Bolivia's Black Gold

September 25, 2007

Bolivia has been called "the beggar on a throne of gold." While rich in natural resources, it is the poorest nation in South America. The national economy has been based on tin mining, though there are rich deposits of oil, antimony, iron, manganese, copper, sulphur, lead and gold. Tin accounted for 70% of Bolivia's export earnings in 1966 (The New York Times, January 23, 1967). The militant tin miners emerged in 1952 as one of the more powerful bulwarks of the Bolivian "social revolution." The nationalization of the tin mines, an essential part of the much- lauded Bolivian Revolution of 1952, was begun under the leadership of President Victor Paz Estenssoro.

But this policy, leading towards economic independence, has not been continued by current "President" Ren Barrientos. His newly implemented policy of incentives for private (foreign) investment and reorganization of the three nationalized mines has been rewarded with increased U.S. AID grants and stronger support from the International Monetary Fund, the Export-Import Bank and the Inter-American Bank for Reconstruction and Development. While this economic policy in the long run might statistically indicate development of the Bolivian economy, it fosters greater dependence on U.S. capital and technology, and reaps substantial profits for the U.S. corporations investing in the country.

The exploitation of oil is illustrative of the tragedy of Bolivian economic development. At the end of the 1930's, the government nationalized Standard Oil's Bolivian operations. Yacimientos Petroliferos Fiscales Bolivianos (YPFB) was created and for nearly two decades was the sole exploiter of Bolivian oil. But the government oil company had difficulty finding international credit. And internally the YPFB lacked the skill, capital and imagination to make a success of the operation. Reasoning that all the petroleum reserves could not possibly be tapped by YPFB alone, the Bolivian Congress in 1955 passed a New Petroleum Code extending exploration rights to private companies. The code was one of many concessions to North American interests which led to the demise of the Paz Estenssoro government.

By October 1966, Gulf Oil Company, the fifth largest U.S. petroleum company, was pumping 18,000 barrels of oil a day from the eastern lowlands near Santa Cruz to the Chilean free port of Africa. From there it was shipped to California for refining and distribution. Gulf's investment of $100 million in exploratory opera- tions was rewarded by the discovery of deposits totaling 1.5 trillion cubic feet of gas and 200 million barrels of oil (The New York Times, November 18, 1966).

Oil exploitation remains a sensitive issue in Bolivia. Some Bolivian Congressmen, claiming that the 1955 code covers only petroleum exploration, have argued that Gulf has no rights over its gas discoveries. While pledging to put YPFB back on its feet, Barrientos' policies lead observers to conclude the opposite. The man he chose to head YPFB is so incompetent that he reportedly has no knowledge of the different octane levels. At the same time, Barrientos has given full support to Gulf's request for a two million acre concession in western Bolivia.

When it comes to protecting investments, any and all means at hand are utilized. Argentina is nervously watching guerrilla operations in Bolivian border areas. Not only does it fear the spread of guerrilla warfare, it also is worried about an interruption in the flow of oil through the pipeline connecting the two countries and running near the zone of guerrilla action. The Christian Science Monitor (August 2, 1967) reported that military contingency plans have been elaborated anticipating a deterioration of order in border areas. And it is difficult to imagine that Gulf (not to mention other U.S. corporations active in Bolivia) will not mobilize its considerable influence in Bolivian and U.S. government circles to protect its interests. These interests are now increasingly jeopardized by opposition from the guerrillas, students and miners who are slowly eroding the foundations of the Barrientos regime.

Tags: Bolivia, Oil, Privatization

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