Wednesday, May 10, 2006

Bolivia: Did Evo, MAS Loot Bolivia's Old Age Pension Fund???

Bolivia's Pension Fund Administrators, who administer the fund on behalf of all Bolivians, are demanding that Bolivia's government pay the fund the value of the stock it held in the newly nationalized oil and gas companies. Soliz Rada, Bolivia's rather strident gas and oil minister, has publically refused, claiming the fund is not entitled to any money under the new decree.

Confusing???

When Evo Morales' government decreed the "nationalization" of Bolivia's Oil and Gas companies, it stated its claim based on Bolivia's ownership of half the stock of these companies. This statement on who owns the stock is the crux of this problem.


Capitalization and Pensions

Under the innovative capitalization law in the 90's, the Bolivian government did not privatize YPFB (the oil company) outright. What it did was separate the company into several upstream and downstream units, and spun each one off. In return for a 50 percent capital investment, private buyers could acquire half the stock and get management control. In effect, what they paid had to go specifically towards investments in the company.

YPFB's 50 percent share of the equity, as Economist Rosemary Thorp describes it, "was [now] formally owned by all Bolivians of voting age, and was held in new collective pension funds, with the legal obligation to provide a universal and equal annual pension, a 'bonosol', to all Bolivians of 65 and over."

This was a unique approach, meant to avoid the problems of privatizations in Eastern Europe and Latin America, and to provide a viable system of social security. In order to accomplish both goals it ensured that capital coming in went straight to needed investments. Had funds gone to the treasury, it could have ended up as a quick fix for budget and foreign debt problems, besides being subject to sticky fingers.

While capitalization did not go right in the case of the airlines, in oil it looks very succesful. The mixed ownership companies were until fairly recently, autonomous bodies and could operate as efficiently and profitably as is possible in Bolivia. And it is undisputed that YPFB attracted several billion dollars in investment into the country, and the gas industry has increased hugely.

The reasoning behind making Bolivias pension fund the sole beneficiary of the ownership interest of the YPFB, was to eliminate YPFB as a source of patronage, cronyism, and theft for whatever government happened to be in power in power. It also ensured that the pension funds held assets, that were outside of the grasp of the same greedy politians. If a future government wanted to divest Bolivia of these assets, it was not entitled to the proceeds by the same logic, and any proceeds went directly to the fund. Conversely a government re-nationalizing the companies or at least assuming a bigger role in ownership, would be required to pay the pension fund the fair market value of the shares or risk the very integrity and soundness of the fund.

Under Bolivian Law, the pension fund administrators hold these shares, under a a constitutional mandate based on three Bolivian laws: the Bonosol Law the capitalization law , the law of popular credit and property PCP laws have preeminence over decrees in the Bolivian system. So now the present nationalization decree calls for the stock in these entities to be transferred from the pension funds to the government, and without compensation. Soliz Rada's claims that stock never was never formally transferred is wrong, since the decree itself admits the funds held the assets. In addition, there is ample documentary evidence that this has been recognized as fact by Bolivia's Government and Courts. Further, it is written into the law and the contracts and the corporate charters of the individual companies - which even the government is following in attempting to appoint new directors.

Morales and MAS want to ignore laws, and impose their will on everything by decree - like most tin-pot authoritarians. And there is a hint of pure ideological hatred and resentment in these actions. While Evo and Soliz Rada were as expected among the loudest critics of capitalization, MAS also opposed the pension scheme and the pre-natal care laws, on grounds of fiscal responsibility!! And this coming from the left!

Ideas like capitalization and the Bonosol, were just too much for the dogmatic ideologues around MAS like Soliz Rada. Beyond the deep hatred of Goni, they deeply resented new ideas they could not undersand, and were outside their narrow frames of reference, and which they suspected might actually work. So now they go about trying to erradicate these concepts from the Bolivian mind and polity with a vengeful single-mindedness, and they forget who they are really hurting - the Bolivian people.

3 comments:

Miguel Centellas said...

Thank you! I'm so tired of people describing Bolivia's "privatization" as simply that. It was never privatization. The thing was lauded internationally in the mid-1990s precisely because it was NOT privatization. How quickly people forget.

It's also sad how quickly people forget what Goni did in his four years as president (1993-1997). Decentralization, the BONOSOL, municipal reforms, bilingual education, a pluricultural constituionalism, etc. Stark contrast to the 1930s tired ISI project in Evo's government or the run-of-the-mill populism of Chavez's Venezuela.

If anything, the Goni experience taught me one simple, hard, painful lesson: Don't ever go back to your country to try to make a difference. For all your effort, you'll be spat upon & called a "vendepatria". I wonder if Goni doesn't wish he'd just stayed in the private sector, or gotten a career in the US and been successful like so many other emigres. After 2003, I'm staying put in the US of A.

Boli-Nica said...


It's also sad how quickly people forget what Goni did in his four years as president (1993-1997). Decentralization, the BONOSOL, municipal reforms, bilingual education, a pluricultural constituionalism, etc. Stark contrast to the 1930s tired ISI project in Evo's government or the run-of-the-mill populism of Chavez's Venezuela.


It is insane. The whole "Plan For All" was set up very carefully, and was designed to avoid pitfalls of both privatization as well as past mistakes. It also addressed issues such as pre-natal care.
And it was meant to be very inclusive, to the point where Goni brought the NGO's and indigenous groups into the process -particularly with the design and implementation of the Municipal Participation reforms.

But of course, everyone forgets that.

Anonymous said...

The sad history of Bolivia: 60 presidents in its first 90 years of existence, averaging a revolution every nine months. People get the government they deserve. The US Constitution is the oldest written constitution still in effect in the world and is based largely on Magna Carta, written in 1215 at Runnymede. Hell yeah, I'm staying here. I read once that Simon Bolivar asked not to have Bolivia named after him on his death-bed, because he knew it would not work.