Will Bolivia's Election Take Place As Planned in December?

Wednesday, September 28, 2005

BOARD OF ADVISORS Featured Q&A With Our Board of Advisors Bernard Aronson Peter Hakim Managing Partner, President, Bolivia's presidential and con- Guest Comment: Eduardo ACON Investments Inter-American gressional elections scheduled Gamarra: "The current turmoil LLC Dialogue for December 4 are up in the air created by the Constitutional Diego Arria Donna Hrinak Q after the country's Constitutional A Tribunal requiring a reappor- Director, Co-chair, International Tribunal last week ordered Congress to tionment of congressional seats as mandat- Columbus Group Trade, Competition, redistribute seats in the legislature in ed by the Constitution is unlikely to end and Government accordance with the most recent national without a major battle involving regional Genaro Arriagada Affairs Practice, Board Member, Banco Steel Hector & Davis census. Will the elections take place as actors, political parties in Congress, the del Estado de Chile planned? Is Bolivia any nearer to resolving leading presidential candidates, organized Jon Huenemann Joyce Chang its long-standing political and social con- labor, and others. In addition, the Tribunal Principal, flicts? will also have to rule on the constitutional- Global Head of International Emerging Markets Department, ity of the electoral process since a few Research, J.P. Morgan Miller & Chevalier Guest Comment: Manuel Rocha: members of Congress who stand to lose Chase & Co. "I hope this matter gets resolved Continued on page 4 James R. Jones Adrian Cruz before December 4. If not, one Senior Partner, Co-chair, Manatt Jones can expect to see further distur- ACPZ Venture Capital, A PHOTO OF THE DAY LLC Global Strategies LLC bances prior to the planned date for the elections. Bolivia is not anywhere closer to W. Bowman Cutter Paul Laudicina Vice President, resolving its perennial conflicts. They have Partner, been around since Bolivia's inception and E.M. Warburg A.T. Kearney will continue to be part of the Bolivian Pincus Thomas F. McLarty III political landscape. Sadly, chronic instabili- Dirk Donath President, Kissinger ty seems to be the norm and not the excep- Managing Director, McLarty Assoc. Eton Park Capital tion. No matter who wins in the next pres- Management Beatrice Rangel idential election, social peace is not what President & CEO, will follow. We will probably see a continu- Myles Frechette AMLA Consulting ation of the political instability that has Former US Ambassador to plagued the country for the past decades. José Antonio Ríos US Secretary of State Condoleezza Rice Colombia International President, The structural and deep fissures in Bolivian Global Crossing society cannot be resolved with an electoral met with Haiti's interim prime minister, Wallace Gardner outcome, independent of who emerges vic- Gerard Latortue, in Port-au-Prince yes- Vice President, Everett Santos torious. It will require many years under a terday. Rice urged Haiti to speed up Worldwide Sales, CEO, Emerging preparations for elections. See related leadership that enjoys the consensus of the Chubb & Son Markets story on page 2. Partnership majority of Bolivians, something that is Michael Gavin Photo: State Department. lacking in today's Bolivia." Head of Latin Roger Scher America Econ. Head of Latin Research, UBS American Sovereign Ratings, George W. Grayson Fitch Ratings Professor of Govt., The College of Tony Smith Inside This Issue William & Mary Partner, Schmeltzer, Aptaker FEATURED Q&A: Will Bolivia's Election Petrobras Aims to Raise $3 Billion & Shepard Take Place as Planned in December?...... 1 Through Auction of Oil Field...... 2 Rice Calls on Haiti to Speed Spain's Telefonica Moviles Looks to Subscribers may pose questions to the Board of Up Election Preparations ...... 2 Challenge America Movil in Mexico...... 3 Advisors for the Featured Q&A by contacting the Editor at [email protected] Total Sees Compromise with By the Numbers: A Monthly Look at Venezuela over Higher Taxes...... 2 Latin American Data by Claudio Loser...... 3

NEWS BRIEFS Political News projects as long as its stake in existing projects was not reduced. "We will reach a Immigration Judge: Posada Won't compromise with Venezuela," Christophe Be Sent to Venezuela or Cuba Rice Calls on Haiti to Speed de Margerie, president of Total's explo- A US immigration judge said Up Election Preparations ration and production division, was quot- Tuesday that Cuban exile and sus- ed as saying by Bloomberg News. De US Secretary of State Condoleezza Rice on Margerie said the company is not opposed pected terrorist Luis Posada Carriles Tuesday urged Haiti to speed up prepara- to a new tax law that would increase royal- will not be deported to Cuba or tions for upcoming elections, which she ty payments to the Venezuelan govern- Venezuela. While leaving open the said are key to the Caribbean nation's ment amid skyrocketing global oil prices, possibility that Posada could be future stability. "In my conversations but would like to reach a compromise on deported to another country, Judge today, I noted that all Haitians must accel- the amount. "It's normal to renegotiate William Abbott said he feared erate preparations for the elections," Rice taxes when contracts were signed when Posada would be tortured in said during a joint press conference with [oil] prices were at $15 a barrel and have Venezuela or executed in Cuba. Haiti's interim prime minister, Gerard now reached $60 [per barrel]," he was Venezuela is demanding Posada's Latortue in Port-au-Prince after meeting quoted as saying by Marketwatch. extradition to face charges he mas- with Latortue, interim President Boniface Venezuela, the world's fifth-largest oil terminded the 1976 bombing of a Alexandre, and members of the country's exporter, said in June it would raise Cuban airliner that killed 73 people. Provisional Electoral Council. "Everybody income tax rates on heavy oil ventures with whom I spoke focused on the fact after increasing the royalty rate on the Abbott's ruling is expected to strain that there must be a transfer of power by projects last October to 16.67 percent already tense US-Venezuela rela- the 7th of February and that everybody from 1 percent. Total owns 47 percent of tions. believes that that is necessary for stability the Sincor project, which produced an Source: The Miami Herald. here in Haiti." Rice said that "technical average of 173,000 barrels of oil a day in Mexico's Fox Names New matters" that need to be addressed ahead 2004, and is negotiating with Venezuela a Public Safety Secretary of the planned November 20 presidential $5 billion expansion of the project, called and legislative elections include determin- for Sincor II. State-owned Petroleos de Mexican President Vicente Fox on ing where polling places will be and regis- Venezuela (PDVSA) owns 38 percent and Tuesday named his intelligence tering poll workers. Latortue said his gov- Norway's Statoil 15 percent of the original chief, Eduardo Medina, to be secre- ernment shared the US' concerns and was Sincor. Total doesn't want to change the tary of public safety. Medina taking steps to resolve the technical prob- ownership stakes in the original Sincor replaces Ramon Martin Huerta, who lems. Rice also said the elections must be project, de Margerie said, although it along with eight others was killed in "open and inclusive and fair," and urged might consider adjusting the percentages a helicopter crash last week. Haitians to vote. The elections would be in Sincor II. De Margerie said Venezuela the first since the government of former "can't enforce" its threat to force oil com- Source: Reuters. President Jean-Bertrand Aristide was top- panies to grant PDVSA a larger stake in Report: Migration to pled during a nationwide revolt in their projects. Earlier this month, Total US Peaked in 2000 February 2004. The US-backed interim increased its 2005 capital spending plan by The number of illegal and legal government that took over after Aristide $1 billion to $11 billion, not including migrants coming to the United fled into exile has been criticized by rights acquisitions, partly because of rising proj- States each year peaked in 2000 and groups for arresting political opponents ect costs. then substantially declined after and keeping them in prison for months without filing charges, while hundreds of Petrobras Aims to Raise $3 Billion 2001, according to a report released Haitians have died in violence despite the Through Auction of Oil Field Tuesday by the Pew Hispanic Center. presence of a 7,000-strong, Brazilian-led By 2004, the annual inflow of for- United Nations peacekeeping force. Brazilian state-owned energy company eign-born persons was down 24 per- Petrobras is auctioning a heavy oil field to cent from its all-time high in 2000 Company News raise up to $3 billion, an unnamed source above 1.5 million. The basic trend cited by Reuters said early today. was seen for all migrant groups from "Petrobras is conducting an auction in every region of the world, and for Total Sees Compromise with Brazil. Bidders have been short-listed," the both legal and illegal migrants. The Venezuela over Higher Taxes source was quoted as saying. The field, full report is available at which carries a roughly estimated value of www.pewhispanic.org. France's Total, Europe's largest oil refiner, $2 billion to $3 billion, was put up for sale said Tuesday it would reach a deal with very recently, according to Reuters. Up to Source: Pew Hispanic Center. Venezuela over higher taxes for heavy oil 10 global energy companies have looked at

Copyright © 2005, Inter-American Dialogue Page 2 of 4 Inter-AAmerican Dialogue’s Latin America Advisor Wednesday, September 28, 2005 the asset. Petrobras, which is spending heavily on exploration and production, By the Numbers: A Monthly Look at Latin American has short-listed Mitsubishi Corp., Mitsui Data by the Inter-American Dialogue's Claudio Loser Corp., and Sumitomo Corp. for the Remittances a Growing Source of Domestic Investment Brazilian offshore heavy oil block called Jubarte, according to two other unnamed WASHINGTON—A hot topic in Latin America today is the impor- sources cited by Reuters. "Only one of tance of remittances sent by workers back to their home countries. them will be awarded. It's an offshore This has been studied in detail at the Inter-American Development block yet to be developed and it is expect- Bank and at the Inter-American Dialogue by a team lead by Manuel ed to produce very heavy crude oil," said Orozco. The amount of money sent by workers to their homes was one of the sources. Mitsubishi and Mitsui, some $38 billion in 2003 and may reach $50 billion this year, some Japan's two largest trading houses, have 2.5 percent of total GDP for the region. This is a major, although already taken part in a few energy projects somewhat controversial, benefit of globalization and migration. in Brazil, including the Barracuda and Caratinga offshore oil fields. Their pres- A lot has been written about the impact of these flows on the individual lives of the ence is part of a larger tendency by poor, the high costs of transferring these remittances home, and the dangerous temp- Japanese trading houses to invest billions tations of governments to intervene and direct these flows, both at the giving and of dollars in oil and gas production assets receiving end. worldwide. Only recently the focus has been placed on the macroeconomic impact of these Spain's Telefonica Moviles Looks to remittances. Some tentative results emerging from an ongoing study at the Dialogue Challenge America Movil in Mexico provide some interesting observations about their importance for the domestic economies (the reader should be aware that I am in charge of the study, together with Spain's Telefonica Moviles said Tuesday it my associate Caitlin Lockwood). plans to sign up more subscribers in Mexico as it takes on regional mobile giant The chart below shows aggregate numbers for how domestic investment was financed America Movil in its own back yard, for the period 1980-2003 in seven countries where remittances are particularly Reuters reported. "For Telefonica, Mexico important: Mexico (the largest), Colombia, Dominican Republic, Ecuador, El is a country that has a great growth poten- Salvador, Honduras, and Jamaica. What can be observed is that remittances have tial," the new head of Telefonica Moviles' taken increasing importance in financing investment, while allowing for a reduction Mexican unit, Miguel Menchen in domestic savings, and are now more important than foreign borrowing. Alumbreros, was quoted as telling Latin American: Financing of Investment reporters during an event to inaugurate a (simple average of seven countries, 1980-2003) a center to test new technologies. 100% Menchen, however, did not say how much the company planned to invest in Mexico, 80% where it has 5.8 million customers, well 60% behind America Movil's 32.3 million. Telefonica Moviles, which operates in 40% Mexico under the brand name Movistar, 20% entered the Mexican market four years ago. Purificacion Carpinteyro, the director 0% of corporate sales for Telefonica Moviles 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 in Mexico, said the company would focus Foreign Borrowing on corporate customers there. Telefonica Gross National Savings, including Net Current Transfers - Remittances Moviles and America Movil are Latin Remittances America's two largest mobile operators, Source: World Development Indicators 2005, Timeseries Database. and are battling head to head in several Remittances have became a central component in increasing consumption and countries in the region. America Movil, reducing national reliance on foreign borrowing, all without forced saving schemes, owned by Mexican billionaire Carlos Slim, elaborate subsidies on foreign investment—just plain self and family interest. Not a has some 73.8 million customers in the bad record for such massive movement of people and money as we see today in Latin Latin America, while Telefonica Moviles America. has more than 88 million subscribers in Spain, Morocco, and 13 Latin American Claudio Loser is a Senior Fellow at the Inter-American Dialogue and former Head of the countries, including more than 28 million Western Hemisphere Department at the International Monetary Fund. in Brazil.

Featured Q&A Guest Comment: Ivan Latin America Advisor Continued from page 1 Rebolledo: "Bolivian President is published every business day by the their seats have challenged President Eduardo Rodriguez has repeat- Inter-American Dialogue, Copyright © 2005 Rodriguez's decision to call for early edly said that he has no inten- Erik Brand, A General Manager, Publishing elections. Together, these decisions have tion of prolonging his mandate beyond the potential to delay the election date January 2005, at which time a new presi- Robert Simpson, and exacerbate tensions in Bolivia once dent should be in office after voting on Editor December 4. However, with each passing day it seems more than likely that the Devin Finn, December elections for president, vice Reporter ... It is more likely that president, senators, and representatives “ Danielle Jetton, all actors ranging from will be postponed, adding to Bolivia's Computer Services Coordinator ongoing political/social crisis. The regional to political will work Electoral Court has already declared that Inter-American Dialogue: elections cannot proceed until the exist- Peter Hakim, out an arrangement to allow President ing parliament approves the changes the elections to go forth based on revised 2001 census data. Michael Shifter, in December. Based on this census data, Potosi, Oruro, Vice President, Policy ” and La Paz would lose representation, - Eduardo Gamarra Joan Caivano, while Santa Cruz would gain seats. The Director of Special Projects Constitutional Tribunal (Bolivia's high- est court) has ruled in a similar fashion. Dan Erikson, again. A significant sector sees a post- The other pressing issue will be the Director for Caribbean Projects ponement as a last-ditch maneuver to Constituent Assembly, which is already Claudio Loser, prevent Evo Morales from winning the scheduled to begin on the first Sunday of Senior Fellow election. At this stage, Morales leads all July 2006. A delay in the presidential public opinion polls, although even if he election will definitely impact this Judith Morrison, were to win the election he would not Assembly and pre-Assembly processes, Executive Director, Inter-Agency Consultation on Race in Latin America obtain the 50 percent plus one required which potentially face a myriad of com- to become president. Those who see the plexities due to land reform, parliamen- Marifeli Perez-Stable, Tribunal's decision as political also argue tary composition, energy policies, edu- Vice President for Democratic Governance that it is a Santa Cruz-based attempt to cation reform, autonomy issues, etc. Jeffrey M. Puryear, change the composition of the legisla- Already, protesters are threatening major Vice President, Social Policy ture so that in the congressional round blockades if the December elections are Evo Morales has less of a chance of postponed. If this happens, we will be Viron Vaky, becoming Bolivia's next president. While back to where we started in June of this Senior Fellow it is likely that tensions will escalate con- year, and perhaps worse." Subscription Inquiries are welcomed at siderably in the next few days over this [email protected] particular issue, it is also likely that a compromise will be worked out. The fact Latin America Advisor is published every is that in Bolivia all actors have violated Manuel Rocha is a Founding Partner at business day by the Inter-American Dialogue 1211 Connecticut Avenue, Suite 510 the Constitution in a variety of ways to The Globis Group LLC and a former US Washington, DC 20036 overcome serious political impasses and Ambassador to Bolivia. Phone: 202-822-9002 Fax: 202-822-9553 even to prevent violent confrontations. In this instance, the Tribunal's ruling Eduardo Gamarra is a Professor of The opinions expressed by the members of the Board of Advisors and by guest commentators do may indeed be correct, and actors may Political Science and Director of the Latin not necessarily represent those of the publisher nor recognize this as a reality, but it is more American and Caribbean Center at do they represent any consensus of belief. The analy- likely that all actors ranging from region- Florida International University. sis is the sole view of each Advisor and does not necessarily represent the views of their respective al to political will work out an arrange- employers or firms. The information in this report ment to allow the elections to go forth in Ivan Rebolledo is President of the has been obtained from reliable sources, but neither December. If no agreement is worked Bolivian-American Chamber of its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have any ques- out, however, a postponement could Commerce. tions relating to the contents of this publication, have serious consequences for the tense contact the editorial offices of the Inter-American calm that Bolivia has enjoyed since Dialogue. Contents of this report may not be repro- duced, stored in a retrieval system, or transmitted Eduardo Rodriguez assumed office in without prior written permission from the publisher. June."