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Last Updated: Thursday, 8 November 2007, 00:07 GMT
Fuelling Bolivia's crisis?
By Lola Almudevar
Santa Cruz, Bolivia

Truck driver
Chasing fuel is a lengthy process

In the midday heat, truckers hang out of the windows of their trucks or sit slumped behind their wheels, waiting.

They may have to queue for hours to fill their tanks with diesel at this petrol station in the city of Santa Cruz, eastern Bolivia.

"Sometimes you get to the front of the queue and the diesel has already run out," says Agapito Serviche from his pick-up truck.

"The diesel does not last long enough for a day's work, so I have to stop working and come back to the queue just to put food on the table."

Blame game

Pascual Arellano medium soy producer looking at his crop in Chane Independencia Northern Santa Cruz
I expect to lose 40% of my crop this year
Pascual Arellano

Santa Cruz, which is home to large scale commercial agriculture, has been worst hit by Bolivia's chronic diesel shortages, which coincide with the start of the planting season.

In rural Santa Cruz, tensions are worse.

Uncle and nephew, Pascual and Vidal Arellano grow soy and have more than 200 hectares of land near the village of Chane Independencia.

But these days, they spend more time at petrol stations than in the fields.

"Sometimes the whole family has to go out for diesel. One person has to be in one station queuing and another elsewhere," Pascual Arellano says. "I expect to lose 40% of my crop this year."

Those lining up hold President Evo Morales responsible, blaming his policy of nationalising Bolivia's natural gas reserves in 2006 and refineries this year.

Under President Morales, state energy company Yaciemientos Petroliferos Fiscales Bolivianos (YPFB) took over hydrocarbons operations. Private companies were asked to sign new contracts and pay higher taxes and royalties to the state.

"When the multinationals were here, we didn't go without diesel," says Apagato Serviche. "Now they have drawn up new contracts and we are in crisis. Whose fault can it be but the government's?"

Future shortages?

But diesel shortages were on the horizon long before Mr Morales came to power in 2005.

Trucks queuing for fuel
Truck drivers are forced to stop working to queue for fuel

Bolivia has the second largest natural gas reserves in Latin America, but its diesel refining capacity has not met domestic needs for almost two decades.

Consecutive governments have spent more than $100m (50m) a year on fuel subsidies, making Bolivia's diesel the cheapest in South America.

The subsidy helps people in this country, which is South America's poorest.

But it also gives rise to contraband smuggling, which President Morales blames for the shortages.

Nationalisation may not have caused the diesel crisis, but avoiding future shortages will depend on its success.

Not enough

In the short term, Bolivia is importing diesel from neighbouring countries and Venezuela, and has militarised border petrol stations to stop diesel leaking out through smuggling.

President Morales
President Morales has threatened to expel foreign energy firms

In the long term, Bolivia needs investment in its hydrocarbons sector as a whole, not just to avoid deficits in diesel, but also natural gas.

Growing domestic demand, as well as contracts signed with Argentina, commit Bolivia to doubling its natural gas output by 2011, from 37 million to 76.8 million cubic metres a day.

Critics say Bolivia is destined to fail and incur fines because it is not attracting the investment needed to develop capacity.

"Even though Bolivia has large, proven reserves of natural gas, it is facing an energy crisis," says Hugo del Granado, an industry specialist and former vice president of YPFB.

"It is not a question of transporting the gas," he says. "It is the fact that there is no way of producing the amount needed."

Mr Del Granado points to the decision by Brazil's state energy giant Petrobras to freeze about $2bn in planned investment in the wake of nationalisation, which he says deterred other investors.


But while investors have dragged their feet, they have not walked out of Bolivia.

President Morales has given them until this month to produce investment plans or face expulsion.

Vidal Arellano and daughter
Soy producer Vidal Arellano has been unable to operate his tractor

His rhetoric is uncompromising, but behind the scenes, the hydrocarbons ministry has sought alliances with companies in the United States. Moreover, Petrobras and the Brazilian President, Luiz Inacio Lula da Silva, will visit Bolivia in the coming weeks to discuss supply and investment opportunities.

Patricia Vasquez, an analyst with the consultancy Energy Intelligence, believes investment is on the way.

"For international corporations like Exxon or Chevron, Bolivia is a small percentage of their overall global portfolio, but they are used to the ups and downs and have invested a lot here, so they are willing to take risks," she says.

"Bolivia is attractive because there is a lot of gas, and markets on the doorstep."

Populist outbursts

The objective of nationalisation is poverty reduction - and some argue it is not solely investment rates that should be the key indicator of success.

3F Oil station
Fuel subsidies make Bolivia's diesel the cheapest in the world

"In the late 1990s, after privatisation, investment rocketed, but the state made far less money, due to the generous terms offered to companies," says Claire McGuigan from the NGO Christian Aid.

"The government also failed to use revenues to improve the lives of Bolivian people in areas like health and education. On that front, President Morales is doing far better."

Showing that revenues are being put to good use, and that investors are now answerable to the state, form parts of Mr Morales' strategy, in a country where gas is a political football that led to the death of more than 60 gas protesters and the downfall of a president in 2003.

Earlier this month, Mr Morales accused pipeline company Transredes, which is largely owned by the British company Ashmore Energy International Ltd, of conspiring against his government.

His comments came during a ceremony to open a $24.6m pipeline built by Transredes to funnel gas to La Paz, Bolivia's capital. Transredes described the comments as "entirely false" and critics said Mr Morales was generating a hostile environment for investors.

But many see such outbursts as typical of the populist leader, whose goal is to show the Bolivian people that he is prepared to stand up to multinational giants.

If Mr Morales is to quell anxieties over diesel and natural gas in the long term, his challenge, according to Kathryn Ledebur from the Andean Information Network, is to "effectively implement spending plans to use the additional revenue, which has increased ninefold, to better the lives of the Bolivian people.

"If he can use investment to develop the industry, he could generate sustained economic stability in Bolivia for many years to come. "

Protesters storm Bolivia airport
19 Oct 07 |  Americas
Fights erupt in Bolivian Congress
23 Aug 07 |  Americas
Battle for Bolivia's heart
08 Sep 07 |  From Our Own Correspondent
Country profile: Bolivia
18 Sep 07 |  Country profiles

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