Monday, March 23, 2009

Why Bolivia's Murder-Bribery Scandal Matters

It reads like a crime thriller: an oil company executive robbed and shot to death while carrying 450,000 dollars in cash to the house of the brother-in-law of an influential political figure. More than a month after the fact, the murder-bribery scandal involving Evo Morales former #2, Santos Ramirez continues to rivet Bolivians as more and more details come out about the widespread corruption and inefficiency not only in the oil company but in the entire Bolivia state. It poses the strongest challenge faced by the Morales government, and its future plans.

This crisis raises key questions about Bolivia's political and economic future. In some ways these issues are as important as the discussions on autonomy. It matters and will continue to matter for a long time for some of the following reasons:

Evo's Plans:Evo has said that natural resources are the "fundamental base of the countries development". He is in power in large part because of his calls for nationalization of the industry. Yacimientos Petroliferos Fiscales de Bolivia YPFB, the national oil and gas company. which (in theory) manages the hydrocarbon production which is at the heart of these plans. The government is going to appropriate a one billion dollar loan from the Central Bank this year to "strengthen" the company.

MAS Plans: YFBP is the building block in MAS conception of a centralized, state-directed economy, set out in the party's rhetoric, its 06 economic plan, countless decrees and laws, and meant to be enshrined in the approved Constitution. Many Bolivian experts see this as a return to the statist approach of the nationalist-military period that started in 1952 and ended in 1985 with the collapse of the economy.

Close to Evo: Santos Ramirez co-founded MAS with Evo, led the senatorial MAS block, helping draft and push through both the oil and gas nationalization and the new constitution. Ramirez got married recently, Evo was best man. He was seen as a potential VP candidate.

MAS Scandal - It is the biggest scandal in the oil industry in Bolivian history: Corruption at YPFB is nothing new - every government since the 50's used it as a piggy bank. Never has there been a case this big, involving the chief executive caught in flagranti. It is also the largest in scope, because revelations continue to come out involving all levels of the company starting with wrongdoing and incompetence at management to lower level employees kicking back portions of their salaries to the ruling party. In addition, the scandal is touching key government ministeries and regulatory agencies involved in the fiasco, as well as those where similar shenanigans are coming to light.

MAS big - For comparison: another soap opera in neighboring Peru, a scandal involving politicians and a VP of the national oil company rigging the bidding to favor a Norwegian company, caused the sacking of ministers, the entire cabinet resigning, protests in the streets and Garcia's popularity plummeting further. While that scandal showed the vulnerability of the the bidding process, and involved powerful figures in and around the government, Bolivia's scandal directly involves the CEO of the national oil company, one of Evo's 4 or 5 major collaborators, with his hands directly in the pot. Call it a blatant example of corruption 101- showing a total lack of transparency in the company and absolute impunity.

Evo's fault: While not directly linked to any ill-gotten gains, he pretty much put his "compadre" in a position where ripping off the state was easy as taking candy from a baby.. Evo signed A series of decrees granting the higher ups at YPFB authority to award no-bid contracts to outside suppliers, directly, and further giving the president of the company (Santos) the right to directly authorize payments without approval of the board, as well as directing that funds be available in the state bank for immediate disbursal. That is why Santos alone was able to sign a contract to build a 86 million dollar plant with a front company incorporated only 3 days before. Company being able to draw from a government bank without any proof of work done, and literally being able to withdraw nearly half a million dollars in cash. ,

As Carlos Miranda the Bolivian hydrocarbon industry expert put it, this set of measures - combined with the nationalization decree - did away with "20 years of contracting experience" set out in the previous hydrocarbons law, which required open and international calls for bids and approval at least by the board of directors of the company. Miranda was writing last October when he said that this new regime could lead to "graver" situations than the (then) unfolding Peruvian case. This results from the MAS governments attempts to erase the past, by deligitimizing institutions and laws from prior governments. Evo's government readily breaks existing laws -Evo himself admitted to doing. These laws are "neo-liberal" in his conception, tainted and therefore illegitimate.

MAS Incompetents: From the beginning of the Morales administration YPFB was staffed by political hacks, cronies and family of MAS bigshots. Santos Ramirez notched it up when he came in, adding almost 500 people to the 1000 person roster. "Administrators" replaced oil and gas professionals and technical people, at all levels of what is an organization dedicated to exploring, extracting, and commercializing hydrocarbons. To make matters worse, in the supposedly "autonomous" company, salaries offered were at first lowered making it uncompetitive with the regional standards. And people with experience in multi-nationals and previous governments were dissuaded and/or barred from working there. The result a brain drain of Bolivian hydrocarbons talent to places like the gas fields of Peru.

Even MAS Incompetents: Directing this lunacy is Evo and the handful of ideologues who are clueless. The MAS/officialist leadership has had SIX different presidents and five hydrocarbons ministers in only three years. The company once required its president to have 10 years of executive experience at a high level in the hydrocarbons industry. Now it seems enough to have a college education. Santos (prez #5), was a rural schoolteacher and lawyer. The current president Carlos Villegas - who at least is an economist - was most famous for authoring angry polemics against the multinationals using suspect numbers. He is also one of the main geniuses behind the disastrous nationalization process, and specifically authored decrees barring transnationals from the domestic hydrocarbons industry. In other words he now has to deal with the shortages and lack of investment caused by his own stupid advice. Not to mention the corruption that went on under his own watch as Minister of Hydrocarbons - when the actual contract in question was signed. Morales government is so low on qualified people it has to recycle people like Villegas to try to set the house in order. In Peru by comparison, everyone connected with the scandal was fired.

NO MAS Investment: Evo's war against multi-nationals, including Brazil's state company Petrobras has meant a significant drop in investments, causing production to level off the last couple of years, even at a time when demand in the continent was high,. That has the practical effect of making it hard to supply the internal market when demand grew, since associated products like diesel and keresone depend on gas production - and on infraestructure investments. Evo has placed YPFB in control of the entire cycle of production and commercialization internally, excluding the multinationals from the downstream side of the business . In the end that explains why there are chronic shortages of products like cooking gas, diesel, and gasoline in Bolivia a country that has been self-sufficient in the past.

MAS Irrationality and Improvisation: As a result of both the improvisation, ideological silliness and incompetence YPFB is a mess. Its mistakes are masked by the record earnings that are largely the result of sectorial policies of the governments Evo rails against. It lacks transparency, no more public information available on budgeting and contracting - it took a murder to publicize this crooked contract. Meanwhile the company seems to be acting on government whims, It is spending millions on building gas stations. Meanwhile, only four wells were drilled last year, in comparison to the 65 drilled annually at the beginning of the decade. Peru in contrast drilled 153 last year, with smaller gas reserves. All the while Evo continues feuding with multinationals, and presses forward with constitutional provisions that seem to doom international investors in the sector.

MAS Refounding: The chaos and corruption scandal is in big part a result of an ideological attitude that puts politics above practicality. This ideological obsession which attempts to re-impose the heavily statist economy and centralize government that operated in Bolivia for years. Attempting to recreate this model is silly in light of the obvious evidenceof its failure worldwide. Not to mention the fact that its spectacular collapse in Bolivia led to world-record inflation. Evo's schemes in ypfb show that a really bad idea, executed with incompetence is even worse. Simple reality shows that Bolivia needs foreign investment and expertise to properly manage its natural resources. And that continuing on this path is disastrous. It also resurects the demons of corruption and impunity that proliferated in Latin American countries with centralist governments whose economies were anchored by large state-run enterprises, before the type of reforms that made possible world-class companies like Petrobras.

The government still barely concedes mistakes in 3 years of mis-management . While they now will bring in experts from Norway, Holland, and Canada and GASP! the World Bank, Evo has so far refused to announce any change of direction, even reaffirming that the billion dollar loan will go ahead. They prefer to make big media productions of such events as a drilling rig arriving from Venezuela. Failing to note later that said drill has been sitting idle for months, while PDVSA is asking for money for rental. And underneath all the revolutionary bla, bla, bla, the government has only unlocked the oil company making it vulnerable to the same old school corruption that plagued Bolivia for years. And again it says something that it took a murder to uncover it.

Friday, March 20, 2009

Lula Smacks Down Evo Part 2 - Evo's Moods

This week Lula again took shots at Evo Morales while discussing Brazil's plans to become self-sufficient in natural gas. While he did clarify again that Brazil "will continue buying gas from Bolivia, we have a contract until 2019" he continued with this statement:

"It is important that the world knows that we will have gas, that we have other ways. We will not be dependent on anyone's good mood,

To make sure everyone understood whose "mood" he was talking about he further said:

At the peak of our crisis with Bolivia when there were only difficulties, when Evo had a lot of complaints against Petrobras and Petrobras had complaints about Evo, when there indications that we might or might not have gas, we had a meeting of the National Council of Energy Policy..[it was there the government decided] to make it a priority to find gas, because we can not have an important energy matrix dependent on another country.

En el auge de nuestra crisis con Bolivia, cuando sólo había dificultades, cuando Evo tenía muchas quejas de Petrobras y Petrobras tenía quejas de Evo, cuando había indicaciones de que podríamos tener o no tener gas, hicimos una reunión del Consejo Nacional de Política Energética........ [Fue allí que el Gobierno decidió] “transformar en prioridad, encontrar gas, porque no podemos tener una matriz energética importante dependiente de otro país

Saturday, March 14, 2009

Lula Smacks Down Evo

At an event inagurating a natural gas processing plant, Lula had this to say about Evo Morales and Bolivia as a natural gas supplier

I am very happy. If Petrobras continues on this path, there will be a day when I will call Evo Morales "Dear Evo, now we wil leave you in peace to sell gas to whoever you want to, Brazil doesn't need any more. we are self-sufficient"
Its logical that strategically Brazil will continue buying, because for our own growth we have no interest in a poor neighbor. We need to our relation..its important that people understand, that when we fight less, we produce more..."

“Hoy estoy acá feliz de la vida. Si Petrobras continúa en el recorrido en el que está, va a llegar un día en que voy a poder decir a Evo Morales: ‘Evo querido, ahora nosotros te dejamos en libertad para vender el gas a quien quieras. Brasil no precisa más. Somos autosuficientes. Es lógico que estratégicamente Brasil va a continuar comprando, porque para nuestro crecimiento no nos interesa tener un vecino pobre. Tenemos que crecer. Pero para que tengas una dimensión de la relación entre nuestros países, voy a decir, y es importante que la gente comprenda, que cuanto menos peleamos, más producimos’”.

Not The First Time
Last February Lula in a very significant speech in front of the Argentine Congress....also had this to say in reference to Bolivia's request for a voluntary reduction in gas volumes in order to comply with Argentina's requests...

We don't have gas, those who do don't exploit it as they should.

El presidente Lula da Silva, que concurrió a la cita con unos días de anticipación, describió perfectamente la situación con la siguiente frase en su intervención ante el Congreso argentino: ´No tenemos el gas... Algunos que lo tienen no lo explotan como deberían´.

Et Tu Lula?

So what gives? Isn't Lula Evo's ideologically-attuned buddy? In public Lula is all smiles with Evo, praising him to high heaven. But Lula's policy is Brazil's long-term strategic interest in achieving self-sufficiency in hydrocarbons. And through Petrobras they are laying down billions in investments - at home and abroad. Specifically it is investing in natural gas exploration and production to achieve self-sufficiency. Lula's government has just passed a new natural gas legislation, strengthening the regulatory framework and ending Petrobras monopoly to permit competition both in downstream and upstream.

Bolivia was once considered a long-term supplier of natural gas and strategic partner of Brazil. At the government of Brazil's heavy prodding, Petrobras invested heavily in developing Bolivia's gas reserves and laying the pipeline to Sao Paulo. Bolivia now supplies 50 percent of Brazil's natural gas. But Evo's government after three years in power is unreliable, and unpredictable as El Deber says. Even after the rift caused by Evo's very public humiliation .of Brazil and Petrobras during the "nationalization" media theater, Evo has had 3 years to make it right. But through ideological intrasigence, incompetence, and simple idiocity the Morales government has mismanaged its hydrocarbons industry neither able to produce as a "nationalized" industry and uncertain and risky for foreign investment.

Lula's seemingly out of character comments might carry a bit of payback for the May 2006 "nationalization". Or it simply may be frustration at 3 years of trying to work Evo Morales behind the scenes to back off a bit and accept the fact that Bolivia's hydrocarbons industry needs technical know-how and investment from abroad. Evo only seems to have ears for Hugo Chavez, and Lula may have simply given up. And he can afford to. At the rate Petrobras is going it will also be in a position to export gas and oil in quantities rivaling those of Venezuela. Chavez should also be worried.

Tuesday, March 10, 2009

TV: Burn Notice Season Finale

USA Networks Burn Notice The filmed-in-Miami show had a hell of an ending. One of my favorite shows on TV. Smartly written spy story - with a dose of humor, very well acted by Jeffrey Donovan -fresh off an acclaimed role in Clint Eastwoods "Changeling", uber-hottie Gabrielle Anwar (Scent of a Woman), the one and only Bruce Campbell as the 3 main characters. Throw in the re-occuring characters played by Sharon Gless and Caprica 6 herself, Tricia Hefler blessing us twice a week in cable....

Ultimately what really worked was the resolution of the storyline that has been built up these two seasons. Really good shows like Heroes and Lost can get muddled and complicated - with spy stuff it can get out of hand. The writers of Burn Notice were really smart in making the solution to the Burn Notice question fairly simple. It is an off-the-books government operation that "recruits" the best intelligence operatives by first of all "burning" them and then bringing them into the fold on a limited knowledge basis. So there is a paper trail that says they were kicked out of the CIA or whatever, making everything deniable. And they are indebted to the shadow agency thinking it saved them. And it is easy to go rogue. Of course it was diabolically hard to figure out. And it keeps thB e story human and dependent on the characters. Elegant and not entirely implausible.

Boli Bonus Points
: Tricia Hefler....Gabrielle Anwar....and a black Saab 9-3 Turbo convertible as a kick-ass spy mobile!!