Bolivia: Limits to Evo’s radical reforms

The government in La Paz postponed the implementation of new contract signed by foreign oil companies, as agreed to reconsider plans to increase mining taxes.

Evo Morales’ nationalization plans have suffered serious setbacks this week, as the Bolivian government postponed the implementation of contracts signed with oil foreign companies and reconsidered plans to increase mining taxes. Both measures come as the Constituent Assembly is in standby since installed in August last year as part of the political struggle between Morales’ leftist administration and the opposition strongholds in the East of the country.

On Wednesday Morales signed a deal with the Confederation of Mining Cooperatives to end a two-day protest over government plans to increase mining taxes. The agreement came a day after more than 20,000 independent miners took to the streets in La Paz to protest against a rise in the Complementary Mining Tax.

After a five-hour meeting with mining leaders, President Morales said: "I`ve never thought about stamping out mining cooperatives, as some have said...This government belongs to the grassroots movements, they (mining cooperatives) have been part of this government and they have to continue." He touted the agreement as a reconciliation with the mining cooperatives, which group about 55,000 independent miners.

The decision halted Morales’ plans to “shake up the mining sector in Bolivia”, which last year registered exports worth $792 million but which generated only $45 million for Bolivia in revenues.

At the same time, La Paz has indefinitely postponed the implementation of contracts signed by foreign energy companies to comply with the nationalization of the industry, as state owned energy company YPFB said on Wednesday. "It has been decided not to carry on with the legalization of the contracts... until we can guarantee the necessary conditions for their implementation," said a statement released by YPFB on Wednesday. YPFB said the decision was based on "technical and operative reasons."

According to observers, the government cannot put the contracts into force until it completes an overhaul of YPFB. In the past the government has admitted that the nationalization process has been hampered by a lack of funds at YPFB.

In the embattled Bolivia, YPFB lacks of funds and technical capabilities to adapt to modern technologies used by foreign companies, turned into partners as per the new deals.

Hernan Etchaleco

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Author`s name Dmitry Sudakov