Bolivia Makes A Choice
By Alan Stoga*

When Bolivian voters recently approved a series of referenda about the future of their oil and gas industry, they demonstrated awareness of a simple truth: energy is the key to their future. That was surprising in a country that had been on the verge of anarchy less than a year ago, partly over how to develop its abundant gas reserves. And it may yet prove to be an overly optimistic conclusion, since the five questions on the ballot were poorly written, confusing, and contradictory, and the overall voter turnout — like most elections in the Americas — was low.

But it is also possible that a substantial number of Bolivians understood that the referendum was really about whether they wanted to remain poor or wanted a chance at prosperity. And, given the chance to express an opinion, they overwhelmingly chose prosperity.

Of course, in a country where politics is a blood sport and where there is no consensus about almost anything, the most likely consequence of the vote is that the country's leaders will find ways to ignore even such a powerful message. In fact, as soon as the votes were counted, some politicians insisted that the voters had chosen nationalization, while others declared that the country wanted to pursue the aggressive energy development effort pioneered by deposed President Sanchez de Lozada.

If this continues, history will record yet another tragedy in a country whose per capita income is less than $2.50 per day, and where most development indicators are appallingly low. What makes this an inexcusable tragedy is that Bolivia is sitting on 55 trillion cubic feet of natural gas reserves — more than enough to propel ordinary Bolivians into the twenty-first century.

Regardless of the outcome, the Bolivian people may be on to something. For years Latin Americans have been caught up in a sterile debate about the Washington consensus, about whether and why it had failed to produce sustained economic growth almost anywhere in the hemisphere. Unfortunately, the result has been more talk than action.

But the Bolivians have stumbled onto a simple equation: in an energy short world, energy resources could be the key to growth and development or, more precisely, the key to financing growth and development. Developing and exploiting hydrocarbons is a notoriously bad way to create jobs, but it is a notoriously good way to generate financial resources. This is either good or bad news, depending on what a country does with those resources. Corruption, mismanagement, and inefficiencies have turned most oil countries into welfare states — even worse, into poor welfare states. But without the resources, those countries never would have had the chance to waste them.

Consider the simple arithmetic for Bolivia. At current prices, the country's largely untapped gas reserves are worth something like $70 billion — which, even after likely development costs, is more than $8,000 per capita.

Actually, Bolivia is not alone. The Americas, from Canada to Argentina, is awash in hydrocarbons, at least relative to regional demand. Proven reserves south of the Rio Grande are thought to be on the order of 120 billion barrels and the potential could be four times as great, even excluding non-conventional energy sources like Venezuela's tar sands. The Americas may not have Middle Eastern scale energy resources, but the region also does not have the Middle East's deep seated political rivalries, the in-bred terrorism, or the Palestinian problem. Even with the enormous demand of the United States, the reality is that the Americas have the potential to create a stable, energy self-sufficient marketplace.

What is lacking is anything resembling a coherent strategy. Such a strategy would include financing, development and distribution infrastructure, security, a balanced dialogue among producers and consumers, and strategic inventories, among other issues. It would entail creating a paradigm within which national oil companies, private oil and gas companies, suppliers, banks, and other actors could execute particular transactions that are consistent with identified national priorities, organizational preferences, and needs. And it would entail an unprecedented degree of collaboration between the public and private sectors, as well as between the United States and the rest of the hemisphere.

Technically, such a strategy would be relatively easy to define; politically, the effort could rival Moses' effort to talk his way out of Egypt. But it is possible that the combination of growing instability in the Middle East, the inexorable rise in U.S. energy demand, the increasing U.S. paranoia about Islamic terrorism, and Latin America's desperate need to finance a new growth strategy could be sufficient to persuade the governments of the Americas to think rationally about their intertwined economic futures — and to use energy as the lynchpin of that new strategy.

At least the Bolivian people seem to think it is time to do so.

*Alan Stoga is president of Zemi Communications.