Petroleumworld`s
Opinion Forum:
viewpoints on issues in energy, international
politics & civilization.
Sunday
Feature
Bolivia’s Gas Nationalization:
Opportunity and Challenges - Part
III
Increased
Gas and Oil Revenues
from Nationalization Benefit Various
Projects
By Tina Hodges
As a result of its new oil and gas policy, as well as high
prices, the Bolivian government’s income from gas and
oil increased from US$173 million in 2002 to an estimated US$1.57
billion in 2007,[1] in other words, by a factor of nine. The
Bolivian government has articulated a vision of using these
increased revenues to spur national development. But how is
the government actually spending these funds?
This third
memo in AIN’s four part series looks at how
oil and gas revenues are actually being spent at the national,
departmental, and local levels. It is difficult to determine
a full accounting of which projects are benefiting from oil
and gas revenues because expenditure of these revenues is not
often accounted for separately from other government revenues.
In addition, spending decisions for the gas and oil revenues
are divided amongst the national government, the nine departmental
governments, and all of the municipal governments.[2] Even
so, information gathered from public budgets, government officials,
and civil society experts gives an initial glimpse into how
the revenues are being spent. At the national level, revenues
are going to a stipend for families with children in primary
school and to a pension program for Bolivian senior citizens.
At the departmental level, roads are the single largest category
of spending from gas and oil revenue. At the municipal level,
road building, school construction, and other projects are
benefiting from the revenues.
National Level
At the national level, the government spends oil and gas revenues
on a program called the Juancito Pinto Stipend that gives about
US$25 a year to the families of each child enrolled in primary
school. The program aims to encourage school enrollment and
defray school supply costs. In addition, as mentioned earlier
in this series, the Bolivian legislature approved a Morales
administration proposal on November 27 to spend 30 percent
of the direct hydrocarbons tax (IDH) on a Renta Dignidad payment
to Bolivian senior citizens.[3] Ongoing negotiations between
the Morales administration and departmental prefects may modify
this measure.
Beyond these two programs, which have been publicized as the
fruits of increased oil and gas revenues, it is not clear which
other initiatives benefit from these revenues. The oil and
gas revenues go into the general treasury, making it impossible
to match programs with funding sources.[4]
However,
one can calculate the share of Bolivian government spending
that comes from oil and gas income. Oil and gas revenues
accounted for a sizeable 19 percent of the national budget,
according to calculations from the Bolivian government’s
2007 national budget.[5]
The Ministry
of Public Works’ new Viviendas Solidarias
(Solidarity Housing) program may benefit in part from increased
oil and gas funds. The US$600 million program, primarily financed
by pre-existing housing fund, provides home construction loans
to families who would have difficulty getting loans from a
commercial bank.[6]
An analysis
by Fundación Jubileo of the 2007 national
budget found that 65 percent of the national government’s
share of the direct hydrocarbons tax and royalties goes to
fund government administration and recurring expenses while
only 35 percent goes to investment projects.[7] Fundación
Jubileo argues that gas revenues should be used for investment
in the economy rather than recurring expenses because these
resources are non-renewable. The organization also points out
that since gas prices fluctuate and may drop, they are not
reliable to cover recurring expenses.
Indigenous Development Fund
A 2005 supreme decree reserves five percent of the IDH for
an indigenous development fund.[8] To implement this fund,
the Bolivian government established a board of directors comprised
of three representatives of indigenous organizations from the
highlands and three from the lowlands. Unfortunately, the groups
have not been able to reach agreement on the distribution of
funds. The highland indigenous groups, which represent a much
larger indigenous population than the lowlands, want the distribution
to be based on population size while the lowland indigenous
groups suggested the distribution between the highlands and
the lowlands be split evenly.[9]
Departments
The advent
of the IDH in 2005 meant that departments that had not previously
received any income from the oil and gas
sector began to receive large infusions of funds. Those who
had already been receiving funds through royalties saw large
increases. As shown in the graph below, the departments as
a whole saw their budgets almost triple in the space of three
years. The second graph shows that oil and gas revenues make
up a huge portion of the departmental budgets, 78 percent in
fact.[10] The departmental governments are highly financially
dependent on the national government. Transfers from the national
treasury, including revenues from oil, gas, mining, and forestry,
make up 98 percent of the departments’ budgets.[11]
A Fundación Jubileo report found that the departmental
governments are spending 60 percent of oil and gas revenue
on recurring expenses and only 40 percent on investment projects.[12]
Investment projects include constructing roads, assisting small
business, and building power plants while recurring expenses
are ongoing operating expenses such as salaries. Fundación
Jubileo reports that departmental governments have increased
investments in response to its report.[13]
Given that such a large portion of the departmental budgets
come from oil and gas revenues, looking at the overall budgets
gives a good sense of how the departments are using these revenues.
The pie chart below shows the spending of all nine departments
by category of project. Road building is the largest expenditure,
comprising 45 percent of departmental spending. Unfortunately,
the road construction industry in Bolivia is known to suffer
from corruption and contracts sometimes go to those with close
ties to the government.[14]
While not representative of Bolivian departments as a whole,
Santa Cruz provides an example of departmental spending from
gas and oil revenues. Experts note that departmental governments
generally lack the administrative capacity to use the massive
new infusion of funds to effectively carry out projects.
The Ministry
of Finance reports that some US$700 million, the equivalent
of a year’s worth of the main oil and
gas tax, are sitting in departmental, municipal, and university
bank accounts.[16] In the face of citizen protests that the
department was sitting on funds received from oil and gas,
the department of Tarija decided to give about US$ 320 to each
family, a politically popular move.[17] According to the Minister
of Planning and Development, the two departments with the largest
oil and gas revenues, Tarija and Santa Cruz, have spent the
lowest percentage of their 2007 budgets. Between January and
August, Tarija executed 34.9 percent of its budget while Santa
Cruz spent 35.4 percent of its budget.[18] Tarija and Santa
Cruz are the two departments that are the most stridently opposed
to the Morales national government and the IDH cuts. The Morales
administration has used the figures of large dollars left unspent
by departments as an argument for shifting funding away from
the departments and towards municipalities. While the low percents
indicate a lack of administrative capacity, it is dangerous
to measure departmental government effectiveness solely by
how quickly budgets are spent.
Municipalities
It is much
harder to characterize the Bolivia’s municipalities’ spending
due to the sheer number of them and a lack of existing analyses.
However, anecdotes can illuminate the type of spending from
oil and gas revenues seen at the local level.
For example,
the municipality of Caraparí, in Tarija
department, sits on top of the largest known gas reserve in
Bolivia. The municipality’s budget for 2007 is a hefty
US$29 million. With a population of 12,000, that amounts to
$2,400 per capita.[19] For comparison purposes, the annual
salary of a Bolivian teacher with ten years of service is US$3,000.[20]
Civil society groups, such as the civic committee (similar
to a chamber of commerce), the small farmers’ union,
ranchers, the women’s center, and others, organized to
propose projects to meet the population’s needs. They
succeeded in persuading the local authorities to put in place
80 projects in the 43 communities that make up the municipality.[21]
Projects include building new bridges and paving roads and
opening a health center to combat Chagas disease, a tropical
parasitic disease common in the area. Perhaps the largest project
is using gas revenues to install three electricity generating
turbines. Nevertheless, unemployment is a major problem in
the municipality, meaning many families continue to live in
poverty.
In Santa Cruz municipality, which includes the city of Santa
Cruz, oil and gas revenues are being spent on building schools,
urban roads and arterials, and water infrastructure projects.
Santa Cruz, like other Bolivian municipalities, uses a participative
planning process in which neighborhood level groups propose
projects for their neighborhood and the municipal government
compiles the requests. Interestingly, the sum of all of the
neighborhood requests is less than the total amount of funds
available. A government official explained that this is because
the neighborhood groups are focused on only their immediate
context, while it is the larger projects, above the neighborhood
scale, that are more expensive.[22]
In Oruro,
the government is using oil and gas revenues to build streets,
improve public plazas, assist miners, and plant
vegetation to prevent erosion.[23] Civil society groups have
proposed that the government fund a system to monitor air and
water quality – important issues due to the environmental
impacts of mining in the area.[24]
Conclusion
According to the Ministry of Planning and Development, the
Bolivian people expect that the increased revenue from oil
and gas will be distributed in a way that will benefit the
people, generate employment, and change the conditions of inequality
and exclusion.[25]
It is too
early to judge whether or not the revenues will be able to
meet these lofty goals. The revenues are currently
funding stipends for primary school students and senior citizens
as well as road construction and other projects. It is difficult
though, to discern a cohesive plan that could guide the use
of revenues to ensure that they are used to best meet the government’s
articulated national development goals.
While Bolivia has a National Development Plan, the national
government does not have a specific plan for the use of the
increased oil and gas revenue, according to government official
and nonprofit experts. Bolivia would benefit from a national
debate over how best to use the revenues.
Unfortunately, the debate so far has focused on political
wrangling between the national and departmental governments
over revenue distribution rather than on how best to use the
resources to benefit all Bolivians.
Notes:
[1]
República de Bolivia Ministerio de Hidrocarburos
y Energía, Nueva Política Hidrocarburífera
del País: Distribución de I.D.H., Regalías,
y Participaciones, La Paz, Bolivia, March 2007, p2.
[2] For an explanation of how these revenues are distributed
between the different levels of government, see Andean Information
Network, Part II: Political Conflict over Gas and Oil Tax Revenue
Distribution, December 4, 2007.
[3] See Andean Information Network, Part II: Political Conflict
over Gas and Oil Tax Revenue Distribution, December 4, 2007.
[4]
Author interview with Marcelo Martínez Céspedes,
Expert in International Commerce and International Relations,
Ministry of Planning and Development, October 25, 2007.
[5]
Budget figures from: Honorable Cámara de Diputados
Comisión de Hacienda y Fundación Jubileo, Presupuesto
General de la Nación e Inversión Pública,
2007, p15-16. The direct hydrocarbons tax (IDH) brought in
5,941 million Bs. and the special tax on hydrocarbons (IEDH)
brought in 1,489 million Bs. Royalties from all sources, including
mining and forestry as well as oil and gas brought in 3,713
million Bs. of which, according to calculations from Ministry
of Hydrocarbons publications, 3,509 million Bs. was from oil
and gas. Oil and gas revenues from the IDH, IEDH, and royalties
brought in 19 percent of the national budget.
[6]
Author interview with Marcelo Martínez Céspedes,
Expert in International Commerce and International Relations,
Ministry of Planning and Development, October 25, 2007.
[7]
Fundación
Jubileo, Jubileo, January/February 2007, pp6-8, http://www.jubileobolivia.org/pdfs/Revista%20Jubileo%206.pdf
[8] Decreto Supremo 28421.
[9] Autor interview with Carlos Arze, Centro de Estudios para
el Desarrollo Laboral y Agrario (CEDLA), October 24, 2007.
Interview with Elizabeth Lopez, Red Umavida, October 25, 2007.
[10]
Calculated from base data in graph of departmental budgets
by income
source. Graph from Ministerio de la Presidencia,
Viceministerio de Descentralización, Propuesta de Regionalización,
PowerPoint Presentation, September 2007. The figure does not
include capital income, financing sources such as loans, or
transfers from the national government for health, education,
and social projects.
[11] Ibid.
[12]
Fundación
Jubileo, Jubileo, January/February 2007, pp. 6-8, http://www.jubileobolivia.org/pdfs/Revista%20Jubileo%206.pdf
[13]
Author interview with René Martínez, Fundación
Jubileo, October 25, 2007.
[14] Autor interview with Carlos Arze, Centro de Estudios
para el Desarrollo Laboral y Agrario (CEDLA), October 24, 2007.
[15]
Figures provided during author interview with José Padilla,
Asesor de Minería, Hidrocarburos, y Energía,
Prefectura de Santa Cruz, October 18, 2007.
[16]
La Prensa. “Las movilizaciones por el IDH se extienden
por 7 regiones.” October 26, 2007.
[17] Author interview with Jubenal Quispe, Maryknoll, October
23, 2007.
[18]
Agencia Boliviana de Información. “Prefecturas
de Santa Cruz y Tarija son las que menos ejecutan recursos
de inversión pública.” October 30, 2007.
[19]
El Deber. “Caraparí Despierta de su eterno
letargo.” November 20, 2006.
[20]
USA Today. “Bolivian President Slashes Salary for
Public Schools.” January 28, 2006.
[21]
El Deber. “Caraparí Despierta de su eterno
letargo.” November 20, 2006.
[22]
Autor interview with Anibal Jerez Lezana, Director Adjunto,
Oficialía Mayor de Administración y Finanzas,
Gobierno Municipal Autónomo de Santa Cruz de La Sierra,
October 18, 2007.
[23] Author interview with Ely Lopez, Red Umavida, October
25, 2007.
[24] Ibid.
[25]
Author interview with Marcelo Martínez Céspedes,
Expert in International Commerce and International Relations,
Ministry of Planning and Development, October 25, 2007.
Source: Andean Information Network
Tina
Hodges is WOLA program Assistant for Mexico and the
Andes. AIN researcher Emily Becker contributed to this report.
The Washington Office on Latin America
( WOLA) is funded by
foundations, religious organizations, and individuals. Petroleumworld
not necessarily share these
views.
Editor's
note:This
article is part III of IV and was originally published by Andean
Information Network, on Wednesday, 16 January 2008, Part I
: Background
on Bolivian Oil and Gas Policy, Current Conflicts, and Challenges
was publish. on
PW Nov. 21, 2007; Part
II Political
Conflict over Gas and Oil Tax Distribution,Tuesday,
04 December 2007. Petroleumworld
reprint this article in the
interest of our readers.
All
comments posted and published on Petroleumworld, do not reflect
either for or against the opinion expressed in the
comment as an endorsement of Petroleumworld. All comments expressed
are private comments and do not necessary reflect the view
of this website. All comments are posted and published without
liability to Petroleumworld.
Fair use Notice: This site contains copyrighted material the
use of which has not always been specifically authorized by
the copyright owner. We are making such material available
in our efforts to advance understanding of issues of environmental
and humanitarian significance. We believe this constitutes
a 'fair use' of any such copyrighted material as provided for
in section 107 of the US Copyright Law. In accordance with
Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.
All works published by Petroleumworld are in accordance with
Title 17 U.S.C. Section 107, this material is distributed without
profit to those who have expressed a prior interest in receiving
the included information for research and educational purposes.
Petroleumworld has no affiliation whatsoever with the originator
of this article nor is Petroleumworld endorsed or sponsored
by the originator.
Petroleumworld
encourages persons to reproduce, reprint, or broadcast Petroleumworld
articles provided that any such reproduction
identify the original source, http://www.petroleumworld.com
or else and it is done within the fair use as provided for
in section 107 of the US Copyright Law. If you wish to use
copyrighted material from this site for purposes of your own
that go beyond 'fair use', you must obtain permission from
the copyright owner.
Internet web links to http://www.petroleumworld.com are appreciated.
