The party is over! What a gas!

28 Dec

In a bold move today, Evo ended a 6-year natural gas subsidy and almost doubled gasoline prices (increase of 73-83%).  The announcement was made abruptly, during the holiday season, and at a time when Evo happened to not be in the country.  Unsurprisingly, several unions immediately announced strikes.  The military stepped to in give citizens rides since transport was striking.  This is the kind of mayhem that I wish I was still in Bolivia to see.  Does this mean that the roads will finally be unclogged from trufis, taxis, and buses?

The decision to end the subsidy is the correct one, though it should’ve been implemented gradually, and I am a bit impressed that Evo had the political courage to jeopardize his campesino base when he was previously the olympic champion of issuing subsidies.  (Cheese to pregnant women, a stipend to retired folk…call it social security.)  This seems to be the latest in a string of acknowledgements by Evo of the mounting problems faced by the national oil & natural gas industry.  About 2 months ago, an analyst caused a stir by his estimate that Bolivia has one-third (8.3 Tcf) of the natural gas reserves that it had 5 years ago.  Worried about fulfilling its pipeline contracts with Brazil and Argentina, Bolivia is tightening its supply, not only by stemming the estimated $130 million of gas smuggled out of the country (I remember in San José, about 4 hours from the border to Brazil, a fellow was telling me of the smuggling going on there and people were selling gasoline in 2-liter coke bottles at the store), but also by putting the pressure on the petroleum companies to drill more.

Interestingly enough, with the subsidy, gasoline in Bolivia was not all that cheap, compared to the U.S.  (but definitely very cheap compared to Brazil, Argentina and surrounding countries.)  The price of gasoline (natural gas) has gone up from $2/gal to $3.78/gal.

*In an update, I talked to the manager of a non-profit in Cochabamba the day after the announcement was made and she was extremely worried.  She spoke of it as a disaster in Bolivia, not only for the poor who can’t afford rate hikes in public transportation but also for her non-profit who will have to change their budget and perhaps slash upcoming projects because of higher transportation and general costs.

*In an another update, six days after gasolinazo was announced, due to mounting protests and widespread unpopularity of the initiative among his base, Evo revoked his decree and reinstated the subsidies.  Disappointing, but shows how delicate his power is.

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