Tuesday, May 16, 2006

Bolivia Vs. Brazil: Vienna..Name..Calling

This past week has seen a really big row in South America involving Bolivia against Brazil over the nationalization of certain oil and gas holdings. One view has Evo in the middle of a tug of war between Chavez and Lula, but he did a pretty good job of making headlines and aggravating the Brazilians further. Lula and the Brazilian foreign ministry have taken an increasingly critical stance with Morales government over the nationalization decree.

Separating Spin From Fact - War of Words v 1.0

Before the nationalization decree of May 1, 2006, Bolivia passed a its Hydrocarbon law, based on the popular referendum, which raised the tax on natural gas exports. One of the most affected companies was Petrobras, the Brazilian oil and gas giant which is partially owned by the State. After Morales was installed as President, Brazil and Bolivia began negotiating over price, volume and taxation. More or less out of the blue, came the nationalization decree, which was done loudly on May day with plenty of bells and whistles, speeches and troops.

That next week, a photo-op meeting of Presidents Evo and Lula, took place to smooth things out in Argentina. The two were joined by the host President and also, Chavez of Venezuela. According to Reuters, Brazils foreign minister, Lula and Evo were working on "an accord to guarantee natural gas supplies, and Lula said that ultimately they recognized Bolivia's sovereign rights, a Lula aide quoted by Reuters said that "gas prices was the central issue for Brazil." So the message here was that Brazil accepted the nationalization as fait accompli, the bottom line here was over price and any compensation. The week after, a high level Brazilian delegation, consisting of Petrobras President and the Minister of Energy arrived in La Paz, and serious negotiations began, according to all concerned.

So basically they took care of it right??

Not quite, behind the scenes, this mini-summit annoyed at least some in the Brazilian government, due to the presence of Hugo Chavez. What business did he have there??

The week after, Evo Morales in what could be seen as a crowd-pleasing stump speech accuses the oil companies of conspiring with the "mafias" that own media outlets to reverse nationalization. Problem is this ends up in that same media outlets and is read outside as a slight. The largest company is Petrobras, you can not talk about the multi-nationals without talking about the Brazilian company.

Brazil increasingly starts accusing Hugo Chavez of Venezuela of directly interfering in Bolivia. Celso Amorim, the Brazilian foreign minister in front of a congressional committee said President Lula himself had warned Chavez that his interference in Bolivia, jeopardized the proposed South American gasoduct program. Amorin also stated plainly that Chavez wields a huge influence on Evo Morales. In addition, one of President Lula's advisors, accused the Venezuelans of interfering in Bolivia. One clue to what had particularly irked them, was the presence of PDVSA officials at Evo's nationalization decree speech. Venezuela of course, denies it. But it shows an increasingly stronger tone by Brazil before Venezuela.

Vienna Calling

So then this circus moves to Vienna for the EU conference with Latin American leaders. It is here where Evo, makes controversial statements to the World Press. At a press conference on Thursday the 12th, when asked about the Bolivia-Petrobras contracts he responded:

Si quiere hablar de los contratos, le voy a demostrar que son ilegales e inconstitucionales y si quiere saber sobre Petrobras le voy a informar cómo ilegalmente operaron sin respetar las normas de Bolivia

If you want to talk about the contracts, I will demonstrate that they are illegal and unconstitutional, and if you want to know about Petrobras I will show you how they operated illegally without respecting Bolivias norms.

Interestingly enough, he also admittedhe did not consult with/or give advance warning to leaders of countries affected. That is contrary to a claim made, that he was unable to get through to Lula or those close to him, in the critical couple of days prior to the announcement. He also happened to be meeting with Castro and Chavez those days too. This could be taken as a further slight to Lula personally.

Bolivia's foreign ministry tried to put out the fire, claiming President Morales was talking about Bolivia's mulitple contracts with approximately 20 multi-nationals, never ratified by congress and therefore unconstitutional. No dice there, the direct quote is taken from this AFP article. This initial press conference seemed to set the tone for the war or words that cast a shadow over what would otherwise be a boring meeting, according to some articles in CNN and the New York Times

Soliz Rada, Bolivia's dogmatic oil minister further stoked the fire by stating that Petrobras should be left out of Chavez pet project to run a natural gas pipeline from Venezuela to Argentina, ironically via Brazil.

Then Brazil's foreign minister Celso Amorim came out swinging and said his government was outraged at Evo's statements, and even considered pulling its ambassador Other statements were issued by Petrobras and Gas Minister. It seemed that when the Brazilian government was concerned about the security of Brazilian gas and oil interests, it had let Petrobras go public, keeping itself above the fray. Here, they took the initiative.

Still More...

Now we also need to go back to what was happening on the ground in Bolivia. Bolivian and Brazilian negotiators were simultaneously negotiating not only the price of gas, but also any compensation which Bolivia might have to pay Brazil. That would be because Bolivia might have to pay the value for a small percentage of the stock, to obtain a majority interest in the mixed-ownership companies that Petrobras operates. Evo said that Thursday that there would be no compensation for any assets seized, since they had recouped their investment. That is in stark contrast to what Evo, and other s in his cabinet had said earlier.

So this mini-crisis heats up on Thursday and Friday, and then you have the spectacle of Blair, Chirac, Javier Solana, and assorted Euro-types making all sorts of statements, but basically telling Morales and Chavez to mellow out, and try to work with the evil multi-nationals. While BP is a UK concern, Blair does represent the Labor Party of Great Britain, for whatever that is worth to Evo.

Solved on Saturday or Photo Op??
So on Saturday, Lula and Evo have breakfast and essentially say to the world it all was a misunderstanding blown out of proportion by the media.
But consider this story in the AP out of Brazil.
Lula firmly told Evo that he would not live under the sword of Bolivia's gas over him. Clearly this is leaked by the Brazilian government to show that not all was hunky dory.

And Brazil Now??

This has shaken Brazilian policy-makers. The country
s foreign policy the past 60 years has been fairly independent, very measured, and prudent. Its foreign policy establishment takes pride in its professionalism and sophistication; it is undoubtedly very experienced in dealing with governments in the third world. Brazil has cultivated the image of a relatively benign big neighbor, even during its authoritarian military governments, and by and large many South Americans view the giant positively, outside of rival Argentina. And Lula's work behind the scenes with Morales seemed to be a good course of action.

This row with Bolivia is hurting Lula's image in an election year, as he gets slammed in the media:

''Lula for President . . . of Bolivia,'' read a headline of a column in the daily O Estado de Sao Paulo. This week's Veja, Brazil's largest-circulation news magazine, carries a cover showing Lula with a painted oil-stamped shoe on his rear end, and a headline reading, 'Lula went to bed as the `big leader' of Latin America, and woke up as the fool of the court of Venezuelan [President] Hugo Chávez, who plotted the theft of Brazil's assets in Bolivia.''

But beyond, electoral politics and headlines, there seems to be palpable nervousness in the Brazilian public about gas prices. Celso Lafer, Brazil's ex-foreign minister, claims he has not seen this kind of public reaction over a foreign policy issue'in many decades.' according to Andres Oppenheimer. Lafer says this hurts Brazilians national pride, regardless of class. (Bolivia national pride, is at issue too, though) Since the conventional wisdom in Brazil according to Oppenheimer seems to be that this is something that Chavez provoked, Bolivia can still be seen as more of a satellite or pawn (and a victim) in this beef.
More ominous - and undereported- is the fact that some in Brazil's military establshment has taken notice, and considers the nationalization and the potential expropriation of Brazilian-owned farmers a threat to its "national security" and is urging the government tomove troops to the Bolivian border area. And long term they are asking for a re-armament of Brazil's military to protect from future wars resulting from new enemies and allainces.
People like Lafer represent the foreign policy elite of Brazil, and what is emerging is a consensus to shift how Brazil does business in the area. This consensus seems to be shared by the military establishment, as the recent comments from military intelligence shows. Short term, it means that Chavez is seen as its most dangerous rival, and it will be more vocal in seeking to curb his influence. Long term, this new rival is seen as leading to unknown outcomes and complicating life for Brazil.