Bolivia 07/11/2011

A busy week for Evo Morales who cuts gas subsidies, creates state construction company, and negotiates access to Peruvian port.

President Evo Morales has told the press that he is considering the reduction and possible eventual abolition of state subsidies for gas. At the end of 2010 the president tried something similar, whereby he removed the subsidies with immediate effect rather than the slower transition he is now suggesting. The policy failed and subsidies were reinstated almost immediately.

Morales explains the renewal of the policy as a cost cutting measure, as the subsidy currently costs the state US$600m per annum, set to rise a further US$100m for 2012.

To help reduce the cost of gas the government has signaled that further exploration will be necessary. Gas exploration has supposedly been on the decrease since 2000 when there were 39 explorative missions, compared to the 15 which remain in 2011. Similarly the country now produces 14 million barrels a year as opposed the 16 million it was producing in 2005.

Morales moved this week to create a state run construction company which will be named La Empresa Estratégica Boliviana de Construcción y Conservación de Infraestructura Civil (The Strategic Bolivian Civil Infrastructure Construction and Conservation Company – EBC).

The president of the Bolivian Construction Association, Jaime Ponce, raised his concerns over the new company’s effect on private interests. Ponce believes there is an issue in allowing the state to be the judge of works such as highway constructions as they would have none of the obligations that private companies must obey.

Such criticism is unlikely to deter Morales, whose government already oversees various state companies that produce paper, milk, sugar, cement, gold, and more.

Morales has also informed that legislators from Bolivia will go to Peru this week to negotiate an agreement for his country to use Port Ilo. The port lies in south Peru, and should the agreement go ahead will finally give landlocked Bolivia long awaited access to the sea and all the maritime activities that come with it.

Bolivia has pined for coastal access ever since the nation of Chile took Bolivia’s coastal territory in an 1879 peace agreement, which Morales is currently challenging. Morales eagerly awaits the negotiations with Peru so that he can then go on to set up a naval training base as soon as possible.