social and environmental impacts of world bank/imf...

Singapore Journal of Tropical Geography, 25(3), 2004, 281-303 Copyright 2004 Department of Geography, National University of Singapore and Blackwell Publishers Ltd

INTRODUCTION

This paper argues that neoliberal economic“reforms”1 implemented in Bolivia – structuraladjustment in 1985; the capitalisation2 of thestate oil company Yacimientos PetroliferosFiscales Bolivianos (YPFB) and the passageof the Hydrocarbons Law (Ley de hidrocar-buros) both in 1996 – facilitated the entranceof multinational oil corporations that wereresponsible for a series of social and environ-mental impacts throughout the country.Capitalisation was particularly significant asthe Bolivian government sold 50 per cent of

the equity in the state oil company to variousmultinational corporations (MNCs), includingEnron and Shell (Table 1). Despite significantprotests and criticisms, the process wascensored from all public scrutiny and accoun-tability (Vargas Salgueiro, 1996; Molina,1999a). While it is true that YPFB’s projectswere environmentally destructive even priorto capitalisation, the so-called reforms spon-sored by the World Bank, InternationalMonetary Fund (IMF) and Inter-AmericanDevelopment Bank (IDB) stimulated sub-

SOCIAL AND ENVIRONMENTAL IMPACTS OFWORLD BANK/IMF-FUNDED ECONOMIC

RESTRUCTURING IN BOLIVIA: AN ANALYSIS OFENRON AND SHELL’S HYDROCARBONS PROJECTS

Derrick HinderyDepartment of Geography and Environmental Studies, University of Hawai’i

at Hilo, Hawai’i, USA

ABSTRACT

With the spectacular financial collapse of Enron in 2001, Enron and Shell’s Rio San Miguel- Cuiabágas pipeline gained international notoriety for degrading the last, most intact dry tropical forest inthe world, Bolivia’s Chiquitano forest. The paper uses specific case studies, including the case ofthe Cuiabá pipeline, to examine how economic restructuring sponsored by the World Bank,International Monetary Fund (IMF) and Inter-American Development Bank (IDB) facilitated theentrance of multinational oil corporations that have caused significant social and environmentalimpacts in Bolivia. The paper explores the influence of international financial institutions andmultinational oil corporations on Bolivian state institutions, particularly their ability to regulateand address impacts caused by developments in the hydrocarbons sector. It concludes thatneoliberal policies, which resulted in partial privatisation of the state oil company and in expandedcontrol over natural resources by multinational corporations (MNCs), were detrimental to sensitiveecosystems and indigenous inhabitants.

Keywords: economic restructuring, decentralisation, Enron, Bolivia, World Bank, indigenous peoples, gas

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stantial foreign direct investment in thehydrocarbons sector, leading to a dramaticgrowth in exploration, production and distri-bution and a concomitant rise in associatedimpacts. Between 1997 and 2001, investmentin the sector rose from USD 296 million to USD401.3 million (Economist Intelligence Unit,2002), which is over five times what YPFBinvested prior to capitalisation (World Bank,2000).

Economic restructuring in Bolivia wasimplemented in conjunction with decentra-lisation and accompanying administrativereforms (Kohl, 2002). However, contrary toneoliberal rhetoric that these would boost theeconomy and deepen democracy, as theBolivian case demonstrates, economic andpolitical restructuring led to a reduction in staterevenues, massive social unrest, and easedMNCs’ access to natural resources (WorldBank, 2000). Imposition of radical structuraladjustment in 1985 resulted in rapid growth ofthe informal sector and widespread popularopposition that was met by acts of repression(Conagham et al., 1990). Based on extensiveparticipatory qualitative research, includinginterviews with a range of representatives fromthe state and private sectors and civil society,3this paper emphasises the importance of local

knowledge in conducting a socioeconomicand political analysis of environmental change(Zimmerer, 1996; Muldavin, 2000a).

Using case studies, the subsequent analysisseeks to explore conflict over access to naturalresources and contextual sources of environ-mental change – two critical areas of inquirywithin political ecology (Bryant, 1992) – in thecontext of radical economic restructuring. Itseeks to build upon findings that assert thatmarginalised social groups embrace bothmodern and alternative approaches todevelopment (Zimmerer, 1993; Bebbington,1996). In order to do so, the paper links casesof local place-based acts of resistance arisingfrom impacts generated by developments inthe hydrocarbons sector to the broadernational economic reforms promoted byinternational financial institutions andimplemented by Bolivian state institutions.This multi-scaled approach employs whatBlaikie (1994: 7) has referred to as one of eightelements that comprise an agenda for politicalecology:

Since political ecology is usuallylocated, as part of its concerns, inplace-based and locally specific inter-actions as well as in larger, pervasive

UNIT CAPITALISED STRATEGIC PARTNER

AMOUNT OF CAPITALISATION

(USD millions)

TOTAL FOREIGN INVESTMENT IN

CAPITALISATION (%)

CHACO (exploration and production)

BP Amoco Bolivia

306.6

37

ANDINA (exploration and production)

YPFB, Pérez Companc, Pluspetrol Bolivia

264.7

32

TRANSREDES (transport)

Enron International, Shell Overseas Holding

263.5

31

TOTAL

834.9

100

TABLE 1. CAPITALISATION OF THE BOLIVIAN STATE OIL COMPANYYACIMIENTOS PETROLIFEROS FISCALES BOLIVIANOS (YPFB)

Source: Adapted from VMEH (2002).

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and often non-place-based politicaland ideational forces (e.g. environ-mental ideologies or state policies), anumber of different levels or scales ofanalysis are implied. These have to bemade specific (a relatively easy task)but also linked by credible explanations(which is very much more problematic,involving the linking of proximate toremote causes).

With regards to decentralisation, theeffectiveness of local governments in mana-ging natural resources is questionable (Larson,2002). The evidence suggests that, whenimplemented within a neoliberal framework,decentralisation of natural resource manage-ment can reduce the decision-making powerof indigenous peoples and lead to devastatingoutcomes caused by multinational oilcorporations. Although popular participationmay increase accountability (Kaimowitz et al.,1998), the cases here challenge the argumentthat participation necessarily results in moreequitable mechanisms of natural resourcemanagement (Ribot, 2002). My analysiscomplements other research that has shownthe socially and environmentally deleteriousconsequences of economic liberalisation inLatin America (Farthing, 1995; Morley, 1995;Thrupp, 1995; Markandya et al., 1996;Kaimowitz et al., 1997; Pacheco, 1998). Econo-mic liberalisation can lead to a shift towardsmore polluting resource- and energy-intensiveindustries and weaken environmental controls(Hansen-Kuhn, 1993; Castaños, 1994; Jones,1995; Cherp et al., 2003).

Given that economic liberalisation in Boliviawas largely sponsored by the World Bank,much of the paper distils the Bank’s hiddenagenda in promoting the reforms and revealstheir social, political and environmentalimpacts. Over the last two decades, civilsociety pressure arising from impacts gene-rated by notorious World Bank projects suchas the Polonoreste project in Brazil and theSardar Sarovar dam project in Indiaredistributed the Bank’s accountability from

borrowing countries to external groups suchas advocacy non-governmental organisations(NGOs) (Rich, 1994; Linaweaver, 2003). Despitethis shift, this paper lays out arguments insupport of Caufield’s (1996) contention thatthe World Bank is a “master of illusion”.Claiming to have implemented profoundinstitutional reforms to increase transparency,accountability and legitimacy, the World Bankhas reshaped its public face as a contemporaryproponent of environmental protection andsocial justice while continuing to be drivenprimarily by private sector interests.

In addition to the literature on theaccountability and regulation of internationalfinancial institutions such as the World Bank,over the last 30 years much has been writtenon corporate responsibility, with topicsranging from debates over moral responsibility(Guerrette, 1986; Crusto, 2003; Soares, 2003)to corporate governance reform, especially inthe wake of more recent financial scandalsinvolving Enron, Arthur Andersen, World-com, Tyco and Adelphia (Sohne, 2003). Thecases presented here demonstrate the mannerin which Enron and Shell shirked responsibilityfor environmental disasters and impacts onlocal communities in Bolivia by manipulatingthe press, shaping regulations, co-optingNGOs and elected officials, and gaining controlover part of the state oil company.

Proponents of World Bank-sponsoredcapitalisation in Bolivia argued that statecompanies were corrupt and inefficient, and thatthe country needed to increase economic growthby drawing on the capital and technology ofmultinational oil corporations. Yet, acceleratedeconomic growth in the hydrocarbons sectorassociated with the economic restructuringentailed the construction and renovation of aseries of pipelines for transport of oil and gas tomarkets within and outside of South America.As a result, such expansion of activities withinthe sector increased various social andenvironmental impacts, a point which isacknowledged by the World Bank itself (see,for example, World Bank, 2000).

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SOCIAL AND ENVIRONMENTALIMPACTS OF HYDROCARBONSPROJECTS

Impacts of hydrocarbons projects are parti-cularly harmful as exploration, production anddistribution often occur in sensitive eco-systems and indigenous territories. In Bolivia(Figure 1), this is clearly manifested by theBolivia-Brazil gas pipeline, which runs eastfrom Santa Cruz, through San José de Chi-quitos to Puerto Suarez and, ultimately, PortoAlegre in southern Brazil, crossing a numberof sensitive ecosystems and seriouslythreatening the livelihoods of indigenousGuaraní, Chiquitano and Ayoreo communities,both in Bolivia and Brazil. In operation since1999, the Bolivia-Brazil pipeline triggeredincreased exploration and the construction ofadditional pipelines feeding into it, includingthe Rio San Miguel-Cuiabá pipeline that runsnortheast from San José de Chiquitos to SanMatías and on to Cuiabá in Brazil, bisectingthe Chiquitano forest – the world’s largestremaining tract of tall, dry tropical forest – andthe Pantanal wetlands, among other protectedareas in the eastern lowlands (see Hamer-schlag, 1999). Environmentalists have arguedthat the pipeline “right of way”, the path clearedfor the pipeline route that Enron and Shelldefined as spanning a width of 30 m along theentire length of the pipeline (Entrix Con-sultants, 1999), and the illegal service roadshave increased access to sensitive areas, withlong-term ramifications.4

The argument that hydrocarbons projectsalleviate poverty in Bolivia by increasingemployment and revenue for the state isproblematic: profits primarily go to multina-tional oil corporations; state revenues areunevenly distributed geographically; and theprojects generate little employment and createfew linkages with the rest of the economy(Andersen & Meza, 2001). These contradic-tions were at the heart of conflict over thePacific LNG (liquefied natural gas) project,through which multinational oil corporations

British Gas, Repsol YPF and Pan American (aBritish Petroleum and Bridas Corporation jointventure) attempted to export gas to markets inCalifornia and Mexico through Chile. Facili-tated by the economic reforms discussedbelow, the Pacific LNG project, the largestinfrastructure project in the history of Bolivia(still in the planning stages), was anunderlying cause of the violent clashes bet-ween the government and indigenous groupsthat ultimately culminated in the expulsion inOctober 2003 of the Bolivian president,Gonzalo Sanchez de Lozada (1993-97; 2002-03).5

Documents from the Bolivian energy andHydrocarbons Vice-Ministry (Viceministeriode Energía e Hidrocarburos) (VMEH, 2002),make clear that economic restructuringfacilitated the entrance of multinational oilcorporations (including Enron and Shell) intoBolivia and shifted control of hydrocarbonsproduction from the state to foreign-ownedcorporations:

With the application of the measuresof Structural Adjustment, initiated in1985, there was a redefinition of rolesof the state and the private sector. TheState stopped participating in produc-tion in order to undertake normativeand promotitive functions of privateinitiatives... The new HydrocarbonsLaw, promulgated the 30 April, 1996, theCapitalisation of Yacimientos Petroli-feros Fiscales Bolivianos (YPFB) andthe signing of the contract of purchase– sale of gas with the Republic of Brazil,has in turn figured favourably fornational and international privateinvestment... The success of the re-forms realised in the sector can beobserved in the results of the capi-talisation of YPFB, and the substantialinvestment agreements for the next 8years.

Company documents6 also demonstrate thatthe World Bank’s hydrocarbons sector

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capitalisation project, initially implemented bythe Bolivian government in 1996, shiftedcontrol over oil and gas pipelines, such as theCuiabá pipeline, from the state to Enron andShell. With this shift, Enron, Shell and theirBolivian consortia – Transporte de Hidrocar-

buros S.A., or Transredes, GasOriente Boli-viano and GasTransboliviano – becameresponsible for impacts generated from newhydrocarbons activities (e.g. construction ofpipelines, wells and plants). There is ongoingdebate regarding the degree to which Enron,


Figure 1. Areas of oil and gas exploration and exploitation in Bolivia (1998-99) andrelevant pipeline locations.

Source: Based on Areas de Exploración y Explotación Petrolera en Bolivia, Centro del Planificación Territorial Indígena & Confederación de Pueblos Indígenas de Bolivia, December 1999.

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Shell and their local consortia should be heldaccountable for impacts stemming from thepre-existing infrastructure inherited from YPFBthat, company representatives insist, was inextremely poor condition. This issue becameparticularly important when Transredes’ OSSAII pipeline (running east from Arica in Chile toSanta Cruz) ruptured in January 2000 in theAndean highlands, spilling some 30,000 barrelsof reconstituted crude oil into the RioDesaguadero and contaminating patches ofnative prairies, pastures and crops in appro-ximately 18,000 hectares (Getter et al., 2000;La Razon, 2000a). The spill occurred near thetown of Sica Sica, in a rural Bolivian altiplanoregion inhabited principally by Quechua andAymara indigenous populations that dependon livestock and cultivation of crops such asquinoa, amaranth and potatoes.7 Within thesame year, Transredes suffered a further twopipeline spills – one near Cochabamba, theother in Camiri – in addition to three otherprior incidents (FOBOMADE & AmazonWatch, 2000).8

An audit conducted in 1999 by asubcontractor for the Hydrocarbons Super-intendency (Superintendencia de Hidrocar-buros), the state agency that regulates thehydrocarbons sector, found that 65 points ofthe 2,052 km of oil pipelines in Bolivia (most ofwhich were managed by Transredes) neededimmediate repair and 80 other points neededto be repaired in the medium-term (La Razon,2000b). After six months of investigation, thesuperintendency found that Transredes hadfailed to undertake the preventative measuresit had recommended on 1 December 1999 (twomonths prior to the OSSA II spill) and imposeda sanction of USD 114,000 for lack of main-tenance and prevention in the section of thepipeline that crossed Rio Desaguadero (LaRazon, 2000a). Notwithstanding the team oflawyers from Transredes who dissected thesanction and the company’s appeal, presen-ting testimony from international experts andlocal witnesses, in 2000 the sanction wasupheld (El Deber, 2000b; La Razon, 2000c). Inaddition, the company had to spend USD 35

million cleaning contaminated watersheds andother areas (La Razon, 2000c). Ironically, theUSD 114,000 Transredes allegedly paid for thesanction merely went to a regional fund tofinance oil and gas development, rather thanto affected communities or environmentalprotection measures (La Razon, 2000a).

A few months after the sanction, Trans-redes also paid local Aymara indigenouscommunities in Chuquiña and Japo (easternBolivia) the sum of USD 3.7 million as compen-sation and USD 2.2 million for the rehabilitationof native prairies, in accordance with theresults of a subsequent independent audit,and then only after pressure from the affectedcommunities (El Diario, 2001). Previously, theAymara community at Chuquiña announcedtheir intention to sue Transredes and theMinisterio de Desarrollo Sostenible yPlanificación (MDSP), the Sustainable Deve-lopment Ministry: Transredes had notcomplied with the Ministry’s orders to provide9,283 metric tons of pasture to the communitiesin both Chuquiña and Japo as compensationfor having degraded their pastures and reeds(El Deber, 2000c). Bolivian environmentalNGO Foro Boliviano sobre Medio Ambiente yDesarrollo, or FOBOMADE (2000), criticisedTransredes’ failure to follow through withmitigation and compensation.

Social unrest had emerged because Trans-redes did not comply with providing water,medicine and pasture to local communities,ignoring an administrative resolution in July2001 from the Ministry (La Razon, 2000d). Thecompany’s non-compliance attests to itssignificant power in relation to the Ministry;that Transredes was sanctioned at all appearedto stem largely from tremendous presscoverage of the spill, as well as the degree ofinternational involvement (over 27 inter-national organisations) (La Razon, 2000d).Yet, in the case of the Cuiabá pipeline,9 inFebruary 2000, Vice-Minister Neisa Roca,whose portfolios included environment,natural resources and forest development(Viceministerio de Medio Ambiente, Recursos

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Naturales y Desarrollo Forestal), issued onlya formal warning to GasOriente Boliviano (aconsortium of Enron, Shell and Transredes)for not complying with agreements establishedin the project’s environmental impactassessment (EIA) (PROBIOMA, 2000). It ispossible that Roca did not issue a sanction(the next step in the legal process) becauseshe truly believed the company had addressedthe issues raised. But ongoing reports fromNGOs, indigenous groups and civic organi-sations regarding violations of the EIA andcompensation programmes indicate that thiswas more likely due to a conflict of interestbetween the priorities of the Vice-Minister’senvironment (i.e. protection) and forest deve-lopment (i.e. favouring pipeline construction)portfolios, and because the matter receivedless press exposure than the Rio Desaguaderospill.

During the same year, Transredes wasaccused of offering 1300 bolivianos (aboutUSD 200) as bribes to community members inCamiri for that oil spill (El Deber, 2000b).Similarly in the case of the Rio Desaguaderospill, Vice-Minister Roca had accused Trans-redes of concluding agreements with com-munity members who were illiterate (La Razon,2000d). The behaviour of the companyrepresentatives in these instances was similarto that displayed in the case of the Cuiabápipeline in spring 1999, in which they effec-tively minimised compensation and mitigationof impacts by negotiating with the 34 Chi-quitano and Ayoreo indigenous communitieslocated within the pipeline’s “right of way” ina divided manner, bypassing regional andnational organisations. Although the Vice-Minister’s warning to the companies in thecase of the Cuiabá pipeline was one of themost significant actions taken by a Bolivianstate agency, it was a minor rebuke incomparison to the USD 5.9 million the Vice-Ministry demanded from Transredes for theoil spill in Rio Desaguadero. Yet, criticsclaimed that even that sum was trivial incomparison to USD 84 million that Petrobras,the Brazilian oil and gas company that has

extensive involvements in Bolivia, had to payfor an oil spill in Brazil (El Diario, 2002). Inthis context, critics used the Brazilian case toemphasise the relative weakness of theBolivian Sustainable Development Ministry inrelation to its counterpart in Brazil, as indeed aBolivian Sustainable Development Ministerconceded:

Transredes is convinced that it will notbe sanctioned for the successive oilspills. It is assured that as it “is a Boli-vian company” and has national capital,the Government would not dare to applya severe punishment (El Deber, 2000d).

The aforementioned statements point tothe tremendous power of multinational oilcorporations in relation to Bolivian stateinstitutions, particularly those charged withregulating their actions. In addition, actionsundertaken by Hydrocarbons Superinten-dency as compared to that of the SustainableDevelopment Ministry suggest a significantfracture between the two state institutions. TheSuperintendency, for instance, did not accuseTransredes of negligence in the OSSA IIpipeline rupture, but merely stated thecompany did not act quickly enough to takepreventative measures (El Diario, 2000). Incontrast, Vice-Minister Neisa Roca found thatTransredes was negligent because it couldhave greatly reduced the amount of oil spilledhad it acted more rapidly (La Razon, 2000d).She claimed that 29,000 out of 30,000 barrelsof oil spilt were lost during the first 23 hours,when oil was still being pumped through thepipeline. Staff at the NGO FOBOMADE wentfurther, suggesting that Transredes had notjust manipulated the press to diminish thesignificance of the spill, but failed to provideessential data, endangered the health ofcommunity members engaged in cleaningoperations and improperly disposed ofcontaminants (FOBOMADE & Amazon Watch,2000).

Given the significant impacts caused by thethree oil spills and the construction of the


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Cuiabá pipeline, it is significant that Bolivianstate institutions imposed relatively minimalsanctions, did not press criminal charges norsuspend construction or operation of thepipelines – actions that were supported byexisting legislation (La Prensa, 2000). Becauseof the severity of the Rio Desaguadero spill,there was even discussion of the possibilityof the Bolivian government pressing criminalcharges against Transredes; however, neitherthe Hydrocarbons Superintendency norMinistry of Sustainable Development pursuedlegal action. Even Vice-Minister Neisa Roca(cited in La Prensa, 2000), who maintained thatTransredes was negligent, intimated she wouldnot pursue criminal charges because pipelineruptures were out of her jurisdiction, and thelegal process would be arduous and slantedin favour of the company:

I still don’t want a lawsuit against[Transredes]. The Prefecture of SantaCruz brought a lawsuit [for insuf-ficiently treating waste products]against Guabirá [a sugarcane refinery]for the death of fish [in the Piraí river]and Guabirá won after strolling throughfive provincial tribunals.

What is implied in the Vice-Minister’s statementis that it was more politically feasible to takeadministrative rather than legal action for acriminal act. Bolivian Environmental Law, Ley delmedio ambiente of 1992, states thatcontamination of waterways constitutes anenvironmental crime on which the Vice-Ministryshould prepare a site report to be submitted tothe Public Ministry. That the Vice-Ministerherself openly shunned pressing criminalcharges attests to the perceived clout ofTransredes, which is well equipped with legaland public relations teams. It is likely that thiswas also a factor explaining why the Ministry ofSustainable Development did not suspend theconstruction or operation of any of the pipelines,even after multiple oil spills and the environmentaldegradation caused by the construction of theCuiabá gas pipeline. Rather, both state agenciespursued moderate administrative measures.

FOBOMADE (2001) criticised Transredesfor manipulating communities and influencingthe supposedly independent audit of the oilspill. Moreover, it lamented nepotism thatarose between the state, Transredes, and thevarious NGOs and consultants contracted byTransredes. While some of the emergentconflicts of interest between multinational oilcorporations and NGOs are analogous tothose present between international financialinstitutions and collaborative NGOs (Hoch-stetler, 1997; Keck &Sikkink, 1998), these areparticularly problematic, in the Bolivian case,when NGOs are directly contracted by non-transparent, illegitimate and unaccountable oilcorporations.

REGULATING THE HYDRO-CARBON SECTOR: THEWORLD BANK

The World Bank influenced Bolivian stateinstitutions in various ways through structuraladjustment and capitalisation as well asfinancial and legal reforms. Within the hydro-carbons sector, World Bank support forcapitalisation and for modifications of policies,laws and regulations were paramount inencouraging private investment. The pro-mulgation of the Hydrocarbons Law in 1996was expected to liberalise trade in oil andnatural gas; establish an independentgovernment agency to promote explorationinvestments and negotiate contracts; createan agency to regulate distribution tariffs andidentify anti-competitive practice; andderegulate prices (World Bank, 1994a).

United States (US) economic interest was asignificant motive for capitalisation. COREInternational Inc. (1994), which assessed thefunding prospects for the US Trade andDevelopment Agency, indicated that fundingthe capitalisation would benefit US investors,create demand for equipment, open newmarkets and create jobs. The US governmentitself and the IDB also played key roles inencouraging the Bolivian government to

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implement capitalisation (CORE, 1994). In July2000, the national Bolivian newspaper LaRazon (2000e) reported that World Bank staffexerted significant pressure on the Boliviancongress to approve the Public Ministry Law,Ley orgánica del ministerio público of 1993,implement reforms to the Judicial Counsel Law,Ley de organización judicial of 1993, andinstitutionalise the Counsel. These were someof the pre-conditions for approval of a USD 30million “judicial reform” loan. The capitalisationprogramme itself imposed stiff conditions thatthese legal, regulatory and financial reformshad to be enacted in order for this loan to bedisbursed (World Bank, 1994a).

As the investment, mining and hydro-carbons laws were of paramount economicimportance, the World Bank (1994a) made theirpassage a condition of the judicial reform loan.A letter from the Bolivian government (Ministerof Finance, 1994) requesting the loan alsoconfirmed that the Bank had stipulated thepassage and promotion of various other lawsand regulations as necessary conditions.Through (this and other) conditional loans,the World Bank shaped virtually every majorstate institution in Bolivia, effectively makingstate employees dependent on World Bankfunding. Such financing presents a significantconflict of interest for state officials ininstitutions responsible for monitoring andregulating the social and environmentalimpacts of the World Bank’s economic reformsassociated with the hydrocarbons sector.

In particular, the World Bank’s project forhydrocarbons sector reform and capitalisationcredit sponsored the creation of an environ-mental office, Unidad del Medio Ambiente(UMA), within the Energy and HydrocarbonsVice-Ministry (VMEH), ostensibly to regulate,prevent and mitigate negative social andenvironmental impacts associated with theeconomic reforms in the hydrocarbons sector.In addition, the World Bank (2000) sponsoredwhat came to be known as the “learning andinnovation loan” (LIL) capacity-buildingproject to strengthen the socio-environmental

management capacity of UMA.10 The totalestimated cost of the LIL project was USD 5.5million, of which the Bank financed USD 4.8million. The LIL project was one of theinstitution-building activities sponsored bythe Bank to ensure that structural, legal andfinancial reforms were implemented success-fully, and without negative effects. However,from the inception of the project in 2000, NGOsand indigenous organisations criticised theWorld Bank funding, alleging that UMA wasineffective in addressing negative impacts ofhydrocarbons projects brought by theeconomic reforms (FOBOMADE, 2000). Repre-sentatives of various civil society groupsaffected by Enron and Shell’s projects allegedthat UMA was partial to the companies andtheir local consortia, and that the Energy andHydrocarbons Vice-Ministry too had failed toenforce existing laws owing to their extensiveties to energy companies:

In the current context, social andenvironmental impacts in the sectorhave multiplied. Some of them, such asthe oil spill in Río Desaguadero, haveprovided evidence of the non-existenttechnical capacity on the part ofcompanies and responsible govern-ment agencies in confronting thesetypes of accidents, the vulnerability ofcommunities, but, above all, the scarcewill of responsible environmentalinstitutions in applying and enforcingexisting legislation, particularly theVice-Ministry of Energy and Hydro-carbons, whose close links with energycompanies has been observed in thenational press, as with the case of thecurrent functions of the former Vice-Minister of Hydrocarbons in thecompany Chaco (AMOCO), the ex-head of UMA, and other functionariesthat have moved from this Vice-Ministry to energy companies (FOBO-MADE, 2000).

Moreover, anonymous interviewees at theSustainable Development Ministry in early


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2000 argued that UMA should not havemonitored environmental issues since (as partof the Vice-Ministry of Hydrocarbons) it hada vested interest in advocating hydrocarbonsprojects as “national interest” and defendingmultinational oil corporations. Ironically, bypromoting the LIL project, the World Bankattempted to finance a questionable institution(which it had originally created) to addressthe increasingly negative impacts of hydro-carbons development that the Bank itself hadconceded resulted from its own economicreforms. Clearly too, UMA staff had a conflictof interest in monitoring impacts associatedwith the World Bank-sponsored reforms ofwhich they were a part. Moreover, under theHydrocarbons Law, the state received aportion of payments made by energycompanies for concessions, some of whichwas channelled to UMA (World Bank, 2000).Ultimately, therefore, UMA’s fundingdepended on revenues from environmentallydestructive hydrocarbons projects, anotherconflict of interest.

During the design phase of the LIL project,FOBOMADE (2000) recommended that it bemodified such that representatives of localcommunities affected by hydrocarbonsactivities would have decision-making power,directly monitor impacts and supervise projectimplementation. After the third round ofconsultations, the World Bank reoriented theproject to a limited extent and created com-missions of inter-institutional coordination atnational, departmental and local levels thatwere to have decision-making power andundertake monitoring, regulation and conflictresolution (FOBOMADE, 2000). These com-missions were to be based on the PopularParticipation Law, Ley de participaciónpopular of 1994, and composed of represen-tatives from a broad range of sectors withincivil society as well as various state insti-tutions. In the spirit of decentralisation,FOBOMADE proposed that local monitoringby those communities affected by hydro-carbons activities be the lynchpin of theproject. However, the revised project

documents, purportedly incorporating the civilsociety concerns raised, revealed that, ratherthan heeding these proposals, the World Bank(2000) remained steadfastly resolved to fundUMA to conduct monitoring. This, FOBO-MADE (2000) argued, essentially reduced the“monitoring network” to a handful of UMAconsultants in the city of Santa Cruz. A directorof the Bolivian NGO Centro de EstudiosAmbientales para el Desarrollo Sostenible(CEADES) insinuated, the entire consultationprocess was manipulative and deleterious tovulnerable communities affected byhydrocarbons activities:

Through the World Bank LIL projectthe oil companies are trying to use[Confederación Indígena de Bolivia –the national indigenous organisation]to legitimate a consultation regime thatis totally contrary to the interests ofindigenous and peasant communities.They pretend to undertake regionalmeetings with indigenous peoples(without participation of peasants orcolonists, and with a small number ofNGOs, the majority of which arefunctionaries of the World Bank), andwith no democratic participation ofaffected communities, seek to approvethis regime, which would enormouslyhinder social monitoring of thecompanies (personal correspondence,Jorge Cortés, 8 August 2001).

In this context, the LIL case corroboratesGwynne & Kay’s (2000) contention thatdecentralisation in Bolivia shifted functionsto the local scale without transferringsignificant decision-making power. Thatindigenous and peasant representatives wereultimately relegated to insignificant roleswithin the LIL project supports the notionthat control over decision-making on naturalresources is shaped by disparate powerrelations (Boelens & Doornbos, 2001).

In March 2000, I observed a videocon-ference between the World Bank’s offices in

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La Paz, Bolivia, and Washington, D.C., atwhich NGOs and indigenous organisationswere arguing against the support for a projectthat focused on strengthening UMA. A WorldBank official in La Paz commented that it wastoo late, insinuating that the Bank toorecognised the controversial aspects but wasalready committed to funding UMA. Indeed,despite its alleged receptivity to modificationsproposed by civil society groups, the LILproject appeared “pre-cooked”. Moreover, theWorld Bank’s (1994b:2) project document forthe capitalisation programme, which wasprepared in 1994 prior to capitalisation,explicitly stated that a forthcoming technicalassistance project (i.e. the LIL project) wouldbe implemented to improve the capacity of theEnergy and Hydrocarbons Vice-Ministry’s“environmental assessment of hydrocarbonand power-related reforms”.

Internal World Bank documents show thatrepresentatives were well aware that itsinvestments were at odds with its mandate ofsustainable development and povertyalleviation and, further, that the Banksupported the project because of its highreturns, rather than any true desire to addressimpacts generated by the economic reformsand associated hydrocarbons activities:

Another internal Bank documentobtained by [the Institute for PolicyStudies] outlines the profitability of theoil, gas and mining sector for the WorldBank. That memo stated, “By sector,Oil, Gas and Mining had by far thehighest equity return after specificprovisions (26.6 per cent)” (Wysham,2001:n.p.).

The LIL project information document (WorldBank, 2000), written approximately four yearsafter the capitalisation of the Bolivianhydrocarbons sector, admitted that reform andcapitalisation of the state oil company, alongwith the opening of the Brazilian gas market,had triggered social and environmentalimpacts which were beyond the regulatory

capacity of state institutions to contain.Similarly, other documents describing potentialimpacts of capitalisation prepared prior tocapitalisation (e.g. World Bank, 1994b), hadanticipated that capitalisation could increasehydrocarbons development and its associatedimpacts, which indicates that the World Bankfailed to prevent, control and mitigate negativeimpacts fully envisioned in its own studies.

CAPITALISATION: MNCs, THESTATE AND NGOs

Investors who were interested in buying partsof Bolivia’s capitalised public enterprises hadtremendous influence on the Boliviangovernment in crafting the Capitalisation Law(Ley de capitalización of 1994) whichinvolved various sectors, including hydro-carbons, airlines, telecommunications andmining. The World Bank’s definitional missionreport (CORE, 1994) on capitalisation of stateenterprises stated that private investors (likeEnron and Shell) were to be given a 50 percent share in the companies, but with assuranceof control through a management contract.Such an arrangement suggests that contraryto World Bank, IDB and Bolivian governmentdiscourse assuring the public that control ofcapitalised enterprises was to be evenly splitbetween the government and private investorswas unfounded. In reality control rested withprivate companies.

In the case of the Cuiabá pipeline, it is clearthat Enron and Shell wielded control.Ownership of GasOriente Boliviano was splitin the following manner: Enron 20 per cent,Shell 20 per cent and Transredes 60 per cent.Transredes, the oil and natural gas transportconsortium, was in turn owned by both Enronand Shell (25 per cent each),11 two Bolivianpension funds, Futuro de Bolivia AFP andAFP Previsión BBV, (34 per cent), as well asprivate investment funds and former workersof YPFB (16 per cent). Of this last 16 per cent,in 2002, a representative from Transredesadmitted to me during a confidential interviewthat some ex-employees of YPFB had sold their


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shares to the private companies Fondelec (see<http://www.fondelec.com/portfolio/>) andIndosues. This meant that the Bolivian state –through the pension funds – ultimately onlyowned 20.4 per cent of GasOriente Boliviano.

Through capitalisation, the Bolivian statereceives a relatively small proportion ofrevenue – 18 per cent from new gas fields and50 per cent from existing fields – compared toEnron and Shell (CEDIB, 2001), particularly inview of the fact that, as of May 2002, 97 percent of hydrocarbons reserves were new (LosTiempos, 2002). Moreover, the amount of gasin new reserves discovered after capitalisation(1.44 trillion cubic metres) far exceeds existingreserves (0.04 trillion cubic metres) (La Razon,2000f; CEDIB, 2001; Los Tiempos, 2002).

In addition to issues related to the relativecontrol of private investors as compared tothe state, there was also controversy over themanner of Enron’s entry into Bolivia. Followingthe fallout from the Enron bankruptcy scandal,an opinion piece in the national newspaper ElDiario (2002) stated that there was no fairbidding process, and that Enron’s entry wassecured by questionable financial contri-butions to government representativesnegotiating the capitalisation.

Scrutiny of the way that Gonzalo Sanchezde Lozada’s administration implementedcapitalisation during his first term (1993-97)suggested that certain state representativeswillingly adopted neoliberal economic policiesbecause they benefited personally. PresidentLozada was criticised because, as founder andhead of the private company Compania Mineradel Sur (COMSUR) he had an enormouseconomic interest in the mining sector(Conaghan et al., 1990) and, therefore, stoodto gain from capitalisation of the state miningcompany, Corporación Minera de Bolivia(COMIBOL). These allegations were con-firmed in September 2002 when indigenousChiquitano peoples’ representatives, accom-panied by a delegation of NGOs, travelled onrural roads originating near the town of San

José de Chiquitos to the heart of the Chiquitanoforest and found that COMSUR was about totap gas from Enron and Shell’s Cuiabá pipelinefor the Don Mario gold mine – a projectoperated by Orvana Minerals Corporation(http://www.orvana.com) in which Losada’sCOMSUR had a controlling interest.12 Thisimplied that Enron, Shell and COMSURsecretly conspired to construct the pipelinethrough the middle of the forest in order toprovide energy to the remotely located goldmine. In July 2003, Chiquitano and Ayoreoindigenous representatives lodged a complaintwith Rachel Kyte, the World Bank ombudsmanin Washington, D.C. (Compliance AdvisorOmbudsman, 2003), alleging that the WorldBank, through its group member InternationalFinance Corporation (IFC), was both a funderand shareholder (11.1 per cent) of the DonMario project in violation of InternationalLabor Organisation (ILO) Convention 169 onindigenous and tribal peoples,13 Bolivianenvironmental law, and the World Bank’soperational guidelines. The letter called uponthe Bank to suspend the Don Mario projectuntil investigations were completed and toindemnify the affected populations. Conse-quently, in late August 2003, the World Bankombudsman came to Bolivia to conduct aninvestigation, recommending an investigationof all of COMSUR’s operations in Bolivia (seeCompliance Advisor Ombudsman, 2003).

The Bolivian state depends heavily onrevenues from oil and gas, particularly giventhat it has the second largest gas reserves inSouth America. In 1994, the World Bankestimated that the Bolivian Treasury receivedapproximately 50 per cent of its revenues fromthe sector (World Bank, 1994c). With thecompletion of the Cuiabá pipeline, extensivenew gas finds and additional pipeline con-struction, this amount will likely increase,assuming the state receives its fair (albeitminimal) share of profits. However, as statecoffers grow, pressure to approve damaginghydrocarbons projects will likely increase.Confidential interviewees at the SustainableDevelopment Ministry acknowledged that

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Enron and Shell placed immense pressure onthe Bolivian government to grant theenvironmental license for the Cuiabá pipelineas rapidly as possible with the route bisectingthe Chiquitano forest.14 Although Vice-Minister Neisa Roca wanted to approve thealternative routing that followed existing roads,she was told by the Vice-President’s Office togrant the environmental license for thecheapest route, the one that would clear a rightof way directly through the Chiquitano forest(Plate 1). In retrospect, representatives fromthe Treasury and Economic DevelopmentMinistry realised that this was a mistake, butby then, construction had already commenced.In addition, given the alleged conspiracybetween Enron, Shell and former presidentSanchez de Lozada’s company COMSUR, itappears the pipeline was also constructedthrough the middle of the forest in order tosupply energy to the Don Mario mine. On 15June 1999, the day the US government’s Over-

seas Private Investment Corporation (OPIC)approved a USD 200 million loan to Enron andShell, OPIC issued a press release hailing theunprecedented environmental requirements ithad imposed upon the companies and allegingbenefits accruing to indigenous peoples. Inthe release, OPIC (1999) echoed Enron’s proudsentiment about passage of the “Heart” Law,Ley corazon of 1999, that was aimed to makeBolivia a centre, literally “the heart” for energyand telecommunications development byopening export corridors/highways.

Prior to this, Enron representative, AbrahamMoreno, commented that Enron “had achievedthe approval of the ‘Law of the Heart’”(Molina, 1999b:199), thereby presuming toremove any legal barriers to constructing thepipeline. The Ley corazon identified 11 pro-jects, including the Cuiabá pipeline, to attractforeign investment and promote the export ofnatural gas and electricity to neighbouring

Plate 1. Early construction phase along the route of the Rio San Miguel-Cuiabá pipeline,about 5 km from San Matías, before crossing the border to Brazil,

November 1999. Author’s photo.


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countries under 40-year concessions(Department of Energy, 2002). In February2000, at a consultation meeting on the bi-oceanic highway (export corridor) projectadministered by IDB, which was attended bydozens of civil society groups, includingNGOs, indigenous representatives andpoliticians (and at which I was present), Vice-Minister Roca argued that Bolivia is a poorcountry to justify the need for foreigninvestment from MNCs and internationalfinancial institutions for mega-projects. Yet,Roca had been quick to criticise them for takingaway power from the state by investing in theUSD 30 million “Chiquitano Forest Conser-vation Program” negotiated by Enron, Shelland (initially) five conservation NGOs15 that,to date, excludes representatives of localindigenous and peasant communities from theprogramme board:

They did their business amongstthemselves. They are going to use theland to put the pipeline in. They aregoing to see that the environment willnot be hurt. They are judge andjury….This is my country, those are mynatural resources, and I am in chargeof them. And now we are going to giveresponsibility to third parties? (NeisaRoca quoted in Langman, 2000).

CONCLUSIONS

Current conflicts in Bolivia relating tohydrocarbons development are similar to thosethat occurred in the early and middle part ofthe twentieth century, when foreign aid, legaland technical assistance and political pressurefrom the US persuaded Bolivia to surrenderdomestic reserves to such foreign companiesas Standard Oil and Gulf. After a series ofnationalisations and de-nationalisations of thestate oil company YPFB, the neoliberaleconomic “reforms” adopted in 1985 andthereafter marked the beginning of another erain which foreign aid, legal and technicalassistance and political pressure once againencouraged the state to capitalise the national

oil company, deregulate the economy, providefiscal “incentives” for MNCs and grant Enronand Shell the first major contract for naturalgas exports to Brazil. Although internationalpressures were similar to those applied inprevious eras, the economic, legal and insti-tutional reforms adopted in this contemporaryneoliberal era have transformed the state andeconomy much more profoundly.

Economic and political restructuring inBolivia facilitated the entrance of multinationaloil corporations that constructed a series ofpipelines which were particularly detrimentalto indigenous communities, and which led tonegative environmental impacts of an unpre-cedented scale and magnitude. This argumentrepresents a nuanced analysis of what Bryant(1992) has referred to as contextual sources ofenvironmental change, one of three criticalareas of inquiry within political ecology (seealso Peluso, 1988; Hirsch, 1990). By referringto historical and contemporary dynamics ofindigenous peoples’ struggle over protectingsensitive ecosystems that are the basis fortheir livelihood, the paper opens a second areaof critical inquiry within political ecology,conflict over access to environmental re-sources (Bryant, 1992; Blaikie, 1994). Inparticular, the so-called reforms juxtaposedextremely powerful corporations besidevulnerable indigenous groups who werecompelled to engage in acts of resistance inorder to re-assert their claims over naturalresources.

Based on the premise of attracting foreigninvestment through deregulation, economicrestructuring impeded the responsible stateinstitutions from addressing impacts causedby developing the hydrocarbons sector, butstrengthened others that were allied withmultinational oil corporations. Since the con-struction of the main Bolivia-Brazil pipelinebegan, Enron, Shell and their local consortiahave been responsible for four major oil spills,a gas leak16 and various ramifications on localenvironments and livelihoods caused by thepipeline construction. In these cases, company

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personnel dealt with affected communitiesseparately and thus minimised compensationand mitigation of impacts. The companies’persistent acts to thwart the minimal sanctionsimposed by state agencies and their disregardfor domestic and international laws is evidenceof their immense power.

Along with the administration of GonzaloSanchez de Lozada, the international financialinstitutions that promoted capitalisation of thestate oil company, including the World Bank,IMF and IDB, should be held accountable forthe impacts generated by the capitalisedcompanies in Bolivia and also for promoting aprocess that purported to leave the state withequal control, but left it with only a 34 per centstake in Transredes, Enron and Shell’s newlycapitalised company. The capitalisation planpromoted by the aforementioned internationalfinancial institutions was particularly insidiousin that it made public welfare dependent onprofits from unsustainable hydrocarbonsdevelopment. Furthermore, contrary to neo-liberal rhetoric, the motives for capitalisationwere anything but humanitarian. Rather, theyaimed to support investors, open new marketsand create jobs – in the US. Staff and consul-tants from international financial institutionsworked hand in hand with representatives fromBolivian state institutions to implement theinstitutional, legal, regulatory and financialreforms. Contrary to its professed directive ofsustainable development and poverty alle-viation, the World Bank consistently fundedprojects that marginalised indigenous peoples,degraded the environment, increased debt andaided problematic state institutions.

The World Bank’s LIL project is one of themost egregious projects the Bank hassupported in Bolivia. Although the project hasaimed to address negative social andenvironmental impacts engendered by the veryeconomic reforms it promoted, the Bank merelyfunded an environmental office (UMA) of astate agency that is heavily influenced bymultinational oil corporations. Ironically, localmonitoring, which was proposed by indige-

nous and NGO representatives, would havefollowed the intent of the Bolivian Laws forPopular Participation, Decentralisation, (Leyde descentralización administrative of 1995)and the Environment, all of which weresupported by the World Bank. Rather thanacknowledging that its projects werefundamentally unsustainable, the Bankimplemented the LIL project as a band-aid forthe negative impacts generated by theeconomic reforms.

The numerous impacts caused by thehydrocarbons projects, together with theassessments in documents of the World Bankitself, illustrate that the Bank failed to prevent,control and mitigate negative impacts that werepredicted to arise with capitalisation. Since2000 in particular, the waves of protestsagainst the privatisation of state companies,of water and gas, as well as the marches forterritory and dignity by various indigenousand peasant groups had contested theprogression of the economic reforms,culminating in the October 2003 ousting ofGonzalo Sanchez de Lozada. This analysisprovides insights into how neoliberal economicpolicies sponsored by international financialinstitutions affect vulnerable populations andsensitive ecosystems and builds on previousresearch on impacts of international aidconducted within the field of political ecology(Colchester, 1986; Hecht & Cockburn, 1989;Muldavin, 2000b; Muldavin, 2000c). In aneffort to further integrate political economyand political ecology, the paper combinesmacro and micro levels of analysis of extractiveindustries (natural gas) with the goal ofproviding comparative value to other studiesin Latin America (Buttel & Sunderlin, 1988).

The MNCs brought in by the reforms havenow become powerful players that shapenational legislation and development. Alongwith their multilateral counterparts, they havedriven the enactment of transformativeneoliberal legislation and (using lobbyists,public relations teams and financial finesse)co-opted NGOs, politicians and represen-


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tatives of state institutions involved inregulating and monitoring the hydrocarbonssector. As a result of such pressure, privateinvestors gained control of capitalised com-panies through management contracts andcreative divisions into consortia (such asGasOriente Boliviano and Transredes), amongother mechanisms. Such slick manoeuvringobscured the actual control exerted by privateinvestors in comparison to the Bolivian stateand was misleading, if not intentionallydeceptive, in justifying capitalisation witharguments that the state would maintain equalcontrol (but now retains a mere 34 per cent).Representatives from Enron, Shell and theirlocal consortia placed immense pressure onthe Bolivian government to issue theenvironmental licenses for destructiveprojects. In this context, by analysing nuancedrelationships within and between MNCs, civilsociety, state institutions, and the environ-ment, this paper aims to deepen politicalecological research linking MNCs toenvironmental change (Pearson, 1985; Redclift,1987; Leonard, 1988; Bryant, 1992)

The economic reforms, regional tradeagreements, and associated increases inhydrocarbons activities carried out by multi-national oil corporations have profoundlyaffected sectoral and geographical patterns ofdependency in Bolivia. In a relative sense,increasing dependence on hydrocarbonsreduced Bolivia’s economic dependence onthe mining sector and shifted Bolivia’s regionaldependence from the Andean group countries(Colombia, Ecuador, Peru and Venezuela) tothe Mercado Común del Sur (Mercosur) or“Southern Cone Common Market” countriesof Argentina, Paraguay, Uruguay and,particularly, Brazil. In fact, Enron and Shellclaimed that the Rio San Miguel-Cuiabápipeline was a model for Bolivia’s integrationwith Mercosur:

The pipeline and power plant expansionis a project of Transredes S.A., Enronand Shell Gas Latin America B.V., andhas been developed with the strong

support and close cooperation of theBolivian, Brazilian and Argentinegovernments. It is viewed as a modelproject for Mercosur economic andenergy integration. It also demonstratesthat responsible economic developmentcan go hand-in-hand with progressiveenvironmental policy.17

Nonetheless, Enron and Shell’s increased rolein Bolivia, along with other foreign oil com-panies, has in turn made Bolivia increasinglydependent on private investment from the USand Europe.

The main cases analysed in this paper, theconstruction of the Rio San Miguel-Cuiabá(Bolivia-Brazil) pipeline, the World Bank’s LILproject and the OSSA II pipeline (RioDesaguadero) oil spill, vividly illustrate thegrave consequences of economic restructuringin Bolivia. Although pressure from civil societyin Bolivia has caused international financialinstitutions to implement some reforms relatedto their accountability, legitimacy and transpa-rency, such measures have not fundamentallychanged their practices but, rather, haveserved to legitimate damaging projects andpolicies. The analysis reveals that their rhetoricof poverty alleviation and sustainable deve-lopment is, for the most part, a veneer thatobscures their destructive practices and doeslittle for the indigenous communities whodirectly suffer the consequences:

These (large-scale) projects managemany resources in the name ofIndigenous Peoples. Nonetheless, ourpeople and communities continue to bethe same or worse. We see people andprojects pass in which others improvetheir situation, but in our communities,nothing or little has changed. We remainat the margin of economic benefits(OICH, 2000).

At the time of writing, pressure fromindigenous groups and other sectors of civilsociety continuing in the wake of the ousting

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of Sanchez de Lozada had led the governmentto modify the Bolivian Constitution and theHydrocarbons Law; ultimately, these wouldentail the convocation of a constituent assem-bly and a national referendum on natural gas.It remains to be seen to what extent suchchanges will alter the proportion of revenuethe state retains from multinational oilcorporations and whether environmental andsocial impacts generated in the sector will beaddressed directly.

ACKNOWLEDGEMENTS

This research was funded by grants from theInter-American Foundation, UCLA LatinAmerican Center, and UCLA InternationalStudies and Overseas Program. I am parti-cularly grateful to Joshua Muldavin, JohnAgnew, Stephen Bell, Carlos Torres, SusannaHecht and Judith Carney for their guidance inconducting this research. I am most deeplyindebted to various individuals from theChiquitano and Ayoreo communities, as wellas a number of NGOs in Bolivia for theinvaluable information they provided. I amparticularly grateful to Henry Tito and JorgeCortés of CEADES, who have inspired me inthe way they work to strengthen indigenousmovements by encouraging autonomy andself-sufficiency.

ENDNOTES1 I use the term “reform” merely to maintainconsistency with the terminology used by the WorldBank and Bolivian state institutions without implyingany positive connotation whatsoever.

2 The process of capitalisation differs fromprivatisation in that the money gained from the saleof the state company does not go to the state, but,rather, stays with the company to finance futureinvestment (Ewing & Goldmark, 1994).

3 Fieldwork was conducted from October 1999through August 2000, and during my subsequent tripsin 2000, 2001, 2002 and 2004. Ethnographicqualitative research techniques (in particular, semi-structured interviews and participant observation)were combined with political-economic structuralanalysis (based on archival review) (Little &

Horowitz, 1987; Bassett, 1988; Hecht & Cockburn,1989; Bryant & Bailey, 1997).Various individualswere interviewed in the state sector (the Energy andHydrocarbons Vice-Ministry (VMEH), SustainableDevelopment Ministry (MDSP), National ProtectedAreas Service (SERNAP) and Senate Commission forSustainable Development), the private sector (Enron,Shell and their consortia in Bolivia, and theirconsultants AATA and Dames & Moore), variousinternational and Bolivian NGOs (Friends of theEarth, WWF, Amazon Watch, Bank InformationCenter, Missouri Botanical Garden, WorldConservation Society, PROBIOMO, CEADES,FOBOMADE), and members of the Chiquitano andAyoreo indigenous communities and journalists.

4 See maps of oil and gas pipelines at <http://w w w . s u p e r h i d . g o v . b o / p u b l i c / L S T _MAPAS_3_archivo.pdf>. The Bolivia-Brazil pipelinetraverses the Kaa-Iya Gran Chaco National Park(managed by Guaraní indigenous representatives), theChiquitano forest, and the Izozog, Chiquitos andUtoquis wetlands in Bolivia; and in Brazil, theprotected areas of Ibitinga and Corumbatati (im-portant for migratory birds); the National Forest ofIpanema; the Pantanal National Park; and theendangered remnants of the Mata Atlantica (see Pató,2000; Hamerschlag, 1999). The routing and con-struction of the Rio San Miguel-Cuiabá pipelinenegatively impacts the livelihoods of, in particularthe Chiquitano, as well as Ayoreo indigenous com-munities, apart from small-scale agriculturalproducers and other sectors. Forest clearing for thepipeline right of way have increased the susceptibilityto fire (due to edge effect) and prospects for illegallogging and colonisation. Approximately 90 speciesfound in the Chiquitano forest are listed in theConvention on International Trade in EndangeredSpecies of Wild Fauna and Flora (CITES).

5 In the months leading up to his ousting, GonzaloSanchez de Lozada was implicated in conspiring withthe Pacific LNG consortium on the controversialplans to export natural gas to California (via a re-gasification plant in Mexico) through Chile ratherthan Peru. Deep-rooted tensions had flared up asBolivians viewed the project as a means by which toregain the access to the Pacific that had been lost in1879 when Chile annexed Bolivia’s coastal territoryin the Pacific War; additionally, the project wouldhave generated significant profits for Pacific LNG,but only relatively small revenues for the Boliviangovernment. In summer 2004, Bolivians voted in areferendum to export gas through Peru, not Chile.The project is intimately tied to economic restruc-turing in Bolivia, as the entrance of foreign oilcorporations enabled by capitalisation included thosein the Pacific LNG consortium.

6 Documents from Enron, Shell and their Bolivianconsortia for which I am not at liberty to disclose details.


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7 Fobomade & Amazon Watch (2000) claimed thatalthough Transredes was supposed to contractprofessionals to conduct the cleanup, instead, oil wasremoved manually and placed into plastic bags bycommunity members and soldiers with no protectiveclothing (but merely dressed in white!).

8 On 10 July, 2000 barrels of crude spilled fromTransredes’ pipeline in Parotani, a town nearCochabamba (Los Tiempos, 2000). Then on July 13,another ruptured, spilling between approximately 200and 600 barrels of oil into the Parapeti river inCamiri, immediately killing thousands of fish andpreventing local indigenous communities fromdrinking the water (those who did, experiencedpulmonary and gastrointestinal problems). Withintwo days, oil spots were observed 80 km downstreamfrom the spill, at San Antonio del Parapeti, (emailcorrespondence, Fobomade, 25 August 2000; ElDeber, 2000a).

9 Key social and environmental impacts caused byconstruction and operation of the Cuiabá pipelineinclude the failure on the part of Enron, Shell andinternational financial institutions to comply withagreements to title the lands of affected indigenouscommunities; their failure to provide long-termcompensation as established in ILO Convention 169(see note 13 below); their failure to include indigenousrepresentatives on the board of the Chiquitano ForestConservation Program (governed by Enron, Shell,and four NGOs), as well as causing secondary impactsalong the pipeline route (e.g. hunting, colonisationand lack of reforestation), and direct social andenvironmental impacts (e.g. soil erosion, degradationof wetlands, increased prostitution in local townsand increased alcoholism).

10 UMA was consolidated in 2000 by the WorldBank’s “Hydrocarbon Sector Reform andCapitalization Credit” (Credit no. 2762 BO). The“Hydrocarbon Sector Social and EnvironmentalManagement Capacity Building Project” (Credit no.33780), informally known in Bolivia as the LILproject, was also implemented in the same year.

11 Both Enron and Shell shares were held via theirconsortium TR Holdings Company: TR acquired a50 per cent stake in Transredes. TR has managementcontrol of the company while former companyemployees of state oil company YPFB and privatepension funds control the remaining 50 per cent

12 Sanchez de Lozada founded COMSUR in 1962.COMSUR acquired many of his mines after hecapitalised the state mining company, COMIBOL.During his short-lived second presidency (2002-03)his stake in the company had been held in trust (untilthe expiry of his term). On 11 January 2002,COMSUR acquired a controlling interest in OrvanaMinerals, operator of the Don Mario mine (<http:/

/www. orvana.com/AIF-2003-Sep30.pdf >). For theWorld Bank’s link to the mine, through IFC’s interestin COMSUR, see <http://www2.ifc.org/ogmc/files/eirprojects/Comsur.pdf>; and <http://www.ifc.org/about>.

13 Article 15 of ILO Convention 169, in particular,specifies the rights of indigenous peoples toparticipate in the use, management and conservationof national resources in their lands and that“governments shall establish or maintain proceduresthrough which they shall consult these peoples, witha view to ascertaining whether and to what degreetheir interests would be prejudiced, before undertakingor permitting any programmes for the explorationor exploitation of such resources pertaining to theirlands. The peoples concerned shall wherever possibleparticipate in the benefits of such activities, andshall receive fair compensation for any damageswhich they may sustain as a result of such activities”(<http://www.ilo.org/ilolex/english/convdisp1.htm>).

14 In 1999 and 2000, even prior to construction ofthe Cuiabá pipeline, indigenous and environmentalgroups had opposed routing the pipeline through themiddle of the Chiquitano forest and Pantanalwetlands, advocating the alternative routing alongexisting roads that went round the forest (Hindery,2003). A video on the controversy related to themine and pipeline can be viewed at <http://w w w. a m a z o n w a t c h . o r g / n e w s r o o m / i n d e x .php?type=video>.

15 These were the Bolivian offices of the WorldWildlife Fund (that subsequently withdrew itsparticipation) and Wildlife Conservation Society inSanta Cruz; Noel Kempf Museum and FundaciónAmigos de la Naturaleza, both Bolivian, based in SantaCruz; and the Missouri Botanical Garden, USA.

16 In September 1999, three executives fromTransredes were charged with causing environmentalcontamination resulting from a diesel and oil spill inan oxidation lagoon located in the municipality ofSanta Cruz. On July 7, there was a gas leak in Trans-redes’ pumping station in Tiguipa south Bolivia,where an earlier explosion had killed 11 people(FOBOMADE & Amazon Watch, 2000).

17 This text is cited from a website of Enron andShell which promoted the significance of the Cuiabáproject and is no longer operational.

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