Today’s New York Times Article on Bolivia

This morning the New York Times ran an article on Bolivia’s political crisis over gas, in which I was quoted. The article focuses on how polarized Bolivia has become over the gas issue, which is true. But then it goes on to paint the two sides of the debate in a way that seemed more cartoon than fact. As with so many of the news articles this past week, the backers of gas privatization are sold as solid economic scholars and opponents as the uneducated masses.

Here’s an example:

On one side, there are Bolivians like Carlos Alberto López, a former vice minister of energy who was educated at Harvard and the London School of Economics.

Across this capital, in a small office decorated with posters of the revolutionary icon Che Guevara, another protagonist expresses a sharply opposed viewpoint…Jaime Solares, 53, who started working at age 13, has a 10th grade education and heads the Bolivian Workers Central, the country's largest labor confederation.

The US national paper of record has reduced the gas issue to a debate between a star from Harvard vs. a high school drop out.

The first problem with this is the inference that the education that really matters here is the kind one gets at Harvard. Well, I went to Harvard (Masters in Public Administration, 1985) and I have learned just as much economics from regular “uneducated” Bolivians as I did from Robert Reich and Lester Thurow. Take Victor the plumber, for example, with whom I spent a day fixing the water pump at our house years ago. Victor explained to me, many years before the gas rebellion erupted, that Bolivia’s greatest economic mistake was selling its natural resources as raw products without the value added of turning them into something else (such as turning crude into gasoline or electricity). Economics 101 – and a lesson that the Bolivian government never seemed to figure out.

Second, it is just plain not true that all the “educated” experts are opposed to Bolivia taking back control of its oil and gas. One of the economists who has studied the issue most closely is Roberto Fernandez Terán. Below is the letter to the editor he sent to the New York Times today. It is too bad that this point of view didn't make it into the Times article.

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Letters to the editor
New York Times

The Times’ coverage of the Bolivian debate over gas and oil (Bolivia Epitomizes Fight for Natural Resources, May 23, 2005) oversimplifies the issues and leaves readers with the false impression that there are not solid reasons behind the popular demand for nationalization.

Why are social movements calling for Bolivia to take back control of its gas and oil?

First, the contracts that gave Bolivia’s gas and oil to foreign energy companies in the 1990s are unconstitutional because they were never approved by the Bolivian Congress, as required by law. Second, those same corruption-driven privatization deals gave away, to foreign companies, proven gas and oil reserves worth more than $11 billion. Third, before privatization, nearly half of the revenues coming into the Bolivian treasury came from the publicly-owned gas and oil industry. Today the foreign oil companies that have replaced that public ownership are contributing less than ten percent and much of that is passed on to Bolivian consumers.

In Bolivia the cost of producing and transporting a barrel of oil is approximately $7. Yet Bolivians are being forced to pay world market prices for our own oil, currently $48 per barrel.

Like any other country, we in Bolivia do not want to sell our gas and oil in raw form at bargain prices. Countries reap the real economic benefits from their gas and oil when they industrialize domestically and sell it as processed products – gasoline, plastic, electricity, etc. Foreign oil companies want to keep Bolivia, South America’s poorest nation, from doing that.

Why would the people of any nation with severe unemployment and a lack of economic opportunity willingly accept such an arrangement? It should be no surprise that millions of Bolivians are not willing to accept the give away of the nation’s oil and gas.

Roberto Fernandez Terán
Economist, Professor
University of San Simon
Cochabamba, Bolivia