Planting for 25 years (The Boliva-Brazil natural gas export project)

Planting for 25 years (The Boliva-Brazil natural gas export project)

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During the last six years is safe to say that half of Bolivia’s economic growth is because the natural gas exports project from Bolivia to Brazil. Which, in my opinion, is one of the most successful national projects (from an economic perspective) for the last 50 years. Indeed, this project starts in 1974 and in 1999 the first volumes of natural gas were end to Brazil. Now Bolivia is having the profits of 25 years and at the best time, since the selling prices of our gas is associated with the international oil prices (currently very high), it should be emphasized that this indexation formula was agreed in the nineties decade of the last century. In this regard, the following question arises: How is the project to export natural gas is linked to Bolivian economy? the answer can be broken down into several components:

1. Installed capacity in Bolivia allowed to supply the growing demand for natural gas by Brazil this, associated with the increase in international oil prices, allowed Bolivian hydrocarbon exports increase significantly, which turn, increased the net international reserves of the Central Bank, thereby providing greater space to monetary policy to appreciate the domestic currency (relative to the US dollar) and thus support the «Bolivianización».

2. The creation of the Direct Tax on Hydrocarbons (IDH) one year before the nationalization process, replacing the previous tax system (based mostly in income taxes) explains, almost entirely, the increase in tax collection from the Bolivian oil sector. This allowed the country to have fiscal surpluses and greater spending power.

3. With this amount of additional resources, both the Central and Regional Governments financed public projects, building of roads and provision of services. Thus, the sectors of construction and formal services in Bolivia were benefited with the boom in the oil sector, generating the corresponding multiplier. Meanwhile, the «nationalization» of hydrocarbons allowed two aspects: 1) Now YPFB is the entity that controls all hydrocarbon production contracting private companies, in fact, the nationalization lived in the country, was not the orthodox type (with expulsion of companies and expropriation of capital) merely was a contract renegotiation with private operators of the moment; 2) generated (relatively small compared to the revenue from the IDH) additional resources that benefited the Bolivian state company.

I want to note that completing the project to export natural gas to Brazil is a positive example of what Bolivians can do. It is a project that transcended political ideology of the moment, , now we see how the efforts of many technical profesionals during the period 1974-1999, feeds us in the present. However, a substantive question arises: What will be our next «Brazil»? That is, for example 2025 (Bicentennial of the Old Republic) What will be the project that will feed us? What we are planting now? The challenge is raised.

Mauricio Medinaceli Monroy

La Paz, August 2, 2012

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