BOLIVIA: President Evo Morales says he is still considering cutting national subsidies in the future

Record ID: 792237

  • Title: BOLIVIA: President Evo Morales says he is still considering cutting national subsidies in the future
  • Date: 5th January 2011
  • Summary: SANTA CRUZ, BOLIVIA (FILE) (REUTERS) VARIOUS OF OIL REFINERIES IN CAMPO GRANDE
  • Embargoed: 20th January 2011 12:00
  • Keywords:
  • Location: Bolivia, Plurinational State Of
  • Country: Bolivia
  • Topics: Domestic Politics
  • Reuters ID: LVA3ERV0LMLCW37JO8XCDYBABPWT
  • Story Text: Bolivian President Evo Morales said Tuesday (January 04) he still had plans to cut oil subsidies in the future.
    Morales on Friday (December 31) reversed a hefty fuel price increase that had sparked nationwide protests, landing him with one of the biggest crises of his five years in power.
    The decision to slash fuel subsidies sent prices soaring by as much as 83 percent, but Morales said an end to subsidies eventually was inevitable.
    "Sooner or later, you have to stop with the subsidy. We are in the consultancy stage at the moment with the social movements to find a way and we will decide on that. Finishing with the subsidy encourages investment for oil," said Morales.
    Former oil minister and former investigator for Olade (the Organisation for Latin American Energy) Mauricio Medinacelli explained the issues Bolivia's oil market was facing.
    "Bolivia has the highest tax system in all of Latin America and the Caribbean. That is to say no other country - not Venezuela, not Argentina, not Mexico - has a tax has high as we have in this country, because here there are 60% royalties. This, of course, is reflected in lower investment and, of course, lower production affecting the supply to the domestic market," said Medinacelli.
    Morales typically enjoys solid support among Bolivia's poor indigenous majority but the rise in fuel price angered his leftist base and trade unions led demands for it to be reversed.
    In La Paz's market places, local workers said they were still struggling to get gas for their homes and businesses.
    "At times there is not enough gas, at times they don't come to send it to us. Lots of times Bolivians ask themselves, 'Do we have gas here in Bolivia?' Because at times there is not enough to cook, or for the houses," said cook Rosario Mamani Tarqui.
    The fuel subsidies cost the state about $380 million each year -- equivalent to about 2 percent of the gross domestic product.
    Morales had defended the price increases as a vital tool to cut fuel imports and spur lagging investment in oil output but the threat of further protests is thought to have persuaded him to change course.
    "Of course whichever company has the right to recuperate its investment and make a profit. This will always be respected. At the oil fields, the technicians will tell us how much can this be, if at this point the operator or service provider or partner only pays 10 dollars per barrel, the same as the state company, it does not recover its investment and has even less chance of making profits. Bolivia should go back to exporting oil, heavy crude or light, but that is ensuring a good investment and for that we must end the subsidy," said Morales.
    Morales nationalised the energy industry soon after he took office in 2006, vowing to boost domestic fuel production. But progress has been slow and leading foreign companies have been reluctant to increase investments in exploration and refining.
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