Bolivia’s Nationalization of Natural Gas By: Andrew Switkay, Ed Wons, Andrew Mong, Dillon Farrell

Energy in South America Economic growth in recent years is partially driven by rising prices for commodities such as oil Economic growth in recent years is partially driven by rising prices for commodities such as oil Only significant exporters of gas are Venezuela, Bolivia, and Ecuador Only significant exporters of gas are Venezuela, Bolivia, and Ecuador State intervention threatens production levels State intervention threatens production levels Lack of cooperation could slow economic growth Lack of cooperation could slow economic growth

Natural Gas vs. Oil One barrel of crude oil has about 6x the energy content of 1000 mcf of natural gas One barrel of crude oil has about 6x the energy content of 1000 mcf of natural gas Natural Gas is cleaner, safer and more useful Natural Gas is cleaner, safer and more useful Lower air emissions, very little water used, no dirty water discharge, no substantial amount of solid waste Lower air emissions, very little water used, no dirty water discharge, no substantial amount of solid waste

Natural Gas in South America Bolivia has 2 nd largest natural gas reserve Bolivia has 2 nd largest natural gas reserve Resource nationalization troubles the ability to supply gas Resource nationalization troubles the ability to supply gas Argentina is now dependent on gas imports from Bolivia Argentina is now dependent on gas imports from Bolivia Bolivia Bolivia 2002 – estimated 54.8 trillion cubic feet 2002 – estimated 54.8 trillion cubic feet 2007 – estimated 31.5 trillion cubic feet 2007 – estimated 31.5 trillion cubic feet

Brazilian Gas Consumption 10 th largest energy consumer in the world 10 th largest energy consumer in the world Imports 40% of its natural gas Imports 40% of its natural gas Motor vehicles beginning to rely on natural gas Motor vehicles beginning to rely on natural gas Increasingly high demands Increasingly high demands

Nationalization May 1 st, 2006 May 1 st, 2006 Morales ordered military to occupy energy installations Morales ordered military to occupy energy installations 53 energy installations occupied 53 energy installations occupied Brazil’s Petrobras Co. Brazil’s Petrobras Co.

Silas Rodeau Silas Rodeau Bolivian VP Garcia- est revenue jump to $780 million Bolivian VP Garcia- est revenue jump to $780 million Along with Petrobras; Repsol YPF, BG Group PLc, & TOTAL are major gas Co’s in Bolivia Along with Petrobras; Repsol YPF, BG Group PLc, & TOTAL are major gas Co’s in Bolivia October 28 th, 2006 agreement October 28 th, 2006 agreement

Agreement Bolivian goal was to raise revenue shares from major fields from 60% to 82% Bolivian goal was to raise revenue shares from major fields from 60% to 82% Much resistance from Petrobras Co. Much resistance from Petrobras Co. Copied Chavez Copied Chavez

Geopolitical Effects During early 1990’s, Argentina privatized their state- owned energy company During early 1990’s, Argentina privatized their state- owned energy company Becoming energy dependent Becoming energy dependent Prices will rise Prices will rise Southern Gasoduct could help lower Argentina dependency Southern Gasoduct could help lower Argentina dependency

Geopolitical Effects Brazil uneasy about the role of Chavez in Bolivia Brazil uneasy about the role of Chavez in Bolivia Causing Brazil to take the backstage to Bolivia Causing Brazil to take the backstage to Bolivia Tensions raise between Bolivia and Petrobas Tensions raise between Bolivia and Petrobas

Geopolitical Effects Bolivia’s nationalization involves risk Bolivia’s nationalization involves risk Loss of foreign investments Loss of foreign investments Petrobas has created complications between regions rather than collaboration Petrobas has created complications between regions rather than collaboration Strengthened relations between Bolivia, Venezuela, and Cuba Strengthened relations between Bolivia, Venezuela, and Cuba Weakened relations between Brazil and Argentina, Argentina and Bolivia Weakened relations between Brazil and Argentina, Argentina and Bolivia

Implications for Washington Traditionally concerned with coca production Traditionally concerned with coca production Relationships with Peru and Colombia Relationships with Peru and Colombia Bolivia’s combating illegal drugs Bolivia’s combating illegal drugs Bolivia’s increase in ties with Venezuela and Cuba Bolivia’s increase in ties with Venezuela and Cuba Bolivian’s nationalization Bolivian’s nationalization Turning down the FTAA Turning down the FTAA ALBA alternative (Chavez’s) ALBA alternative (Chavez’s) Economic Implications Economic Implications

Rise of UNASUR Treaty signed on May 23, 2008Treaty signed on May 23, 2008 Brought together two existing trade blocs (Mercosur & CAN)Brought together two existing trade blocs (Mercosur & CAN) 12 member Union12 member Union Largest economic, monetary and political alliance in the worldLargest economic, monetary and political alliance in the world Promotion of South American regional integrationPromotion of South American regional integration

Goals Single Market Single Market Development of international infrastructure Development of international infrastructure Common Defense Policy Common Defense Policy  enhancing multilateral military cooperation,  promoting confidence and security building measures  fostering defense industry exchange Free movement of visitors & migrant workers among member nations Free movement of visitors & migrant workers among member nations

Emerging Geopolitical Force One of the Western Hemisphere’s leading multilateral bodiesOne of the Western Hemisphere’s leading multilateral bodies Combination of countries‘GDPs would reach more than $2.3 trillion: 7 th in the world.Combination of countries‘GDPs would reach more than $2.3 trillion: 7 th in the world. Brazil at the center of UNASUR momentumBrazil at the center of UNASUR momentum Undermines the OASUndermines the OAS "In a world overpopulated with agencies that generally do not fulfill the objectives for which they were created, UNASUR became very useful and, in addition, laid bare the ineffectiveness of the OAS, an entity that since its creation has operated at the service of US interests”"In a world overpopulated with agencies that generally do not fulfill the objectives for which they were created, UNASUR became very useful and, in addition, laid bare the ineffectiveness of the OAS, an entity that since its creation has operated at the service of US interests” Late Argentine President Nestor Kirchner

UNASUR Backs Morales 2008 Attempted coup of Bolivian President Evo Morales2008 Attempted coup of Bolivian President Evo Morales Emergency meeting in Santiago by Chile president Michele BacheletEmergency meeting in Santiago by Chile president Michele Bachelet Condemned violence and attacks against Bolivian democracyCondemned violence and attacks against Bolivian democracy Created commission of “support and assistance” to Bolivian governmentCreated commission of “support and assistance” to Bolivian government OAS not involved in peaceful resolutionOAS not involved in peaceful resolution

Brazil’s Role As one of the major actors of UNASUR, Brazil successfully used it as a regional mechanism that has helped to smooth relations with BoliviaAs one of the major actors of UNASUR, Brazil successfully used it as a regional mechanism that has helped to smooth relations with Bolivia Lula’s close relationship with Evo MoralesLula’s close relationship with Evo Morales

"For the first time in South America's history, the countries of our region are deciding how to resolve our problems, without the presence of the United States.” -Evo Morales

Questions Do you think the nationalization of Bolivia’s natural gas will ultimately lead to economic and political stability? Do you think the nationalization of Bolivia’s natural gas will ultimately lead to economic and political stability? Do you think it is possible for the United States to regain some of its influence in Latin American countries prior to UNASUR? Do you think it is possible for the United States to regain some of its influence in Latin American countries prior to UNASUR?

Sources era-of-rousseff%E2%80%99s-rule/ era-of-rousseff%E2%80%99s-rule/ era-of-rousseff%E2%80%99s-rule/ era-of-rousseff%E2%80%99s-rule/ CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3- zDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFcMKiKt7 LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6Sy6cA CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3- zDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFcMKiKt7 LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6Sy6cA CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3- zDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFcMKiKt7 LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6Sy6cA CurrentHistory.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEESi3- zDu58Et5v0Stn5zdgtXqUkqmYwZIs6OrX1sqCy4Zv_U8v7w5lwbWsUBi3eJI6mNNHaUrJFxdd0n5foyVlFcMKiKt7 LO9ntq5HTISU1ui_u7co0IhmcqlKARL2DfY7zFwqR1&sig=AHIEtbRJ8MYiGqLApgE5AT7b_Xhe6Sy6cA