Dividing the Spoils of Bolivia's New Gas Cash

The latest political squabble in Bolivia this week isn’t over whether to move the national capital, or if soccer should be played at high altitude, or over Evo Morales' desires for a second term. This week in Cochabamba and elsewhere the battle is a more traditional one – over money. Specifically, rival politicians are sparring over new proposals from the Morales administration over how to divide the new wave of cash coming in from Bolivia's increased taxes from foreign oil corporations.

The fact that there is new cash is news in itself. For years Bolivia's leaders heeded the warnings of the International Monetary Fund (IMF) and others, that any increase in foreign oil taxes would just result in the foreign firms shutting down operations and packing their bags. Bolivia's political left must have missed that day in economics class, however, and pressed for higher taxes anyway (both before Morales took office and after). The result is that the companies agreed to new long-term contracts and Bolivia is now taking in almost $1 billion a year more in national revenue.

The subject of the current debate is the Impuesto Directo a los Hidrocarburos (IDH), one of the key mechanisms through which that money is distributed here. The current conflict was set off when President Morales announced a plan last week to divert a significant portion of those funds for a new pension plan for Bolivia's seniors – a segment of the population where poverty hits particularly hard. He also included in that plan a major dig at his leading opponents, the independently elected state governors. The Morales proposal would significantly cut the funds sent from La Paz to the governors for them to spend on public projects, transferring more of it downward on the revenue food chain to the cities. It seems, pretty likely, a move directed more by politics than anything else.

Marches and Toyota Land Cruisers

Understandably, the governors are screaming bloody murder. Yesterday in Cochabamba that opposition took to the streets, in a march to Plaza Colon convened by the local Civic Committee, in close alliance with the local governor, Manfred Reyes Villa. The march drew a crowd of several thousand, according to newspaper estimates, a number that Los Tiempos called reducida.

I ran into a friend of mine there, a young woman with no special interest in politics who works in an administrative job for a small private university. Looking bored as she sipped on an ice cream shake, I asked her why she was there. "My whole office is here. Obligatorio, they told us to come." How many others came under similar circumstances is hard to tell, but the crowd of state government employees headed back to work afterwards looked pretty thick.

Meanwhile, as civic leaders declared through amplification systems how urgent it was to keep those resources for projects sponsored by the state of Cochabamba, the local press carried inconvenient news for Mr. Reyes Villa about how some of the funds under his management have been spent. According to Los Tiempos, the Cochabamba governor used some of those IDH funds to purchase 26 brand-new "luxury vehicles" for the use of his senior staff. His chief aid, for example, was handed use of a new Toyota Prado Land Cruiser (similar to the model pictured above), which he operated for personal use. These are vehicles that cost up to $70,000, reported the Cochabamba daily.

When the story surfaced, the Governor's office quickly announced that 25 of the 26 luxury vehicles would be returned, with the exception of the one used by Reyes Villa himself. All of this, however, was not an especially strong argument for protecting the Governor's access to Bolivia's new oil revenues.

Maybe the Best Autonomy is Individual

From a classic public policy perspective, new revenue like this should be invested in strategic ways that maximize opportunities for progress and development. Usually, that means building up universities, schools, roads, and employment programs. Usually.

The problem, however, is what I like to call "the donut theory of economics." If a guy works in donut store and spends eight hours a day spreading chocolate icing or milky glaze atop donuts, sooner or later, through means honest or not, he is likely to have some donuts to eat. In corruption-plagued Bolivia the donuts are the cash that flows through public coffers, and at every level of government a lot of bites get taken along the way.

In theory, sending the cash down to the municipal level brings it closer to the people and their immediate needs. Well, in theory. Why the city government here in Cochabamba thinks that it needs to spend a wad of cash remodeling the Plaza 4 de Noviembre again for the second time in three years is beyond me. And do we really need a footbridge to the Cine Center?

With Toyota Land Cruisers being handed out like candy in one direction, and plaza remodelings eating up scarce cash in the other, maybe it does make sense to give more of the cash directly to the people. A few hundred Bolivianos stuffed into the hands of seniors at one end of the spectrum, and public school students at the other, at least means that fewer officials will get their hands on it.

Regional autonomy, we are told, is about getting Bolivia's revenue out of the hands of an administratively heavy central government. Fair enough. But, in Bolivia's case, maybe the best autonomy is personal. I am reasonably certain that my aging neighbor (who tries diligently to teach me Quechua each morning as I wait for the bus) can make better use of some new cash than having Manfred's deputies cruising the streets in $70,000 cars.