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Last Updated: Tuesday, 7 September, 2004, 04:33 GMT 05:33 UK
Firms urged to help as Bolivia fights poverty
By Jane Monahan
In La Paz, Bolivia

Bolivian Indigenous Angelita Mamani Castro walks to vote  in a national referendum on the country's gas reserves
In July, Bolivians voted for higher taxes on foreign energy firms

For some it is the 'curse of oil', for others the 'calamity of copper' - poor countries that are rich in commodities but stay poor. Bolivia hopes to do things differently.

Centuries of exporting mineral resources and more recently oil and gas have failed to lift Bolivia's 8.7 million people out of poverty.

Two thirds of its population, which is largely Aymara or Quechua Indian in origin, remain poor.

"The exploitation of natural resources [has not] led to Bolivia's industrialisation, or even to the development of a national middle class," says Viktor de los Heros, president of Bolivia's national chamber of commerce.

But that could change. In July this year, Bolivians voted in a controversial referendum to combine higher taxes on foreign energy firms operating in Bolivia with a sharp increase in the country's gas exports.

"We are in a new century. Bolivians are demanding a new approach" to how the country's natural gas reserves, the second largest in South America, should be managed, says Mr Heros.


Increasingly, the government, the ever more important opposition party Movement for Socialism (MAS) and the national chamber of commerce are all urging firms to become "socially responsible".

They want the country's oil, gas and mineral exports to benefit low-income Bolivians through increased investments in social services, in job creation and in basic infrastructure such as heating and lighting.

"Foreign investors have a right to make a profit. They risk their money investing," says Gerardo Velasco, a member of the chamber of commerce. "But they also have a responsibility to the Bolivian society."


The pressure placed on inward investors is beginning to work.

Children in La Paz
The hope is that Bolivia's young will not have to grow up in poverty

Coeur d'Alene, the US's largest silver producer, recently announced plans to invest $105m in a silver and tin mining operation near Bolivia's historic mining town of Potosi, south of the capital, La Paz.

The Spaniards started mining near Potosi in 1545 and kept the mines working there throughout Spain's 300-year empire.

The size of Coeur d'Alene's investment shows how rich the area's mineral seams still are. "It will be the biggest silver mining operation of the company overseas," says Bob Martinez, Coeur d'Alene's president.

At first glance there is little difference between the Coeur d'Alene operation and traditional investments. Raw materials are exported and most of the silver refining will be done abroad.

But as part of the investment package the company will not only create 1,000 mining jobs, but establish a foundation to help generate alternative employment in local industries, in tourism and in a Potosi city silversmith.


Another "socially responsible" project, says the chamber of commerce, are plans to build a gas pipeline from the landlocked country through Peru to the Pacific for exports to Mexico and California.

It is supported both by President Mesa's government and the opposition.

The pipeline would make it possible to connect 250,000 homes of poor subsistence farmers in the western highlands and reduce their dependence on primitive forms of fuel, says Jorge Alvarado, MAS deputy in the Bolivian Congress.

Building it would also generate many jobs, and as a large section of the pipeline would pass through the country, Bolivia could hope for royalty payments as well.

Plans for an alternative route - from Bolivia through to ports in Chile - are much less popular.

It would generate fewer jobs and royalties.

But land-locked Bolivians also harbour a deep-seated grudge against Chile stemming from a war in 1879 over valuable nitrate deposits. Bolivia was defeated and lost its ports on the Pacific.

News that the gas pipeline might go through Chile sparked last October's riots, which toppled the government. Dozens died in the unrest.


Bolivian reformers are also eager for the country to move up the technological ladder. They want to use the gas reserves to create more value-added products both for export and the domestic market.

To this effect, the Texan energy firm Sasol Synfuels International could license its gas-to-liquids technology to state-owned gas and oil company Yacimientos Petroliferos Fiscales Bolivianos (YPFB).

The technology liquefies methane, which makes up 90% of Bolivia's gas.

It also occupies less space than traditional liquid gas plants, which in turn means it could be built in remote areas, for instance in Tarija near the source of Bolivia's gas, rather than at a terminal on the Pacific coast.

"The gas can be blended with crude oil to replace the lead in petrol, greatly reducing car exhaust fumes," says Ben Weber, Synfuels president.

It could also be used to replace oil and coal in electricity power plants, or in petrochemical plants which manufacture plastics and fertilisers.


Other gas export agreements with neighbouring countries could also help Bolivia's plans for industrialisation.

Under a 10-year agreement with Argentina, a 1,000 mile long pipeline will be built by 2007, at a cost of $1bn. In addition, Argentina will finance a liquefied gas plant in Tarija.

Once completed, Bolivia should earn an extra $500m from its gas exports to Argentina.

Similarly, Brazil, which already imports gas from Bolivia through an existing pipeline, will build a petrochemical complex and a gas fired electricity plant near the Bolivian border town of Puerto Suarez.

But the country's infrastructure is under-developed and there are not enough skilled workers.

President Mesa's government and the opposition hope to tackle shortcomings through royalties and higher taxes on the gas and oil sector - although they disagree on how much to take.

Bolivia's industrialisation will take some doing.

Bolivian peasants end oil siege
20 Aug 04  |  Americas
Bolivia signs big gas export deal
04 Aug 04  |  Americas
Bolivians 'back gas export plans'
19 Jul 04  |  Americas

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