Tuesday, May 23, 2006

Bolivia: Is Nationalization Decree Unconstitutional

Bolivian author,Francisco Justiniano Suárez, examines the constitutionality of the Nationalization Decree Decreto Supremo Nº 28701 . His conclusions are very interesting.

The current nationalization of oil and gas of May 1st was done by Presidential decree, which modifies the Hydrocarbons law passed last year by Congress after it had been approved by a referendum. Under Bolivian law, laws passed by Congress have supremacy over decrees. Ironically, the contracts between Bolivia and the multi-nationals, were ratified by decree in the 90's, and were just recently found unconstitutional.

Article 1: The decree states that the Bolivian state retakes "the property, possession, and absolute control of these resources", based on what was approved by the referendum of June 2004. But the author points out that the referendum itself, did not "ask about nationalization of hydrocarbons", only about the ownership of hydrocarbons "at the wellhead". There was no question regarding the "ownership, possession or control of hyrdorcarbons" so this decree on its face is wrong.

Article 2. "YPFB is responsible for defining volumes and prices of hydrocarbons for the internal market as well as export and industrialization". The author states that the Hydrocarbons law on the books, does not authorize the state to establish prices of export for gas, so "the law is being changed by a decree" which is unconstitutional according to Justiniano Suarez.

Article 4. "Participation for [foreign] enterprises is fixed at 18 percent when it involves large fields (more than 100 million cubic feet daily)" This is against what is in both the Hyrdrocarbons law and the referendum, that fixes in 50 percent the ownership share for foreign companies. On its face the decree is unconstitutional.

Article 5 "The Ministry of Hidrocarbons and Energy is the one that must regulate and normalize all the hidrocarbon activities in the country (production, transport, refining, storage, etc.). This goes against the "Ley De Sirese", that establishes that this responsibility is of the "Superintendent" for Hydrocarbons. Consequently this would also be invalid and unconstitutional.

Article 6 "It is hereby transferred to Yacimientos, for no consideration, all the stock that formed part of the Collective Capitalization Fund of the capitalized oil companies, and that are being administered by the AFP (Pension Administrators)."

The author says that this is an expopriation of the benefits of all Bolivians who over the age of 21 when capitalization was approved. While the hydrocarbons law of 2005 does transfer the stock to Yacimientos, he says it can not be done without paying fair compensation, since that would contitute expropriation under the Bolivian Constitution. He states that every Bolivian citizen can potentially ask for an indemnization. Further, he finds that the decree interferes with the rights of the Pension Fund Administrator. who also have a right to a defense. The contract between the Bolivian State and these entities were ratified by three Bolivian laws.

All in all, this shows that the current government is taking a very heavy-handed approach, and ignoring the rule of law. When Morales starts his administration by appointing a non-lawyer to run the justice department, complains about the high courts, and then tries ruling by decrees it is clear his administration has nothing but contempt for the rules.


David Broder said...

Who cares if it's unconstitutional? Wasn't the gas privatised in the first place without being approved of by Congress?

In any case, why should the constitution tell him what to do? More important to address the needs of Bolivian workers and peasants than to stick to some archaic, unpopular constitution written by the white settler class.

Norman said...

I haven't read your posts before, so I can't tell if you're being sarcastic, or if you really mean what you say. I hope it's the former... Never mind. I just read your profile.

David, the constitution of any country is the base legal document on which all other laws are based. It is your first protection against an abusive government. If a President begins to rule by decree in violation of the constitution, he becomes a de facto dictator and you place yourself literally at his mercy. Western governments often are based on a set of checks and balances - the legislature formulates and passes law. The executive ensures compliance and the judicial interprets where necessary. Oversimplified, but the point is that it is extremely dangerous when the Executive branch assumes the powers and roles of the other branches. Even so-called "benevolent" dictators are worrisome. The constitution and the laws are to protect the Bolivian workers and peasants. Overall, the constitution is a solid document and the right laws are on the books. Enforcement of the law is lacking.

If you accept that Evo can unilaterally circumvent the constitution, why should anyone obey any constitution or law he develops? Long-winded, but your remark defintely raised my eyebrows.

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