On May Day, 2006, Bolivian troops occupied the country's natural gas facilities.
Petrobras, Brazil's national oil company, owned the largest stake in the fields and Brazilian industries depended on Bolivian gas. Yet Brasilia reacted quite calmly. Why?
Simply because Bolivia had no leverage. The “nationalization” raised taxes on the gas companies (Petrobras, Repsol, British Gas, and Total), but changed nothing else. Brazil wasn't happy about losing the profits, of course (the Federal Republic of Brazil owns a 55.7% stake in Petrobras), but all Brasilia really cared about was retaining access to the gas at a reasonable price. And that's what they got: the red line shows the date of the nationalization: the big run-up in price preceeded it.
Petrobras and Bolivia had a “take-or-pay” contract, in which Petrobras promised to purchase no less than 65% of Bolivia's daily capacity, even if they couldn't use it, at rates based on this (get ready for it):
The price per million BTUs, PGt = 0.475 × [0.5 × (FO1t-1/FO10) + 0.25 × (FO2t-1/FO20) + 0.25 × (FO3t-1/FO30)] + 0.5 × PGt-1, where FO1 is the price in $/ton of fuel oil with a 3.5% sulphur content (aka, “Cargoes FOB Med Basin Italy”), and FO2 and FO3 are the price of fuel oil with a 1.0% sulphur context (aka, “U.S. Gulf Coast Waterborne” and “Cargoes FOB NEW.”
Another way of putting it is that the contract stipulated that if oil prices doubled, it would take two years for Bolivian gas prices to increase 97 percent. Which doesn't quite seem to have been what happened, since crude oil prices don't quite track fuel oil and Brazil sometimes needed to overpay when it couldn't use all the gas on offer, but close enough.
In other words, the revolution turned out to be something of a dud. Petrobras kept its assets and its contract. Bolivia did get more revenues but a tax hike didn't require troops. Political theater, it was.
Of course, whether it was good theater depends on your seat. Investment in the gas industry has collapsed, and Petrobras now prefers to access higher-cost gas deposits at home ... not because of the taxes, but because of the uncertainty. Similarly, the dramatic way in which the tax hikes were guised as a nationalization meant tossing out the old revenue-sharing agreements with the provinces, and thus the current autonomy crisis.
It's not clear where the country goes from here. I had lunch with a Bolivian and a Brazilian who joked about civil war. The Brazilian was sanguine until the Bolivian suggested that eastern rebels might cut off the taps.
“No, you can't have a war,” joked the Brazilian, “until we get the other gas projects going. Then we will happily sell you weapons.”
Is there any resentment in Bolivia about the Brazilian annexation of Acre, and if so, does it influence modern Bolivian attituddes towards Brazil and brazilian companies? I ask this mainly because of what seems to be Bolivia's permanently hostile attitude twoards Chile more than a century later.
Posted by: Randy McDonald | August 21, 2008 at 12:07 PM
I've never heard it mentioned.
History may provide an explanation.
Acre was claimed by Bolivia in 1867, but was then almost entirely populated by Brazilian settlers. (23,000 to 2,000 in 1900.)
Acre then achieved "independence" twice after revolts that /Brazilian/ troops put down on Bolivia's behalf. The final "fighting" didn't involve the armies of both countries (although Brazil moved troops into Acre for what today would be called peacekeeping), but between Bolivia and a private guerrilla force.
The issue was finally resolved by negotiations that netted Bolivia £2,000,000 and big chunks of the Mato Grosso.
Nothing really like the humiliating punch-in-the-face and territorial seizure that was the War of the Pacific. There, Bolivia didn't agree to a cease-fire until the fighting had been effectively over for three years, or a peace treaty until twenty more had passed.
Besides which, the littoral was an integral part of the country, nothing like a sparse frontier that most Bolivians cared about as much as Americans cared about the Philippines.
Bolivians are concerned with Brazilian landownership in the east, but the truth is that those issues are a subset of the Bolivian drive for land reform in general --- it isn't aimed at the Brazilians, but at all the big estate owners.
Does that answer the question?
Posted by: Noel Maurer | August 21, 2008 at 02:21 PM
Pretty much. Thanks!
Posted by: Randy McDonald | August 21, 2008 at 02:53 PM