Bolivia: Corruption and Errors in Petroleum Contracts Hinders Nationalization of Natural Gas

NotiSur - South American Political and Economic Affairs, March 30, 2007 | Go to article overview

Bolivia: Corruption and Errors in Petroleum Contracts Hinders Nationalization of Natural Gas


Bolivian President Evo Morales has reacted angrily to revelations that there was corruption among members of his Movimiento al Socialismo (MAS) in the setup of contracts to extract the country's large natural-gas reserves. Legislators from the conservative opposition party Poder Democratico y Social (Podemos) have been raising significant criticisms regarding errors in natural-gas contracts arranged by the Morales administration. The controversy, which has bogged down the nationalization of Bolivia's natural-gas resources, led to the firing of the head of the state petroleum company.

YPFB president resigns

The head of Yacimientos Petrol feros Fiscales Bolivianos (YPFB), Bolivia's state petroleum company, barely lasted two months in the job. Manuel Morales Olivera resigned at the president's request because of the scandal regarding errors in renegotiated gas contracts with multinational corporations. On March 23, Hydrocarbons Minister Carlos Villegas administered the oath of office to Guillermo Aruquipa Copa, who will be the new head of YPFB. Villegas took over what is arguably the most important ministry in Bolivia during a previous controversy regarding the pace of gas nationalization (see NotiSur, 2006-09-29).

Morales assured citizens that the nationalization, a central facet of his presidency, "is a process that will continue," but he added that it was "convenient [to have] a change." There have now been firings or resignations of two ministers, three vice ministers, various superintendents, and three YPFB presidents since MAS came to power in early 2006 (see NotiSur, 2006-02-03).

Morales Olivera, no relation to the president, had to step down because the 44 renegotiated contracts, which submit companies to a new tax regime and YPFB supervision, have not yet been implemented, even though they were signed five months ago. Local press outlets also published photographs of YPFB employees drinking tropical drinks on Cuban beaches during a seminar, adding further scandal to drag down Morales Olivera's career. He had faced strong criticism from the opposition for having neither a university degree nor experience working in the petroleum sector before heading the YPFB. But, said Vice President Alvaro Garcia Linera, he had family who helped him--he was the son of an influential MAS leader and brother to the director of national Customs.

His replacement, Aruquipa, was the vice minister of exploration and exploitation in the Hydrocarbons Ministry. Before taking office, he warned that delays in applying the new contracts would create significant and serious damage to the country, which has South America's second-largest natural-gas reserves after Venezuela. "I humbly ask that in the next week these projects be approved," Aruquipa said at his swearing in.

Morales said his government could have committed "errors," but he said the change in YPFB presidents was not because of corruption problems. "Never are we going to rob, never are we going to trick the Bolivian people," said Morales.

Opposition rails against contract errors

Podemos legislators attacked "basic errors" in the contracts throughout March, alleging corruption among MAS officials who negotiated them. On March 12, Morales promised that those who sought bribes for contract negotiations with 12 companies like Brazil's Petrobras, Spain's Repsol YPF, and French TotalFinaElf would face jail. …

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