Bolivia’s new business model: Custom laws for foreign investors

At last November’s Investing in the New Bolivia event, the Evo Morales government rolled out the red carpet for foreign corporations, with a little help from the Financial Times. Standing before an audience of executives and investment managers (no officials below the Chief Officer level allowed) at the Four Seasons Hotel in Manhattan, President Morales made a personal plea for the need for foreign investment:

We are accelerating our investment—the big problem that we have is with [our] private companies … Bolivian private companies are very small, and not even the state has the companies to build [on the scale we need]. This is what obliges us to come here and propose to you to see how you can be of service, how you can be our partners.

Y estamos acelerando en tema de inversión—el gran problema que tenemos es con las empresas privadas,  … nuestros empresarios bolivianos son muy pequeños, ni el estado tiene empresas para construir. Este es lo que nos obliga venir acá plantearles a ver como pueden prestar servicio, pero pueden ser socios.

Development Minister Rene Orellana took it from there. In addition to a secure investment environment, secured by three new laws protecting investors, the Bolivian government offered direct support for investors. Orellana proposed that the government’s legislative and executive powers would be put at the disposal of foreign investors. Working together with investors, the state could “define or approve concrete norms, let me say laws or even Supreme Decrees, to support the initiatives to invest in Bolivia. So we are open to have a bilateral dialogue with those who are interested in investing in Bolivia” (originally in English).

At the center of this push is energy: generating electricity (mostly from large dams) and extracting fossil fuels. While exporting gas is the largest contributor to Bolivia’s trade surplus and the country has nearly doubled production since 2006, the sector has long struggled to find new gas resources and has been hard hit by falling prices. The state-owned gas producer YPFB has not found a major new field since the 1990s. For long- and short-term reasons, the Evo Morales government has declared attracting new investment in hydrocarbons a strategic priority.

In newly published interviews with Erbol, two experts on the oil and gas sector, Francesco Zaratti and Hugo del Granado argue that the Bolivian government is custom-tailoring laws to the needs of foreign corporations. In December 2015, Bolivia passed an Incentives Law (Law 767: Ley de Promoción de inversión en exploración y explotación hidrocarburifera, full text) that transfers 12% of hydrocarbon tax revenue to a special fund to reward companies that make large investments in the sector. State incentives total US$2.89 billion. Zaratti argues the law had one particular company in mind:

“Mi criterio particular es que estas dos leyes son trajes hechos a la medida de algunas empresas. Por ejemplo, la primera ley de incentivos de diciembre del año pasado parecería estar hecha a medida de Total, con el fin de que pueda desarrollar el campo Incahuasi y Aquío, reservas conocidas, pero que no se volvían comerciales porque había algo que impedía a Total hacer la inversión necesaria para adecuar al campo.”

“My personal view is that these two laws are suits made to the measure of certain companies. For example, the first Incentives Law of December of last year seems to be made to fit Total, with the goal of it developing the Incahuasi and Aquío Field, whose [gas] reserves are already known but which has not been commercialized because something prevented Total from making the necessary investment to prepare the field.”

In May 2016, the government proposed amending the Incentives Law to extend the  production contracts of oil and gas corporations willing to commit at least $350 million to exploratory drilling or at least $500 million to exploration and production. Potential beneficiaries of this amendment include Repsol, Total, Pluspetrol, Panamerican, Petrobras, YPFB Andina, and British Gas. The amendment passed last week.

By returning tax funds guaranteed to regional and local governments, universities, and the Indigenous Fund, the Incentives Law rolls back one of the major gains of Bolivia’s partial nationalization of gas, demanded by the 2003 protests and delivered in 2006. However, the Morales government insists any short term losses will be made up when new investment produces a larger pie of gas export revenues beginning in 2017.

For now, a precedent has been set: even plurinational Bolivia will modify its domestic laws to attract and subsidize foreign corporate investment. The slide from 21st-century socialism to 21st-century capitalism continues.

CMPCC: Root Causes of Climate Change are Capitalism and Culture

Big conference, bigger questions

Tuesday at the CMPCC was the first day of truly massive events, besides the 17 (+1) Working Groups (Mesas de Trabajo) which themselves reached up to 500 people each. Yesterday morning was devoted exclusively to a massive opening ceremony held at Tiquipaya’s stadium. The New Bolivia has a combination of faces: the grassroots movements gathered in a stadium face, the indigenous tradition face, and the we’re running the state face. All three were on display in the pageantry of yesterday morning: dozens of banners and hundreds of wiphalas (indigenous flag of the Andes whose rainbow colors symbolize inclusion) marked the first side; the ceremony was inaugurated with requests for permission from Mother Earth and Father Cosmos; and Evo’s entrance began with a massive salute from hundreds of red-coated soldiers.

The content of the speeches was more interesting (Evo’s personal content was extended and rambling, but had its good moments which are already beginning to be overshadowed by tactless and factless comments about male sexuality and European baldness), and led into the afternoon session on “The Root Causes of Climate Change.”

The morning speeches were marked first by representatives of five continents (no one from Australia or Antarctica) addressing the summit: Faith Gemill (a Gwich’in from Alaska) spoke about a shared need to decolonize indigenous peoples; a member of the European Parliament’s left-green alliance said that the summit has allies on the European left willing to challenge the Copenhagen Accord; Nnimmo Bassey of Friends of the Earth-Nigeria/International called for an end to fossil fuels (“Keep the oil in the soil, the coal in the hole, and the tar sands in the lands”) and a rejection of false solutions; Suma Dutra argued that more than 90% of her native India has not been part of the new fossil-fuel-dependent economy and that this majority is waking up to the issue; and Eveldina Mazioli (Brazil) spoke to the systemic change towards small-scale agriculture advocated by Via Campesina, one of the world’s largest and most dynamic transnational alliances.

This brought us to Evo, who addressed with props differences between the capitalist and indigenous way of life. What I found striking was the personal animus involved on the part of people wanting show they are “better than” indigenous people, by using commodities. Contrasting a ceramic, fancy china, and plastic plates, Evo pointed out that capitalism/consumerism encouraged people to leave behind the plates that return to being earth when they break, in favor of modern versions that contaminate the world around them.

The massively attended afternoon session on “Root causes of Climate Change” kept its focus more exclusively on capitalism, with activists, a sociologist, an ethicist, and a vice president all framing the issue. Real aspects of capitalism are driving factors in the global ecological crisis: the quest for expansion, relentless incorporation of resources into the economy, an inability to settle for sufficiency, the promotion of consumerism as an economic strategy, treating environmental costs as externalities, and on and on.

Of course, however reasonable it is to put capitalism at the center of the ecological crisis, doing so raises more questions than it answers. Let me put this another way for people who aren’t as skeptical of capitalism as I am: suppose we accept that the dynamics of capitalism are provoking a crisis in the liveability of the planet; and that those same dynamics make any kind of solutions extremely difficult. What other questions does that raise?

First, what kind of economic and social systems might substitute for endless growth? How will they provide incentives for a “people-centered economy”? Unlike when I was growing up, the other possible are less unified, but far more diverse. The plural left here in Bolivia is one example of the kind of diversified solutions: nationally direct industries function alongside communal indigenous economies, and small and massive cooperatives. What is not capitalism is many things.

Second, how in the world does the political groundswell needed for real transformations get built? Third, what alternatives? (This is the easy one, actually: There’s a ton of movement, planning, and visioning work done on this question.)

Fourth, and most complicated, given that capitalism isn’t going anywhere in most of the world for at least a few decades, how much inside-capitalism response to the climate crisis is necessary? This may be the hardest question, since capitalism and its critics will have to work together to solve one of the most difficult technical and social problems ever, even as the critics remain skeptical that an end to the crisis is possible through such cooperation.

Beyond our economic system (as if that were a small matter), I think we have to ask real questions about the other issues raised by our five continental representatives.

Culture: We are talking about a real ethical transformation, built atop many cultures that have got used to relentless consuming more as a chief measure of personal status. And we’re also talking about internalizing all the consequences of our decisions for other people and the planet in our economic and social choices. What in the world will that look like.

Colonialism: The power states exercise over indigenous peoples, and that a powerful few countries exercise over the rest ends up being a key factor in climate change. The oil and mining industries operate through inequality between regions of production and consumption. Simply put, the kind of people who drive SUVs wouldn’t put a conventional oil pit in their backyard to do so. Instead they rely on less fortunate communities to supply the fuel, and pay the price. The one nice thing about this arrangement is that confronting it creates a virtuous cycle. To the degree that drillsite and fence line communities demand respect or gain in power, the whole system gets an incentive to switch to green ways of being. The difficult part is that very real systems of power have to be challenged in the process.

False solutions: In the short term, there are both real and false solutions to climate change. Some things will in fact slow, and one day reverse, the increase in carbon dioxide in the atmosphere. Others won’t. How do we tell the difference? And how do we stop the false solutions from being implemented? This is extremely important in a “flexible” climate change regime like the one that exists since the Kyoto Protocol: any country can pay another to implement a cheaper false solution, and avoid real emissions cuts in return.

Finally, in writing this I feel torn geographically. Half of these questions may seem un-askable in the United States. They are daily matters of discussion in movements here. And from the looks of the conference not just here. The thing about the global climate crisis is that it makes asking difficult questions a necessity. Since the 1990s, the small island states of the world have regarded these kinds of global discussion as life or death matters, because they are: they might be literally underwater without comprehensive solutions. In recent years, much of Africa (facing desertification and major food production loss) and countries like the low-lying, very-dense Bangladesh (not as low-lying or dense as the Netherlands, but money works wonders) have been added to the list. In circumstances like these, you must move very quickly along a chain of logic like this: “If capitalism is the problem, what might be the solution.” Or along a different chain of logic: “If the global economy can’t feed over one billion people, what good is it?” Part of seeing this week’s conference for what it is, is to recognize that thousands of people from movements across the global South, and some of the North as well, are here asking themselves just these kinds of questions. It may be a while before such questions seem reasonable to North Americans, and longer before they seem practical. This post hopes to make that possible.

The dangers of financial shock therapy…

A week ago Saturday, when the preparation of Sarah Palin to be vice president seemed like the central political issue, I heard Naomi Klein, among others talk about the presidential campaign. Like any good writer with a recent book, she offered a capsule summary of the shock doctrine. Instead of getting into the detail, I let the amazing director Alfonso Cuarón do it for you.

Whether or not you’ve caught up with the details of the crisis in the financial markets or the Wall Street bailout, keep one eye on the political game being played here. After a week of downtown Manhattan traders whipsawing the market (with a net loss of less than 1%), an emergency measure is proposed, on a scale larger than anything we’ve ever seen in our lifetime (think the full price of the Iraq war being proposed up front). This is classic shock politics. And it doesn’t end today, it transfers the risk and the loss from Wall Street banks to the US Treasury in the form of new debt. Klein argues on Real Time with Bill Maher:

The disaster is far from over. They’ve actually just relocated the disaster. The disaster was on Wall Street and they have moved the disaster to Main Street by accepting those debts. … The bomb has yet to detonate, the bomb is the debt that has now been transferred to the taxpayers. So it detonates when — if John McCain becomes president, in the midst of an economic crisis, and says, “Look, we’re in trouble, We’ve got a disaster on our hands. We have to privatize social security; we can’t afford healthcare; we can’t afford food stamps. We need more deregulation, more privatization. You know the thesis of the Shock Doctrine is that you need a disaster to rationalize putting through these policies.”

And it’s not just McCain who might try some kind of emergency pullback around the debt. Those of us who were hopefully watching the president from Hope, Arkansas, saw this whole story in 1992:

It was in the two and a half months between winning the 1992 election and being sworn into office that Bill Clinton did a U-turn on the economy. He had campaigned promising to revise NAFTA, adding labor and environmental provisions and to invest in social programs. But two weeks before his inauguration, he met with then-Goldman Sachs chief Robert Rubin, who convinced him of the urgency of embracing austerity and more liberalization. Rubin told PBS, “President Clinton actually made the decision before he stepped into the Oval Office, during the transition, on what was a dramatic change in economic policy.”

The narrative is from Klein again, who warns that Barack Obama has his own Chicago Boys advising his economic policies. And right on cue, Mr. Hope is announcing the bailout “will likely postpone his sweeping proposals on healthcare, education, alternative energy, and other priorities.”

Primer on the financial mess…

Okay. No one can claim that the vortex of disappearing money is not confusing. Those of us who spend our days buying mere things with services thrown in for a bonus, are bound to be confused by the array of ways in which money, currencies, debt are bought, repackaged and sold. Not to mention the ways in which the possibility of any of those “things” fluctuating in value is then remade into a commodity in and of itself.

So, I’m assembling here (stay tuned to this post) as much background as I can on how this happened…

First up, is This American Life‘s collaboration with NPR on The Giant Pool of Money, an hour-long radio documentary on how excess cash begat a housing boom, a mortgage collapse, and the credit crunch. Ignore the bit from early this summer when they speculate that everything will only get as bad as the 1970s. As Lehman Brother’s understated last dispatch declares:

This episode of financial crisis appears to be much deeper and more serious than we and most observers thought it likely to be. And it is by no means clear that it is over.

Smart and graph-heavy expert Doug Henwood of Left Business Observer gives his take in two parts (1|2) as the crisis evolves.

The New York Times, which has had to start a blog called Freakonomics (after a book, but imagine the great grey paper running that title in stabler times), offers summaries of the crisis by David Leonhardt, “Bubblenomics,” and John Steele Gordon, “Greed, Stupidity, Delusion — and Some More Greed.”

$700B! WTF? New York to talk back to Wall Street THURSDAY

A do-it-yourself protest is gathering to counter the rush “do something” by bailing out Wall Street. More thoughts from me soon on how “we” got into this mess, and what options there are, but here’s one place to pull the emergency brake on the train to spending $700 billion of our money to buy bad debt. Seems to me all the times we’ve asked for our money for something useful, we’re told there isn’t any…

When: 4pm Thursday, September 25!
Where: Southern end of Bowling Green Park, in the plaza area
What to bring: Banners, noisemakers, signs, leaflets, etc.
Why: To say we won’t pay for the Wall Street bailout
Everyone,

This week the White House is going to try to push through the biggest robbery in world history with nary a stitch of debate to bail out the Wall Street bastards who created this economic apocalypse in the first place.

This is the financial equivalent of September 11. They think, just like with the Patriot Act, they can use the shock to force through the “therapy,” and we’ll just roll over!

Think about it: They said providing healthcare for 9 million children, perhaps costing $6 billion a year, was too expensive, but there’s evidently no sum of money large enough that will sate the Wall Street pigs. If this passes, forget about any money for environmental protection, to counter global warming, for education, for national healthcare, to rebuild our decaying infrastructure, for alternative energy.

This is a historic moment. We need to act now while we can influence the debate. Let’s demonstrate this Thursday at 4pm in Wall Street (see below). We know the congressional Democrats will peep meekly before caving in like they have on everything else, from FISA to the Iraq War.

With Bear Stearns, Fannie and Freddie, AIG, the money markets and now this omnibus bailout, well in excess of $1 trillion will be distributed from the poor, workers and middle class to the scum floating on top.

This whole mess gives lie to the free market. The Feds are propping up stock prices, directing buyouts, subsidizing crooks and swindlers who already made a killing off the mortgage bubble.

Worst of all, even before any details have been hashed out, The New York Times admits that “Wall Street began looking for ways to profit from it,” and its chief financial correspondent writes that the Bush administration wants “Congress to give them a blank check to do whatever they want, whatever the cost, with no one able to watch them closely.”

It’s socialism for the rich and dog-eat-dog capitalism for the rest of us. Let’s take it to the heart of the financial district! Gather at 4pm, this Thursday, Sept. 25 in the plaza at the southern end of Bowling Green Park, which is the small triangular park that has the Wall Street bull at the northern tip.

By having it later in the day we can show these thieves, as they leave work, we’re not their suckers. Plus, anyone who can’t get off work can still join us downtown as soon as they are able.

There is no agenda, no leaders, no organizing group, nothing to endorse other than we’re not going to pay! Let the bondholders pay, let the banks pay, let those who brought the “toxic” mortgage-backed securities pay!

On this list are many key organizers and activists. We have a huge amount of connections – we all know many other organizations, activists and community groups. We know P.R. folk who can quickly write up and distribute press releases, those who can contact legal observers, media
activists who can spread the word, the videographers who can film the event, etc.

Do whatever you can – make and distribute your own flyers, contact all your groups and friends. This crime is without precedence and we can’t be silent! What’s the point of waiting for someone else to organize a protest two months from now, long after the crime has been perpetrated?

We have everything we need to create a large, peaceful, loud demonstration. Millions of others must feel the same way; they just don’t know what to do. Let’s take the lead and make this the start!

When: 4pm Thursday, September 25!
Where: Southern end of Bowling Green Park, in the plaza area
What to bring: Banners, noisemakers, signs, leaflets, etc.
Why: To say we won’t pay for the Wall Street bailout
Who: Everyone!