News summary update 2006-01-13
Fortnightly news summary
FOCUS ON BOLIVIA
14.01.2006
ELECTIONS
NEW GOVERNMENT
HYDROCARBONS
OTHER NEWS
14.01.2006
ELECTIONS
- Official election results gave Evo Morales and Movimiento al Socialismo (MAS) almost double the votes of his main rival, putting into serious question all the polls which showed only 5% difference between ‘Evo’ and ‘Tuto’. Morales won 1,544,374 votes (53.74%) against Podemos (Jorge Tuto Quiroga) with 821,745 votos (28.59%); Unidad Nacional ( Samuel Doria Medina) with 224,099 votos (7.79%); MNR with 185.859 votos (6.46%) and MIP (Felipe Quispe) with 61,948 votes. 3,102,417 voters out of total of 3,679,886 eligible citizens voted, the highest percentage in decades.
- As a result MAS secured 84 representatives in Parliament (12 senators and 72 congressmen) out of a total of 157 representatives. Whilst it controls Congress, it does not have enough senators to control Senate holding just 12 of the total 27 seats. Podemos will have 50 representatives and UN nine.
- MAS won three out of nine prefectures (Potosí, Oruro and Chuquisaca).
NEW GOVERNMENT
- Evo Morales announced that he would be cutting his Presidential salary and the salaries of deputies by half, saying the Government needed to share the economic burden. According to his proposal, the monthly presidential salary will be between 14,000 and 15,000 bolivianos (some 1,875 USD) and that of legislators will be of 9,000 bolivianos (1,125 USD).
- MAS also announced that it would be imposing a tax increase on the wealthy (probably those with properties worth more than $300,000). However Evo Morales took a conciliatory tone in a meeting with the powerful business elite in Santa Cruz (who have been traditionally most opposed to MAS). During a speech he promised to create a stable, legal and economic environment to attract investment and create jobs. "I do not want to harm anybody. I do not want to expropriate or confiscate any assets. I want to learn from the businessmen." Morales promised to hold a referendum on their autonomy demands, and said he would quickly resolve a dispute over El Mutun, a rich and controversial iron mining project near the border with Brazil that is due to be developed with private capital
- Evo Morales embarked on an extensive world tour in the aftermath of his election victory. MAS spokesperson, Alex Contreras, said the aim of the tour was to show that a MAS Government had support and would not spiral into chaos as other parties had alleged during the election campaign.
- Controversially he visited Cuba first followed by Venezuela where he said Bolivia was now a member of the "anti-imperialist and anti neo-liberal" bloc. Chavez promised to help develop Bolivia’s gas reserves and offered a $30 million grant to start social and educational programs modelled after Venezuela's. Cuba pledged to train 5000 Bolivian doctors and provide eye treatment to 50,000 Bolivians each year. Morales then headed to Spain, France, Belgium, Holland before heading East to China, South Africa, Brazil and Argentina.
- U.S. Secretary of State Condoleezza Rice told CNN that American policymakers would look at the new president's actions before "determining the course of U.S.-Bolivian relations." "The issue for us is, will the new Bolivian government govern democratically?" Rice said Dec. 19. "Are they open to cooperation that, in economic terms, will undoubtedly help the Bolivian people, because Bolivia cannot be isolated from the international economy." Evo Morales said he would have visited the US if he had been invited. "I never had good relations with the United States, but rather with the American people," the Bolivian president-elect said. He said that they would refuse US economic aid (estimated at $90 million dollars) if it involved intervention in Bolivia’s domestic policies. New Assistant US Secretary of State for Western Hemisphere Affairs Thomas Shannon said: 'We want an opportunity to enter in dialogue with the president-elect and with the government to better understand how we can go forward with the ... extremely positive ... relationship that we have historically had.'
- In talks with European governments, Evo Morales was apparently urged to ensure a secure legal environment that protected European investments. EU foreign policy chief, Javier Solana said “legal security is fundamental if it wants money to come” and said Morales had “given his word” over the issue. Solana also said he had discussed ways to stop coca-growing feeding into the drug trade. "He is a man ... with the will to do good things for his people. I hope he can do that and if the good things he can do for his people are within the rules, the EU will help."
- Spanish Prime Minister Rodríguez Zapatero in his meeting with Morales promised to write off "a substantial part" of the Bolivian debt, estimated at $120 million, to be invested in education programs to eliminate illiteracy.
- Strangely the big issue for some Bolivian papers and European
press was Evo Morales’ dress code. Morales hasn’t been seen in a suit
for years and attended most meetings with European leaders in
short-sleeved shirts, leather jackets and sweaters and the debate is
whether he will wear a tie at his inauguration on 22nd January.
HYDROCARBONS
- Morales stressed to European press that nationalisation did not mean “expropriation” or “confiscation” and that Bolivia was looking for foreign investment to develop its hydrocarbon resources. “We need partners, not masters,” Morales said. At the same time, Morales said evidence suggested two energy companies (thought to be Chaco and Andina) were involved in fraud and smuggling and would be punished severely. He refused to name anybody but in Spain said Repsol was not one of the companies under investigation. Morales said that current contracts would be renegotiated.
- Vice President Elect, Garcia Linera said that their nationalisation programme would mean that the property, management, use, setting of prices and processes of exporting gas would return to the State, however it would not involve confiscation and would encourage foreign investment. The new Government would make three guarantees to the oil/gas firms: Clear long-term rules, that investment would be recoverable, and that companies would have right to profits.
- Petrol companies through their Chamber of Commerce said they couldn’t invest whilst rules for investment remained unclear. According to their statistics, investment in 2005 fell to 175 million dollars, the lowest investment since 1998 when they invested 604.8 million dollars. However at the same time exports grew to record levels especially to Brazil.
- The new hydrocarbons law has led to an additional income of 1,900 million bolivianos ($237.5 million) for the State in the last 6 months, more than anticipated due to the increase in gas/oil prices. The gas/oil companies stress that they are paying to comply with the new law but “under protest.” The President of Inland Revenue predicted that taxes on petrol companies will make up 50.3% of national taxes in 2006.
- Repsol congratulated Morales on his victory and said it was ready to work with the new Government in order to reach “satisfactory agreements” for the benefit of everyone. Repsol’s shares fell by 1.43% in the aftermath of Evo’s victory. Evo’s announcement that Repsol was not under investigation was undermined by news that Repsol had illegally registered Bolivian gas reserves as financial assets in the US stock exchange even though Bolivian law clearly makes all reserves before the point of extraction “property of the State.”
- Morales said his visit to Argentina would focus on negotiating new prices for Bolivian gas exported to that country. A “solidarity price” was agreed by the government of Carlos Mesa (2003-2005) in the aftermath of the Argentinean financial crisis where Buenos Aires pays nearly two dollars per one thousand BTU (British Thermal Unit, standard unit of energy), well below the international price. Investigations revealed that Argentina is now estimated to have less than ten years of reserves left. According to the ex-president of CAISE (the Argentinean Association of Investors in the Electric Sector), Argentina will need to import gas from Bolivia or limit its exports to Chile. Argentina currently buys only 5% of its natural gas from Bolivia.
- Carlos Villegas, economics advisor to MAS said that the visit to China was to look at possibilities for maximising Bolivia’s gas reserves and looking for investment to industrialise its use. Analysts said while distance would probably rule out direct exports, China had a growing strategic interest in being involved in energy production worldwide.
- Petrobras head, Sergio Gabrielli denied that reports that it had agreed to share management of refineries with the Bolivian State but said it was open to discussion and negotiations on the issue. Santos Ramirez, Senator and former head of the Economic Commission said the State would prioritise repurchasing refineries in order to increase control of the hydrocarbons productive chain.
- Meanwhile in an important precedent for Bolivia, the Venezuelan
Energy Minister announced that 22 petrol firms had agreed to change
their operational contracts to ones of mixed Enterprises where the
State firm, PDVSA controlled the majority of shares.
OTHER NEWS
- Bolivia’s financial statistics looked healthy at the end of the year with 2005 gross domestic product growth of 3.9% and similar performance expected in 2006. GDP expanded by 3.6% in 2004 and inflation is forecast to end this year at 4.2%, down from 4.6% last year. 47% of exports came from the hydrocarbons sector. However as the Vice-President Elect Garcia Linera pointed out this has had little impact on poverty indicators.
- Brazil’s foreign minister, Celso Amorim said he would be pushing for Bolivia to be a full member of Mercosur in order to reduce pressure on Evo Morales’ new government.
- The World Bank announced that it would start to cancel Bolivia’s
debt to the Bank from July 2006 with a total cancellation of $390
million for the period 2007-2016 (an average cancellation of $39
million per year). The debts eligible for cancellation for the World
Bank were those accrued up to December 2003 in contrast with the IMF
that includes debts up to December 2004. The World Bank and IMF debt
make up 36% of Bolivia’s total external debt. The Bolivian government
revealed that the Inter-American Development Bank which is one of
Bolivia’s biggest creditors is looking at possible mechanisms for
cancelling Bolivia’s debts.
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