Category Archives: Mining

Bolivian Political and Social Landscape: Primer for Pending Presidential Elections

As the presidential campaigns gain momentum, AIN outlines the political and social landscape in Bolivia to provide background to understand upcoming electoral debates.

President Evo Morales is running for a third term in the October 12, 2014 elections.  Critics argue he is not eligible to run for another consecutive term, but the Plurinational Constitutional Tribunal ruled in his favor, and the opposition across the political spectrum lacks a strong, unifying candidate.  Four candidates have formally registered to run against Morales.

Bolivian Government Achievements

  • Macroeconomic success:
    • From 2009 to 2013, Bolivia’s economy experienced steady growth.

1 GDP growth

The population living in extreme poverty fell from 38% in 2005 to 24% in 2011.

2 poverty

  • Bolivia has accrued a significant “rainy day fund.”  According to the New York Times,  “Bolivia has the highest ratio in the world of international reserves to the size of its economy, having recently surpassed China.”
  • Employment rates and wages have both steadily increased under Morales. The minimum wage increased in 2013 from about $145 USD (1,000Bs) to about $174 USD (1,200Bs) a month.
  • Double holiday bonus: In November 2013, President Evo Morales decreed that all employers must pay a double holiday bonus to all employees.  Previously, the bonus was one month’s salary paid in December.  The double holiday bonushad a mixed reception, celebrated by workers, but criticized by many employers and small business owners.
  • Social programs: The Morales administration started several popular cash transfer programs, including benefits to school children and pregnant mothers, which have promoted significant decreases in maternal and infant mortality as well as increases in school attendance and high school graduation.
  • Gas income: The Bolivian government has strengthened the economy by increasing state hydrocarbons revenues as a result of the 2004 hydocarbons law, the 2006 Nationalization Decree, and high gas prices.  This income has permitted significant investment in infrastructure and social programs.

Coca Leaf and Drug Control

  • In 2013, Bolivia successfully petitioned the United Nations to recognize legal coca cultivation and uses within its borders.
  • The Morales administration has achieved sustained reductions in the cultivation of illicit coca leaf using a system of community coca control. (26% reduction from 2010-2013).
  • Unlike previous military forced eradication, this innovative model relies on coca grower participation.  This model guarantees subsistence and enables coca growers to diversify their income, leading to greatly reduced human rights violations.  For more information see this WOLA-AIN memo.

3 eradication
Source: Bolivian Vice-Ministry of Social Defense

  • Bolivia currently has less than half as much coca as Colombia and Peru.  Yet inexpensive and abundant Peruvian cocaine paste base floods through Bolivia to Brazil and other consumer countries, offsetting national control efforts.
  • The Morales’ administration has diligently pursued drug interdiction after the 2009 expulsion of the US Drug Enforcement Agency, reporting significantly increased seizures. However, the great bulk of cocaine sales and profits trafficking occur outside Bolivia’s border, limiting the impact of these initiatives.
  • In spite of tensions, US-Bolivian on-the-ground collaboration on coca reduction continued productively until September 2013, including a trilateral agreement, including Brazil, to improve monitoring technology.

Challenges facing the Morales Administration 

  • TIPNIS issue: In spite of much rhetoric about protecting the rights of Mother Earth, the Morales administration has gone ahead with plans to build a highway through the Amazon, including the TIPNIS, a national park and indigenous territory.
    • This is an enduring point of contention in the country, most notably among lowland indigenous peoples who led two marches to La Paz to protest the lack of prior consultation of TIPNIS resident about the project, which is guaranteed by the 2009 Bolivian constitution.  Both marches, in 2011 and 2012, were met with police repression from the government. The segment of the construction project within the territory is on hold, but may be resumed.  Critics highlighted contradictions with the administration’s pro-indigenous and environmental discourse and its handling of the incident.
  • The lowland indigenous umbrella organization, CIDOB, and its highland counterpart CONAMAQ are both split between factions that support the MAS ruling party and its vocal opponents.
  • Policies of extraction vs. environment: One of the most significant challenges for the MAS administration has been balancing multi-sector demands for basic services financed primarily by extractive industries with its rhetoric of protecting and living in harmony with nature.
    • Bolivia’s economy has always been heavily reliant on extractive industries such as mining and hydrocarbons that have a substantial environmental impact.  Conflicts often arise in mining communities over the benefits of mining income versus the damage to the environment.  In addition, continuing contamination, such as the recent bursting of a damn holding toxic mining tailings in the Chuquisaca department, exacerbates the Morales administration’s inherited legacy of environmental degradations from centuries of mineral exploitation.
  • Violence Against Women: Violence against women and children has always been startlingly prevalent in Bolivia.  In March 2013, the Bolivian Congress passed a comprehensive a law to address these issues, which contained progressive ideas and preventative measures.  However, the government lacks the resources and political will to fully implement the law.  See this AIN update for more information.

4 violence stat

  • Unsafe abortions: This is another concern for women in Bolivia.  Abortions are illegal except in the case of incest, rape, or if the mother’s life is in danger. Pro-choice advocates had a partial victory in a February 2014 constitutional tribunal ruling that upheld the illegality of abortion, but threw out the rule that requires women to get a judge’s consent in the three permitted exceptions.  (See Emily Achtenberg’s article in NACLA for more information on this ruling.)  Lack of access to and information about sexual and reproductive health combined with cultural taboos and widespread sexual violence put women’s health at risk and severely limit their choices.  Although they are illegal, an estimated 60,000 abortions are performed in Bolivia each year, and only 46% of them are performed without complication.  See this AIN update for more information.

5 abortions
Source: La Razón

  • Judicial delay and prison overcrowding: The Bolivian justice system suffers from tremendous judicial delay, resulting in lengthy pretrial detention, as well as severe prison overcrowding.  Only 17% of prisoners in Bolivia are actually serving their sentence, while the other 83% are merely awaiting trial, which could take years.  After prison riot and fire that killed 35 people, Morales a pardon and amnesty decree in September 2013.  However, to date the pardon has benefitted only about 800 people. More comprehensive reforms, including the reduction of disproportionately high drug sentences (drug war prisoners make up almost half of all inmates) need to be enacted.

6 prisoners
Source: La Opinión

  • Legacy of dictatorships: Unlike neighboring Chile and Argentina, which initiated some legal action against those involved, impunity for authors of human rights violations continues in Bolivia.   A group of survivors of the dictatorship have maintained a vigil for more than two years outside the Ministry of Justice, demanding acknowledgment for the crimes of the dictatorship and the declassification of military files from the dictatorship era.  In 2004, the Bolivian government passed a law guaranteeing compensation to victims, but modifications have reduced the initial promised aid to 20%, and only 1,714 of the 8,000 who applied were approved to receive benefits.  See this AIN update for more information, as well as this Amnesty International report and BBC article.

 

7 dictatorship march
Photo: Gonzalo Ordoñez for AIN

Bolivian-US Bilateral Relations

  • A mutual lack of trust is the single largest impediment to improved bilateral relations.  This lack of confidence should be addressed as a prerequisite for reinstatement of ambassadors. In spite of a lack of ambassadors, bilateral relations have varied, depending on the skill of the Chargés and other officials from both nations.
  • A lack of transparency on the part of USAID and credible allegations that the agency was inappropriately aiding lowland opposition led Morales to expel Ambassador Goldberg in 2008.  USAID in Bolivia did not follow international agreements on development. See AIN background.
  • The Morales administration responds positively to genuine diplomatic gestures.  For example, November 2008 meetings with US congressional leaders permitted the sort of frank exchanges that can create rapport and lay the basis for more regular dialogue and better mutual understanding. See WOLA and AIN analysis on bilateral relations.
  • US decisions to “decertify” Bolivian drug control efforts since 2008 are increasingly disconnected from reality. Governments in the region continue to see the US determinations as offensive and politically motivated. More information here.
  • US funding steadily decreased since 2008.  Although the Narcotics Affairs Section, the Drug Enforcement Agency, and USAID are now gone, Bolivia has compensated with funds from its own treasury and increased support from the European Union.
  • Request for extradition of ex-President Gonzalo Sánchez de Lozada: Widespread resentment continues for the US refusal to extradite the ex-president for the death of 69 protestors in October 2003. Although US officials claim the charges are politically motivated, two-thirds of the Bolivian congress, where Sánchez de Lozada’s own coalition had a majority, voted to indict him. The Bolivian government submitted a new extradition request on July 10th, 2014 and the US has promised to respond within sixty days. The US is expected to reject this initiative.
  • US citizen Jacob Ostreicher accused of money laundering:  Although US representatives and Sean Penn have argued for Ostreicher’s innocence, charges against Ostreicher appear credible. He was subject to protracted pre-trial detention in violation of his due process rights, as is every Bolivian arrested on drug charges under drug legislation imposed by the US in 1988.  There was also a great deal of corruption around his case on the part of some Bolivian government officials.  He escaped from Bolivia at the end of 2013 and is considered a fugitive by Interpol.

Conclusion

Recurring protests and strikes from diverse sectors, including transportation workers, university students, and milk and meat producers have characterized the political and social landscape in the past few months.  However, this does not necessarily equate to discontent with the Morales administration.  Rather, many sectors are strategically taking advantage of election momentum to leverage to get demands met.  As one indigenous protester explained, “We’re not the opposition.  We just want the respect of our people and our rights and a solution.”

Although the administration’s performance has been mixed, Morales still enjoys widespread support and his party will most likely retain a majority in both houses of congress.  Furthermore, the opposition on both the left and the right lack a strong, representative, unifying candidate.  It is likely that Bolivian voters will opt for continuing the status quo.

Colquiri Conflict Continues

In late May 2012, conflict erupted in Colquiri, a mining district about 350km south of La Paz.  Salaried and cooperative miners who work in different areas of the same mine struggled to control territory.  Although the government, salaried workers, and cooperative miners reached an agreement on June 19th, conflict reemerged in September as cooperative and salaried workers continued to fight for control of the richest vein.  Tensions flared after cooperative miners killed a salaried miner and injured seven others during a march in La Paz, and Colquiri threatened to be a repeat of an incident in 2006 in Huanuni, Oruro that left sixteen people dead and 115 injured in a conflict over access to the richest veins.  The government issued a new decree that divided the mining rights equally between the salaried and cooperative miners, but tensions remain high in Colquiri.

Competition for mining rights

Violent competition for access to mining territory has become increasingly frequent in Bolivia.  The government’s closure of hundreds of mines in 1985 and the subsequent privatization of the mining industry throughout the 1990s gave rise to competition between newly formed, private cooperatives and the small number of remaining state-employed, salaried miners.  This dramatically changed the dynamics of mining and miners’ political power, there have since been many conflicts over access to resources.  (For background see AIN’s 2007 update, “Cooperative Miners in the Nationalization Process: Explosive Politics.”)

Salaried miner during a protest in La Paz; “Cooperativists – pay your taxes!”
Photo credit: Gonzalo Ordóñez

The government mining agency, COMIBOL, and Sinchi Wari, a subsidiary of Swiss corporation Glencore jointly administered Colquiri up until late June.  Cooperative miners are independent, artisanal miners whose income comes from the amount of minerals they extract rather than a fixed salary.

At the center of the conflict is the Rosario Vein, believed to be the richest in tin and zinc.  However, the government recently admitted its production potential is unknown, since Sinchi Wari took the only documentation when the mine was nationalized.

Violence Erupts Over Rosario Vein

On May 30th, cooperative miners forcefully took over the mine, occupying it until June 8th.  In response, salaried miners called for total nationalization.  Critics claimed that the government favors the cooperative miners because the incumbent Movement Towards Socialism (MAS) views the cooperativists’ support in the upcoming congressional elections to be more important.

 

“100% Nationalization of the Colquiri mine for Bolivia now!”
Photo credit: Gonzalo Ordóñez

In June, the government, cooperativists, salaried miners, and Sinchi Wari signed agreements, some of which were contradictory and resulted in blockades, marches, and threats from both cooperative and salaried miners.   In rejection of the government’s proposal to grant the most profitable vein to cooperative miners, salaried miners violently retook the mine on June 14th, leaving 22 people injured.  Over the next several days, cooperative miners blockaded, marched, and took over another mine operated by Glencore affiliate, Sinchi Wayra.

Cooperative miners refused to relinquish the Rosario vein.  On June 19th, the parties finally reached an agreement to nationalize the entire mine, but allowing cooperatives to still continue to exploit designated areas. The government allocated the majority of the Rosario vein to the cooperative miners and left a small portion for the salaried workers.

Source: La Razon
Caption: Characteristics of the Rosario Vein

  • The government handed over the greater part of the vein to cooperative miners.
  • A decree granted the southern sector to state mining company.
  • The 26th of February Cooperative obtained the concession for the northern sector.

The agreement failed to satisfy cooperative or salaried miners, and tensions boiled over into another violent confrontation on August 9th.  The armed forces confiscated explosives to prevent an escalation of violence.

After a brief period of peace, on August 30th, salaried miners forcefully took over the Rosario vein, demanding a reversal of the June agreement and threatening to detonate explosives and destroy the mine if their conditions were not met.  Shortly after, salaried miners went on strike and blocked access to the Colquiri Mine, installing guards around the mountain who threatened to throw dynamite at anyone who tried to pass the blockade.

Throughout September, salaried workers maintained their strike and blockade of the mine while cooperative miners held road blockades countrywide.  Both groups staged protests and marches in La Paz.  On September 18th, cooperative miners marched to the headquarters of the salaried miners’ union where salaried miners were stationed.  A confrontation ensued, and cooperative miners launched dynamite at the salaried miners, killing one and injuring at least seven more.

Salaried miner protest with the Bolivian Workers Central in La Paz
Photo credit: Gonzalo Ordóñez

Salaried miners retaliated in Colquiri by taking over cooperative facilities, blocking the entrance to the cooperative sections of the mine, burning two vehicles that belong to cooperative leaders, and threatening cooperative miners and their families.  Families of salaried miners also joined the retaliation.

Government Response

As per usual in these types of conflict, the government’s reaction was tardy.  After the death of the salaried miner, the government sent some 500 police officers to the area.  Police confiscated dynamite from both cooperative and salaried miners on multiple occasions, including once when cooperative miners tried to transport dynamite in an ambulance to use in a march.  Although the government responded late, it seems that government involvement may have helped avoid further violence; shortly after the death of the salaried miner in La Paz, cooperative miners arrived with eight buses of people, and salaried miners prepared to “resist the incursion,” but ultimately the cooperative miners decided against initiating a confrontation.

In the following weeks, there was strained dialogue between the government and both parties.  Cooperative miners from other areas joined the Colquiri cooperativists in installing blockades around the entire country.  The Bolivian Workers Central, the main union in Bolivia to which salaried miners belong, initiated a 72-hour strike in solidarity with the miners.

Salaried miner protest with the Bolivian Workers Central in La Paz
Photo credit: Gonzalo Ordóñez

In response to the death of the salaried miner, the government passed a decree criminalizing the possession and use of dynamite in protests.

On October 3rd, the government passed Supreme Decree 1368, which demarcated the zones of work for salaried and cooperative miners in the Rosario Vein and expanded the area miners are allowed to work.

For now, the conflict seems to have subsided.  However, with such tension between both groups who are working in close quarters, it is likely reemerge.

Mallku Khota Mining Mess: Analysis

Bolivian Mining Conflict in Mallku Khota: Analysis

The violent conflict around the Mallku Khota mining area and subsequent nationalization of the mineral deposit highlight the recurring issues in Bolivia of consultation, resource competition, and the role of transnational corporations.  The conflict is complex, and many aspects remain unclear.  An administration that ran on a platform against foreign exploitation of Bolivia’s rich resources inherited a contract with a corporation seeking to profit from one of the largest undeveloped silver and indium deposits in the world.  Communities with pre-existing conflicts in the area became further divided between those promised benefits from mineral exploitation and those that stood to lose more than they would gain if the project advanced to the exploitation stage.  Months of tension and hostility resulted between communities, police, and the mining company, causing in multiple injuries and the death of a protester.

South American Silver Corporation

In 2003, the North American company, General Minerals Corporation (GMC), bought the rights to the Mallku Khota concession and began exploring the area in 2004 under the subsidiary Compañía Minera Malku Khota  [sic](CMMK).  GMC formed the South American Silver Corporation (SAC) in 2006, which took over CMMK and began operating in Mallku Khota that same year.  According to SAC, the company has completed half of the exploration; extraction has not yet begun.

SAC’s contract extends to 2015, and the company projected to invest $50 million dollars during this period.[1]  SAC says it has invested over $16 million dollars since 2007.[2]  Its 2011 Preliminary Economic Assessment estimated that $411.4 million dollars of initial capital would be required for the extraction phase of the project.[3]  As a small, speculative company, SAC may have been planning on selling its investment or joining with a larger company to begin exploitation.  Substantial outside investment and guarantees against nationalization would have been necessary to continue the project .  Interestingly, SAC did not release a statement regarding the conflict until June 14th, two and a half months after the first kidnapping incident.[4]  Even then, the company downplayed the conflict, describing it as, “a small group of people carrying out illegal artisanal mining on exploration concessions owned by South American Silver” and “activists from outside the local community” that “have been encouraging confrontations between communities and attempting to interfere with work on the project.” [5][i]  SAC also echoed the erroneous assertion of Minister of Government Carlos Romero that the man who was killed during the conflict with police on July 5th died by his own hands.[6]

 

Mineral Deposit

Mallku Khota has one of the world’s largest undeveloped silver deposits and possibly the largest undeveloped indium deposit.[7]  Indium is a semiconductor used in touchscreens and liquid crystal displays (LCD) like computer monitors and flat screen televisions, making it a highly desirable resource with the rising popularity of these technologies.  There is estimated to be 140-230 million ounces of silver and 935-1,480 tons of indium in Mallku Khota.[8]  SAC also reports the existence of gallium (a semiconductor), copper, lead, and zinc.

Independent cooperativist miners also  illegally mine gold,[9] although, SAC did not previously report the existence of gold in their public reports.[10]  As recently as July 13th, SAC reported that gold makes up about 0.1% of the mineral deposit.[11]  Potosí governor Félix Gonzáles claimed the company’s failure to report the gold or the illegal exploitation helped fuel conflict between communities.[12]  In an interview several days later, SAC CEO Greg Johnson stated that they had not reported illegal cooperativist gold mining on the  concession, because it was “not economically that significant to our project.”[13]  He added that “it was causing conflict with other communities in the area,” and that there were accusations of environmental damage. [14]

 

Community Support and Opposition

Community support for SAC is highly disputed.  The Bolivian press and SAC report conflicting and inconsistent figures about the number of surrounding communities, as well as how many were in support of or opposition to SAC.  Los Tiempos quoted a report that estimated the opposition to SAC to be around 600 people,[15] but it also reported a week earlier that 8,000 anti-SAC protesters marched from Mallku Khota to La Paz.[16]  SAC maintains that 43 of 46 surrounding communities “strongly support” the company.[17]  Newspapers report between 44[18] and 45[19] communities in favor of SAC, comprising five[20][21] or six ayllus, but do not list the overall population or a total number of communities or ayllus in the area.[22]  SAC also asserted that several petitions have been signed supporting the company, although the press reported none of these.[23]

SAC claims to have undertaken development projects in local communities, but it is unclear how many or which communities benefitted from these initiatives.  The projects may have been unevenly distributed among communities, contributing to the conflict.  One local leader said SAC’s presence provoked divisions, noting, “They’ve played us against each other by putting money into our own social organizations.”[24] Employment opportunities with SAC also exacerbated friction.  It is unclear how local employment with the company is distributed in the communities.  On June 12th, anti-SAC protestors attacked three communities who had allegedly defended the company.  The Potosí governor identified some of the victims as SAC mine employees.[25]

It appears some communities received job training and education about the benefits of SAC’s project.  A non-governmental organization documented three projects funded by SAC– two educational programs about the benefits of the company’s project and one training participants for basic mining jobs.[26]

Environmental Issues

The environmental concerns about the mining project are considerable.  Because of the nature of the deposit, the minerals would have to be extracted using open sky exploitation, a technique with a high environmental impact.  Community members fear that mineral exploitation will contaminate the three major lakes in the area, which residents use to raise trout and water sheep and cattle.[27]  A government study revealed that there is already pollution in Mallku Khota Lake and other water sources in the area. Its causes, however, are contested.  The Bolivian government faults some 400 to 600 local families who use mercury in the process of illegally exploiting gold.[28]  However, the National Council of Ayllus and Markas of Qullasuyo (CONAMAQ), a confederation of highland Aymara-, Quechua-, and Uru- speaking indigenous communities, maintains that the contamination is from SAC.[29]

 

Prior Consultation

Protesters denounced that the community was not consulted prior to the initiation of SAC’s project.  According to the new Bolivian constitution passed in 2009, indigenous communities have the right to consulta previa, or “prior consultation,” before any exploitation of natural resources on indigenous territories occurs.[ii]  The state must consult residents of any communally held indigenous land title (TCO, tierra comunitaria de origen) before agreeing to any activity in the area.  The SAC concession directly affects 42 TCOs, and many residents understandably feel entitled to a consultation; it was a repeated demand in negotiations.[30]  Even communities who supported SAC asked that a prior consultation be carried about before the actual exploitation began.[31]

However, there are two complications.  First, GMC and subsequently SAC obtained the rights to the concession prior to the passage of the new constitution.  Second, the legislation specifies that consultation must be done before exploitation takes place, and the SAC project is still in its exploratory phase.  The lack of legislation interpreting prior consultation for projects that predate the new constitution creates a legal gray area in the conflict.

Celia Garcés  and the Center for Documentation and Investigation (CEDIB)

 Government’s Late Intervention

The Morales administration ignored requests of the governor of Potosí and local indigenous leaders to intercede before tensions exploded into violence.[32]  The government intervened only after the second hostage situation and outbreak of violence between community members in mid-June.

When several thousand Mallku Khota protesters marched to La Paz to demand the reversal of SAC’s concession, the police tear-gassed protesters, including children.[33] Vice-Minister of the Interior and Police Jorge Pérez claimed that unnamed outside sources funded the march and denied that police had detained the 15 protesters unaccounted for after the skirmish.[34]

On June 13th, after protesters took over a mining camp and attacked three pro-SAC communities, the government dispatched 230 police officers to the area,[35] which gradually rose to 500.[36]

On July 5th, anti-SAC protesters clashed with police. Four protesters sustained bullet wounds, and one was fatally wounded.  Medical professionals as well as representatives from the Permanent Human Rights Assembly confirmed that protester José Mamani Mamani died from a bullet that entered the nape of his neck.[37]  Minster of Government Carlos Romero denied that there was any confrontation with police.[38]  He also asserted that Mamani Mamani died because he drunkenly mishandled dynamite.[39]

In addition, at the site of Mamani’s death, a joint inspection by local authorities, including the Human Rights Ombudsman, revealed 24 used tear gas canisters, 30 bullet casings, four loaded bullet shells, 13 rounds of used 9-millimeter casings, a shotgun, and other police paraphernalia.[40]

Conclusion

Resource management issues have plagued the Morales administration, and are likely to continue to generate conflict .  The tension in Mallku Khota unfolded concurrently with a clash between miners in Colquiri, La Paz, as well as a series of protests in Cajamarca, Peru against a US mining company that left several dead.[41]

The Morales administration has consistently expressed the desire to develop Bolivia’s rich natural resources to bring social benefits to the population.  The strong anti-transnational platform that Evo Morales campaigned on makes it politically difficult to appear in favor of companies like South American Silver.  However, financial and technological limitations make it difficult to move forward with massive projects such as Mallku Khota without external investment, in spite of Vice-President Alvaro García Linera’s claim that the government willing and able to spend up to $1 billion dollars to develop this project.[42]

With the rising silver prices and the increasingly high demand for indium, Mallku Khota has the potential to generate substantial state income.  The challenge remains to figure out how the state can utilize Bolivia’s rich natural resources with minimal environmental impact and maximal benefit to Bolivians, only with the consensus and participation of the communities surrounding these resources.


[ii] Bolivian Political Constitution of the State, Feb 2009.

CAPÍTULO CUARTO
DERECHOS DE LAS NACIONES Y PUEBLOS INDÍGENA ORIGINARIO CAMPESINOS. ARTICULO 30.-I. Es nación y pueblo indígena originario campesino toda la colectividad humana que comparta identidad cultural, idioma, tradición histórica, instituciones, territorialidad y cosmovisión, cuya existencia es anterior a la invasión colonial española.II. En el marco de la unidad del Estado y de acuerdo con esta Constitución las naciones y pueblos indígena originario campesinos gozan de los siguientes derechos:
A existir libremente……4. A la libre determinación y territorialidad….6. A la titulación colectiva de tierras y territorios….7. A la protección de sus lugares sagrados…..10. A vivir en un medio ambiente sano, con manejo y aprovechamiento adecuado de los ecosistemas…. A ser consultados mediante procedimientos apropiados, y en particular a través de sus instituciones, cada vez que se prevean medidas legislativas o administrativas susceptibles de afectarles. En este marco, se respetará y garantizará el derecho a la consulta previa obligatoria, realizada por el Estado, de buena fe y concertada, respecto a la explotación de los recursos naturales no renovables en el territorio que habitan..16. A la participación en los beneficios de la explotación de los recursos naturales en sus territorios.  17. A la gestión territorial indígena autónoma, y al uso y aprovechamiento exclusivo de los recursos naturales renovables existentes en su territorio sin perjuicio de los derechos legítimamente adquiridos por terceros…III. El Estado garantiza, respeta y protege los derechos de las naciones y pueblos indígena originario campesinos consagrados en esta Constitución y la ley.

 


[1] http://erbol.com.bo/noticia.php?identificador=2147483961006
[2] http://www.soamsilver.com/july-10-2012-news-release.asp
[3] http://www.soamsilver.com/upload/Technical_Reports/110511_MK_PEA_Update_SEDAR.pdf
[4] http://www.soamsilver.com/june-14–2012-news-release.asp
[5] http://www.soamsilver.com/june-14–2012-news-release.asp
[6] http://www.soamsilver.com/july-8-2012-news-release.asp
http://www.lostiempos.com/diario/actualidad/economia/20120706/gobierno-muerte-en-mallku-khota-no-fue-por_177567_374938.html
[7] http://www.soamsilver.com/section.asp?pageid=14615
[8] http://www.swissinfo.ch/spa/suiza_y_el_mundo/internacional/Bolivia:_diez_heridos_en_choque_entre_indigenas_por_yacimiento_minero.html?cid=32729060
[9] http://www.lostiempos.com/diario/actualidad/economia/20120613/aumenta-tension-en-mallku-khota-por-toma-de-mina_174914_368565.html
http://www.nacionaldehuanuni.com/index.php?option=com_content&view=article&id=1155:curaca-cancio-rojas-es-enviado-a-la-carcel-por-gobernacion-potosina&catid=3:bolivia&Itemid=2
http://www.lostiempos.com/diario/opiniones/columnistas/20120612/mallku-khota-mineria-moderna-o-tradicional_174682_368107.html
[10] http://www.soamsilver.com/upload/pdfs/Investor-Materials/SAC_Corporate_Report_2011.pdf
http://www.soamsilver.com/upload/pdfs/Investor-Materials/Fact_Sheet_May_2012.pdf
http://soamsilver.com/section.asp?catid=3898&subid=3899
[11] http://www.la-razon.com/economia/Garcia-invertira-necesario-Mallku-Khota_0_1649835030.html
[12] http://erbol.com.bo/noticia.php?identificador=2147483961006
[13] http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2255563707
[14] http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2255563707
[15] http://www.lostiempos.com/diario/actualidad/economia/20120615/toman-megayacimiento-minero-en-mallku-khota_175154_369102.html
[16] http://www.lostiempos.com/diario/actualidad/economia/20120607/comunarios-de-mallku-kota-llegan-a-la-paz-piden-expulsion-de-empresa_174180_366928.html
[17] http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2255563707
http://www.soamsilver.com/july-10-2012-news-release.asp
[18] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59385
[19] http://www.lostiempos.com/diario/actualidad/economia/20120710/santalla-dice-que-rehenes-agredieron-a-comunarios_177952_375800.html
[20] http://www.eldiario.net/noticias/2012/2012_06/nt120629/nacional.php?n=21&-denuncian-secuestro-de-dos-trabajadores-de-la-companiia-minera-mallku
[21] http://www.lostiempos.com/diario/actualidad/economia/20120703/piden-intervenir-mina-y-gobierno-envia-comision_177161_373989.html
[22] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59385
[23] http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2255563707
[24] http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2255563707
[25] http://www.lostiempos.com/diario/actualidad/nacional/20120520/gobernador-pide-militarizar-zona-minera-en_172065_361903.html
[26] http://cumbredelsajama.com/es/?opc=ofertas
[27] http://www.la-razon.com/economia/Evo-Morales-concesion-Mallku-Khota_0_1646835305.html
http://www.la-razon.com/economia/Garcia-invertira-necesario-Mallku-Khota_0_1649835030.html
http://www.erbol.com.bo/noticia.php?identificador=2147483959256
[28] http://www.la-razon.com/economia/Denuncian-contaminacion-ambiental-Mallku-Khota_0_1621037925.html
[29] http://www.la-razon.com/economia/Denuncian-contaminacion-ambiental-Mallku-Khota_0_1621037925.html
[30] http://www.lostiempos.com/diario/actualidad/nacional/20120510/liberan-a-los-dos-policias-rehenes-en-mallku-khota_170951_359311.html
[31] http://www.opinion.com.bo/opinion/articulos/2012/0612/noticias.php?id=59780
[32] http://www.lostiempos.com/diario/actualidad/economia/20120703/piden-intervenir-mina-y-gobierno-envia-comision_177161_373989.html
http://www.la-razon.com/economia/comunarios-Mallku-Khota-presencia-autoridades_0_1631836901.html
http://www.eldiario.net/noticias/2012/2012_06/nt120611/politica.php?n=33&-pobladores-de-mallku-khota-exigen-seguridad-ante-los-avasallamientos
[33] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59375
[34] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59385
[35] http://www.la-razon.com/economia/comunarios-Mallku-Khota-presencia-autoridades_0_1631836901.html
[36] http://erbol.com.bo/noticia.php?identificador=2147483961000
[37] http://erbol.com.bo/noticia.php?identificador=2147483961000
http://www.la-razon.com/economia/Evo-Morales-concesion-Mallku-Khota_0_1646835305.html
[38] http://www.lostiempos.com/diario/actualidad/economia/20120706/gobierno-muerte-en-mallku-khota-no-fue-por_177567_374938.html
[39] http://www.lostiempos.com/diario/actualidad/economia/20120706/gobierno-muerte-en-mallku-khota-no-fue-por_177567_374938.html
[40] http://erbol.com.bo/noticia.php?identificador=2147483960978
[41] http://www.aljazeera.com/video/americas/2012/07/201278114549256192.html
http://www.bbc.co.uk/mundo/ultimas_noticias/2012/07/120704_ultnot_peru_declara_estado_emergencia_protestas_proyecto_minero_conga_jr.shtml
[42] http://www.la-razon.com/economia/Garcia-invertira-necesario-Mallku-Khota_0_1649835030.html

Timeline of Bolivian Mining Conflict in Mallku Khota

The several violent, reoccurring conflicts in northern Potosí over the presence of a Canadian mining company have finally been at least temporarily resolved by an agreement by the Morales government to rescind South American Silver’s mining concession.  After multiple violent clashes between community members, various demonstrations, a march to La Paz, three different hostage situations, and the shooting death of one community member during police intervention, the situation was finally resolved on July 10th with the signing of an agreement between community members and the government.  Among other things, the agreement reversed the Canadian company’s mining concession, promised compensation for injured community members, and guaranteed that the government would not take legal action against protesters, including those involved in the hostage situations.  An in-depth analysis of the events will follow this update.

 

Timeline of Incidents in Mallku Khota

April

  • April 1st: A group of community members opposed to the Canadian mining company, South American Silver (SAS), briefly took a community relations representative from the company hostage, but the incident did not receive much attention nationally.[1]

May

  • May 5th: Community members took a police officer hostage.
    • Police entered the community with arrest warrants for some community authorities.  The charges were initiated by SAS and presumably related to the kidnapping in April but the press did not specify.[2]
    • Community leader Cancio Rojas explained that the community was opposed to SAS because the community was not consulted before the concession was given and it feared that SAS would contaminate water sources in the area once exploitation of the minerals began.[3]
  • May 7th: Community members took a second police officer hostage.
  • May 9th: Protesters release police hostages after Potosí governor made vague promises of a community consultation. [4]
  • May 18th: A community meeting to discuss the fate of SAS turned into a violent confrontation that left dozens wounded.  Some 200 community members who are hostile to SAS arrived to the meeting unexpectedly, wielding dynamite and shouting accusations at meeting attendees.[5]
  • May 28th: Thousands of people Mallku Khota residents marched from their communities in northern Potosí to La Paz to demand the eviction of SAS.
  • May 31st: The Bolivian government reaffirmed that it would respect the Canadian company´s mining concession.[6]

June

  • June 7th: Protesters demanding the reversal of SAS’s mining concession arrive in La Paz.
  • June 8th: Police tear-gassed protesters, including children, in the Plaza Murillo.[7]  Protesters wounded some police officers.[8]
  • June 10th: Representatives from five Mallku Khota ayllus asked the government to send security forces to the area to avoid conflicts between local communities.  These ayllus claimed marchers represent Mallku Khota.[9]
  • June 12th: A group of approximately 700 anti-SAS community members attacked three pro-SAS communities.[10]  According to reports, the attackers included cooperative miners who supposedly illegally exploit gold in the area.
  • June 12th: Some 6,000 community members opposed to SAS took over a mining camp in the area.  Using dynamite and trenches they had dug, they impeded access to the entrance.[11]
  • June 13th: The government dispatched 230 police officers to the area.
  • June 28th: The government released Cancio Rojas from prison and put him under house arrest in Potosí.  The community authority was accused of damaging the SAS’s equipment and kidnapping police officers in May.
  • June 28th: Community members took  two engineers from SAS hostage, accusing them of spying.[12]  The engineers admitted to dressing up in traditional clothes from the area, considered a serious offense for an outsider, and taking pictures during a community meeting.[13]

July

  • July 2nd: Anit-SAS community members took three more SAS employees hostage, presumably  when they raided and burned a mining site in Sacani. [14][15]
  • July 3rd: The Cochabamba police commander sent 150 officers to the area.[16]
  • July 5th:  Three SAS hostages escaped.[17]  By this date, there were 380 police officers stationed in the area.
  • July 5th: Four community members sustained gunshot wounds, and one died during a conflict with police.[18]  Protesters took one police hostage.
    • The Morales administration staunchly denied that any confrontation with police, and insisted that the fatally wounded protester, José Mamani Mamani, died because he drunkenly mishandled dynamite.[19]
    • Medical examiners, however, confirmed he died from a bullet entering the nape of his neck.[20]
    • A joint inspection by local authorities found 24 used tear gas cans, 30 bullet casings, four loaded bullets shells, 13 rounds of used 9 millimeter casings, and other police paraphernalia at the site of Mamani Mamani’s death.[21]
  • July 7th: State entered dialogue with community members.[22]
  • June 8th: Community members and government reached a preliminary agreement and liberated remaining hostages.[23]
  • July 10th: Community members and the government signed an official agreement.[24]  The agreement included: [25]
    • Reversion of mining concession
    • Compensation for the family of José Mamani Mamani
    • A job for a relative of Mamani Mamani
    • That the government pays for all the medical expenses for the four community members who were shot by police
    • A guarantee that no legal action will be taken by the government against any of the community members
    • An investigation looking into the police officers and corresponding legal action if merited
    • Compliance with community justice sentence for engineers
      • In a local trial, community authorities mandated that the engineers must build 1,000 adobe houses in 30 days after they recover for injuries sustained in their captivity.[26]
    • Legal support for community authority Cancio Rojas, who has been charged with several crimes related to the conflict.


[1] http://www.la-razon.com/economia/Mallku-Khota-SA-denuncia-rehenes_0_1641435885.html
[2] http://www.lostiempos.com/diario/actualidad/nacional/20120510/liberan-a-los-dos-policias-rehenes-en-mallku-khota_170951_359311.html
[3] http://www.lostiempos.com/diario/actualidad/nacional/20120510/liberan-a-los-dos-policias-rehenes-en-mallku-khota_170951_359311.html
[4] http://www.lostiempos.com/diario/actualidad/nacional/20120510/liberan-a-los-dos-policias-rehenes-en-mallku-khota_170951_359311.html
[5] http://www.la-razon.com/ciudades/Pelea-Mallku-Khota-heridos-desaparecidos_0_1616838339.html
http://www.lostiempos.com/diario/actualidad/politica/20120519/violencia-entre-ayllus-del-norte-de-potosi_171996_361733.html
[6] http://www.paginasiete.bo/2012-06-01/Nacional/Destacados/29Cul00101-06-12-P720120601VIE.aspx
[7] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59375
[8] http://www.opinion.com.bo/opinion/articulos/2012/0608/noticias.php?id=59364
[9] http://www.eldiario.net/noticias/2012/2012_06/nt120611/politica.php?n=33&-pobladores-de-mallku-khota-exigen-seguridad-ante-los-avasallamientos
[10] http://www.lostiempos.com/diario/actualidad/economia/20120613/cooperativistas-atacan-tres-comunidades-en-mallku_174878_368477.html
[11] http://www.la-razon.com/economia/comunarios-Mallku-Khota-presencia-autoridades_0_1631836901.html
[12] http://www.la-razon.com/economia/Comunarios-condicionan-libertad-ingenieros-Presidente_0_1641435905.html
[13] http://www.opinion.com.bo/opinion/articulos/2012/0710/noticias.php?id=63236
[14] http://www.la-razon.com/economia/Comunarios-secuestran-tecnicos-Mallku-Khota_0_1643835662.html
[15] http://www.eldiario.net/noticias/2012/2012_07/nt120703/sociedad.php?n=71&-campamento-de-empresa-minera-es-saqueada-y-quemada-por-comunarios
[16] http://www.lostiempos.com/diario/actualidad/economia/20120704/secuestran-a-otras-3-personas-en-mina_177274_374204.html
[17] http://www.la-razon.com/economia/Evo-concesion-compania-Mallku-Khota_0_1648635155.html
[18] http://www.lostiempos.com/diario/actualidad/economia/20120706/mallku-khota-cuatro-heridos-de-bala-son-atendidos-en_177578_374958.html
[19] http://www.lostiempos.com/diario/actualidad/economia/20120706/gobierno-muerte-en-mallku-khota-no-fue-por_177567_374938.html
[20] http://erbol.com.bo/noticia.php?identificador=2147483960926
[21] http://erbol.com.bo/noticia.php?identificador=2147483960978
[22] http://www.la-razon.com/economia/comunarios-Mallku-Khota-liberan-rehenes_0_1647435266.html
[23] http://www.lostiempos.com/diario/actualidad/economia/20120709/gobierno-logra-acuerdo-y-liberan-a-tres-rehenes_177841_375577.html
[24] http://www.la-razon.com/economia/Evo-concesion-compania-Mallku-Khota_0_1648635155.html
[25] http://www.la-razon.com/economia/comunarios-Mallku-Khota-liberan-rehenes_0_1647435266.html
[26] http://www.eldiario.net/noticias/2012/2012_07/nt120709/sociedad.php?n=39&-tres-ultimos-rehenes-son-liberados-tras-diez-dias

Is Bolivia Ready to Export Lithium?

On October 11, Bolivia’s Mining Minister Jose Pimentel stated that Bolivia plans to start production of lithium carbonate and potassium chloride for export this month, and expects a finalized product by January or February.[i] However, it is unlikely that Bolivia’s lithium carbonate will be available on the international market in the near future.

At an isolated pilot plant, Bolivian and international scientists have been working to develop a process to separate lithium from other minerals present in Bolivia’s Salar de Uyuni salt flats.  The unique climatic conditions and mineral concentration of the Salar present special challenges, and it is unclear whether the extraction process has been perfected.  Between October and March the region receives significant rainfall, which could negatively affect evaporation and separation.  This separation process can take up to 18 months, even without foreseeable rainy season delays.[ii] Furthermore, a successful trial run at the pilot plant would represent the first time lithium carbonate has been produced outside a laboratory in Bolivia.

The pilot plant, when fully functioning, should produce up to 480 metric tons of lithium carbonate per year, a small amount in comparison to regional competitor Chile’s annual production of 40,000 metric tons.  With lithium carbonate prices at five dollars per kilogram (April 2010), the potential sale of 40 tons a month seems fiscally feasible for a pilot plant that cost the Bolivian government $5.7 million.  Moreover, Bolivia and South Korea signed a deal for future investment in lithium in August 2010.

However, information about the Bolivian government’s economic strategy to get its lithium to market is not readily available.  Aside from the challenges of locating the “best market,” Bolivia faces immediate infrastructure hurdles.  The logistics of transporting the lithium to port in a region where roads and electricity are limited further complicate exploratory efforts.

Rebecca Hollender is lead author of “Bolivia and its Lithium; Can the ‘Gold of the 20th Century’ Help Lift a Nation out of Poverty,” (May 2010).  The report is available in English and Spanish at: http://www.democracyctr.org/bolivia/investigations/lithio.htm.


[i] “Bolivia to Start Producing Lithium in October for Export, Minister Says.” Bloomberg. 12 October 2010.

[ii] Estimate based on Chile’s lithium carbonate production methods.

Wright on Bolivian Lithium: Interesting, but Not Quite Right

It’s not the first time a respected, established journalist has presented a selective view of events in Bolivia.  In general, Lawrence Wright’s New Yorker article “Lithium Dreams” covers a great deal of territory, but lacks objectivity and thorough research in some areas.

Some errors are simple and avoidable, such as misspelling Pablo Solón, Bolivian ambassador to the U.N.’s name, or confusing the timeline of key incidents.  Wright claims, “After President George W. Bush placed Bolivia and Venezuela on a blacklist, saying that neither country was doing enough to combat drug trafficking, Morales and Chavez expelled their respective ambassadors.”  Morales actually expelled Ambassador Goldberg and Chávez followed suit on September 11 four days before the U.S. “decertification” of Bolivia’s antinarcotics initiatives.  Both assertions could have been easily verified by fact-checkers.

Other inaccuracies stem from partial truths or unnecessary hyperbole, and tend to gloss over the complex dynamics at play in Bolivia.  For instance, Wright laments that Bolivia did not take advantage of silver production in the sixteenth and seventeenth century – without recognizing the inherent workings of the Spanish colonial system of extraction and exploitation.

The Uyuni town square in the sunshine in December, 2005. Features children playing by a small monument and a beautiful colonial-style building in the background.
Uyuni town square over four years ago. (Jialiang Gao. December 2005.)

Wright’s statement that “before Bolivia can hope to exploit a twenty-first century fuel, it must develop the rudiments of a twentieth-century economy” narrowly evaluates progress from the perspective of the most-developed nations, placing much of the world in this backward category.  He exaggerates to sustain his hypothesis by inaccurately demoting the largest town near the Salar, Uyuni, to “a mud-brick town perched on the perimeter of the salt flat.”  Although Uyuni is no metropolis, the majority of its buildings are not made from adobe.  Furthermore, although road infrastructure and other transit routes need improvement in many areas of Bolivia, there are several roads leading to Uyuni, not just the single-lane dirt road that Wright describes.

Misreading Morales’ “Obsession” and Bolivian Government Initiatives

It is true that the Morales administration has made little progress on lithium extraction and international contracts to exploit it, and it appears unlikely that this will change in the near future.  It remains unclear how this will impact the currently stable Bolivian economy in the long run.  Yet Wright oddly concludes that unless the Morales administration immediately cuts a deal with multinationals or rushes to extract and sell the lithium themselves, all hope is lost:

“[Morales’s] obsession with preventing the Salar from becoming another Cerro Rico may also keep it from ever becoming a source of Bolivian wealth. Until his regime can come to an agreement with a multinational corporation—or figure out on its own how the mine the treasure in the Salar de Uyuni at a competitive global price—its lithium will remain forever stuck in the brine, as will Morales’s dreams of Bolivian batteries and electric cars.”

Although a high level of international interest currently exists, Wright makes it seem like now is the only time to sell the metal.  He also implies President Morales will likely extend his tenure beyond his elected five-year term, describing his presidency as a “regime,” although Morales repeatedly asserts he will not seek reelection after his second term, in accordance with the Bolivian constitution.  Moreover, suggesting that the Salar is Morales’s “obsession” reveals that the author doesn’t understand how overambitious and overextended Morales and the MAS government are, in fact leaving little time for any single-minded focus.

Wright even refutes his own hypotheses.  He argues that Bolivia is a victim of the “resource curse,” stating that “Bolivia has its own chaotic political history, and a long tradition of failing to use its wealth to develop its infrastructure to provide decent training and education for its citizens.” Yet, several paragraphs later he adds that “the average teacher’s salary has risen by forty percent,” and “some of the money from gas revenues has gone to subsidize school lunches, to create a form of social security for the elderly, and to provide incentives for mothers to keep their children in school.” All of these government programs, initiated during Morales’ tenure, reflect an effort to invest resource income to benefit Bolivians.

Missing the Mark on Hydrocarbons

Wright provides a narrow, incomplete assessment of Bolivia’s natural gas industry and the “nationalization” of hydrocarbons:

“The [nationalization] approach, though popular with Morales’s base, is seen by many economists as shortsighted:  the foreign gas companies that developed the Bolivian natural-gas fields, after their discovery in 2000, have experienced dramatic declines in their profit margins, leaving in doubt their future investments in the country.”

There are many problems with this statement.  First, Wright suggests that the Morales administration’s nationalization initiative cut foreign investors profits.  In fact, the majority lost the bulk of their profits as a result of the Hydrocarbons Law implemented in 2005 during the administration of Carlos Mesa, a source quoted repeatedly in the article.  The “nationalization” process primarily consisted of the purchase of a majority of shares from Chaco and Transredes international consortiums and one refinery from Petrobras.  This was an incredibly costly process for Bolivia, but did not affect all international investment.

Of the remaining foreign investors in the Bolivian gas industry, only one, CHLB, reacted negatively to policy changes and is seeking international arbitration.  All others, including BG, Pluspetrol, Petrobras and Total, continue investing in Bolivia with no apparent plans to pull out.[i] Furthermore, although exploration revealed huge additional natural gas deposits in 2000, existing reserves were already being exploited, contrary to Wright’s assertion of their “discovery in 2000.”

Wright presents further half-truths.  He continues, “Bolivia’s neighbors, meanwhile, have turned to more reliable sources of natural gas.”  It is true that Brazil has begun to actively explore offshore options and has reduced the amount of gas purchased from Bolivia, yet in November 2009 the Brazilian ambassador to Bolivia confirmed that his country would continue to purchase 30 million cubic meters a day until 2019, as previously agreed, and stated that it was probable that the contract could be extended.[ii] Although Argentina discovered its own natural gas reserves, the nation plans to renew its existing contract to purchase Bolivian natural gas on March 26.  The new contract stipulates sales to Argentina of 5 million cubic cm per day for the next three years, gradually increasing to 27 cubic cm per day by 2017.[iii] Furthermore, Bolivia recently signed an agreement with Uruguay to buy natural gas, and Paraguay has also expressed interest.  Regional negotiations are about to begin to identify how to best transport gas throughout the region.

Admittedly, along with lower prices, natural gas production has failed to increase.  This delay, paired with flourishing contraband of subsidized gas canisters to neighboring Peru, has led to frequent internal shortages.  A lack of reinvestment in the industry has also dampened production potential.  Yet, Carlos Mesa’s statement cited in the article is inaccurate: “[T]he former Bolivian President, says that gas production has fallen to the point that the country is now importing it.”  In truth, Bolivia imports diesel and sometimes gasoline, but does not import natural gas.  Mesa continues, “’We produce less and less,’ he said, calling the situation a ‘disaster.’” Although restricted production provoked internal shortages, it did not cause significant economic problems.  In fact, according to Reuters in late 2009, “State revenue from the key natural gas sector boomed to $2.65 billion last year, from just over $1 billion in 2005, and revenue from the mining sector increased fourfold in the same period to $128.1 million.”

In spite of difficulties in the hydrocarbons sector, increased revenue and advantageous economic moves in other areas have put Bolivia on comparatively strong overall economic footing.  In January the IMF noted:

“Increased export volumes of gas and mining and the concurrent boom in commodities prices led to a 230 percent increase in export receipts between 2005 and 2008. […] The external and fiscal positions strengthened sharply during the boom years.

Larger export receipts, coupled with higher taxation of the hydrocarbon sector and moderate rates of increase in government spending, led to substantial external current account and fiscal surpluses. […] These surpluses contributed to the build-up of a comfortable reserves buffer, which—added to the debt relief obtained under Multilateral Debt Relief Initiative (MDRI)—turned Bolivia into a net external creditor in 2008.”

However, if we accept Mesa’s claims of “disaster,” it is important to factor in recurring multiple problems related to the Morales administration’s resource management and extraction efforts. These issues include widespread corruption allegations, as well as problems with output and technical capacity in the national hydrocarbons company and the Mutún iron foundry.  In light of these very real challenges, an extremely slow, measured approach by the Bolivian government – whether by design or default – and not the rapid “now or never” action recommended by Wright appears to be the most prudent course.

Mystifying Morales

The middle section of the article, based on conversations with several Bolivian ex-advisors, breaks with the analytical focus of the rest of the piece, and Wright largely bases his assessment on a few sources who are not experts on resource management.  For example, he frequently cites Fernando Molina, claiming the journalist is “one of Bolivia’s best-known intellectuals,” when in fact he does not enjoy that reputation.  Molina presents some questionable analysis, such as oversimplifying and minimized the Aymara world view: “The Aymara see the world as a fight between the forces of good and the forces of evil, like in ‘Star Wars.’”

Wright also attempts to shed light on President Morales’ moral character, describing the leader after accompanying him on an official presidential trip.  Although the author often quotes Morales directly, the rest of his portrayal seems to imply that Morales is alternately quirky and paranoid.  He writes, “Morales, who is fifty, is a creature of his biography.”  Characterizations of an indigenous president merit extra diplomacy, and the following description of Morales’ formation as a leader can be interpreted as objectifying the president as an exotic rarity.

Furthermore, Wright asserts that Morales possesses a “mystical attachment to coca.”  Despite the traditional and spiritual significance of coca, Morales’ primary connection, like that of tens of thousands of Bolivian families, is a pragmatic reliance on the leaf as a source of economic subsistence.  Wright later criticizes Morales’ statement that “social control” to limit coca farming is “vague.” Perhaps this term was unfamiliar to the author, but it is specifically defined and implemented in the Chapare region, where Morales still leads coca growers’ unions.[iv]

Wright seems to use an unfair yardstick to criticize Morales in his presidential persona.  He describes how Morales imposes exaggerated security measures such as sending his luggage on separate flights, and would rather call his own doctor during international travel or use a common Bolivian home remedy for an earache – implying Morales does not trust U.S. doctors.   Comparatively, Barack Obama’s security is a great deal more elaborate, and it is not at all rare for presidents to consult their own physicians while out of the country.

He also claims that Morales “fired” ex-Justice Minister and indigenous union leader Casimira Rodriguez because “She didn’t seem to be learning anything.”  Although Wright is quoting Morales’ former campaign advisor in this instance, he offers no further information to put this comment into perspective.  Rodriguez’s removal from the post did not reflect a lack of ability on her part; she left office at the same time that about a third of the cabinet turned over.  The author does not seem to understand that MAS views these ministerial posts as rotating appointments to be shared by different key constituencies.  Whether or not you agree with this political strategy, the reality fails to support Wright’s hypothesis that Morales’ “nontraditional appointments” demonstrate poor judgment.

Conclusions

If Wright had accurately assessed the numerous impediments Bolivia faces in its attempt to extract lithium and negotiate international contracts, his article could have made a significant impact.  There are no guarantees that lithium exploitation in Bolivia will be successful, but the author oversteps his bounds and overshadows his more salient points by dramatizing the issue and creating a false sense of economic crisis and urgency for lithium exploitation.

Wright’s historical segments on the demand for lithium seem even-toned and balanced. In contrast, the information about Bolivia is dramatic, incomplete and misleading.  Wright’s tone reflects a common problem with outside reporting on Bolivia: journalists often lack the information and input they need to contextualize their hypotheses and affirmations.  In the absence of a solid frame of reference, they tend to exaggerate existing ironies or trivialize the nation’s political dynamics.  Furthermore, Wright, like others before him, relies too heavily on a handful of interviews or “experts,” and as a result, perhaps unintentionally, reflects their biases.


[i] For examples of recent  foreign investment in the hydrocarbons industry: http://www.reuters.com/article/idUSN2638135520091126?feedType=RSS&feedName=everything&virtualBrandChannel=11563, http://www.eldiario.net/noticias/2010/2010_02/nt100210/3_01ecn.php

[ii] http://spanish.peopledaily.com.cn/31617/6800343.html

[iii] http://www.laprensa.com.bo/noticias/230210/noticias.php?nota=23_02_10_nego1.php

[iv] The latest UNODC Coca Cultivation Report points out that, although the social control method faces challenges in some areas of Bolivia, in the Chapare region the cato restriction for coca production is largely observed. For further information on social control in the Chapare, please refer to AIN’s report: “Obama’s Bolivia ATPDEA Decision: Blast from the Past or Wave of the Future?” at http://ain-bolivia.org/2009/08/obama%E2%80%99s-bolivia-atpdea-decision-blast-from-the-pa/#hide.

Part III: Bolivia’s Mining Rollercoaster: Negotiating Nationalization

Re-inserting the State

Beginning in October 2006, the Morales administration has taken measures to reinsert the state into the mining sector, including the May Day presidential decree giving state institutions such as the mining company, COMIBOL, greater control.  The administration also seeks to increase the state’s share of the earnings in light of skyrocketing prices for Bolivia’s principal minerals: silver, gold, tin and zinc.  The Morales administration has negotiated several times with the 50,000 cooperative miners, who supported him during the 2005 elections and who represent 80% of Bolivia’s miners, offering them concessions in his “nationalization” plan.

The Latest Conflict …and Agreement

Both sides reached a new agreement on July 20 after five days of roadblocks.  The roads around Potosi, one of the largest and oldest mining centers, had been completely blocked by the cooperative miners.  Five days earlier, police turned back 1,500 cooperative miners outside La Paz, as they prepared to march to protest a MAS proposal for the new mining code.  The miners took issue with the proposal that all joint venture contracts and leases with COMIBOL, including those of mining cooperatives, must be renegotiated and approved by congress.  The FENCOMIN miners said that President Morales promised them the new mining code would not include these changes.  Furthermore, cooperative miners demand that the new constitution officially recognize their right to mine as “self-employed” miners.

The agreement reached on July 20, according to FECOMIN’s President, Andres Villca, responds to “ninety-eight percent” of their demands1  and will strengthen the already strong cooperative miners’ position in the mining sector, which includes private companies and the re-emergent COMIBOL as well.  The agreement includes respecting areas where cooperative miners are working; extending the leases and shared-risk contracts that cooperative mining companies have signed with the state; a promise from the government to give access to richer areas of Bolivia’s mines to the cooperative miners;2 and a promise from the Morales administration that it will take steps to insure that the cooperative miners are fully recognized in the new constitution.  Villca also indicated that the agreement recognizes the government’s obligation to protect mining areas from takeovers, a practice that cooperative miners have used in the past to gain access to richer veins and wealthier mines.

Depleting Mines: a “Time Bomb”

However, access to more mines and richer veins is still a largely unresolved issue between the government and the cooperative miners.  The mines in which the cooperatives currently work are quickly becoming exhausted.3   According to the Mining Minister, Luis Alberto Echazú, at this time Bolivia is only exploiting 30 percent of its mines. A lack of investment over several years has prevented the exploration and opening of new mines. Without access to additional mines, the 50,000 cooperatives will have few places to earn a living while mineral prices are some of the highest in history.  This situation has been described as “time bomb”4  which could explode into protests, roadblocks and mine takeovers if thousands of cooperative miners left without access to the minerals.

The Tax Debate

Pending issues in the Morales’ administrations attempt to reactivate the mining industry include a new mining code redefining the state’s ownership of mining operations and, most controversial, taxes on transnational mining companies’ profits.  The proposed MAS tax plan is a 50-50 split on the profits, up from 35 percent, and the elimination of a sales tax credit that companies can currently apply to their income tax.5  

An executive for San Cristobal Mines, an affiliate of the US Apex Silver Mines, expressed concerns over some other aspects of the MAS proposed tax plan.6   Vice President of the San Cristobal Mine, Geraldo Garret, said that while they were committed to remaining in Bolivia due to the large investment they have made and the potential for profits, he lamented that the company might be required to pay up to 70-90 percent of the profits if additional surtaxes are enforced.7   However, Minister Echazú questioned Mr. Garret’s concern for lost profits given that the proposed surtaxes would be applied only when earnings reach high levels.

In addition to the tax plan ex-Mining Minster, Jorge Espinosa, recently stated that the Bolivian mining sector is not sufficiently secure to make it an attractive choice for foreign investors. A point that Peruvian mining consultant, Walter Belaunde, emphasized when he offered the models of neighboring Chile and Peru who guarantee stable tax plans in the contracts they sign with mining corporations.8  The Morales administration insists that an updated mining policy would create secure conditions for foreign investors and regularly points out that guarantees already exist.

Environmental Concerns

While the Morales administration has said that environmental groups will play a role in policy development, environmental advocates remain skeptical. Given pressures from cooperative miners and private companies, many doubt that the Morales administration has the political will and capacity to implement a mining policy that offers greater environmental protection. At this point it is unclear how the new mining policy will offer such assurances.

El Mutún

In the midst of negotiating with the cooperative miners and debating mining taxes, the Bolivian government celebrated the signing of a contract with Jindal Power and Steel of India to begin the exploitation of the Mutún iron mine in the eastern department of Santa Cruz. Reportedly one of the largest iron ore deposits in the world, Jindal has committed to investing $2.1 billion in the next 10 years and will exploit half of the mine over the next 40 years. The Bolivian government estimates that when fully operational the state will receive over $200 million a year in revenues.

Huanuni

President Morales also signed into law the nationalization of the Posokoni tin mine in Huanuni, Bolivia’s largest tin mine and the sight of a massive conflict between cooperative miners and COMIBOL miners in October 2006.  The initiative received mixed reviews. The signing was postponed a day after a cooperative miner from Huanuni tried to enter the government palace just before the ceremony carrying dynamite in his backpack.

Negotiating “Nationalization”

The dynamic of three major actors in the mining sector – cooperative miners, multi-national mining corporations and a re-emergent state – in a country where until recent decades the mines were its economic motor, presents major challenges as the Morales administration attempts to keep its electoral promises to recuperate the nation’s natural resources. Elevated mineral prices and potential profits create urgency on the part of all interested parties to upgrade and reactivate the sector as quickly as possible. This is especially true of cooperative mining interests who seek to maximize short-term profits rather than long term investment.

Clearly, a weak COMIBOL and lack of investment in the mining sector9  weakens the attempts of the Morales administration to implement fully its nationalization plan, a situation that the cooperative miners have not hesitated to exploit.10   Yet, in this respect Morales eludes the convenient label of “socialist” that so many western and even Bolivian journalists assign him. He has demonstrated a willingness to negotiate a “nationalization” plan that is pragmatic and, far from radical, that seeks partnerships between the state and private enterprise. Perhaps, a more radical plan would also be more responsive to environmental concerns. What remains to be seen is if President Morales will be able find a balance that lives up to his election mandate while keeping the cooperative miners sufficiently satisfied and attracting much needed foreign investment.

 


1 La Patria. “Tras negaciones: Gobierno garantizó áreas de trabajo y los contratos con  Cooperativistas.” July 23, 2007.
2 This meets a longstanding cooperative miner demand and was the central issue that led to the October 2006 conflict at the Posokoni tin mine in Huanuni that left sixteen people dead and 115 injured.
3 For example in Cerro Rico, the historic silver mine in Potosi, there are currently over 16,000 cooperative miners extracting the little silver and zinc left in the mine. So much mineral and ore have been extracted over the centuries that some have warned that the mine could collapse at any moment.
4 La  Razón.  “La caída en los precios es un peligro por los cooperativistas.” July 29, 2007.
5 According to the 1997 Mining Code companies currently pay a Complimentary Mining Tax (CMT) which is a tax paid on the sale of minerals.  The CMT varies between 1% and 10% depending on the mineral and the market price. Mining companies also pay a Corporate Income Tax (CIT) based on the net profits. The CIT is credited to the CMT. The CMT is like a “prepayment” of the income tax. For example, if a company pays $100 CMT and their CIT is $120 then they are credited $100 through the CMT and pay only an additional $20. If the CMT is higher than their CIT then companies pay the total amount of the CMT and do not pay an additional amount for the CIT.  The Morales administration proposal increases the CIT another 10 percent and eliminates credit for companies when they pays the CMT. So, according to the proposal companies would have to pay both the CMT and the full CIT. Furthermore, the proposal expands the minerals and metals included in the CMT to include previously excluded ones such as iron, copper, antimony, and bismuth. Ref. Ley 1777: El Código Minero, Titulo VIII, Capitulo III, Art.  100.
6 San Cristobal is in the process of developing a large open pit silver and zinc mine in the department of Potosi. They own 65 percent stake in the mine while Japan’s Sumitomo Corp. holds the other 35 percent. The say they will be investing over $700 million in the mine which the company describes as one of the largest silver deposits in the world and which has just come on line. Reuters. “Apex produces silver concentrates at Bolivian mine.” August 7, 2007.
7 Reuters. “Bolivia’s San Cristobal concerned about mining taxes.” July 27, 2007.
8 La Razón.  “La minería tiene pocas opciones.” July 27, 2007
9 See previous memos “Mining Policy in the Morales Administration: Reactivation and Conflict. Parts I and II.” The mining bust of the mid-eighties that led to the firing of 40,000 COMIBOL miners and the neoliberal economic policies of the last two decades that Bolivia implemented and formed the basis for the current mining code have left COMIBOL a shell of its former self. The political and social instability of recent years and a lack of access to the sea have also added to Bolivia’s problems in attracting the high levels of foreign investment.
10 Many see the cooperative miners as sharing many of the same interests as corporate mining companies. For example, both want a limited role of COMIBOL and the State, and both want to limit the taxes on their earnings. However, most Bolivian based cooperative miners are also interested in limiting the amount of access that foreign companies have to Bolivian mines and have resisted the presence of foreign operations; at times attempting to take over mines or parts of mines where foreign companies are working. Yet, they also know that foreign investors can bring needed upgrades in technology and equipment.

Mining Policy in the Morales Administration: Reactivation and Conflict

Protest by cooperative miners in La Paz at the San Francisco church, February 15, 2007. The signs say "We demanded daily bread for our children" and "The cooperative miners demanded the return of our sources of work in our deposit in the hill. Posokoni." President Morales has announced plans to commence a new era in Bolivian mining in 2007. The year 2006 saw the highest mining revenue since 1985 and exports jumped from $346 million in 2005 to over $1 billion in 2006. Increased demand for minerals, in large part c from China and India, has revitalized the Bolivian mining sector.  Price increases on the world market for Bolivia’s most profitable metals – zinc, silver, tin, and gold – has heightened hopes that mining can again become a dominant industry, as it had been for most of the nation’s history.  If the reactivation of the industry and tax reform can be structured and implemented effectively, the current mining boom could benefit most Bolivians for the first time.

The Morales administration has promised that greater mining income, in addition to increased hydrocarbon revenues, will fund social and health programs for citizens throughout Bolivia. However, the potential profit gains and greater state control have both raised expectations and anxieties of other interested groups. Private mining companies anticipate that skyrocketing demands for minerals will bring increased profits but fear that the state will expropriate their investments through the nationalization process. Communities most affected by mining, some of the most polluted and impoverished regions, hope that the reactivation of the mining sector and greater state control will guarantee greater benefits for their communities. Environmentalists worry that without greater environmental protection, exploitation of new mines will worsen water contamination and other environmental conditions in the world’s eighth most biologically diverse country.  

The diverse groups of miners are also struggling, amongst themselves and with the government, to determine who will receive the rights to work in the mines and on what terms.  Follow the links below to read the complete three part series on Bolivia’s mining sector from the Andean Information Network.  

Part I

Cooperative Miners in the Nationalization Process: Explosive Politics

On May 1, 2007, one year after the “nationalization” of the hydrocarbons industry, Bolivian President Evo Morales declared all Bolivian territory a public mining reserve and reasserted that all minerals, metals, precious and semi-precious stones are under the jurisdiction and power of the State mining company, Bolivian Mining Corporation (COMIBOL), excluding concessions granted before the decree.

 

Part II

An Emerging Mining Policy for Bolivia

On May 1, 2007, one year after the “nationalization” of the hydrocarbons industry, Bolivian President Evo Morales declared all Bolivian territory a public mining reserve and reasserted state jurisdiction and control over all minerals, metals, precious and semi-precious stones. The state mining company, Bolivian Mining Corporation (COMIBOL) now administers all mineral wealth except concessions granted before the decree.  The decree also requires that the National Geological and Technical Mining Service complete a study previously unexplored and prospected areas to give the government and COMIBOL a more precise assessment of the vast mineral wealth within the nation’s borders. The decree prohibits granting further concessions, and freezes those currently under negotiation until a study can be completed.1

 

Part III

Bolivia’s Mining Rollercoaster: Negotiating Nationalization

Evo Morales became president with an electoral mandate to reclaim state control over the nation’s natural resources.  For Bolivia’s mining sector, this means maintaining a balance between the interests of cooperative miners, attracting much needed foreign investment and increasing the State’s take on the earnings. This update on the nationalization of Bolivia’s mines is the third in a three part series on Bolivia’s mining sector from the Andean Information Network.  

Bolivia’s cooperative mining union, FENCOMIN, has again demonstrated its formidable political power, forcing the Morales administration to guarantee its right to mine and to give them access to more lucrative mining areas — apparent concessions to the new nationalization program.  The MAS government is also negotiating a new tax plan which seeks to maintain foreign investment while giving the state a larger stake of the earnings. 

Part II: An Emerging Mining Policy for Bolivia

Future mining concessions eliminated; pre-existing concessions remain intact

While stopping short of fully nationalizing the industry, the decree clearly asserts state control over all mineral wealth in the national territory and continues the process of “recovering control” of Bolivia’s natural resources, a key element of the President’s 2005 electoral platform. However the original interpretation of the decree has shifted. Mining Minister, Luis Alberto Echazú, stated foreign and domestic private mining companies will be required to enter into joint ventures with COMIBOL, the state mining company, and that concessions will no longer be granted to private companies. “Future concessions have been modified; they are going to have to sign a contract with COMIBOL.  We’re not going to grant private concessions.”2

The May 1 decree should not modify previous concessions and other private investments, They will not have to renegotiate contracts, nor enter into a joint venture with COMIBOL. Echazú affirmed, “Those who are already working in [Bolivia] will continue working under the same conditions.” Therefore, the operations of U.S. based Apex Silver Mines and Couer d’Alene Mines, that plan to initiate production in the coming year, should not be affected by the May 1 decree. 

However, what remains unclear is whether the ongoing petitions for concessions will be affected by the decree. At one point Minister Echazú held out the possibility that these concessions would only be delayed until the completion of the study. With regard to future private investment in the mining sector Morales reiterated his mantra “Bolivia wants partners, not masters.”  According to Morales, these contracts “will allow investors to recover their investments, but they will also to have to make an economic contribution to the state."

The Four Pillars: An Emerging Mining Policy for Bolivia

In the aftermath of the Huanuni conflict3 and the prolonged negotiations over “nationalization” and new terms for foreign investment, a somewhat ambiguous mining policy has emerged.  Like the hydrocarbons nationalization, this policy attempts to maintain foreign investment necessary to upgrade and develop the industry, while providing greater economic benefit to the state. Unlike the hydrocarbons industry, the need to placate the powerful and volatile cooperative miners has led to modifications in initial implementation plans. The Morales government has outlined four general policy points for the reform and “nationalization” of the industry:
 
1. “Recovering” the nation’s minerals: Asserting the state’s control of over all aspects of the mining industry – exploration and prospecting, exploitation, extraction, refining, and sale of the nation’s mineral wealth.

2. Re-writing the Mining Code: The current code was written in 1997 when Bolivia’s governments implemented neo-liberal economic policies beneficial to transnational companies and a few wealthy Bolivians when the mining industry was still on shaky ground.
The Morales administration seeks to accomplish two main goals in writing a new mining code:
        a.    Change the tax structure determined by the existing law in which companies paid a total of $67 million in taxes in 2006, when net profits were $600 million. The Bolivian government plan would increase the current 35% tax on profits to a 50 percent tax on net profits.5
        b.    Give COMIBOL the right to manage and run mines without the current restrictions on the state company, and instead require private companies interested in operating in Bolivia to enter into a 50-50 partnership with COMIBOL.

3. Upgrade the industry in two fundamental areas:
        c.    Technology: Since there has been little investment in the industry since the mid-1980’s, the Morales government would require that any investor share technology with the state company and help upgrade the technological capacities throughout the industry.
        d.    Training for cooperative and artisan miners:  The government plans to invest more in training programs for the majority of the miners who use “artisan methods.” considered both inefficient and more polluting than newer technologies.  The 1997 Mining Code mandates training for miners, but very few have benefited from the programs.

4.  Popular participation:  the Morales administration has said that it will invite “all stakeholders” to the table as Bolivia develops the mining industry, including those representing local communities and environmental interests. As in many other countries, the Bolivian mining industry has damaged the environment and left local communities impoverished. Indeed some the poorest and most polluted communities in Bolivia are located in mining areas.

The Morales administration does not expect the new mining code to pass easily, given that the opposition holds a slight majority in the Senate.  The marketing and investment director of the Mining Ministry, Freddy Beltran, explained, “The idea of the opposition is to not allow anything to pass that comes from the government, therefore, of course we will have a tough battle there (in the Senate).”6 Furthermore, while the Morales administration has done its best to accommodate the cooperative miners, this group has consistently opposed any proposed tax hikes.7

The voice not heard: Mining and the environment

Outside of Huanuni a sludge-filled river trickles from the COMIBOL plant at the base of the Posokoni tin mine, where independent miners attempt to extract any remaining tin. The communities downriver no longer plant or graze their animals along the river bank due to the pollution.  Many documented cases of environmental contamination from mining exist.  Local organizations and the Oruro Departmental government have expressed concern about the Kori Kollo mine, operated by Inti Raymi, a subsidiary of Newmont Mining Company. A study by a professor at the Oruro Technical University identified extensive environmental damage including “seeping and leakage of cyanide in several places (around the mine) and many years of water overflow from the evaporation and filtration ponds, the dispersion of toxic dust, the acceleration of the process of soil salinization, the movement of heavy metals and increased sediment in the Desaguadero River.” This contamination has severely affected the water supply and farming in the region.

While the Morales administration has said that environmental groups will play a role in policy development, environmental advocates are skeptical the Morales administration has the political will and capacity to implement a mining policy that offers greater environmental protection.
They fear that within a government looking to create jobs and generate tax revenues, the voices of environmentalists challenging this vision and ecologically harmful mining practices are seldom heard, especially over the dynamite blasts of cooperative miners. 9

Threats against environmentalists and local community leaders

Environmental advocates have been threatened as a result of their work supporting local communities suffering the negative environmental impacts of mining operations. On February 8, 2007 a group of men forcibly entered the offices of Centro de Ecologia y Pueblos Andinas (CEPA), a NGO supporting local communities and the environment in Oruro. According to a statement released by the organization, they tried to “to pressure CEPA to abandon its work with communities that demand a transparent environmental audit (of the Kori Kollo mine).” CEPA directors said that the group threatened several colleagues as well as a leader representing communities in the Desaguadero River watershed and Uru Uru and Poopó Lakes. They also threatened break into and vandalize CEPA’s offices. 10

El Mutún: the Sleeping Giant

El Mutún, a small mountain chain in the Santa Cruz Department along the Brazilian border, is one of the largest iron ore deposits in the world, containing an estimated 40 billion tons of medium-grade ore and 10 billion tons of manganese.  In June 2006 the Bolivian government received only one bid, from India’s Jindal Steel and Power, to mine and develop half of the iron reserves for a 40 year period.  According to a Jindal press release they will invest $2.1 billion in the first eight years developing a steel and power plant for processing the ore and making value-added products including long steel products, sponge iron, and pellets. During the next several months, Jindal agreed to the Morales administration’s terms of a 50-50 profit split with COMIBOL. The Bolivian government agreed to provide a discount on natural gas as the power source for the steel production facility – the Santa Cruz-Sao Paulo gas duct passes within 20 kilometers of El Mutún.  However, for eight months negotiations between the two stalled because the government and Jindal could not agree on the reduced gas rate11 and on who should pay for the surrounding infrastructure.

The Giant is still sleeping…

Finally, on March 1, 2007 Jindal and the Bolivian government came to an agreement over the gas rates and infrastructure costs. The agreement required Jindal to provide documentation of the administrative, financial, and technical situation as well as paperwork verifying the legal registration of the company in India and their statutes within 45 days in order to sign a definitive contract. The government threatened to nullify the agreement if Jindal failed to comply.

However, as the deadline passed the government claimed that Jindal submitted only a photocopy of one the 14 required documents. The Indian Ambassador, Armind Sharma, assured the government that they are preparing the additional documents.  Sharma claims that any “discrepancies in questions of form” that appear in the documents result from the translation.12  In early May the Mining Minister, Luis Alberto Echazú, asked the people of Puerto Suarez, the town that stands to benefit the most from the exploitation of El Mutún, to pressure Jindal to complete the bureaucratic requirements. The same day, citing the potential benefit to the nation, President Morales granted another extension. The extension would give Jindal until the first week in July to present the required paperwork.

Iron ore has not been mined in Bolivia in any significant quantities and this project has the potential to make Bolivia significant steel and iron producer at a time when there is a growing demand. The government expects that the project will create 6,000 jobs directly and generate $200 million per year in tax revenues.

Nationalization of the Vinto Foundry

On February 9, 2007 President Morales nationalized the Vinto Foundry outside of Oruro. Seventy percent of the tin smelted at the foundry comes from the Posokoni mine in Huanuni.  Originally built in 1971, COMIBOL sold off the foundry in the “capitalization process” in the 1990’s to ex-President Sánchez de Lozada’s COMSUR for “the price of a dead hen.”13  In 2004 Glencore International of Switzerland paid $200 million dollars for COMSUR shares in Bolivia and an additional $90 million for the Vinto Foundry.14 The government initially said it refused to compensate Glencore for the foundry, because its sale had been illegal. After the company threatened a lawsuit, this initial tough stance seems to have softened, and the government and Glencore are currently negotiating a settlement. On April 23, 2007 the government agreed to provide Glencore the tin it needed to honor its existing contracts.

President Morales warned that other former COMSUR properties that once belonged to Sánchez de Lozada would also be “re-nationalized.” He stated the government would maintain existing jobs at the foundry.  The Morales administration also plans to invest $10 million to upgrade the facility because private investors did not follow through with agreed upon capital investment.  As a result, the foundry operates at only about half-capacity and Bolivia exports the mineral concentrates to be cast abroad.  Control of the foundry will allow Bolivia to export ingots – a mass of metal in convenient shape for storing, shipping or shaping. On May 7 the state television station broadcast the first shipment of 200 tons of tin ingots produced at the foundry since its nationalization. The government calculates that this shipment alone should generate over $25 million dollars with a state earning of $1.5 million in the form of the Complimentary Mining Tax.

Implementing a new mining policy is a balancing act that makes the nationalization of the hydrocarbons nationalization look like a stroll through the park. The effort faces multiple impediments, including the sometimes contradictory visions and expectations of the Bolivian government, private investors and cooperative miners.  The cooperative miners are vocal about protecting their interests to a Morales administration that does not want 40,000 angry miners marching through the streets of La Paz.   Although cooperative miners want to limit foreign mining companies’ access to mines to guarantee higher income they feel they deserve, they also stand to benefit from the technology and training that a stronger COMIBOL or foreign investors could provide.  However, the bigger question may be whether the Morales administration can attract the kind of foreign investment it needs to develop its vast mineral resources while prices remain high and the industry more profitable.  Just how much mineral wealth there is in Bolivia also needs to be determined in order to develop long-term investments and plans to best utilize the nation’s natural resources while protecting the environment.

 

 


[1] Article II of Decree 29117. “Se prohíbe en todo el territorio nacional la otorgación de nuevas concesiones y las que estuvieran en trámite quedan sin efecto, debiendo la Superintendencia General y las superintendencias regionales de minas y el Servicio Nacional de Geología y Técnico de Minas (Sergeotecmin) cumplir esta disposición”.

[2] “Bolivia to make mining firms sign JVs” Reuters. May 29, 2007

[3] For more background on the conflict in Huanuni in October 2006 see “Mining Policy in the Morales Administration: Reactivation and Conflict, Part I, Cooperative Miners in the Nationalization Process: Explosive Politics.” Andean Information Network, 29 May 2007. ain-bolivia.org

[4] Ibid

[5] According to the Mining Code of 1997 currently companies pay a Complimentary Mining Tax (CMT) which is a tax paid on the sale of minerals.  The CMT varies between %1 and %10 depending on the mineral and the market price. Mining companies also pay a Corporate Income Tax (CIT) based on the net profits. The CIT is credited to the CMT. So, the CMT is like a “prepayment” of the income tax. For example, if a company pays $100 CMT and their CIT is $120 then they are credited $100 through the CMT and pay only an additional $20. If the CMT is higher than their CIT then companies pay the total amount of the CMT and do not pay an additional amount for the CIT.  The Morales administration proposal increases the CIT another 10 percent and eliminates credit for companies when they pays the CMT. So, according to the proposal companies would have to pay both the CMT and the full CIT. Furthermore, the proposal expands the minerals and metals included in the CMT to include previously excluded ones such as iron, copper, antimony, and bismuth. Ref. Ley 1777: El Código Minero, Titulo VIII, Capitulo III, Art.  100. “El monto efectivamente pagado por concepto del Impuesto sobre las Utilidades de las Empresas será acreditable contra el Impuesto Complementario de la Minería en la misma gestión fiscal. En caso de existir una diferencia debido a que el importe del Impuesto sobre las Utilidades de las Empresas efectivamente pagado es mayor al Impuesto Complementario de la Minería, está diferencia se consolidará en favor del fisco. Por el contrario, si el Impuesto sobre las Utilidades de las Empresas efectivamente pagado es menor que el Impuesto Complementario de la Minería, el sujeto pasivo pagará la diferencia como Impuesto Complementario de la Minería.”  “BOLIVIA: Mining Industry Sector Analysis 2006 International, U.S. and Foreign Commercial Service and U.S. Department of State.” Eduardo García. “Bolivia plantea elevar impuestos mineros.” Reuters, May  18, 2007.

[6] Eduardo García. “Bolivia plantea elevar impuestos mineros.” Reuters.  May 18, 2007.

[7] See “Mining Policy in the Morales Administration: Reactivation and Conflict, Part I, Cooperative Miners in the Nationalization Process: Explosive Politics.” Andean Information Network, 29 May 2007.

[8] Montoya Choque, Juan Carlos and Richard Silver Mendieta Cárdenas.  “Salinización y metales pesados: evaluación ambiental de la mina “Kori Kollo” (Empresa Inti Raymi S.A.) en la área de influencia, con aplicación de la Teledetección SIG.” CEPA (Centro de Ecología y Pueblos Andinos). 2006.  The study’s authors used primarily information from the Inti Raymi Company, The Oruro Department’s Natural Resource and Environment. Water and soil samples were analyzed at the University of Oruro laboratory. Data has been confirmed by aerial photographs and satellite images.

[9] This analysis is taken from participant responses to a talk given by Bolivian Mining Minister Guillermo Dalence, at “Justicia Ambiental y la mineria en America Latina” March 9-11, 2007. Minister Dalence offered the governments position on the mining industry.

[10] CEPA, “Amenazas a CEPA benefician a Inti Raymi, de Newmont”, can be found at the following website:
http://www.conflictosmineros.net/al/html/modules.php?name=News
In an AIN interview one of CEPA’s directors reported that the group carried dynamite and threatened the director if CEPA continued publishing materials documenting the environmental damaged caused by the operations at several local mines, including Inti Raymi.

[11] Analysts suggest that Santa Cruz business interests with strong ties to another major iron deposit just over the Brazilian border made a play for cheap gas, bringing on the gas price negotiations. The Urucum mine, often called El Mutun’s “twin,” is another major iron deposit with approximately 30 billion tons of ore. In 2005 a group of investors tied to the Brazilian iron and steel company Sidersal planned to begin exploitation. After loosing the El Mutún bid they wanted to access to a cheaper fuel source for their own interests across the border.)

[12] See “Jindal aseguró que entregó documentación legítima”. La Patria. May 10, 2007.

[13] Description from Bolpress article “El Complejo Metalúrgico Vinto vuelve a manos del Estado”,  February 9, 2007.

[14] Bolpress, February 9, 2007.

Mining Policy in the Morales Administration: Reactivation and Conflict

Part II:  An Emerging Mining Policy for Bolivia
On May 1, 2007, one year after the “nationalization” of the hydrocarbons industry, Bolivian President Evo Morales declared all Bolivian territory a public mining reserve and reasserted state jurisdiction and control over all minerals, metals, precious and semi-precious stones. The state mining company, Bolivian Mining Corporation (COMIBOL) now administers all mineral wealth except concessions granted before the decree.  The decree also requires that the National Geological and Technical Mining Service complete a study previously unexplored and prospected areas to give the government and COMIBOL a more precise assessment of the vast mineral wealth within the nation’s borders. The decree prohibits granting further concessions, and freezes those currently under negotiation until a study can be completed.[1]
Future mining concessions eliminated; pre-existing concessions remain intact
While stopping short of fully nationalizing the industry, the decree clearly asserts state control over all mineral wealth in the national territory and continues the process of “recovering control” of Bolivia’s natural resources, a key element of the President’s 2005 electoral platform. However the original interpretation of the decree has shifted. Mining Minister, Luis Alberto Echazú, stated foreign and domestic private mining companies will be required to enter into joint ventures with COMIBOL, the state mining company, and that concessions will no longer be granted to private companies. “Future concessions have been modified; they are going to have to sign a contract with COMIBOL.  We’re not going to grant private concessions.”[2]
The May 1 decree should not modify previous concessions and other private investments, They will not have to renegotiate contracts, nor enter into a joint venture with COMIBOL. Echazú affirmed, “Those who are already working in [Bolivia] will continue working under the same conditions.” Therefore, the operations of U.S. based Apex Silver Mines and Couer d’Alene Mines, that plan to initiate production in the coming year, should not be affected by the May 1 decree.
However, what remains unclear is whether the ongoing petitions for concessions will be affected by the decree. At one point Minister Echazú held out the possibility that these concessions would only be delayed until the completion of the study. With regard to future private investment in the mining sector Morales reiterated his mantra “Bolivia wants partners, not masters.”  According to Morales, these contracts “will allow investors to recover their investments, but they will also to have to make an economic contribution to the state.”
The Four Pillars: An Emerging Mining Policy for Bolivia

In the aftermath of the Huanuni conflict[3] and the prolonged negotiations over “nationalization” and new terms for foreign investment, a somewhat ambiguous mining policy has emerged.  Like the hydrocarbons nationalization, this policy attempts to maintain foreign investment necessary to upgrade and develop the industry, while providing greater economic benefit to the state. Unlike the hydrocarbons industry, the need to placate the powerful and volatile cooperative miners has led to modifications in initial implementation plans.[4] The Morales government has outlined four general policy points for the reform and “nationalization” of the industry:

1. “Recovering” the nation’s minerals: Asserting the state’s control of over all aspects of the mining industry – exploration and prospecting, exploitation, extraction, refining, and sale of the nation’s mineral wealth.
2. Re-writing the Mining Code: The current code was written in 1997 when Bolivia’s governments implemented neo-liberal economic policies beneficial to transnational companies and a few wealthy Bolivians when the mining industry was still on shaky ground.
The Morales administration seeks to accomplish two main goals in writing a new mining            code:
a. Change the tax structure determined by the existing law in which companies paid a total of $67 million in taxes in 2006, when net profits were $600 million. The Bolivian government plan would increase the current 35% tax on profits to a 50 percent tax on net profits[5]
b. Give COMIBOL the right to manage and run mines without the current restrictions on the state company, and instead require private companies interested in operating in Bolivia to enter into a 50-50 partnership with COMIBOL.

3. Upgrade the industry in two fundamental areas:
a. Technology: Since there has been little investment in the industry since the mid-1980’s, the Morales government would require that any investor share technology with the state company and help upgrade the technological capacities throughout the industry.
b. Training for cooperative and artisan miners:  The government plans to invest more in training programs for the majority of the miners who use “artisan methods.” considered both inefficient and more polluting than newer technologies.  The 1997 Mining Code mandates training for miners, but very few have benefited from the programs.

4.  Popular participation:  the Morales administration has said that it will invite “all stakeholders” to the table as Bolivia develops the mining industry, including those representing local communities and environmental interests. As in many other countries, the Bolivian mining industry has damaged the environment and left local communities impoverished. Indeed some the poorest and most polluted communities in Bolivia are located in mining areas.
The Morales administration does not expect the new mining code to pass easily, given that the opposition holds a slight majority in the Senate.  The marketing and investment director of the Mining Ministry, Freddy Beltran, explained, “The idea of the opposition is to not allow anything to pass that comes from the government, therefore, of course we will have a tough battle there (in the Senate).”[6] Furthermore, while the Morales administration has done its best to accommodate the cooperative miners, this group has consistently opposed any proposed tax hikes.[7]

The voice not heard: Mining and the environment

Outside of Huanuni a sludge-filled river trickles from the COMIBOL plant at the base of the Posokoni tin mine, where independent miners attempt to extract any remaining tin. The communities downriver no longer plant or graze their animals along the river bank due to the pollution.  Many documented cases of environmental contamination from mining exist.  Local organizations and the Oruro Departmental government have expressed concern about the Kori Kollo mine, operated by Inti Raymi, a subsidiary of Newmont Mining Company. A study by a professor at the Oruro Technical University identified extensive environmental damage including “seeping and leakage of cyanide in several places (around the mine) and many years of water overflow from the evaporation and filtration ponds, the dispersion of toxic dust, the acceleration of the process of soil salinization, the movement of heavy metals and increased sediment in the Desaguadero River.” [8] This contamination has severely affected the water supply and farming in the region.

While the Morales administration has said that environmental groups will play a role in policy development, environmental advocates are skeptical the Morales administration has the political will and capacity to implement a mining policy that offers greater environmental protection.
They fear that within a government looking to create jobs and generate tax revenues, the voices of environmentalists challenging this vision and ecologically harmful mining practices are seldom heard, especially over the dynamite blasts of cooperative miners. [9]

Threats against environmentalists and local community leaders

Environmental advocates have been threatened as a result of their work supporting local communities suffering the negative environmental impacts of mining operations. On February 8, 2007 a group of men forcibly entered the offices of Centro de Ecologia y Pueblos Andinas (CEPA), a NGO supporting local communities and the environment in Oruro. According to a statement released by the organization, they tried to “to pressure CEPA to abandon its work with communities that demand a transparent environmental audit (of the Kori Kollo mine).” CEPA directors said that the group threatened several colleagues as well as a leader representing communities in the Desaguadero River watershed and Uru Uru and Poopó Lakes. They also threatened break into and vandalize CEPA’s offices. [10]

El Mutún: the Sleeping Giant

El Mutún, a small mountain chain in the Santa Cruz Department along the Brazilian border, is one of the largest iron ore deposits in the world, containing an estimated 40 billion tons of medium-grade ore and 10 billion tons of magnesium.  In June 2006 the Bolivian government received only one bid, from India’s Jindal Steel and Power, to mine and develop half of the iron reserves for a 40 year period.  According to a Jindal press release they will invest $2.1 billion in the first eight years developing a steel and power plant for processing the ore and making value-added products including long steel products, sponge iron, and pellets. During the next several months, Jindal agreed to the Morales administration’s terms of a 50-50 profit split with COMIBOL. The Bolivian government agreed to provide a discount on natural gas as the power source for the steel production facility – the Santa Cruz-Sao Paulo gas duct passes within 20 kilometers of El Mutún.  However, for eight months negotiations between the two stalled because the government and Jindal could not agree on the reduced gas rate[11] and on who should pay for the surrounding infrastructure.

The Giant is still sleeping…

Finally, on March 1, 2007 Jindal and the Bolivian government came to an agreement over the gas rates and infrastructure costs. The agreement required Jindal to provide documentation of the administrative, financial, and technical situation as well as paperwork verifying the legal registration of the company in India and their statutes within 45 days in order to sign a definitive contract. The government threatened to nullify the agreement if Jindal failed to comply.

However, as the deadline passed the government claimed that Jindal submitted only a photocopy of one the 14 required documents. The Indian Ambassador, Armind Sharma, assured the government that they are preparing the additional documents.  Sharma claims that any “discrepancies in questions of form” that appear in the documents result from the translation.[12] In early May the Mining Minister, Luis Alberto Echazú, asked the people of Puerto Suarez, the town that stands to benefit the most from the exploitation of El Mutún, to pressure Jindal to complete the bureaucratic requirements. The same day, citing the potential benefit to the nation, President Morales granted another extension. The extension would give Jindal until the first week in July to present the required paperwork.

Iron ore has not been mined in Bolivia in any significant quantities and this project has the potential to make Bolivia significant steel and iron producer at a time when there is a growing demand. The government expects that the project will create 6,000 jobs directly and generate $200 million per year in tax revenues.

Nationalization of the Vinto Foundry

On February 9, 2007 President Morales nationalized the Vinto Foundry outside of Oruro. Seventy percent of the tin smelted at the foundry comes from the Posokoni mine in Huanuni.  Originally built in 1971, COMIBOL sold off the foundry in the “capitalization process” in the 1990’s to ex-President Sánchez de Lozada’s COMSUR for “the price of a dead hen.”[13]  In 2004 Glencore International of Switzerland paid $200 million dollars for COMSUR shares in Bolivia and an additional $90 million for the Vinto Foundry.[14] The government initially said it refused to compensate Glencore for the foundry, because its sale had been illegal. After the company threatened a lawsuit, this initial tough stance seems to have softened, and the government and Glencore are currently negotiating a settlement. On April 23, 2007 the government agreed to provide Glencore the tin it needed to honor its existing contracts.

President Morales warned that other former COMSUR properties that once belonged to Sánchez de Lozada would also be “re-nationalized.” He stated the government would maintain existing jobs at the foundry.  The Morales administration also plans to invest $10 million to upgrade the facility because private investors did not follow through with agreed upon capital investment.  As a result, the foundry operates at only about half-capacity and Bolivia exports the mineral concentrates to be cast abroad.  Control of the foundry will allow Bolivia to export ingots – a mass of metal in convenient shape for storing, shipping or shaping. On May 7 the state television station broadcast the first shipment of 200 tons of tin ingots produced at the foundry since its nationalization. The government calculates that this shipment alone should generate over $25 million dollars with a state earning of $1.5 million in the form of the Complimentary Mining Tax.

Implementing a new mining policy is a balancing act that makes the nationalization of the hydrocarbons nationalization look like a stroll through the park. The effort faces multiple impediments, including the sometimes contradictory visions and expectations of the Bolivian government, private investors and cooperative miners.  The cooperative miners are vocal about protecting their interests to a Morales administration that does not want 40,000 angry miners marching through the streets of La Paz.   Although cooperative miners want to limit foreign mining companies’ access to mines to guarantee higher income they feel they deserve, they also stand to benefit from the technology and training that a stronger COMIBOL or foreign investors could provide.  However, the bigger question may be whether the Morales administration can attract the kind of foreign investment it needs to develop its vast mineral resources while prices remain high and the industry more profitable.  Just how much mineral wealth there is in Bolivia also needs to be determined in order to develop long-term investments and plans to best utilize the nation’s natural resources while protecting the environment.