditional parties and elites, the country’s leftist social movements pledged to stage protests

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throughout the country until Mesa adopted the Ley de Hidrocarburos proposed by MAS and convoked a constitutional assembly. Even though Mesa and his new coalition partners publicly agreed to address some of their demands, the leftist social movements doubted any agreement between Mesa, the Bolivian elite, and the country’s traditional parties would lead to change. As a result, they saw Mesa’s new alliance as a return to a politics of old in which their voices historically went unheard and the country’s resource flows benefited the few. In the words of one social movement leader: Tuesday the devil wanted the oligarchy of the right to unite with President Mesa and work in favor of the transnationals. Today, God and the Pachamama wanted the actors of October [the leftist social movements] and politicians on the left to unite in order to face them (El Deber 2005b).

Although Mesa invited Morales to dialogue about the social movements’ concerns, Morales responded that he would only meet with Mesa if the acting president also agreed to meet with union, campesino, and indigenous social movement leaders. Mesa declined (Los Tiempos 2005b). Mesa’s new alliance also proved to be built on unstable ground. Although the MNR and MIR agreed to work with Mesa, they favored their own proposal for the new Ley de Hidrocarburos over his. On March 15, the Camara ´ de Diputados approved the MNR and MIR proposal with the support of some NFR representatives (La Prensa 2005d). Over the following weeks, the Senate debated the proposal and made a number of minor revisions. In the process, the Senate removed an amendment that gave indigenous groups the right to veto hydrocarbon projects in their communities. In addition, none of the revisions addressed Mesa’s or MAS’s concerns. On May 6, the proposal was approved by both the Camara de Diputados and the Senate and sent to the president’s ´ office to be approved. Not supporting the proposal, Mesa refused to sign it into law. However, he also refused to veto it. According to Bolivian law, once both the Camara de Diputados and the Senate approved a bill, the president ´ had ten days to sign it. If the president failed to do so, the leader of the Senate gained such authority. As a result, on May 17, Vaca D´ıez of the MIR signed the proposal and thus approved the new Ley de Hidrocarburos No 3058 (GOB 2005b; CEDIB 2006). The new law had four primary components. First, the law increased the rent obtained by the state by 32 percent through a new tax – the Impuesto Directo de Hidrocarburos (IDH). The funds from the tax were to be used for education, health, public infrastructure (i.e., roads, buildings, etc.), economic development, and projects to generate employment. Second, the law eliminated the distinction between “new” and “existing” reserves. All hydrocarbons extracted in the country were thus subject to both the new tax and the existing 18 percent royalty payment. Third, the law recreated YPFB’s old role in the hydrocarbon sector. Whereas YPFB had acted only as a residual company

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that oversaw state contracts, the new Ley de Hidrocarburos legally gave YPFB the right to operate in all segments of the country’s hydrocarbon sector. And fourth, the law obligated energy firms operating in Bolivia to sign new contracts with the state that recognized the legal changes (GOB 2005b). However, the law did not change ownership structure surrounding Bolivia’s hydrocarbons. According to the law, the Bolivian state only controlled its hydrocarbons until the fiscal point (CEDLA 2005:11) The passage of the law almost immediately provoked Bolivia’s leftist social movements to return to the streets. Although the Ley de Hidrocarburos No 3058 addressed a number of the mandates put forward through the referendum vote when Mesa first assumed power, the law failed to recognize MAS’s demands. Unlike the protests of October 2004 that were largely concentrated in the west, leftist social movements across the country mobilized (CEDIB 2006). As the altiplano social movements staged road blockades in El Alto, leftist social movements in Bolivia’s hydrocarbon-producing regions occupied oil and natural gas extraction sites and closed a number of natural gas transport pipelines (Opinion ´ 2005). Abandoned by Bolivia’s marginalized masses and leftist movements, betrayed by the Bolivian elite, and beholden to transnational interests, Mesa had lost nearly all political legitimacy and had no way to resolve the tensions brewing throughout the country. On June 6, 2005, Mesa again put forward his resignation amid mass protests, but this time he refused to return to office. With Coss´ıo or Vaca D´ıez in line to take power, Bolivia’s leftist social movements maintained their protests until both politicians turned down the presidential post and the Senate and Camara de Diputados agreed to hold early elections. ´ On June 12, 2005, Eduardo Rodr´ıguez Veltze, the lead justice within Bolivia’s Supreme Court, assumed the presidential post. Before taking power, Rodr´ıguez pledged to oversee general elections in December 2005 (CEDIB 2006). In addition, shortly after taking office, Rodr´ıguez oversaw the passage of Ley 3091 that obligated whoever took control of the state to hold elections on June 1, 2006 for a Constitutional Assembly – a key demand of Bolivia’s leftist social movements and the first step toward rewriting the country’s constitution (GOB 2005c). The Turning Point The tumultuous year proved to be a turning point in Bolivian history. However, although the victory in the streets benefitted Bolivia’s historically marginalized masses, the victory inside the halls of parliament before Mesa left power benefitted the traditional elite – in particular, the eastern agricultural elite. Who would benefit from the turning point would thus not solely be determined by who would take control of the state, but also by who would control the revenues coming from the Bolivian underground.

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For MAS and their aligned leftist social movements, the call for early elections opened a window for the country’s burgeoning indigenous and campesino-led political parties to potentially gain power at the national level. In the words of a campesino from one of Bolivia’s coca-growing and natural gas-producing regions: In one day we removed three presidents. First was Mesa, then was Vaca D´ıez, and the last was Mario Coss´ıo. We threw them out. We mobilized in the roads, in the cities, in the streets and formed blockades until we defeated them, the governments who had taken advantage of Bolivia. . . . We brought about an interim president and then elections. . . . In the elections we did not think that we were going to be president, never. We thought, ‘now who is it going to be’? But at this moment, the politics that existed provided an opportunity . . . an opportunity for someone who did the work of a campesino, the work of the indigenous, to become president.

Seeking to take advantage of this opportunity was Evo Morales. However, having secured the democratic election of departmental prefects and written the new hydrocarbons law, the eastern landed elite positioned themselves to glean the lion’s share of the riches coming from Bolivia’s oil and natural gas. Indeed, through the changes made during Mesa’s stint in power, the eastern landed elite fortified, expanded, and directed the royalty and tax revenues coming from Bolivia’s hydrocarbon extraction activities to their own departments where they hoped to soon take power. The eastern agricultural elite fortified their share of Bolivia’s oil and natural gas rents by maintaining both the long-established 18 percent royalty rate on extracted hydrocarbons and its existing distribution. As stated in Article 52 of the Ley de Hidrocarburos No 3058, each hydrocarbon-producing department continued to receive eleven of the 18 percent royalty rate for the oil and natural gas extracted within its territory. This department-level revenue stream was first established in 1959. In addition, the Ley de Hidrocarburos No 3058 maintained the rule established in 1988 that an additional one of the 18 percent royalty rate went to Bolivia’s two least developed departments of Beni (two-thirds percent) and Pando (one-third percent). The remaining 6 percent of the royalty rate had previously gone to YPFB. However, through the new Ley de Hidrocarburos No 3058, these revenues were redirected to the national treasury (GOB 2005b). The eastern agricultural elite mildly exacerbated the existing regional inequalities stemming from the distribution of Bolivia’s hydrocarbon rents through the means in which they sought to allocate the revenues of the new 32 percent IDH tax. According to the Ley de Hidrocarburos No 3058, each of Bolivia’s nine departments received a minimum of two of the 32 percent tax. However, hydrocarbon-producing departments received either two of the 32 percent of the IDH or, if greater, 4 percent of the total revenues earned from the hydrocarbon-production activities taking place within their territories. The funds not allocated to the departments went to the national treasury

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table 6.3. Distribution of Hydrocarbon Royalties and IDH Following the Ley de Hidrocarburos No 3058 in 2005 (in millions of US$) Producing Departments Tarija Santa Cruz Cochabamba Chuquisaca Least Developed Departments Beni Pando Other Departments La Paz Oruro Potosi National Treasury

137.9 44.4 40.5 16.9 29.1 23.7 20.4 18.2 18.2 259.2

Source: Ministerio de Hidrocarburos 2007.

and were distributed to indigenous and campesino communities, municipalities, universities, the armed forces, the national police, and other unspecified central government functions. The eastern agricultural elite also sought to secure prefectural discretion over the use of Bolivia’s hydrocarbon rents. Even though a series of mobilizations during Rodr´ıguez’s interim presidency pressured the state to allocate a set share of the IDH tax directly to Bolivia’s municipalities and universities, the money came from the portions of the IDH allocated to the national treasury, not the departments.4 As a result, in 2005, departmental prefects held the discretion of more than 56.9 percent of IDH revenues. Municipalities received only 34.48 percent. Universities received the remaining 8.62 percent (GOB 2005d). The percentage each municipality received was based on their populations. As an ex-president of a local civic committee in one of Santa Cruz’s hydrocarbonproducing municipalities noted in early 2006: The Bolivian laws centralized the majority of the resources coming from our hydrocarbons in the department capitals. With this type of distribution, we are hardly able to touch any of the resources and we have serious problems making a viable development plan. . . . We have been fighting to build some roads for years. They have taken millions and millions of dollars in gas and petroleum from here. While things are supposed to change, I still doubt we will have money to build viable roads. 4

The Ley de Hidrocarburos No 3058 did not specify through what means the IDH should be distributed. However, in Decreto Supremo No 28223 and No 28421, Rodriguez attempted to clarify some aspects of the Ley de Hidrocarburos No 3058 and in Article 8 of the decree, he assigned the prefects control over each department’s share of the IDH (GOB 2005d; 2005e).

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In addition, with Mesa having passed a decree to allow departmental prefects to be democratically elected, the eastern agricultural elite was in a position to use its sway in Bolivia’s eastern department’s urban centers to potentially bring to power a set of democratically elected prefects who would best represent their interests. Securing Points of Power The fall of Mesa and the agreement by Rodriguez to hold presidential elections occurred during a turning point in Bolivian history. As the country’s marginalized masses and leftist social movements struggled against the eastern agricultural elites, they put forward contrasting solutions to the recurring problem of how to best use Bolivia’s natural resource wealth. The resolution forwarded in the Ley de Hidrocarburos No 3058 appeared to temporarily make the eastern landed elite the biggest winners. Although transnational energy firms and their cast of supporting actors seemed positioned to shape any new law affecting Bolivia’s hydrocarbon sector at the outset, their interests and power in Bolivia’s political arena became temporarily irrelevant after Mesa resigned. For the country’s leftist social movements and eastern agricultural elites, the question was not whether transnational extraction firms should be charged higher royalty or taxation rates, but who should benefit from the revenues received from higher royalty and taxation rates. Transnational energy firms thus sat in limbo as political unrest led to uncertainty within the presidential palace. They threatened to bring the Bolivian state to international arbitration after the implementation of the Ley de Hidrocarburos No 3058, but their threats were temporarily abated when Rodriguez became the interim president. Although Rodriguez did follow through on the implementation of IDH, he left the other aspects of the Ley de Hidrocarburos No 3058 to be sorted out by whoever was elected president. As a result, the Bolivian state did not force transnational energy firms to sign new contracts and YPFB did not assume a dominant role within the sector. In December 2005, the democratic election of prefects would prove to only strengthen the gains made by eastern agricultural elites. When Bolivians went to the polls, they elected prefects in Bolivia’s largest hydrocarbon-producing departments of Tarija and Santa Cruz that were sympathetic to – if not part of – the eastern landed elite. Mario Coss´ıo became the prefect of Tarija and Ruben ´ Costas, a large-scale landholder, became the prefect of Santa Cruz. As Coss´ıo and Costas came to power, the eastern agricultural elite finally regained control over the revenues coming from the country’s natural resource wealth that they lost over the previous twenty years. However, the elections also brought about change at the national level. Bolivia’s historically marginalized masses brought to power Bolivia’s first

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indigenous president – Evo Morales. The power relations in Bolivia had shifted. The question became whether Morales could use Bolivia’s turning point to alter how the country was incorporated in the global economy and potentially put an end to the processes of neoliberalization that perpetuated centuries of inequality.

figure 7.1. Evo = Petrobras

7 The Zombies of Neoliberalization: 2006–2009

Nationalization of the production source of any raw material is not enough, as painful experience has taught. Even if a country has become nominal master of its own subsoil, it can remain as condemned to impotency as ever. – Eduardo Galeano (1997 [1973]:148).

In December 2005, Bolivians elected Evo Morales, an indigenous cocagrowing campesino, to be president. He won the election with an unprecedented simple majority of the vote, something no president had achieved since Bolivia returned to democracy in 1982. Morales came to power as a representation of Bolivia. He was of indigenous Aymara descent. His family had a mining past and in the early 1980s, he followed his family to the coca-growing region of the Chapare. Morales became a staunch defender of coca. By the mid-1980s, he had begun representing his fellow coca growers in their union, the Federacion ´ Tropico del Chapare. Morales entered the national political arena in 1997 as ´ an elected member of parliament where he was an anti-imperialist defender of national sovereignty who fought against the U.S. DEA in the War on Drugs to protect the traditional and cultural uses of coca. By the time he won the presidency, he was a leader of and ally to Bolivia’s indigenous, campesino, and union social movements. As a result, his election to the country’s highest office came with a mandate to transform the country’s socioeconomic trajectory, end poverty, and incorporate the country into the global economy on its own terms. However, fulfilling the mandate given to him as president would prove not to be easy. Shortly after taking office, Morales explained the constraints of the power he was given, stating: How does it work now? I’ll tell you. You want to issue a decree to help the poor, the indigenous people, the popular movements, the workers . . . but there’s another law, another padlock. It’s full of padlocks that mean you can’t transform things from the 127

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Palace . . . this is the problem I face, and it’s serious. I feel like a prisoner of the neoliberal laws. (Morales in Mason 2006)

Indeed, these “padlocks” made change within Bolivia difficult. Although Morales was able to increase the take of the country’s natural resource rents going toward the general populace, his ability to use Bolivia’s natural resources and their associated rents to alter the country’s socioeconomic trajectory was constrained by the country’s historical legacy as a natural resource provider, past processes of neoliberalization, and his own administration’s understanding of how the country’s rich natural resource base should be used. Examining turning points requires more than recognizing contrasting solutions to recurring problems. As products of the past, turning points are embedded in long histories that influence how recurring problems are both understood and can potentially be resolved. In Haydu’s words, “solutions may embody contradictions that generate later crises” while simultaneously bequeathing the “tools and understandings with which later actors confront those crises” (Haydu 1998:354). Within this context, the choices made at one point in time may do more than push history down a track that becomes difficult to escape. Past choices can also be the cause of future problems, shape how people understand such problems, and structure the options seemingly available to solve them. Evo Morales inherited a state incorporated into the global economy for its rich natural resource base. Bolivia had long been a provider of raw materials to the world, and after successive neoliberal turns, its role as a provider of natural gas dramatically increased. Bolivia’s deeper insertion into the global economy as a natural resource provider was fueled by burgeoning markets in neighboring countries and overseas and led to the construction of a legal apparatus and built environment that secured the easy export of Bolivia’s raw materials – in particular, the export of the country’s natural gas to Brazil (see Chapters 4 and 5). Internal and external actors alike sought to exercise their power to harness the financial and material gains of the increased outward flow of Bolivia’s raw materials. Additionally, during Bolivia’s neoliberal turns, transnational extraction firms and internal mining elites situated themselves to benefit as much as possible from the country’s extractive economy. In the process, they actively sought to undermine the power of the eastern agricultural elite and marginalize increasing segments of the Bolivian population. However, neither the eastern agricultural elite nor the country’s marginalized masses remained passive observers (see Chapters 5 and 6). Bolivia’s incorporation into the global economy and the sociospatial relations of power surrounding it proved to shape the Morales administration’s understandings of and solutions to the recurring problem of how to best use the country’s natural resource wealth. After rising to the presidential post, Morales “nationalized” Bolivia’s hydrocarbon sector, altered the taxation rates paid by

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transnational oil, natural gas, and mining extraction firms, and redistributed some of the country’s natural resource rents to the historically marginalized masses. The Morales administration also sought to revitalize the state-operated hydrocarbon and mining firms to make them into dominant actors within the country’s extractive industries. In some ways, however, the changes looked more like strategic state-sponsored interventions in support of processes of neoliberalization than any sort of radical leftist alternative. After Morales’s initial years in office, both transnational investment and extraction rates dramatically increased. In addition, the state continued to distribute the rents from its extractive industries to decentralized entities in a way that perhaps undermined its long-term earning potential. Although Bolivia’s marginalized masses and leftist social movements seemed to have placed a dagger in the heart of Bolivia’s neoliberal experiment, its body seemed to lumber onward in a zombie-like state. The Nationalization: Reasserting Control over Bolivia’s Hydrocarbons Shortly after taking office, Morales condemned the neoliberal model of development that had been rolled out in Bolivia over the past twenty-five years. He declared that neoliberalism “is by no means the solution for Bolivia” and that “auctioning off or privatizing natural resources only brings more hunger and misery” (V 2006). Less than five months later, Morales put forward his solution as to how to best use the country’s natural resources. Issuing Decreto Supremo No 28701, Morales proclaimed to nationalize Bolivia’s oil and natural gas reserves. The Morales administration actively sought to portray the nationalization as part of a battle to move Bolivia away from its neoliberal past. In the months after the nationalization, full-color comic book-like pamphlets of the nationalization could be found on desks in government offices across the country. On the front page was a caricature of the scene on May 1, 2006 at the San Alberto reserve. Morales was depicted with a smile, holding a sign up that read, “Propiedad del Estado Boliviano.”1 And at the bottom of the page, the text read, “The hydrocarbon nationalization decree of Evo Morales is a triumph for Bolivia and the social communitarian project against colonialist neoliberalism.” Despite the simplicity of the government pamphlet, the nationalization was not so straightforward and differed from most state takeovers of oil and natural gas sectors. The nationalized object was not the assets of foreign or private oil and natural gas companies, but the oil and natural gas itself. As stated in Art´ıculo 1 of Decreto Supremo No 28701, “In an exercise of national sovereignty . . . the hydrocarbons of Bolivia are nationalized. The state will

1

Property of the Bolivian State.

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recuperate the property, possession, and total and absolute control of these resources” (GOB 2006). However, the distinction made in Decreto Supremo No 28701 was more descriptive. Technically, Bolivia’s hydrocarbons were already the property of the state. According to Bolivian constitution and as stated in the Ley de Hidrocarburos No 1689 passed in 1996, “by constitutional norm, hydrocarbon deposits, in whatever form they are found or appear, are of the direct domain, inalienable and imprescriptible, of the state. Neither a concession nor a contract is able to confer the property of hydrocarbon deposits” (GOB 1996a Art´ıculo 1; see also GOB 1995 Art´ıculo 139). In other words, it was constitutionally illegal for any entity other than the Bolivian state to own the country’s hydrocarbons. The government of Sanchez de Lozada clarified these owner´ ship rights in Decreto Supremo No 24806, noting that a “contract does not confer [name of firm] the property of the hydrocarbon deposits in situ” (GOB 1997). However, through both the Ley de Hidrocarburos No 1689 and Decreto Supremo No 24806, the state granted private investors property rights to the oil and natural gas they extracted “at the mouth of the well” – once it came out of the ground and was no longer part of the hydrocarbon “deposit.” This distinction allowed investors to commercialize the hydrocarbons they extracted as they pleased and it was this aspect that the Morales administration changed through Decreto Supremo No 28701. The Morales administration thus recuperated the state’s right to commercialize Bolivia’s hydrocarbons. According to Decreto Supremo No 28701, “the hydrocarbon firms that participate in the production of natural gas and petroleum in the nation’s territory are obligated to give Yacimientos Petrol´ıferos Fiscales Bolivianos (YPFB) all of the hydrocarbons they produce” (GOB 2006 Art´ıculo 3:1). This technically gave the state the power to determine the end destination to, quantity of, and price at which the oil and natural gas extracted in Bolivia were sold. As a representative of YPFB stated in 2006 shortly after the nationalization: Before, Bolivia had no control of its natural gas. It was the transnationals that would decide to whom to sell, what price to sell, and what volume to sell. And Bolivia, it was just a bystander . . . With this new Supreme Decree 28701, we Bolivians control who to sell to, what price to ask, and what volume to export . . . With this decree the transnationals, in a compulsory way, they give all their production at the wellhead to YPFB.

What the Morales administration thus nationalized were the ownership rights over Bolivia’s oil and natural gas beyond the mouth of the well. After giving YPFB control over Bolivia’s oil and natural gas, the state had to revitalize and capacitate the public company to once again be a major actor in the country’s hydrocarbon sector. Since its systematic dismantlement in the 1990s, YPFB had played an auxiliary oversight role at best (see Chapter 4). To provide YPFB with the necessary finances to increase its role in Bolivia’s

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hydrocarbon sector, the Morales administration used Decreto Supremo No 28701 to temporarily increase the rents the state gleaned from the largest hydrocarbon reserves in the country. On top of the existing 18 percent royalty and the 32 percent IDH tax, companies operating reserves that produced on average more than 2.8 million cubic meters a day (MMm3 per day) of natural gas were obligated to give an additional 32 percent of the value of the hydrocarbons they produced to YPFB until they signed new contracts with the state (GOB 2006 Art´ıculo 4:1). The Morales administration was able to make these changes without exposing the state to legal recourse. With transnational hydrocarbon firms having finessed their way around preexisting laws when entering Bolivia in the 1990s, the legality of their contracts was questionable. In particular, the Morales administration argued that the contracts violated the Bolivian constitution. The Ley de Hidrocarburos No 1689 designated YPFB to be the representative body of the state that signed contracts of shared risk with private extraction firms “to explore, exploit, and commercialize hydrocarbons” (GOB 1996a). However, the Bolivian constitution stated that the legislature must “authorize and approve the business contracts that affect the general rents of the state, as well as the contracts related to the exploitation of the nation’s riches” (GOB 1995 Art´ıculo 59:5). It was also questionable whether the transnational firms upheld their end of the contractual agreements. According to an informant who helped perform the government-requested audits of all transnational oil and natural gas firms operating in Bolivia after Morales took power, “Few, if any, of the transnationals fulfilled their investment obligations and all of them have violated their environmental agreements.” Although a number of the transnational hydrocarbon companies operating in Bolivia threatened to bring the state to international arbitration for the changes made in Decreto Supremo No 28701, their rights to demand compensation for their losses was shaky at best. And with the legal grounds to potentially nullify the majority of existing oil and natural gas contracts, the Morales administration forced investing energy firms to sign new contracts within 180 days to reflect the changes put forward in the Ley de Hidrocarburos No 3058 and Decreto Supremo No 28701. After regaining control over the commercialization of its gas, Bolivia was also able to renegotiate the supply contracts with its primary purchasers, Brazil and Argentina, in order to obtain a price closer to fair market value. Previously, Bolivia had sold natural gas to Argentina for US$0.98 MMBTU. Although gas prices to Brazil varied, in 2005, prices averaged between US$2.41 and US$2.95. However, gas traveling to Brazil along the Cuiaba pipeline was priced significantly lower at US$0.98. After the renegotiations, prices in 2006 to Argentina increased to around US$5 MMBTU and prices to Brazil increased to US$4.20 MMBTU (INE 2011b). Through these price increases and the taxation rate changes put into place by Mesa, the state saw dramatic increases in the government’s hydrocarbon earnings. In 2004, the state took in close to

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1000 900 800

Millions of US$

700 600 500 IDH Royales

400 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year

figure 7.2. Hydrocarbon Royalty and IDH Revenues, 1995–2009. Source: Ministerio de Econom´ıa y Finanzas Publicas (2010). ´

US$287 million. By 2007, the state was taking in approximately US$1.572 billion dollars (Ministerio de Hacienda 2008). A Public Mining Reserve: Reasserting Control over Bolivia’s Mineral Riches When Morales came to power, natural gas was by far Bolivia’s most lucrative and most contentious commodity. However, the Bolivian underground still held plenty of other forms of wealth – in particular, rich mineral deposits. Low global prices and a general lack of demand for many ores resulted in more than a decade of stagnant growth in Bolivia’s mineral sector. In 2003, however, mineral prices began to increase. Several transnational firms that had obtained the rights to the Bolivian subsoil in the late 1990s also began to bring their mines into operation. And a year after Morales nationalized Bolivia’s hydrocarbons, he took steps to increase the role of the state in the country’s mining sector. On May 1, 2007, Morales signed Decreto Supremo No 29117. Through the decree, Morales did not proclaim to nationalize the mining sector. As with Bolivia’s hydrocarbons, the country’s minerals were technically already under the state’s control. According to the Bolivian constitution and Ley de Miner´ıa, all mineral resources were under “the dominNo 1777 Codigo ´ ion of the state” (GOB 1995 Art´ıculo 136, GOB 1997). However, through the decree Morales deemed the entirety of the Bolivian territory a “public mining reserve” (GOB 2007a). In addition and as the nationalization decree did in the hydrocarbon sector, this decree brought the state back into the mineral sector. In particular, the decree stopped new mineral concessions from being granted until a comprehensive geological survey of the

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160

Millions of US$

140 120 100 80 60 40 20 0 1995

1996

1997

1998

1999

2000

2001 2002 Year

2003

2004

2005

2006

2007

2008

figure 7.3. Mineral Royalties and Taxes, 1995–2008. Source: Ministerio de Miner´ıa y Metalurgia (2010). .

country’s subsoil riches had been performed. It also gave the state mining company COMIBOL the rights to exploit and administer all future mines in Bolivia. The Morales administration implemented two other important changes in the mining sector during its initial years in power. First, it created an independent regulatory body, Servicio Nacional de Registro y Control de la Comercializacion ´ de Minerales y Metales (SENARECOM), to oversee the commercialization of minerals extracted in the country (GOB 2007b). SENARECOM was given responsibility for tracking and recording the sale of minerals from Bolivia in order to ensure that extraction firms were charged and paid the proper royalty and taxation rates. Second, the Morales administration instituted a surtax on mineral sales. Once the global price of a mineral surpassed a certain amount, those selling the minerals were obligated to pay more to the Bolivian state (GOB 2007c). Although the changes made in the mining sector were in some ways similar to those made in the hydrocarbon sector, they were not nearly as far-reaching. The creation of SENARECOM helped to ensure that mineral extraction firms operating in Bolivia paid their taxes, but it did not give the state control over the actual commercialization process. Whoever extracted a mineral was still free to sell it at any price and to any buyer. In addition, whereas the surtax increased the government’s take when global mineral prices were high, such an increase in public remuneration was subject to the boom and bust cycles of the global mineral market. During Morales’s initial years in power, however, Bolivia’s mineral sector did not bust. Global mineral prices continued to rise and so did the amount of money gleaned from Bolivia’s mineral royalties and taxes. Indeed, in 2004 the state took in around US$12.3 million in mineral royalties and taxes. By 2007, the state was taking in close to US$118.3 million in royalties and taxes (Ministerio de Miner´ıa y Metalurgia 2010).

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The Persistent Outcomes of Neoliberalization The Morales administration witnessed a windfall of public revenue from Bolivia’s hydrocarbons and minerals during its initial years in power. Nevertheless, its ability to use the country’s rich natural resource base and the profits gleaned from it to pursue alternative strategies of development proved difficult. Two decades of neoliberalization not only shaped who had the rights to Bolivia’s rich natural resource base, but also where the country’s hydrocarbons and minerals could be used, the quantity of natural resources that could be extracted, and who could benefit. For centuries, Bolivia’s comparative advantage had been constructed around the extraction and export of natural resources. Taking a neoliberal turn had only increased the outward flow of raw materials from the country – in particular, the outward flow of hydrocarbons. When Morales purportedly nationalized the hydrocarbon sector, 40 percent of the country’s total export value came from the sale of natural gas (CEPALSTAT 2010). In the 1990s, the budding agreements to sell natural gas to Brazil and basement bargain deals helped fuel the rise of investment in the Bolivia’s oil and natural gas sector (see Chapter 4). Bolivia’s extraction and transport infrastructure had thus been designed to send large quantities of its natural gas to Brazil and it held a long-term natural gas supply agreement with its eastern neighbor. As an ex-government official who worked in Bolivia’s Ministry of Hydrocarbons noted in 2008: There is no big gas pipeline that goes from Santa Cruz to La Paz. There is a gas pipeline, but the pipeline between Santa Cruz and La Paz is only 6 inches (in diameter), a little thing. The gas pipeline that goes to Brazil is 33 inches (in diameter).

The contract signed between the two countries in 1999 ensured that natural gas would continue to flow through the pipeline to Brazil for twenty years. It was a “take-or-pay” contract that obligated Bolivia to supply Brazil a maximum of 30MMm3 of natural gas per day and Brazil to buy from Bolivia a minimum of 23 MMm3 of natural gas per day. Although the contract guaranteed a market for Bolivia’s natural gas, only an average of 34.1 MMm3 of natural gas per day were produced at the time. Most of Bolivia’s natural gas was thus extracted for Brazil. As one of Morales’s Ministers of Hydrocarbons described Bolivia’s relationship with its neighbor: It is difficult to understand at first glance the significance of Brazil for Bolivia . . . Porfirio D´ıaz has a phrase in which he says, ‘Mexico, so far from God and so close to the United States.’ This is his phrase and I like to copy it. I say ‘Bolivia, so far from God and so close to Brazil.’ That is to say, Bolivia is permanently abused by Brazil.

In Morales’s first year in power, Brazil demanded on average of 27.7 MMm3 of natural gas per day – approximately 81 percent of the average daily extracted volume of natural gas in Bolivia in 2006 (INE 2008b).

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Minerals also made up a significant portion of Bolivia’s exports when Morales came to power. In 2006, 20 percent of the country’s total export value came from the sale of minerals. The Bolivian government had no set export agreements for its minerals. However, transnational extraction firms controlled the most productive mines. Despite the changes Morales made in the mineral sector, transnational extraction firms’ control over Bolivia’s mineral economy increased during his initial years in office. In 2007, U.S.-based Apex Silver and Japan’s Sumitomo Corporation began extracting from San Cristobal, the ´ world’s sixth-richest zinc and third-richest silver mine (Sumitomo Corporation 2012).2 The following year, U.S.-based Coeur D’Alene Mines Corporation also began extracting from San Bartolome, ´ one the world’s largest pure silver mines (Coeur D’Alene Mines Corporation 2012). By the end of 2009, zinc production in Bolivia had more than doubled and silver production had increased more than threefold (Ministerio de Miner´ıa y Metalurgia 2010). Although some of the ore from the two mines was smelted in Bolivia, nearly all off it was eventually exported. Indeed, the contracts held over the two mines allowed extraction firms to sell the minerals to whom they pleased. The Morales administration also faced difficulties increasing the quantity of raw materials – in particular, natural gas – extracted in the country. For almost a decade, transnational energy firms had pursued the same strategy to secure profits in Bolivia – they invested in low-risk, high-reward activities. After the privatization of Bolivia’s hydrocarbon sector in the 1990s, transnational firms had dramatically increased the amount of natural gas being extracted in Bolivia. However, they largely invested in existing oil and natural gas reserves and merely sought to satisfy existing contracts of sale (see Chapter 4). In other words, transnational oil and natural gas firms primarily invested in extraction activities, not exploration activities. In addition, they attempted to produce just enough natural gas to satisfy Bolivia’s contract with Brazil, a contract that guaranteed a market. As an engineer who worked at YPFB during the 1990s stated: “More than ten years went by in which there was no exploration. The transnationals were dedicated to extraction because exploration has a higher monetary risk. They wanted guaranteed money and, as a result, they did not explore for anything.” When transnational firms did invest in exploration activities, they often did so to earn a tax deduction or to fulfill a contractual obligation. As an YPFB employee whose job was to track the investments made by transnational firms illustrated to me: Drilling, exploration, development: [here is] a resum e´ of the prospecting activities in the ´ camps of the companies. [It’s] blank. I have a sequential analysis of eight or ten years. Look. Andina in geologic prospecting in the year 2002 had 226 kilometers . . . Seismic prospecting, nothing. Seismic 3D activity, nothing, nothing. Gravitometry, they had 2

In 2009, Apex Silver went bankrupt and the Sumitomo Corporation became the sole holder of the San Cristobal Mine.

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table 7.1. Distribution of Seats in the Bolivian Legislative Assembly in 2006 Party MAS PODEMOS UN MNR total

Senate 12 13 1 1 27

Chamber of Deputies 72 43 8 7 130

Source: Corte Nacional Electoral (2006).

7,906 kilometers, but this was to justify, to compensate, to pay the royalties or the debts that they had, the contractual obligation the business had.

Within this context, transnational energy firms sought to merely protect their low-risk, high-reward investments. Preexisting agreements, infrastructural arrangements, and a lack of investment in exploration were not the only zombies of neoliberalization inhibiting the Morales administration from pursuing a counter-neoliberal path. Continued internal struggles over the profits and rents from the country’s extractive industries also made it difficult to diverge from the neoliberal paths of the past. On the one hand, the elite opposed policies to alter the distribution of rents coming from Bolivia’s natural resources as they sought to maintain their last bastions of power and protect their traditional positions of privilege. On the other hand, some supporters of Morales – in particular, many miners – came out in opposition to proposals to increase mineral taxes and royalties and potentially nationalize the mining sector. The election of Evo Morales in December 2005 undeniably illustrated that power within Bolivia was shifting hands, but the shift was not complete. For decades, the formal political arena had been dominated by elites. but with the rise of MAS and election of Morales the marginalized masses moved from exercising their power in Bolivia’s streets to exercising their power in legislative seats. Not only did Morales win the presidential post, MAS took control of the Camara de Diputados (see Table 7.1). However, Morales’s and MAS’s ´ newfound power did not go unchallenged. Although the marginalized masses made enormous gains and began to take control of the formal political arena, legislative power remained divided. The elite – in particular, eastern agricultural elites – maintained their seats and majority control in the Senate. In addition, they secured a number of the newly created prefectural posts (see Chapter 6). The elite could thus exercise enough power to both block legislative change in the Senate and dictate how a large proportion of hydrocarbon revenues were used at the departmental level. As a result, the distribution of hydrocarbon revenues remained unchanged during Morales’s initial years in power and from 2005 to 2007, Bolivia’s departments – in particular, lowland eastern

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600

Millions of US$

500 400 300 TGN Departments Municipalies

200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year

figure 7.4. Distribution of Hydrocarbon Royalties and IDH Revenues, 1995–2007. Source: Ministerio de Econom´ıa y Finanzas Publicas (2010). ´

departments – continued to receive the largest proportion of the country’s hydrocarbon rents (see Figure 7.4). The Morales administration also faced an unexpected foe when it sought to make changes to royalty and taxation rates in the mineral sector. Although large private mining companies – primarily transnational – produced close to 55 percent of the total value of Bolivia’s mineral extraction in 2006, 88 percent of the country’s 58,186 miners worked for cooperatives (Ministerio de Miner´ıa y Metalurgia 2010). Left without work after Bolivia’s first neoliberal turn resulted in the tacit privatization of the state-operated COMIBOL in the 1980s, miners created cooperatives in attempts to maintain their livelihoods. However, declining global mineral prices in the 1990s made it difficult to eek out a living. After years of suffering from the false promises of Bolivia’s free market policies, the miners believed that they should benefit from the early twenty-first century boom in mineral prices. In addition, they believed that they – not a state company or transnational investors – should be granted the rights to Bolivia’s mineral reserves. Although most of the cooperative miners voted for Morales, when his administration talked of nationalizing old state mines and raising taxes and royalties on mineral extraction, they often took to the streets in opposition. Indeed, in 2007, their pressure on the Morales government allowed them to receive an exemption from the newly implemented surtax on minerals when global prices were high (GOB 2007c). The Effects of Persistent Outcomes The zombies of neoliberalization lumbering through Bolivia proved to haunt the Morales administration. A lack of investment in exploration potentially undermined the Morales administration’s ability to use Bolivia’s natural gas as a sustainable revenue base to fuel its program of socioeconomic change. A distribution of natural resource revenues that favored departments, municipalities, and in some cases, miners, complicated the revitalization of the hydrocarbon

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138 400 350

Millions of US$

300 250 200 Exploraon Extracon

150 100 50 0 1997

1998

1999

2000

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2002 Year

2003

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2006

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figure 7.5. Investments in Bolivia’s Hydrocarbon Sector, 1997–2007. Source: UDAPE 2010b.

and mineral sectors. In addition, the legal loopholes secured by Bolivia’s mining cooperatives proved to provide a loophole through which transnational extraction firms could enhance their profits. It was widely believed that investments in exploration drastically decreased after the nationalization, but exploration investment actually peaked well before – in 1998 – and began to fall thereafter (see Figure 7.5). Nationalizing an oil and natural gas sector in which serious exploration activities had not occurred for years, the Morales administration faced an immediate conundrum. Increasing internal demands for natural gas and the preexisting supply contract Bolivia held with Brazil made scarcity a real possibility. Although transnational energy firms were extracting some of the greatest volumes of natural gas ever in the country by 2006, their capacity – or perhaps their desire – to maintain such extraction volumes over the long term or to extract more was limited. Indeed, explaining the impact that a lack of exploration had on the oil and natural gas industry, a hydrocarbon service sector CEO stated: “For years there were no seismic companies working in Bolivia. That’s bad . . . The time from seismic [exploration] work to putting a [oil or natural gas] wellhead on is minimum five years, and that’s back breaking time. Usually it takes about ten years from the point of seismic discovery to the point of production.” To be able to use Bolivia’s natural gas as a sustained source of funding for any sort of counter-neoliberal socioeconomic shift, the Morales administration needed to immediately began to explore for new reserves. The struggles among Bolivia’s competing class factions to glean a greater share of the country’s hydrocarbon rents for themselves further perpetuated the problems surrounding the lack of investment in exploration activities. As a Bolivian congressman noted:

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We have been dedicated to distributing the resources to all of the regions but we have left, as they say, the hen with the golden eggs without food . . . The hen with the golden eggs is YPFB. Without food, it runs the risk of dying. This is not understood . . . the departments are defending the IDH and their royalties and do not see the importance of YPFB, forgetting that in reality YPFB is the mother, the milk cow that we have to first take care of in order to later distribute the cheese.

The eastern agricultural elite first cut the resources going to this “hen with the golden eggs” when writing the Ley de Hidrocarburos No 3058. Whereas under previous law YPFB received one-third of the revenues generated from Bolivia’s 18 percent oil and natural gas royalty, this revenue was redirected to the state treasury (see Chapter 6). Although some of this money may have trickled back to YPFB, most of it was pre-allotted to other causes. In addition, none of the money from the new hydrocarbon tax – the IDH – was directed toward YPFB or to extend the longevity of Bolivia’s hydrocarbon sector. Thus, even though struggles over the IDH altered its distribution, redirecting a cut of the new hydrocarbon tax to ensure that the revenues coming from the sector would continue beyond the life of Bolivia’s already existing reserves was not really part of the mainstream realm of discussion. Even though the Morales administration did not attempt to change the distribution of royalties or the IDH when instituting Decreto Supremo No 28701, it did recognize that it would need to funnel greater amounts of money into Bolivia’s hydrocarbon sector to properly revitalize YPFB. Requiring transnational energy firms operating reserves that produced more than 2.8 MMm3 per day of natural gas to temporarily pay an additional 32 percent tax after the nationalization decree, the Morales administration attempted to raise enough start-up money for YPFB to once again operate as a legitimate entity in Bolivia’s hydrocarbon sector. However, as a CEO in a transnational energy firm operating in Bolivia noted at the time: “To satisfy existing demand, approximately US$5 billion in investments are needed over the next four to five years. This is more than what has been invested since we entered Bolivia in 1996.” Of Bolivia’s forty-nine active reserves at the time of the nationalization, only two produced on average more 2.8 MMm3 per day – Sabalo and San Alberto. ´ Although approximately 50 percent of Bolivia’s total natural gas was extracted from these two reserves, YPFB only received around US$400 million from the temporary tax – an amount well below the estimated investments needed to supply the projected demand for Bolivia’s natural gas (UDAPE 2010a).3 And after YPFB stopped receiving this additional royalty in May 2007, the company 3

The exact amount received by YPFB from the 32 percent tax is unclear. In most of the Bolivian state’s statistics, YPFB’s revenues from the temporary royalty introduced through D.S. 28701 is conflated with the previously existing 6 percent royalty that was eliminated with the introduction of the Ley de Hidrocarburos No 3058. Although the later law was introduced in 2005, the 6 percent royalty remained in effect until May 1, 2006.

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was expected to largely fund and expand its operations through the profits it received from the recuperated shares of its previously privatized assets. In its moment of rebirth, YPFB was thus strapped for cash and struggled to establish itself as a viable entity within Bolivia’s hydrocarbon sector. As an ex-Superintendent of Hydrocarbons under Morales stated: “It is known that YPFB has serious cash flow problems . . . It faces a number of difficulties because of what is available financially. On one hand YPFB has been given immense responsibility, but on the other hand they have not been given the necessary funds.” The financial difficulties of YPFB made it difficult for the company to fully participate in a competitive global industry and had a number of trickledown effects. On the most basic level, YPFB was unable to put together a qualified and experienced workforce. For hydrocarbon engineers, the labor market is global. Usually well paid and in high demand, those who chose to work in Bolivia’s public hydrocarbon sector often did so for wages well below industry norms. As an ex-President of YPFB stated in 2008: “The salaries are extremely low compared to the pay in the industry so it is hard to attract technical and professional people. . . . The rotation of people is elevated, or it will be. I still don’t understand how they are able to keep going as a business.” As a general director at YPFB further elaborated: There are not a lot of professional [hydrocarbon engineers] in South America and in Argentina and Brazil they are able to pay much more . . . This is a big problem for YPFB. The company cannot find many professionals with experience to work for it. Some young engineers are starting to work for us, but none of them have much experience.

Upon its revitalization, Bolivia’s public hydrocarbon sector workforce thus largely consisted of people with newly minted engineering degrees or people who once worked for YPFB in the 1990s but were unable to find employment in the hydrocarbon sector after the company’s privatization. As a result, many people hired into Bolivia’s public hydrocarbon workforce after its immediate revitalization lacked on-the-job experience or held long outmoded knowledge of how the hydrocarbon industry worked. This lack of experience hindered the advancement of Bolivia’s public hydrocarbon sector on multiple levels. On the one hand, YPFB’s engineers struggled to carry out the company’s basic daily operations in the field. As a vice president in one of Bolivia’s natural gas transport companies noted when speaking about obtaining an environmental license: The authorities do not have the technical staff to perform the environmental impact assessments, it takes a much longer time to do them, and effectively, we still end up participating because we have to push all of the time and provide the government with our own technical staff . . . to sort of do the work that the government should do according to the law.

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450 400

Millions of US$

350 300 250 Private

200

Public

150 100 50 0

Year

figure 7.6. Investments in Bolivia’s Mining Sector, 1990–2008. Source: Ministerio de Miner´ıa y Metalurgia (2010).

On the other hand, neither the Ministry of Hydrocarbons nor YPFB could attract experienced candidates to fill its leadership positions. As a result, those who accepted such positions faced a steep learning curve. Lacking the industry know-how, they often preceded slowly and occasionally committed mistakes. In the highly politicized environment surrounding Bolivia’s hydrocarbons, this led to the continual scrutiny of those in such positions by transnational corporations, the government, and Bolivia’s competing class factions alike. Under the microscope of such a diverse array of actors, any errors – or even perceived errors – committed by these officials often led to untimely dismissals. In Morales’s first four years in office, the rotation of people in these positions undeniably intensified. Six different people served as the President of YPFB and three different people served as the Minister of Hydrocarbons. In the mining sector, the power of the cooperatives complicated the Morales administration’s desire to exercise greater control over the country’s mineral resource reserves. The sector did not face the same sort of investment problems that plagued the hydrocarbon sector. Investment levels actually reached record highs during Morales’s initial years in office (see Figure 7.6). However, such increases came as a result of investment from transnational extraction firms, not cooperatives. Despite already paying lower taxes than the transnational investors, the cooperatives believed that the state should also create a fund to help them obtain better technology. In addition, they believed that they should be able to work in joint ventures with entities of their choosing. In an attempt to appease the cooperatives, both demands were met (GOB 2008b; 2009b). However, the cooperatives in some ways co-opted the Morales administration’s attempts to pursue processes of counter-neoliberalization in the mineral sector. As the Morales administration was attempting to revitalize COMIBOL, the cooperatives fought to secure state funds that could have been directed toward fortifying the state company. In addition, some cooperatives signed

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joint ventures with transnational corporations, giving the latter access to the preferential tax treatment the cooperatives had secured in 2007 (Wall Street Journal 2011). In its initial years in office, the Morales administration thus struggled to revitalize Bolivia’s public hydrocarbon and mineral sectors. Even though the government raked in a windfall of profits after increasing the prices and rents on its natural gas, YPFB’s lack of finances, technology, and experience inhibited its ability to rebuild Bolivia’s hydrocarbon sector on its own and temporarily slowed or deterred private investment. In addition, the cooperatives took funds from the state that could have helped to better establish COMIBOL. As an industry representative stated in 2008 about YPFB: We know there are offers to invest in Bolivia . . . but decisions are not made fast enough in La Paz . . . YPFB is, in theory, in charge of everything. But they are not even able to understand what is given to them, the technical information and budget proposals. YPFB should have never been erased from the face of the industry. It should have kept a small participating role . . . At least then, when all of these questions came about, they could have come up with a plausible and credible explanation.

The neoliberalization of both Bolivia’s hydrocarbon and mineral sectors decreased the institutional capacity of both YPFB and COMIBOL. In their initial moments of revitalization, Bolivia’s state industries – a seeming pillar in the Morales administration’s counter-neoliberal shift – could be said to have started off already out of breath and being chased by neoliberal zombies. Neoliberal Understandings in Processes of Counter-neoliberalization It could be said that the difficulties faced by the Morales administration as it forwarded a solution to Bolivia’s recurring problem of how to best use its natural resource wealth merely resulted from the “padlocks” and “neoliberal laws” the free-market ideologues that preceded it put into place. However, past solutions to recurring problems do not merely constrain and complicate the possible choices of future solutions to recurring problems. Past solutions to recurring problems also shape how people understand such problems and the future solutions they propose. The Morales administration’s understanding of the recurring problems surrounding the use of Bolivia’s hydrocarbons and minerals emerged from the country’s social movement struggles against neoliberalization. Its solutions, however, were neither anti-capitalist nor any sort of radical alternative to the processes of neoliberalization that had plagued Bolivia over the past twenty years. In some ways, the Morales administration’s solutions resembled those of the neoliberal ideologues that preceded it. Indeed, the Morales administration’s solutions were based on better exercising the purported comparative advantage surrounding Bolivia’s rich natural resource base, securing the

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presence of transnational firms, and further decentralizing the revenues gleaned from it. To better exercise the purported comparative advantage surrounding Bolivia’s natural gas, the Morales administration wanted to expand its market potential. Although the Bolivian state was contractually obligated to send the majority of the natural gas extracted from its subsoil to Brazil, the Morales administration sought out a long-term contract to supply natural gas to Argentina shortly after coming to office. At the time, the Bolivian state already had a contract to send Argentina as much as 7.7 MMm3 of natural gas per day. However, the agreed upon volume was flexible based on Bolivian supply. Given that Bolivia only produced 34.1 MMm3 of natural gas per day at the time, its ability to supply Argentina’s demand was effectively based on Brazil’s demand. With Brazil demanding up to 30.0 MMm3 of natural gas per day in 2006, it was technically impossible for Bolivia to supply Argentina with 7.7 MMm3 of natural gas per day. Despite this already existing shortage, the Morales administration assumed it could bring Bolivia’s untapped “probable” natural gas reserves into production and negotiated a guaranteed take-or-pay contract to gradually increase the country’s export volumes of natural gas to Argentina to 27.7 MMm3 per day by 2026. The contract was renegotiated numerous times, with the two states eventually agreeing to decrease the amount of natural gas initially being sent to Argentina to 5 MMm3 per day. The volume would then be increased to 11 MMm3 per day in 2015, then 20 MMm3 per day in 2019, 25 MMm3 per day in 2021, and finally 27.7 MMm3 per day in 2026 (Monge 2010). The Morales administration later demonstrated its commitment to increasing its exports of natural gas to Argentina by financing and completing the construction of an 18 kilometer, 32-inch pipeline from Campo Grande in Bolivia to the border of its southern neighbor at an estimated cost of US$43 million (La Razon ´ 2011). With a guaranteed increase in demand for Bolivia’s natural gas, the Morales administration needed to increase its supply. Lacking the funds and technology to do so on its own, the Morales administration aggressively sought to befriend those whom its social movement allies sought to expel: transnational oil and natural gas firms. Although the Morales administration claimed to nationalize the country’s oil and natural gas, it never intended to rid the country’s hydrocarbon industry of transnational investors. Before the nationalization decree was even put into law, the Morales administration labeled its pending actions a “nationalization without expropriation.” At the same time, Morales repeatedly expressed his desire to work with transnational firms through what almost became his catchphrase: “We want partners, not bosses.” This became apparent in the means through which the Morales administration gradually sought to recuperate some of YPFB’s assets that were privatized in the 1990s. Despite introducing its desire to recuperate these assets on

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the day of the nationalization, the Morales administration did not nationalize these assets per se. Technically, the Bolivian state still maintained control over a minority of shares of its previously privatized assets. Since 1996, the state’s shares had been held in the Bolivian pension fund to generate revenue. However, through Decreto Supremo No 28701, the Morales administration transferred control of these shares back to YPFB (GOB 2006 Art´ıculo 6:1). Over the following two years, the state then slowly negotiated with investing transnational energy firms to regain majority control within these companies. As a representative at YPFB described the process: Now, it’s not even a nationalization. You may call this a hostile takeover . . . A company is interested in another company, and it starts buying the shares and it goes to the annual meeting and announces, ‘ok, you guys are no more; we are in charge of this because we have 51% of the shares, so we’re in charge’. That’s a hostile takeover right? We’re buying their shares, well [at least up to] 51%. Of course we have about 35% in one of the ventures and we have about 49% in others, so we’re only buying about 16% or maybe 2% more. And that’s not a nationalization; it’s a hostile takeover, that’s what it is.

Through this “hostile takeover,” transnational energy firms only lost their majority shares in YPFB’s previously privatized assets. By 2006, YPFB’s previously privatized assets only extracted 26.4 percent of the country’s natural gas and 24.8 percent of the country’s petroleum (INE 2008a). Transnational energy firms who did not buy segments of YPFB in the 1990s but invested in new oil and natural gas reserves extracted the majority of the country’s hydrocarbons. Although the Morales administration forced these firms to sign new contracts that properly recognized the legalities surrounding Bolivia’s hydrocarbon industry, it upheld the firms’ previously existing contractual rights to produce the oil and natural gas from the reserves they already operated. As a result, the largest players in Bolivia’s hydrocarbon sector before the nationalization – Petrobras, Repsol YPF, TotalFinaElf, and British Gas – maintained their dominant presence and power. The Morales administration followed a similar trajectory in the mining sector. As it sought to increase extraction levels, it did so by soliciting joint ventures with transnational investors. Perhaps most notably, the Morales administration signed a contract with Inida’s Jindal Steel to mine El Mutun ´ in 2007, one of the world’s largest iron-ore reserves. Although minor amounts of iron ore had been extracted intermittently from the site since the 1970s, Jindal signed a joint venture agreement to work with the Empresa Siderurgica del Mutun ´ ´ (ESM) – a government mining subsidiary – to extract 20 billion tons of iron ore from the mineral reserve. In the contract, Jindal agreed to invest US$2.1 billion in the venture and construct both a steel plant and sponge iron and iron ore plant. However, the bulk of the iron ore extracted would still be exported in its raw form.

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The Morales administration also secured the investments of most major transnational mining firms working in Bolivia. Although it recuperated control over Bolivia’s subsoil rights through Decreto Supremo No 29117, it only granted COMIBOL the rights to exploit and administer future mining projects. The Morales administration did retake the old state smelter and some mines that had been privatized in the 1990s, but according to Morales, the smelter and mines had been sold “for the price of a dead hen” and obtained illegally. In addition, the owners of the assets had failed to comply with their investment agreements (Bolpress 2007). All other privately operated mining firms in Bolivia maintained the rights to the mines they worked and were allowed to continue extracting minerals under the arrangements of their original contracts. As Luis Alberto Echazu, the mining minister at the time, stated, “What has been modified are the future concessions . . . Those already working in the country will continue working (under) the same (conditions)” (Mining Engineering 2007). As a result, both the minerals and most of the profits coming from San Cristobal and San Bartolome´ – Bolivia’s most productive mines – ´ remained in the hands of transnational investors. For the Morales administration, the roots of the problems surrounding Bolivia’s natural resources were not transnational energy and mineral firms per se, but their lack of investment. The Morales administration thus did not seek to remove transnational firms from the two sectors. Instead, it sought to entice them to invest in new sites of exploration by offsetting their financial risks. Although Bolivia’s neoliberal turn resulted in the transfer of the majority of profits coming from the country’s hydrocarbons and minerals to transnational firms, it also resulted in the transfer of the majority of risks associated with exploration – risks that were not financially lucrative enough to entice exploration investment. The Morales administration partially offset such risks by making YPFB and COMIBOL majority partners in all new exploration and extraction activities in Bolivia. Both companies thus absorbed 51 percent or more of the financial risks involved in finding new natural resource reserves. In the hydrocarbon sector, YPFB would later sweeten the deal. For any oil and natural gas exploration activities undertaken by transnational energy firms that brought new reserves into production, YPFB would reimburse the firms 100 percent of their costs (Los Tiempos 2011a). As the Morales administration danced with transnational energy and mineral firms to bolster Bolivia’s purported comparative advantage, it also eventually sought to alter the redistribution of the revenues coming from its rich natural resource base. However, the Morales administration did not seek to alter the decentralization trends that sent the country’s resource rents away from the state-owned extraction companies. Instead, it sought to enhance them. In 2007, the Morales administration further decentralized the distribution of rents from both the hydrocarbon and mineral sectors. Through Decreto Supremo No 29322, the Morales administration re-allotted IDH revenues destined to departments away from the coffers of the prefects: 66.99 percent

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went to each department’s municipalities, 24.39 percent to departmental prefects, and 8.62 percent to each department’s public university (GOB 2007c). Similarly, through Ley No 3787, the Morales administration more directly stipulated how mineral rents should be distributed. In an attempt to equalize the funds being sent to hydrocarbon departments, the decree stipulated that 85 percent of the Regal´ıa Minera (RM)4 – the principle mining royalty – should be sent to mineral-producing departmental prefects. The remaining 15 percent should be sent to mineral-producing municipalities (GOB 2007e). Although the changes to the taxes and royalties in both the hydrocarbon and mineral sectors potentially put more money in the hands of the Bolivian people, the “hens with the golden eggs” – YPFB and COMIBOL – still ran “the risk of dying.” Falling Zombies Despite being plagued by past and seemingly advancing new processes of neoliberalization, the Morales administration could be said to have escaped the neoliberal zombies’ bite. Indeed, during Morales’s initial years in power, some of the zombies began to fall – in particular, those upheld by the eastern agricultural elite. The eastern elite suffered its initial blow during Morales’s rule in the elections for the Constitutional Assembly in June 2006. Elite representative parties garnered only 99 of the 255 assembly seats (CNE 2006). The elite gained enough seats to frequently disrupt the assembly. In its original charter, a twothirds majority vote was needed to decide the procedures for the Assembly and approve amendments. However, after the elite representatives took an obstructionist position in the Assembly and vetoed nearly every procedural decision and proposed amendment, the government declared that only the final draft of the constitution would require the approval of a twothirds majority (Webber 2011:95). This change, combined with the subsequent reallocation of IDH funds away from the departmental prefects, drove the eastern elite to increase their long-standing calls for greater departmental autonomy. In doing so, they sought to maintain access to Bolivia’s hydrocarbon revenues by approving departmental statutes that gave prefects control over the sale and use of the hydrocarbons extracted within their territories (Estatuto del Departamento Autonomo de Santa Cruz 2007). However, the ´ Morales administration deemed such statutes in violation of the Bolivian law. As previously noted, “by constitutional norm, hydrocarbon deposits, in whatever form they are found or appear, are of the direct domain, inalienable and imprescriptible, of the state” (GOB 1996a Art´ıculo 1; see also GOB 1995 Article 139).

4

Regal´ıa Minera = Mining Royalty.

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In September 2008, the eastern agricultural elite’s struggles to save their dwindling power escalated into violent protest. Morales had attempted to stave off conflict with the country’s prefects by calling their bluff and agreeing to hold recall elections for both the presidential and prefectural posts in August 2008. However, both Morales and the opposition prefects that represented the elite received more votes from their constituencies than they had when originally elected. With no resolution imminent, anti-Morales groups in the eastern departments began to loot and burn national government offices within their departments. As pro- and anti-Morales groups clashed across the country, confrontations in the northeastern department of Pando resulted in the shooting and death of more than a dozen Morales supporters (Flores 2008). Government reports linked the shootings to the Pando prefect Leopoldo Fernandez and accused him of hiring mercenaries to do the work. Both pro- and anti-Morales groups were armed. However, video coverage of the event showed that the campesinos’ firepower was limited and they quickly fled into the surrounding jungle, being gunned down by opposition groups as they attempted to hide. While it was unclear how the conflict led to gunfire, Morales put the department under martial law and shortly thereafter the protests across the country subsided. The violence proved to be enough to alter the political standoff between the parties representing the elite and the historically marginalized masses. Prior to the incident, the Morales administration had been unable to get the requisite number of votes in the Senate to push forward the newly drafted constitution. However, the violence and a few concessions made by MAS over segments of the draft constitution swayed some elite representatives in the Senate to vote in favor of putting the constitution to a popular vote. As a representative from one of MAS’s opposition parties who eventually voted for the constitution noted: “The violence and threat to national unity not only strengthened the group [who voted for the constitution], but also gave pause to radicals on both sides, creating the subjective and objective conditions that made an agreement possible” (Bohrt in Van Schaick 2008). A number of traditional ¨ party representatives accused those who voted for the constitution to be part of a “new line of neo-MASistas.” But tired of the violence and division within Bolivia, another representative who split from his party’s line to vote for the constitution responded, “in any case, it is worse to be a neo-fascist” (La Razon ´ 2008). The concessions MAS made to secure the votes of the traditional party representatives were not insignificant. One of MAS’s main priorities was to promote sustainable rural development through a project of land reform. When Morales came to power, 1.2 percent of landowners controlled 80 percent of agricultural land, much of which was located in the eastern Departments of Santa Cruz, Beni, and Pando. All these landowners held more than 1,000 hectares of land and many held more than 15,000 hectares of land

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(Weisbrot and Sandoval 2008).5 However, MAS sought to put a maximum limit on the amount of land that any individual in the country could hold. A crucial tool in securing enough votes for the constitution thus entailed incorporating stronger language into the text to guarantee that already held land would not be affected by such a limit. In the draft constitution that eventually was put to popular vote, land already held was protected from being redistributed as long as it was deemed “productive.” In addition, MAS agreed to allow the Bolivian people to vote on whether the maximum amount of land any individual could legally hold would be 5,000 or 10,000 hectares. Through such concessions, the constitution would protect the economic base of the landed agricultural elite. In January 2009, 61.4 percent of voters cast their ballots in favor of the new Bolivian constitution (CNE 2009a). The constitution was far from any sort of anti-capitalist declaration. It did limit the amount of land any individual could own at 5,000 hectares and reaffirmed that the state was the legitimate owner of Bolivia’s subsoil wealth. However, it also solidified private property rights. In the general elections held later that year, the Morales administration further bolstered its power. It received 64 percent of the presidential vote. In addition, MAS took a majority of the seats in both the Camara de Diputados and the ´ Senate (CNE 2009b). The Past’s Influence on Changing Paths Persistent outcomes and understandings of Bolivia’s recurring problem of how to best use its natural resource wealth affected how the Morales administration sought to exit its neoliberal economic trajectory. These persistent outcomes and understandings were not contingent, but emerged through nearly three decades of neoliberalization. Within this context, the Morales administration’s counter-neoliberal turn in some ways resembled its neoliberal turn. As the Morales administration sought to alter two decades of neoliberal restructuring, its understandings and opportunities for doing so were shaped by the means in which Bolivia was incorporated into the global economy, the sociospatial relations of power surrounding its extractive industries, and the struggles over the country’s rich natural resource base. Indeed, at the heart of many of the struggles surrounding Bolivia’s natural resource wealth was not a debate over how to best use the country’s hydrocarbons and minerals, but how to best use the revenues coming from them. The Morales administration thus continued to uphold – and perhaps even strengthened – Bolivia’s position in the global economy as a provider of natural resources by welcoming new transnational investors and actively seeking to increase exports. The solutions put forward by the Morales administration to the recurring problem of how to best use the country’s natural resource wealth did alter 5

As a note of comparison, the average farm in the United States is approximately 125 hectares.

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the power relations in Bolivia. Amid the struggles between Bolivia’s internal class factions, however, transnational firms seemed to maintain their power within Bolivia’s hydrocarbon and mineral sectors. The potentially most damaging changes to the power held by transnational firms were the revitalization of YPFB and COMIBOL and the increase on rents paid on natural resources extracted in Bolivia. However, neither proved to seriously disrupt the power held by transnational extraction firms operating in the country. Such an outcome occurred not through a struggle waged by transnational energy firms against Bolivia’s marginalized masses, but with the helping hands of the Morales administration. Indeed, as the Morales administration sought to enhance the profits Bolivia’s public hydrocarbon and mineral sectors could glean from the country’s rich natural resource base, it secured the power of transnational extraction firms by deepening Bolivia’s dependence on their investments and quelling the public’s discontent toward their profit-making activities.

8 Post-neoliberal Possibilities, 2010 and Beyond

The fabled devil contract is an indictment of an economic system which forces men to barter their souls for the destructive power of commodities. Of its plethora of interconnected and often contradictory meanings, the devil contract is outstanding in this regard: man’s soul cannot be bought or sold, yet under certain historical conditions mankind is threatened by this mode of exchange as a way of making a livelihood. In recounting this fable of the devil, the righteous man confronts the struggle of good and evil in terms of some of the most acute contradictions of market economies . . . Economic laws triumph over ethical ones. Production, not man, is the aim of the economy, and commodities rule their creators. – Michael Taussig (1980)

In June 2012, the International Monetary Fund (IMF) released its annual Article IV consultation report on Bolivia. The report noted that “prudent macroeconomic policies, accompanied by strong terms of trade, have allowed Bolivia to achieve impressive economic outcomes in recent years” (IMF 2012:4). Such praise from the IMF was not altogether new. It had been cautiously lauding Bolivia’s economy since the country’s real GDP growth rate topped 6 percent in 2008 and the nation seemed to survive the global economic downturn that followed largely unscathed. As IMF representative Gilbert Terrior stated in 2009, Bolivia’s “successful macroeconomic policies” should allow it to aptly face any external economic shocks and “traverse the crisis with total confidence” (in Quiroga 2009). The IMF’s positive assessment of Bolivia stemmed largely from the country’s flush foreign reserves, declining external debt, and strict fiscal discipline. In its first six years in office, the Morales administration increased Bolivia’s foreign reserves from around US$1.759 billion in December 2005 to more than US$12.678 billion by July 1, 2012, decreased Bolivia’s external debt by more than 40 percent, and recorded yearly state budget surpluses (BCB 2012a; 150

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2011a; 2011b). Exercising apparently keen economic management skills, the Morales administration strung together an annual average GDP growth rate of 4.5 percent. Such economic growth was better than most developed countries in the world at the time and nearly matched the growth achieved during Bolivia’s neoliberal heyday in the 1990s (IMF 2011; CEPALSTAT 2011). In some ways, the Morales administration achieved such economic growth while bucking every recommendation the IMF made to previous Bolivian governments. It dramatically increased the rents transnational corporations paid in one of the country’s most lucrative industries. It more than doubled state spending. It subsidized food and fuel. It oversaw the nationalization not only of Bolivia’s oil and natural gas, but also the electricity sector, the water sector, parts of the telecommunications sector, and parts of the mining sector. In addition, it sought to create a number of publicly owned and operated enterprises to strategically use and enhance the value of Bolivia’s primary commodities. Despite this apparent spurn of free-market ideology, however, the Morales administration did not draw the praise of the IMF by seeking to exit the global capitalist economy. Instead, it sought to strengthen Bolivia’s power and position within it. The persistent growth of the Bolivian economy under the guidance of the Morales administration could be seen as an enigma of sorts. On the one hand, many of the Morales administration’s policies ran counter to conventional freemarket ideology. According to the most ardent proponents of the wonders of neoliberalization, taxing or raising the rents paid by transnational corporations would kill all investment. Increasing public spending would drive a state toward fiscal insolvency and state-owned firms operating in lucrative economic sectors would eventually become inefficient bloated bureaucracies. On the other hand, some of the tactics of the Morales administration were seemingly neoliberal. It sought to enhance Bolivia’s purported comparative advantage by increasing the export of raw materials from the country. It openly invited transnational firms to invest in Bolivia’s most profitable economic activities. And it continued to decentralize the power and profits of the state. Given this economic growth amid government intervention and the presence of processes of neoliberalization in a purported counter-neoliberal turn, how are we to understand the changes unfolding in Bolivia? More generally speaking, how do we understand potential post-neoliberal possibilities? In the business press and the words of mainstream economists, the Morales administration continues to largely be depicted as antithetical to capitalist interests (Edwards 2010). Among critical academics and activists, the Morales administration has either been held up as a savior leading some sort of counterneoliberal revolution or been written off as overseeing a form of “reconstituted neoliberalism” (Webber 2011). However, counter-neoliberal turns should neither be seen as necessarily anti-capitalist nor devoid of any characteristics of a neoliberal past. Instead,

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counter-neoliberal turns should be seen as the processes of neoliberalization that preceded them – as variegated, ongoing, and dynamic. These processes of counter-neoliberalization will carry with them some neoliberal characteristics. Solutions to recurring problems are rarely, if ever, removed from history. However, such processes can simultaneously result in the introduction of characteristics that diverge from processes of the past. It is the characteristics of divergence that potentially put places on different paths that over time shape different understandings to recurring problems and their potential solutions. In Bolivia’s neoliberal and counter-neoliberal turns, transnational corporations, national elites, and the marginalized masses struggled over more than minerals and hydrocarbons. They struggled over how the country’s rich natural resource base should be incorporated into the global economy and who should benefit from it. The struggles were thus not over tin or natural gas as such. They were over power and responsibility – over control of the wealth beneath Bolivia’s soil and the livelihoods of those who lived above it. In processes of neoliberalization, power rests in private property and responsibility rests with the individual. In Bolivia’s neoliberal turn, the mining elite initially sought and gained increased power over the country’s natural resource base and later shared this power with transnational extraction firms. Responsibility was held by the individual – by the corporate executive, politician, worker, miner, and peasant. In the asymmetrical power relations surrounding Bolivia’s natural resource wealth, however, corporate executives and some politicians held power without much responsibility while workers, miners, and peasants held responsibility without much power (see Chapters 3 and 4). At the root of the processes of counter-neoliberalization in Bolivia thus rested an attempt to shift power over the country’s natural resource wealth toward the country’s historically marginalized populations. Processes of Counter-neoliberalization In the uprisings surrounding Bolivia’s natural gas, the country’s leftist social movements disrobed the connection between the old mining elite and transnational extraction firms, successfully removing the former from power. The agricultural elite later lost what little legitimacy and power it grasped by resorting to violence in its challenges against Morales. But contrary to popular belief, neither the Morales administration nor Bolivia’s leftist social movements seriously threatened the power of transnational extraction firms in the country. After Morales became president and the new Bolivian constitution was approved by popular vote, the elite knew its power within the country was diminishing. As an ex-MNR politician and member of the Bolivian elite noted: The situation is not going to return again to how it was in ’96 or ’97 or 2001. That is finished . . . There are various things that have changed definitively. First, the Bolivia state is going to manage its natural resources, this is never again going to change.

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Second, the inclusion of the poor, of the indigenous, this also is not going to change, this will stay forever. . . . To think that the indigenous are going to return again to the countryside, to agriculture, this is not going to occur. We have to be conscious of this. As the group that was privileged, we have definitively lost our privileges because we were unjust.

The elite did not completely disappear. They maintained some power within departmental prefects and the concessions negotiated with MAS when writing the new constitution over the maximum allowable size of individual landholdings allowed the agricultural elite to largely maintain control over the country’s export agricultural market. However, as the grip once held by Bolivia’s traditional elite waned within the central government, their hand in controlling the country’s natural resource wealth was re-dealt. The new players dealt into the game were the Morales administration and MAS. Representing the historically marginalized masses, a different level of responsibility came with their power. Whereas previous governments were beholden to Bolivia’s mining and agricultural elites, Morales and MAS were beholden to the country’s miners, peasants, and workers. The Morales administration partially appeased its constituencies by reallocating the majority of IDH funds to municipal levels where they held more power. Despite the shortcomings of the Ley de Participacion ´ Popular (LPP) introduced in the 1990s (see Chapter 4), the law had created a regulatory framework that gave municipalities and their residents a more direct say in how public funds were used. And with greater amounts of public funds going toward municipalities, they could undertake larger projects that potentially had a broader community impact. For municipalities, the problem of having local responsibilities without any sort of power that plagued the LPP in the 1990s was partially rectified. The Morales administration also took some responsibility for the Bolivian masses by instituting new social programs – in particular, the Bono Juancito Pinto, the Renta Dignidad, and the Bono Juana Azurday. The administration put the Bono Juancito Pinto into place in 2006 to encourage families to keep their children in school. Families participating in the program received 200 bolivianos annually for each of their children actively enrolled in school through the sixth grade (GOB 2006b).1 The Renta Dignidad was introduced in 2008 to alleviate poverty among the elderly. The program strengthened Bolivia’s existing social security program by giving those over the age of sixty who had access to the public pension plan 1,800 bolivianos annually and those who did not, 2,400 bolivianos annually (GOB 2007e).2 The government implemented the Bono Juana Azurduy in 2009 to provide money to uninsured mothers for pre- and postnatal care. Hoping to reduce infant and maternal mortality, 1 2

The exchange rate was approximately US$1 to 8.0 bolivanos on October 26, 2006, the day the program was made law. The exchange rate was approximately US$1 to 7.7 bolivanos on November 27, 2007, the day the program was made law.

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mothers were awarded 50 bolivianos for each prenatal visit, 120 bolivianos for the childbirth, and 125 bolivianos for each medical appointment until the child was 2 years old (GOB 2009).3 By 2011, 29.7 percent of the Bolivian population was directly benefitting from these three programs (Ministerio de Econom´ıa y Finanzas Publicas 2011). ´ During the Morales administration’s first six years in office, the success of such programs was mixed. Enrollment rates in primary education marginally decreased and infant mortality remained relatively constant. However, the Morales administration did decrease extreme poverty in Bolivia. The percentage of people living on less than US$1 per day fell from 37.7 percent in 2006 to 26.1 percent in 2009 (IMF 2011:34). Although still well above the average extreme poverty rate in Latin America of 12.6 percent, the Morales administration made some progress. As the Morales administration assumed more power and responsibility, the Bolivian masses assumed they held more power and responsibility. Within this context, the targets and types of struggles in the Bolivian streets changed. For more than a decade, the country’s leftist social movements targeted transnational corporations as the purveyors of the country’s ills and mobilized against corporate forms of rule. In the struggles over gas and water, they sought to reverse the privatization of Bolivia’s natural resource wealth and protect their everyday livelihood needs. Nevertheless, as the state reentered the hydrocarbon sector, made privatized water supplies once again public, and more generally began to insert itself in the country’s social and economic activities, the Bolivian masses’ ire toward transnational corporations partially diminished. Uprisings against transnational corporations still occurred, but many people saw the Morales administration as the caretaker of the country’s natural resource wealth. For some, this decreased the need to take to the streets. As a social movement representative from the Chapare stated: We are resting now. For 19 years we suffered. To a certain extent, we have now been freed. With this change, the nationalization, our economic situation has changed. . . . Before, under the neoliberal governments, the government did not govern. The government was governed by other nations and the transnationals. We often had to be in a state of rebellion to defend our lands. They never gave us what we needed and our struggle was constant. Now we are resting because the government of MAS is together with us.

Like many, the social movement representative saw the Morales administration and MAS working in the interests of the people. For others, the power and responsibility assumed by the Morales administration made it the entity that should address their demands. Indeed, as 3

The exchange rate was approximately US$1 to 7.0 bolivanos on April 3, 2009, the day the program was made law.

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inflationary pressures and rising global food prices pinched the pockets of the Bolivian population in 2010, the Central Obrera Boliviana (COB) began to pressure the Morales administration to address the issue. In both April 2010 and April 2011, the COB staged widespread protests to increase the minimum wage. Although the Morales administration had increased the minimum wage by 35 percent during its first three years in office, such increases barely matched inflation (CEDLA 2011:8). In both years, the protests resulted in confrontations between the police and the COB. In addition, the Morales administration and the COB offered up some less than cordial assessments of one another in the media, but the protests and exchanges differed from those that brought Morales to power. The COB did not protest against the government per se – it protested for the government to make a change to the country’s wage structure. Indeed, the protests seemed in some ways similar to those of Bolivia’s pre-neoliberal past. The struggle was not to be included in the global economy, but to improve the conditions on which such inclusion occurred. Although the Morales administration did not give in to the COB’s demands in 2010, it did increase the minimum wage by 1 percent more than it originally planned in 2011 – from a planned 10 percent increase to an 11 percent increase (Bolpress 2011). In Bolivia’s shifting power structures, however, the position of one of the most dominant actors during the country’s era of neoliberalization largely remained the same – that of transnational extraction firms. Transnational extraction firms were affected by changes to natural resource rents, minimum wage increases, and occasionally faced worker discontent. However, their control over Bolivia’s rich natural resource base went largely unscathed. In the hydrocarbon sector, transnational energy firms continued to produce the majority of Bolivia’s natural gas (see Chapter 7). In addition, the export agreement the Morales administration secured with Argentina led transnational energy firms to increase their investments in exploration and extraction activities. As a vice president of the British Gas Group noted: “We think there is a lot of potential. We’ve been here ten years and plan to be here much longer . . . Legal security is essential for investment, and we’re confident that this is in place [in Bolivia]” (in Romig 2011). In 2010, investments in hydrocarbon exploration and extraction reached US$575 million, more than half of which came from transnational energy firms (see Figure 8.1). By 2011, investment in exploration and extraction reached US$873 million, and investment in the hydrocarbon sector as a whole topped US$1.2 billion. Transnational energy firms were slated to contribute more than one-third of this, more than they ever previously spent in Bolivia in a single year. Transnational mining firms also remained the dominant actors in Bolivia’s mineral sector. From 2005 to 2009, investments in mineral exploration and extraction were the highest in history, totaling more than US$1.4 billion. Nearly all of this investment came from transnational mining firms (Ministerio de

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Miner´ıa y Metalurgia 2010). Although threats to nationalize parts of the mineral sector dampened investment in 2009 and 2010, the Morales administration backed off its more widespread nationalization plans at the request of several of the country’s miners’ unions and cooperatives (Los Tiempos 2011b). In 2011 and 2012, investment from transnational mining firms was expected to rebound as global mineral prices continued to rise. The dominant role of transnational extraction firms in Bolivia was partially a product of the country’s neoliberal past. Both transnational energy and mining firms increased their presence in Bolivia during the 1990s and continued to hold the rights over a number of the country’s hydrocarbon and mineral reserves when Morales took office. However, the Morales administration also openly invited transnational extraction firms to invest in Bolivia and in some ways legitimated their presence. Indeed, as transnational extraction firms increased their investments, extraction activities, and profits, the Morales administration increasingly resolved the threats Bolivia’s historically marginalized masses posed to such investments, extraction activities, and profits. Indeed, a new alliance had been formed. The Bolivian Model ´ In June 2011, Oscar Avalle of the World Bank noted that the process of change unfolding in Bolivia was raising the country’s socioeconomic standing. He stated that in two years, Bolivia should be classified in the World Bank’s eyes alongside Argentina, Brazil, Mexico, and India. In addition, he declared that governments around the world were observing what Bolivia had done to make such a jump and some of the country’s social programs were being

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copied in other places across the globe (ABI 2011a). The following day, an article appeared in the news sporting the title “Bolivia already exports its development model.” In the article, Evo Morales was quoted as saying that the Bolivian model was “internationally recognized” and that people from throughout the world were coming “to study, analyze, and take our social policies” in order to apply them in their own countries (ABI 2011b). But what does this Bolivian model look like, how could it be exported, and what has been behind its purported success? At the root of the Bolivian model rests the apparent belief that processes of counter-neoliberalization should disrupt and reform the traditional power structures surrounding participation in the global economy. This requires creating an entity that can continually counter or check the power of transnational corporations while simultaneously fostering spaces in which immanent and micro-relational forms of power can emerge, congeal, and be expressed. For the Morales administration, state-owned enterprises operating in Bolivia’s most profitable economic sectors served as the antithesis to transnational corporations. Inserted into the global economy primarily for its rich natural resource base, YPFB and COMIBOL were reconstructed to counter and check the likes of Repsol, Petrobras, British Gas, TotalFinaElf, Pan-American Silver, Barrick Gold, and others. Decentralizing revenues generated through its most profitable economic sectors, the Morales administration sought to foster immanent forms of power by better financing existing spaces of supposed direct democracy. The Bolivian model is not anti-capitalist. It is what Bolivian Vice President ´ Alvaro Garc´ıa Linera called an “Andean-Amazonian capitalism” – a form of state-led capitalism. According to Garc´ıa Linera, It is the state that takes on the synthesis of the general will, plans the strategic framework and steers the front carriage of the economic locomotive. The second carriage is Bolivian private investment. The third is foreign investment. The fourth is small business. The fifth is the peasant economy and the sixth, the indigenous economy. This is the strategic order in which the country’s economy must be organized (in Ort´ız 2007).

However, Bolivian private investment has largely been absent in the country’s most lucrative economic sectors since Morales came to power. The historical presence of YPFB prior to its nationalization in the 1990s largely inhibited a local hydrocarbon elite from ever blossoming. At the same time, the absorption of the mining elite into transnational networks in the 1990s and their subsequent ouster with the fall of Sanchez de Lozada limited their presence in ´ the mineral sector during the first six years of the Morales administration. In the absence of a viable Bolivian private sector in its most profitable economic spheres, the state under Morales partnered with transnational extraction firms in Bolivia’s reconfigured power structures within the country. Through this alliance, the Morales administration did not alter how Bolivia was incorporated into the global economy during its first six years in office. In fact, it perhaps strengthened Bolivia’s position in the global economy as a

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provider of raw materials. Natural gas export volumes reached their highest levels in Bolivian history in 2008. Although dropping in 2009, they rebounded in 2010 (see Figure 8.2). Additionally, having guaranteed Argentina increasing volumes of natural gas starting in 2015, the Morales administration ensured that the volume of its natural gas exports would continue to rise. Mineral export volumes reached their highest levels in Bolivian history in 2009 (see Figure 8.3). With global demand for minerals continuing to increase, mineral export volumes were also in line to rise for the foreseeable future. As a government official who worked in the Bolivian Ministry of Hydrocarbons stated, “Bolivia is a permanent supplier of raw materials . . . this is what we tried to change in the last few years, but basically it is still all the same.” The Morales administration did not completely ignore the possibility of using Bolivia’s raw materials for purposes other than export. Following the Ley de Hidrocarburos No 3058, it created an agency within YPFB to explore the industrialization possibilities for Bolivia’s natural gas. It later turned this

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agency into a separate publicly owned company – la Empresa Boliviana de Industrializacion ´ de los Hidrocarburos (EBIH) – through Decreto Supremo No 29511 and in accordance with the new Bolivian constitution (GOB 2008). The EBIH was charged with the responsibility of ridding Bolivia of its dependence on raw material exports by creating secondary industries to make value-added goods from the country’s natural gas – in particular, petrochemicals, plastics, and diesel fuel (Ministerio de Hidrocarburos y Energ´ıa 2010). However, as a director of industrialization at YPFB noted in 2008 after first proposing many of these secondary industries to the government: “Unfortunately, we found out, actually the authorities in La Paz found out that there’s not enough gas for [industrialization] plants, to feed the plants. Because the problem with all the [industrialization] projects is that they use methane . . . the main commodity Bolivia exports to Brazil and Argentina.” In other words, to make the projects of the EBIH a reality, Bolivia needed to be able to first satisfy its contracts with Brazil and Argentina. With the Morales administration having already committed Bolivia to annually export more natural gas than it has ever produced in a year starting in 2015, the prospects of acquiring the natural gas necessary for the industrialization projects appeared to be grim. In addition, the Morales government has faced difficulties getting transnational extraction firms to help produce more natural gas for Bolivia’s industrialization projects since they receive less for natural gas used internally than for export (GOB 2005b). In the mineral sector, the Morales administration sought to extend its alliances with transnational extraction firms to secondary industries by requiring firms signing new mineral contracts to work as partners with state industries, use Bolivian smelters, and construct mineral processing facilities and other value-added industries. Although the project sat on the edge of failure in 2012, the joint venture between Jindal Steel and the Bolivian state firm the Empresa Siderurgica del Mutun iron ore ´ ´ (ESM) to turn some of El Mutun’s ´ into value-added products is an example of this. The Morales administration also actively sought to industrialize Bolivia’s lithium reserves – the largest in the world. As early as 2009, transnational firms were lining up to gain access to and tap these reserves, but none initially agreed to turn the lithium into a higher value-added goods. The Morales administration pledged that, if necessary, the Bolivian state would develop the lithium reserves on its own and use the mineral to eventually make batteries in the country without external investors (La Razon ´ 2010). However, in July 2012, a joint-venture agreement to extract and turn the lithium into value-added products in Bolivia was signed between COMIBOL, South Korea’s state-run mineral development corporation, and a consortium of private South Korean firms including steelmaker POSCO and the LG International Corporation (Korean Herald 2012). The Bolivian model forwarded by the Morales administration in its first six years in office entailed intensifying some processes of neoliberalization in order

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to counter others. Although the state reentered Bolivia’s most lucrative economic sectors by revitalizing YPFB, COMIBOL, and other public entities, it still sought to exercise the purported comparative advantage surrounding Bolivia’s rich natural resource base. As it did, it extended and intensified market-based forms of competition and commodification to incorporate new hydrocarbon and mineral reserves into the global capitalist system. In addition, the state sought to leverage buyers of the riches beneath the country’s soil against one another in order to increase profits. The state-owned industries thus acted as – and often with – transnational extraction firms to bolster the revenue coming from Bolivia’s hydrocarbon and mineral sectors. Nevertheless, the Morales administration also used its newfound revenues coming from exercising Bolivia’s purported comparative advantage to disrupt processes of neoliberalization. Redirecting some of the profits gleaned from Bolivia’s natural resources away from transnational firms, the Morales administration returned the provision of some goods and services deemed necessary for a just livelihood to public hands. In doing so, it de-marketized the provision of goods and services surrounding things such as water and electricity. To receive a water line or electricity, a home, neighborhood, or business no longer needed to be seen as a profitable destination. As a result, the state and local municipalities started to bring water and electricity to places they were never brought before and will more than likely never bear much profit. The Bolivian model in some ways bridged the divide in classic theories of dependent development. Similar to institutional approaches, there seems to be no irreconcilable differences between transnational corporations and the state when both are involved in the same economic sector (Evans 1979). Similar to class-based approaches (Cardoso and Faletto 1973), conflict exists between dominant actors – in particular, between the state and local capitalist classes. However, the Bolivian model differs because the state is neither an independent institutional entity separate from class interests nor does it merely work in the interests of the elite. Instead, the state to a certain extent works in what it sees as the interests of the historically marginalized masses. The Bolivian model thus resembles a somewhat kinder, gentler, softer form of capitalism than both the neoliberal and developmental state models that preceded it. Working in the interests of the masses, the state plays a vital role in the model. On the one hand, it acts as a competitive capitalist entity able to check the power of transnational corporations in sectors linked to Bolivia’s purported comparative advantages. On the other, it acts as a protective socialist entity that promotes spaces of greater democratic participation and provides goods and services necessary for a just livelihood. Internal Derivations Although the actions and agenda of the Morales administration may seem radical to some in the global north, a number of factions in Bolivia have sought

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to push the country’s trajectory of socioeconomic change further. Doing so, most have not attempted to derail the Bolivian model or the Morales administration. Indeed, for most of Morales’s first six years in power, he maintained the support of a large majority of the population. However, some believe that more could be done. In particular, some have pushed to further limit the role of transnational firms in Bolivia’s strategic sectors and give workers more control within these sectors. Calls to further limit the role of transnational firms in Bolivia’s hydrocarbon and mineral sectors have been heard from segments of workers in YPFB and COMIBOL, professionals, and academics in groups such as El Comite´ de Defensa del Patriomonio Nacional (CODEPANAL), and social movements in historic hydrocarbon-producing regions like Camiri. These groups believe that transnational firms are in some ways inhibiting Bolivia’s industrialization initiatives. Driven largely by profit, such firms prefer to send the raw materials they extract to the most lucrative markets. However, if Bolivian state firms were to take a larger role in the country’s hydrocarbon and mineral sectors, they could perhaps ensure raw materials were available and priced at a rate beneficial to advancing and enhancing the country’s industrialization initiatives. Although recognizing that the role of transnational firms in Bolivia’s natural resource sectors is sometimes necessary to overcome the financial and technological barriers the Bolivian state companies face, these groups believe that public-private partnerships should only be pursued in the country’s mineral and hydrocarbon sectors when Bolivian state companies cannot overcome such barriers on their own (see Mariaca et al. 2009; Orgaz ´ Garc´ıa 2008). Within Bolivia’s mineral and hydrocarbon sectors, some workers at YPFB and COMIBOL have sought to enhance their decision-making power and the roles of unions in the companies’ everyday operations. The workers believe that organizing Bolivia’s natural resource sectors along these lines could have a twofold effect. First, enhancing worker participation in the decision making process would potentially make the companies more innovative and efficient. As one YPFB union representative stated, “The workers are the ones that know the institution. Where there are shortcomings, we know what is needed. We can propose projects and new solutions.” Second, transferring power away from the central government and toward workers might allow the state companies to act more as independent entities and thus not merely be seen as rentier arms of the state. This could also better uphold the constitutional mandate that civil society play a role in the governance of public companies (GOB 2009b Arct´ıculo 242). As another YPFB union representative noted, “the decrees passed by the government say that there should be a level of social control, of civil society involvement in public business. The unions can do this. Who could do it better than the workers?” Neither of these derivations radically departs from the Bolivian model being pursued by the Morales administration. Both seek to further strengthen state

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firms in a way that would allow them to better counter the power of transnational firms working in Bolivia’s natural resource sectors. In addition, proponents of the first seek to alter how Bolivia is incorporated into the global economy through industrialization projects. That said, both could potentially improve on the Bolivian model. The Potential Pitfalls While international lending agencies and leftists alike have applauded Bolivia’s socioeconomic trajectory under Morales, there are a number of pitfalls within the Bolivian model of counter-neoliberalization and its derivations. From the problems surrounding the material realities of natural resource extraction, to the “curses” of a rich natural resource base, to occidental visions of progress, the Morales administration has and will find the path it is constructing quite plagued by zombies, counter-currents, and even its own policies. On the most basic level, there are real material constraints to building a sustainable society off of nature’s riches. Natural resources are finite. Relative scarcity, while socially constructed, poses limits on natural resource-led development, as easily and economically accessible supplies will eventually tap out (Bunker and Ciccantell 2005; Barham, Bunker, O’Hearn 1994). With an independent audit solicited by the Morales administration showing that Bolivia’s proven natural gas reserves are significantly lower than originally thought, such a constraint may become a reality sooner than expected. Whereas Bolivia’s estimated proven reserves sat somewhere between 12.8 to 26.7 TCF of natural gas in its proven reserves when the Morales administration took office, its proven reserves sat at only 9.94 TCF of natural gas in early 2011 (Quiroga 2011). Investments in exploration by the Morales administration in non-traditional hydrocarbon areas yielded some positive results and could prove to temporarily stave off any sort of material crisis, but in Morales’s first six years in office, few new reserves were brought into production. Extractive processes are also inherently environmentally destructive. Puncturing the earth not only draws blood, but usually leaves scars. Where extraction occurs, soils and water supplies often become toxic and unsuitable for future use. Remaining tainted for decades, those who live near may struggle to cultivate edible food and can suffer from chronic illnesses associated with low levels of persistent poisoning (Guha and Martinez Alier 2000; Bunker 1984). Even though the Morales administration has waved its green flag at climate change negotiations throughout the world, it has not seriously addressed the material and environmental realities surrounding Bolivia’s extractive economy. Rich natural resource bases have also occasionally proven to be as much of a “curse” as a blessing. The windfall profits associated with some raw materials – in particular oil and natural gas – have often been associated with high levels of corruption (Karl 2004), a problem the Morales administration had to deal with among members of its political party and in the upper echelons of YPFB

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(Cambio 2009). Natural resource-driven economic growth is also often subject to global demand largely beyond the control of the people and places in which extraction occurs (Barham, Bunker, O’Hearn 1994). Indeed, Bolivia lost millions of dollars in revenue in 2009 when heavy rains increased Brazil’s generation of thermoelectric power and thus decreased the demand for its neighbor’s natural gas (Lievana 2010; see Figure 8.3). And historically, resource-rich coun´ tries have grown two to three times slower than resource-poor countries and usually fared worse on many social and human development indicators (Bridge 2009:20). Bolivia’s long extractive history and persistent poverty provide perhaps one of the most illustrative examples of this in the world. The Morales administration has seemed to buck many of these trends, but the tactics it deployed and alliances it made hold their own dangers. States, transnational firms, and local capitalists have not always historically allied for the good of the people. As scholars of dependent development have shown, such actors have allied because they held a common interest in continual capital accumulation and the subordination of the masses (Evans 1979; Cardoso and Falleto 1979). States can and have redistributed their share of the earnings from these alliances, but taking a dominant role in the processes of capital accumulation can increase the state’s interests in subordinating the masses if such processes are threatened. Although the Morales administration has not resorted to using the violent forms of repression deployed by governments of the past, it has at times sought to quell discontent and end work stoppages through discursive forms of subordination. Indeed, both Morales and his vice president labeled the COB an ally of Bolivia’s conservative right when the union took to the streets to struggle for a living wage. The distribution of benefits from alliances between transnational firms, local capitalists, and the state has also often been highly skewed. As scholars of unequal exchange and unequal ecological exchange have long argued, the economic success of some is often related to the lack of success of others (Bunker 1984; Emmanuel 1972; Prebisch 1949). In alliances in which actors hold and can exercise different levels of power within the global economy, the more powerful – transnational firms – often hold the upper hand. Such has been evident in Bolivia during the Morales administration, as transnational firms have remained the dominant actors in the country’s most lucrative economic sectors. Perhaps the most proven way to escape some of these problems and “curses” is to diversify a place’s economy – to de-concentrate economic power and alter how a place is incorporated into the global economy. Although struggling to diversify the Bolivian economy in its first six years in power, the Morales administration’s attempts to create secondary industries and value-added goods from the country’s rich natural resource base in Bolivia could very well prove to turn the “curse” that has plagued the country for centuries into some sort of blessing. Bolivia’s economy would be better insulated from external price and demand fluctuations associated with raw materials. In addition, more value

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could be captured in Bolivia by the state, by private firms, and/or by workers. However, shifting from an extractive economy to a mixed or industrial economy does not guarantee an escape from neoliberalization. The shift could merely move Bolivia from being primarily a space of accumulation by dispossession to being more of a space of expanded reproduction. Indeed, in the Morales administration’s first six years in office, it has only slightly been able to temper the detriments of economic oppression. Although wages have kept up with inflation, they have not kept up with the increasing costs of the daily food basket (CEDLA 2011). With a higher percentage of their wages going to satisfy their basic nutritional needs, the lowest paid workers in Bolivia have undoubtedly suffered the most. The processes of counter-neoliberalization in Bolivia may also be constrained by occidental visions of development and modernization. In other words, the end destination of the Bolivian model is in some ways an attempt to make the global south like the global north – for better and for worse. The ways the Morales administration has proposed to add value to the raw materials from Bolivia’s subsoil seem to perpetuate western models of development and modernization. Petrochemicals are largely used in large-scale capital-intensive agriculture, a system of farming that is not only detrimental to humans and the earth, but also ridden with its own likely dependencies and proven to have diminishing returns (see Badgley et al. 2007; Shiva 2000). Plastics, although useful and perhaps even necessary in a number of conventional industrial processes, often outlast their intended use and contain certain levels of toxicity from the point of production to the point of disposal. In addition, plastics frequently both replace materials that are actually more sustainable (e.g. plastic bottles vs. glass bottles) and are used when unnecessary (e.g., as packaging). Even the substitution of natural gas for gasoline in automobiles and the production of lithium batteries for cell phones, hybrid automobiles, and other devices in some ways perpetuate and idealize the notions of development and modernity originating in the global north. Although both could be seen as a more environmentally friendly option, their use and production in and for the global capitalist economy fails to bring into question the system and processes that have left Bolivia in a perceived state of perpetual underdevelopment for the past 500 years. In some ways, the Morales administration has thus upheld the fabled devil contract – it has continued to barter Bolivia’s souls for the destructive power of commodities. This is not necessarily the fault of the Morales administration nor does it mean that the processes of counter-neoliberalization in the Bolivian model have failed. Structural constraints – indictments of the economic system – have shaped the model. In addition, societies of the past have improved their people’s livelihoods using their rich natural resource bases (e.g. Sweden or California) and/or through imitating or “hooking on” to the accumulation strategies of rising global powers (see Bunker and Ciccantell 2005; O’Hearn 2001). However, one cannot help but wonder if using and depending on some

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of tactics and power relations deployed in processes of neoliberalization the Bolivian model can truly lead to a post-neoliberal reality. The Morales administration has charted a divergent path away from the one created through processes of neoliberalization, but has yet to completely dispel its zombies. Imagining Post-neoliberal Possibilities In Fernando Coronil’s (1996) discussion of Occidentalism, he evokes the work of Jorge Luis Borges to imagine what it might take to exit or alter imperial types of maps – maps similar to what some have called the moving map of neoliberalization (see Brenner et al. 2010b; Harvey 2005). In Borges’s story, imperial cartographers were put to the task of drawing a map that depicted the empire in its entirety. The map was an exact replica of the empire in both scale and detail. It depicted every castle, every person, every tree, and every grain of sand. The map itself was even drawn on the map, thus pictured as an infinite number of maps within maps. Eventually, the map project became too unwieldy and was abandoned. Set aside, it started to erode even before the empire it sought to depict began to collapse. The imperial geography in some ways fell victim to history. Borges’s story could be seen to illustrate the disjuncture between representations on maps and unmapped realities. The map was never finished, and before it could be, it became tattered and torn. It never accurately depicted the empire’s totality and even what it depicted at one point in time, it no longer depicted at another. To Coronil, however, Borges’s story could also be read as an allegory of power. The map not only depicts a representation of power, but also depicts the power to represent. In other words, it is not just about what is or is not pictured on the map. Maps are always inaccurate and incomplete. Instead, it is about the relationship between the representations on maps and their constitutions within the social relations of society – about how maps represent power and how this power is upheld, morphed, resisted, and defeated. Coronil does not pretend that a new map can be created outside of or devoid of history. However, he does believe that different histories exist on maps from which new ones can then be drawn. In his words, There is no exit from the lived world, only views from different positions within it. It is always as if the world were a labyrinth whose exits were entrances into an expanding labyrinth and our maps not only modeled these labyrinths but also created them. Thus, maps embody the imagination of the future, not only that of the past. The destiny of our journey also defines its trajectory (Coronil 1996:76).

The question thus becomes what views from different positions on a map of neoliberalization embody the imagination of the future? How do the landscapes of neoliberalization fall victim to history? The rabid inequalities stemming from processes of neoliberalization became starkly apparent across the globe in the first decades of the twenty-first century

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and people began to more actively challenge neoliberal forms of societal organization. The traditional power structures that usually surrounded and upheld processes of neoliberalization were yet to erode. Nevertheless, how such power structures were constituted seem to be falling victim to history – the power to represent on the map was shifting hands. Indeed, streets all throughout the world – from Egypt to Syria, Yemen to Spain, Greece to Zuccotti Park – began to bear a striking resemblance to those in Bolivia. Whether the Bolivian model can be a solution – or is even a desirable solution – for the places caught up in capitalist crises is difficult to tell. It does carry with it characteristics of the neoliberal past, but it also has many characteristics that diverge. It does challenge the traditional power structures within processes of neoliberalization, and if drawn on a map, it could be said to provide a view from a different position that does in some ways embody the imagination of the past, present, and future. However, the Bolivian model has not been used to challenge how the global economy has been organized through processes of neoliberalization. Its success has been based on being able to best exercise a purported comparative advantage in a competitive global capitalist marketplace. This does not mean that such a model cannot enhance the quality of life for the Bolivian people or people elsewhere in the world. History has shown that similar models have helped some. In addition, places’ comparative advantages could theoretically be exercised outside of a system based on capitalist competition. Until this is the case, however, economic oppression through forms of marginalization and exploitation will continue under the Bolivian model. Describing the state of neoliberal ideology in the wake of the global economic collapse of 2008, Neil Smith (2009) borrowed a phrase from Jurgen ¨ Habermas to proclaim it “dominant but dead.” The ideas stemming from it still underpinned the global economy, but they were no longer innovative, growing, or expanding. Indeed, neoliberalization had entered a zombie-like state. Marx seemed to be observing similar phenomena in the nineteenth century. Commenting on the revolutions of his time and revolutions of the past, he noted: The social revolution . . . cannot take its poetry from the past but only from the future. It cannot begin with itself before it has stripped away all superstition about the past. The former revolutions required recollections of past world history in order to smother their own content. The revolution . . . must let the dead bury their dead in order to arrive at its own content. There the phrase went beyond the content – here the content goes beyond the phrase (Marx 1852).

For Marx, the key was to imagine a future that builds on the past but is not plagued by it – to make the existing geography fall victim to time in order to construct a new one. In Bolivia’s highland language of Aymara, there is no distinction between space and time. The word “pacha” is used to signify both. Space is necessarily temporal and time is necessarily spatial. More generally, pacha can be

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used to mean the natural order of space-time. In a utopian sense, the phrase “pachakuti” is used to signify a return to order or equilibrium in harmony with the earth and universe. As Arturo Escobar (2010) notes, a pachakuti would thus represent a profound transformation in the organization of society. Perhaps most notably, some have suggested that a pachakuti drawing more on Aymara and Quechua ontological notions of the world would perhaps spark a re-orientation of society away from seeking out economic growth at all costs and toward a society that sought “suma qamana” – the Aymara phrase ˜ and goal of living well. Although such ontological perceptions of the world are incredibly foreign to many people’s mindsets – particularly in the global north – they are rooted in hundreds, if not thousands, of years of history. Given the recurring crises born out of the inherent inequalities and ecological destructiveness of contemporary capitalism, it seems to me that such an ontological perspective might have something to offer.

A Pedagogical Appendix (or places to look for those who just want to know more)

A number of pedagogical tools – in particular, documentary films – exist that visually illustrate or provide a backdrop through which to better understand a number of the processes and some of the empirical events discussed in this book. I list them here for use in the classroom or for those just wanting to know more about processes of neoliberalization in general and Bolivia more specifically. All of the books and films listed here provide interpretations of history – as does this book – that should be examined in relation to theory and one another. Introduction For readers who want to know more about the history of Bolivia, a good place to start is with Herbert Klein’s (1998) The American Finances of the Spanish Empire: Royal Income and Expenditures in Colonial Mexico, Peru, and Bolivia, 1680–1809 and Eduardo Galeano’s (1973) Open Veins of Latin America: Five Centuries of Pillage of a Continent. Both provide histories of Latin American and the role of Bolivia and its place in the Latin American and global economy during colonialism and beyond. Laura Gotkowitz’s (2007) A Revolution for Our Rights: Indigenous Struggles for Land and Justice in Bolivia, 1880–1952 provides an in-depth analysis of most of postcolonial and pre-revolutionary Bolivia. James Dunkerley’s (1984) Rebellion in the Veins: Political Struggle in Bolivia, 1952–82 offers an in-depth analysis of Bolivian post-revolutionary and pre-neoliberal history. Benjamin Kohl and Linda Farthing’s (2006) Impasse in Bolivia: Neoliberal Hegemony & Popular Resistance provides an overview of the neoliberal era in Bolivia.

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Chapter 1 A number of documentary videos have been made that examine the different aspects of the processes of neoliberalization that I detail in this chapter. The PBS (2002) documentary Commanding Heights: The Battle for the World Economy – based of Daniel Yergin’s book with the same title – provides an overview of the origins and diffusion of neoliberal policy prescriptions throughout the world. Although perhaps displaying a bias in support of free markets, the documentary provides a good overview of the historical lineage of neoliberal thought and clearly illustrates how it spread. It also touches on Bolivia’s neoliberal turn in the 1980s in interviews with both Jeffrey Sachs and Gonzalo Sanchez de Lozada. ´ Numerous documentaries exist that examine the struggles by different groups throughout the world against processes of neoliberalization. To name a few, Zapatista (Big Noise Films 1998) and Storm from the Mountain (Paper Tiger Television Collective 2001) examine the events leading up to the Zapatista uprisings in Mexico. This is What Democracy Looks Like (Independent Media Center 2000) examines the events that shut down the meetings of the World Trade Organization (WTO) in Seattle, Washington in 1999. Struggles over the privatization of water have been in Flow (Star et al. 2008) and Blue Gold (Bozzo 2008). Bringing some of the crisis-ridden tendencies of neoliberalization to light in the United States, PBS’s The Warning (2009a), Inside the Meltdown (2009b), and Money, Power, and Wall Street (2012) display what can occur when markets – in this case, derivatives and other financial instruments – go unregulated. The Warning includes Alan Greenspan’s testimony before Congress in which he admits that his free-market ideological worldview was perhaps flawed. Edward Burtnysky (2007), although not speaking directly about neoliberalization or free markets, depicts what spatial variation resulting from processes of neoliberalization looks like in Manufactured Landscapes. Chapter 2 The events that unfolded in Sucre on May 24, 2008 are documented in Cesar Brie’s documentary Humiliados y Ofendios (2008). The film is in Spanish, but even for non-Spanish speakers, the film clearly depicts the spectacles of racial and class violence that occurred in the streets that day. Jorge Sanjines’s Courage of the People (1971) gives an inside look into the Bolivian mining sector, worker repression, and the Siglo XX massacre under General Rene Barrientos in Spanish. For a more contemporary take in English that provides a view of Bolivian mining, The Devil’s Miner (Davidson and Ladkani 2005) presents a non-historical glimpse into the life of a child miner and his family.

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Chapters 3 and 4 Dylan Howitt (2006) examines neoliberalization – in particular, privatization – in his short documentary Bolivia For Sale. In particular, he looks at the privatization of Bolivia’s water, hydrocarbons, and dairy industry. He also touches a bit on the struggles against privatization and the rise of Evo Morales. Roberto Fernandez Teran’s (2008) Las Voces del Fuego offers a historical ´ ´ look at Bolivia’s hydrocarbon sector from its creation through its subsequent privatizations and nationalizations in Spanish. Chapter 5 The struggles that unfolded in Bolivia around the turn to the twenty-first century – in particular, around water – have been depicted in numerous documentaries including Blue Gold (Bozzo 2008) and The Corporation (Achbar and Abbott 2005). Fictional accounts have even been depicted in Even the Rain (2010) and Quantum of Solace (2008). Rachel Boynton’s (2006) Our Brand is Crisis provides footage of the reelection of Gonzalo Sanchez de Lozada amid a crisis of neoliberalization in ´ Bolivia. The documentary details how a political marketing firm from the United States ran by James Carville, Stanley Greenberg, and Robert Shrum works to return Sanchez de Lozada to the presidency. The film contains a ´ number of interviews with the major protagonists in Bolivian politics at the time including Sanchez de Lozada, Carlos Mesa, and Evo Morales. ´ Chapters 6–8 Few documentaries exist that fully examine the problems the Morales administration has faced as it has sought out a post-neoliberal trajectory. That said, the films Cocalero (Landes 2007) and Evo Presidente (Vasquez 2009) give some insights into the policy changes Morales has sought to implement. In addition, Oliver Stone’s (2009) South of the Border provides an interview with Morales in the initial years after his election. It also provides a comparative take on the processes of counter-neoliberalization unfolding in Latin America.

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Index

Accion Nacional (ADN), 52, ´ Democractica ´ 64–68, 115 accumulation by dispossession, 18–21, 56–58, 72–73 Acuerdo Patriotico, 66 ´ agriculture, 35, 61, 66, 96 credit, 46, 61 Aguas del Illimani, 116 Aguas del Tunari, 99 Alianza Siglo XXI, 115 Andean-Amazonian capitalism, 158 Apex Silver. See transnational mining companies Argentina, 16, 21, 44, 77, 131, 140, 143, 157, 159 Asociacion ´ de Mineria Mediana (ANMM), 44 austerity, 13–15, 17, 57 autonomy, 35, 37, 46, 52, 73, 84, 87–89, 92, 93, 97, 100, 115, 117, 119, 146 Banco Agr´ıcola de Bolivia (BAB), 46 Banco Central de Bolivia (BCB), 59 Banzer Suarez, Hugo, 22, 45–50, 52 Barrientos, Rene, ´ 41–43 Bechtel, 99 Bedregal, Guillermo, 58 Belzu, Isidoro, 9 Beni, 122, 147 Bol´ıvar, Simon, ´ 110 Brazil, 1, 22, 40, 77, 80–82, 103, 113, 119, 131, 134, 138, 140, 143, 157, 159, 163 British Petroleum. See transnational hydrocarbon companies

Bunker, Stephen, 22 Camara Agropecuaria del Oriente (CAO), 61, ´ 117 Camara Boliviana de Hidrocarburos (CBH), ´ 74 Camara de Industria y Comercio de Santa ´ Cruz (CAINCO), 117 campesinos, 33–40, 42, 93, 95 Cariaga, Juan, 58 Carter, Jimmy, 50 Carville, James, 101 Casa de la Libertad, 31–32 Central Intelligence Agency (CIA). See United States Central Obrera Boliviana (COB), 37–40, 43, 52, 64, 97, 156, 164 Chapare, 48, 74, 91, 95–97, 101, 127 Chavez, Hugo, 15 ´ Chile, 10, 13, 17, 80, 103–105 China, 17, 18, 19, 21, 23 class conflict, 21–25, 32, 93, 138–139 inter-, 35–36, 64, 103–106, 146–147 intra-elite, 36, 64–65, 87–88 climate change, 163 Clinton, William, 101 coca, 91, 95–97 cocaine, 47–48, 59, 95 Cochabamba, 48, 82, 96, 97, 100 city of, 56, 85, 95–96, 98–100, 116 Codigo Davenport, 40 ´ Comite´ C´ıvico of Santa Cruz, 117 Comite´ C´ıvico of Tarija, 117

191

Index

192 Comite´ por la Defensa del Agua y la Econom´ıa Familiar (CODAEC), 99 Comite´ pro Santa Cruz, 117 Compan´ ˜ ıa Minera del Sur S.A (COMSUR), 43, 63 comparative ‘advantage’, 21, 23, 25, 134, 143, 145, 152, 161, 166 Confederacion ´ de Empresarios Privados de Bolivia (CEPB), 44, 45, 49, 51–53 Constitutional Assembly, 121, 146 Coordinadora de Defensa del Agua y de la Vida, 99 Coordinadora Nacional por la Defensa del Gas, 105, 116, 118 Coronil, Fernando, 165–166 Corporacion ´ Minera de Bolivia (COMIBOL), 4, 37–42, 46, 57, 133, 137, 141, 145–146, 149, 157, 160, 162 privatization, 61, 62, 64, 94 Corporacion ´ Regional de Desarrollo de Santa Cruz (CORDECRUZ), 49, 66, 87 Correa, Rafael, 16 Coss´ıo, Mario, 114, 116, 121–122, 124 Costas, Ruben, ´ 124 decentralization, 73–74, 87–88, 145 Dominican Republic, 14 Drug Enforcement Agency (DEA). See United States Ecuador, 16 Egypt, 14, 22, 166 El Comite´ de Defensa del Patriomonio Nacional (CODEPANAL), 161 El Mutun. ´ See mines Empresa Boliviana de Industrializacion ´ de los Hidrocarburos (EBIH), 158 Empresa Minera Unificada S.A. (EMUSA), 63 Empresa Siderurgica del Mutun ´ ´ (ESM), 144, 160 Enron. See transnational hydrocarbon companies Erhard, Ludwig, 59 expanded reproduction, 18–21 Federacion ´ de Juntas Vecinales (FEJUVE), 98 Federacion ´ de Regantes de Cochabamba (FEDECOR), 98–100 Federacion ´ Sindical de Trabajadores Mineros de Bolivia (FSTMB), 36–37, 52 foreign aid, 40–41, 42, 43, 46, 66 fuel subsidies, 60, 117

Gaddaffi, Muammar, 22 ´ Garc´ıa Linera, Alvaro, 158 Gas War. See Guerra del Gas Gisbert, Roberto, 58 Greece, 166 Greenspan, Alan, 16, 170 Guerra del Agua, 98–100 Guerra del Gas, 105–106 Gulf Oil. See transnational hydrocarbon companies Habermas, Jurgen, 167 Haliburton. See transnational hydrocarbon companies Harvey, David, 19, 57, 72 Haydu, Jeffrey, 27, 110, 128 Humala, Humberto, 16 hydrocarbon reserves Camiri, 78 Sabalo, 139 ´ San Alberto, 1, 78, 129, 139 hydrocarbon workers, 93–95, 140–141, 162 hydrocarbons 2004 referendum, 111 commercialization, 79–82, 103–104, 130 industrialization, 158 investment, 5, 43, 76, 82, 135–136, 138, 156 nationalization, 1–2, 5, 43, 113, 129–132, 143–144 pipelines, 44, 80, 131, 134 privatization, 26, 40, 75–83 rent, 48–49, 78–79, 113, 116, 118, 131, 137, 139 scarcity, 163 Impuesto Directo de Hidrocarburos (IDH), 120, 123–124, 139, 145 incorporated comparison, 7 India, 15, 23, 144, 157 Indigenous Congress of 1945, 36 Indonesia, 24 informal economy, 14, 61, 95, 97 Inter-American Development Bank (IADB), 41 International Monetary Fund (IMF), 6, 19, 41, 51–52, 58, 116–117, 151–152 Japan, 21 Jindal Steel. See transnational mining companies Katari, Tupaj, 110 ´

Index Keynes, John Maynard, 13, 16 kharisiri, 55 Kirchner, Christina, 16 Kirchner, Nestor, 16 ´ Kissinger, Henry, 43–45 La Paz, 2, 48 city of, 2, 9, 85, 95, 97, 105, 134, 142, 159 land concentration, 33, 39, 47, 148 reform, 37, 39–40, 47, 65 landed elite, 4, 25–26, 27, 33–35, 44, 46–50, 61, 64–65, 66, 72, 73, 84, 87–88, 113–115, 117, 123–124, 148, 153 Ley de Agua No 2029, 99 Ley de Capitalizacion, ´ 74–76 Ley de Hidrocarburos No 1194, 68 Ley de Hidrocarburos No 1689, 77–83, 111, 130, 131 Ley de Hidrocarburos No 1731, 77–83 Ley de Hidrocarburos No 3058, 117–121, 122–123, 131, 158 Ley de Inversiones, 66–68 Ley de Participacion ´ Popular, 84–86, 154 Ley No 1777 Codigo de Miner´ıa, 132 ´ Libya, 22 Lugo, Fernando, 16 Lula de Silva, Luiz Inacio, 15 ´ Luxemburg, Rosa, 88 Marx, Karl, 18–19, 92–93, 167 Melgarejo, Mariano, 9–10, 17 Mesa Gisbert, Carlos, 109–110, 111–124, 171 Mexico, 15, 21, 23, 56, 157 natural gas to, 103–104 migration, 95 military coup, 41, 44 repression, 14, 36, 42, 45, 64, 96, 105 minerals commercialization, 43, 44, 62, 133 gold, 62 industrialization, 160 investment, 5, 41, 62, 67–68, 141, 156 iron-ore, 144, 160 lithium, 160 nationalization, 37, 137, 145 privatization, 26, 62 rent, 137, 146 silver, 135 tin, 35, 39, 57 zinc, 62, 135

193 miners, 35, 40, 41–42, 61, 64, 93, 94 cooperatives, 94, 137, 142 mines Catavi, 36 El Mutun, ´ 144, 158, 160 San Bartolome, ´ 135, 145 San Cristobal, 135, 145 mining elite, 4, 6, 25–26, 27, 32, 35, 37, 44, 46, 49, 51–52, 57, 58, 62–63, 66–68, 72–74, 88, 104, 107, 153 Morales administration, 2, 5, 129–149, 155–165 Morales, Evo, 1–2, 5, 15, 31, 118–120, 171 diputado, 92, 100 president, 122, 125, 127–128, 129, 145, 157 presidential candidate, 101 Morocco, 14 Movimiento al Socialismo (MAS), 16, 100, 114–116, 117–118, 122, 148, 154 Movimiento de la Izquierda Revolucionaria (MIR), 68, 114–116, 118–121 Movimiento Nacionalista Revolucionario (MNR), 36–42, 52, 58, 65–67, 72, 75, 101, 114–116, 118–121 Movimiento Sin Miedo (MSM), 114 Mubarak, Hosni, 22 nationalization. See hydrocarbons and minerals neoliberalization, 10–17 counter-, 155–157 defined, 13 labor market flexibilization, 14, 60–61, 94–95 marketization, 60 monetary reform, 59–60 privatization, 13, 62–63, 75–83, 171 resistance to, 16, 65, 100, 106 the role of local elites, 22–23 the role of the oppressed, 23–24 the role of transnational corporations, 21 trade liberalization, 13, 61–62 zombie, 17, 129, 148–149 New Caledonia, 21 Nicaragua, 16 Nigeria, 21 Nixon, Richard, 43–45 non-governmental organizations (NGO), 15, 83 North American Free Trade Agreement (NAFTA), 15

194 Nueva Fuerza Republicana (NFR), 118 Nueva Mayoria, 115 Nueva Pol´ıtica Economica (NPE), 55, ´ 58–65 Occidentalalism, 164 Organizaciones Territoriales de Base (OTBs), 85, 100 Ortega, Daniel, 16 Oruro, 95 Ovando, Alfredo, 43–45 pacha, 167 Pacific LNG, 103–105 pacto por la democracia, 53, 65 Pando, 122, 147 Paraguay, 16 Paz Zamora, Jaime, 65 Peck, Jamie, 57, 73 Peru, 16, 20, 24, 104 Petrobras. See transnational hydrocarbon companies pink tide, 16 Pinochet, Augusto, 13 Plan de Todos, 87–89 popular participation. See Ley de Participacion ´ Popular Potosi, 4, 6, 22, 95 primitive accumulation, 18 privatization. See neoliberalization Quispe, Felipe, 105 Reagan, Ronald, 14–15 Repsol. See transnational hydrocarbon companies resource curse, 163 Rodr´ıguez Veltze, Eduardo, 121 Romero, Fernando, 58 royalties. See hydrocarbons:rent and minerals:rent Sachs, Jeffrey, 58, 170 San Alberto reserve. See hydrocarbon reserves Sanchez Berza´ın, Carlos, 105 ´ Sanchez de Lozada, Gonzalo, 9–10, 17, 130, ´ 170, 171 diputado and neoliberal architect, 58–59 mining magnate, 43, 62 president, 72–73, 75, 87, 101, 104 presidential candidate, 65 resignation, 106

Index Santa Cruz, 44, 45, 46–49, 66, 72, 82, 87, 114, 117, 118, 124, 134, 147 city of, 74, 85, 95–96, 115 Servicio Municipal de Agua Potable (SEMAPA), 98 Servicio Nacional de Registro y Control de la Comercializacion ´ de Minerales y Metales (SENARECOM), 133 Shell. See transnational hydrocarbon companies shock therapy, 58 Siles Suazo, Hernan, 115 Smith, Neil, 167 social programs Bono Juana Azurday, 154 Bono Juancito Pinto, 154 Renta Dignidad, 154 South Africa, 15, 22 Soviet Union, 41 spaces of exploitation, 23 spaces of marginalization, 24, 95–98 Spain, 4, 6, 17, 32, 166 spatial differentiation, 21 Standard Oil. See transnational hydrocarbon companies structural adjustment programs. See Nueva Pol´ıtica Economica (NPE) and Plan de ´ Todos Sucre, 31, 170 Suez Lyonnaise des Eaux, 116 suma qamana, ˜ 167 Sumitomo Corporation. See transnational mining companies Syria, 166 Taiwan, 21 Tanzania, 20 Tarija, 103, 114, 124 city of, 115 Thatcher, Margaret, 14 Torres, Juan Jose, ´ 43–45 TotalFinaElf. See transnational hydrocarbon companies transnational hydrocarbon companies Amoco, 76 Ashmore Energy, 74 British Gas, 103, 144, 158 British Petroleum, 5, 10, 91 Chevron, 68 Enron, 5, 10, 19, 68, 74, 76, 80 Esso, 68 Gulf Oil, 40, 44, 46

Index

195 Union Popular (UDP), 50–53, ´ Democratica ´ 115 United Kingdom, 13, 17 United States, 13, 17, 18 Agency for International Development (USAID), 46 Central Intelligence Agency (CIA), 44 Drug Enforcement Agency (DEA), 96, 127 food aid, 40 military aid, 41, 42, 44, 46 natural gas to, 103–104

Halliburton, 5, 74 Pan-American Energy, 103 Perez, 76 Petrobras, 1–2, 5, 10, 40, 68, 74, 77, 80–81, 102, 144, 158 Phillips Petroleum, 68 Pluspetrol, 76 Repsol, 2, 5, 76, 80, 103, 113, 144, 158 Shell, 5, 21, 74, 76 Standard Oil, 40, 78 Texaco, 68 TotalFinaElf, 2, 5, 21, 144, 158 transnational mining companies Apex Silver, 68, 135 Barrick Gold, 20, 158 Battle Mountain Gold Company, 68 Coeur d’Alene Mines Corporation, 135 JCI Limited, 22 Jindal Steel, 144, 158, 160 Newmont Mining, 19 Pan-American Silver, 158 Rand Mines, 22 Rio Tinto, 21, 68 Sumitomo Corporation, 135 Vale, 21 Transredes, 74 Triangular Plan, 41 Turkey, 21 turning points, 110–111, 128

Yacimientos Petrol´ıferos Fiscales Bolivianos (YPFB), 40, 42, 48, 60, 65, 68, 122, 149, 158–163 nationalization, 2, 111, 120, 130–131, 138–142, 143, 145–146 privatization, 73, 75–83 Yemen, 166

union. See Central Obrera Boliviana and Federacion ´ Sindical de Trabajadores Mineros de Bolivia

Zambia, 21 Zapatistas, 15 Zuccotti Park, 166

Vaca Diez, Hormando, 114, 116, 120–122 Venezuela, 14, 15 War of the Pacific, 10, 104 Water War. See Guerra del Agua World Bank, 14, 19, 51–52, 58, 66, 76, 83, 95, 99, 113, 119, 157 World Trade Organization (WTO), 10, 15, 170