October 24, 2006

Minerals, Gas and Spin-offs

CIDA's resource regulation projects in Bolivia

by Dawn Paley

The Dominion - http://www.dominionpaper.ca

With the election of Evo Morales and his party to parliament in late 2005, the political landscape in Bolivia shifted drastically. The move to nationalize hydrocarbon resources on May 1, 2006, took many by surprise, representing a clean break from the way politics had traditionally been done in the Andean country.

Bolivia is part of a new trend in Latin America today, where governments are making links with each other and trying to make the exploitation of their resources work for their citizens rather than for large corporations. This new context is vital for those wishing to understand the Canadian government's role in Bolivia, particularly through the work of the Canadian International Development Agency (CIDA).

Bolivia is one of nine "countries of focus" identified by CIDA, and a recipient of one of their largest bilateral country programs. CIDA's Programming Framework for Bolivia (FCP) includes a minimum bilateral budget of $50 million, plus an additional $14 million to be shared between counterpart funds and multilateral partners including the World Bank and the Inter-American Development Bank.

From the bilateral budget, 50 per cent is shared between healthcare, gender, environment, project management, and water and sanitation. The remaining $25 million is devoted to "the modernization of the state," which is further divided into three branches: civil service and public sector reform, funding of the human rights Ombudsman's office, and "the third and most established component… the formulation and effective enforcement of regulatory frameworks in the energy and mineral resources sectors."

Looking through the lens of regulation in the mineral and energy sectors is one way (albeit limited) of analyzing CIDA's work in Bolivia, a lens that is crucial to understanding an important element of Canada's taxpayer-funded 'development' happening in Bolivia.

Mining and Development

From the outset, CIDA's development assistance to Bolivia has been closely linked with resource extraction. The very first Canadian aid to Bolivia was in 1967, when the government granted $1,620,000 in loans to the Bolivian government for the purchase of mining equipment.

It is difficult to know exactly how CIDA funds aimed towards the mining sector have affected policy in Bolivia. Not only would it be nearly impossible to trace the outcome of CIDA donations to multilateral partners involved in mining regulation, but accessing information from Bolivia is also difficult. As doctoral candidate Alejandra Roncallo noted at a 2002 conference sponsored by York University, because of Bolivia's secrecy laws, which were adopted in 1996, no information regarding the role of the Canadian government in designing Bolivia's new mining regulations is available.

What is clear, however, is that the policy changes that brought COMIBOL (formerly the state-owned mining corporation) to its knees in 1985 ushered in waves of foreign investment that have often had severe economic and social repercussions for Bolivians.

One example of this is the "Christmas Massacre." Seven Bolivians were killed and 30 wounded in 1996 when 800 to 900 members of Bolivian police and military forces intervened in a conflict between Canadian-owned Da Capo Resources/ Vista Gold Corporation and community members in Amayapampa, Bolivia.

Referencing the Christmas Massacre, Pedro Gomez Rocabado, a former miner now working with mining communities, noted in 2002 that the Bolivian government had "an unwillingness to uphold the law or enforce agreements that might infringe on investors' interests, thereby maintaining a development model that prioritizes corporate accumulation of wealth while abandoning Bolivians to their continuing impoverishment."

Hydrocarbons and Development

According to the 1996 Report of the Auditor General of Canada, Canada has been affecting hydrocarbon policy in Bolivia since 1989, when CIDA, Petro-Canada and the Bolivian government began working together to "modernize [Bolivia's] public oil and gas industry through the Bolivia Oil and Gas Project." The same report goes on to explain benefits of the project that included the following: "22 Canadian firms received spin-off benefits from the Bolivian Oil and Gas Project; [and] approximately $20 million in related commercial spin-offs in South America for Canadian firms since April 1995."

In their recent book Impasse in Bolivia: Neoliberal Hegemony And Popular Resistance, authors Linda Farthing and Benjamin Kohl explain that, "an increasingly important component of development assistance includes 'institutional capacity building' -- creating the environment needed for markets to operate." One concrete example of 'institutional capacity building' sponsored by CIDA is the ongoing $8.25 million Hydrocarbon Regulatory Assistance Project, initially granted to PriceWaterhouseCoopers, and recently reassigned to IBM.

Referencing the Hydrocarbon Regulatory Assistance Project, Farthing and Kohl state that, "rather than working for the interests of Bolivia, 'assistance' was designed by the international agency (in this case bilateral) to serve the interests of either international corporations or those based in their own countries." They go on to quote a now-unavailable CIDA report from 2004 that "clearly demonstrates that the generosity of the Canadian government provided about an 800 per cent return to Canadian businesses."

As the Bolivian government moves forward with a new energy agenda, breaking with the privatization-centred energy policies of the last 20 years, CIDA continues to finance energy sector projects that many argue have questionable value to most Bolivians.