Bolivia has taken significant steps towards increased transparency since 2006. President Evo Morales has made institutional transparency and the fight against corruption a main focus of his administration. In practice, however, public disclosure continues to be a challenge. According to the 2008 Open Budget Index, Bolivia provides scant public information on the government's annual budget and financial activities.
Bolivia enacted its Transparency and Access to Government Information Law (Law 27329) in 2004, and in early 2006 Law 3351 created the Vice-Ministry of Transparency and Anti-Corruption within the Ministry of Justice. More recently, following the January 2009 referendum approving the new Constitution, the government passed Supreme Decree Nº 29894, creating the Ministry of Institutional Transparency and Struggle Against Corruption.
The nationalization of all hydrocarbon resources and the renegotiation of private foreign contracts under President Morales introduced the state-owned oil company Yacimientos Petrolíferos Fiscales de Bolivia (YPFB) into all phases of oil and gas production. Bolivia's government has struggled to combat corruption in the past, and with the operation and regulation of the extractive sector both under government control, there is reason for concern and increased vigilance over transparency in the sector.
YPFB has already been embroiled in a corruption scandal involving its president, Santos Ramírez, who was also second in command to President Morales in the Movimiento al Socialismo (MAS) party.1 Ramírez is accused of taking a bribe from a company that received a service contract from YPFB. Though the Ministry of Mining and Ministry of Hydrocarbons publishes its extractive contracts online, scandals such as this one demonstrate that contract transparency alone cannot make up for gaps in monitoring and oversight.
Despite these continuing challenges, the Law of Hydrocarbons (Nº 3058), does recognize citizens' rights to information and to monitor the management of extractive industry revenues. These rights are also protected by the new Constitution.
Even though Bolivia has not become a member of the Extractive Industry Transparency Initiative (EITI), it has expressed interest in participating and initial meetings have been held between EITI representatives and officials from YPFB, the Ministry of Transparency and Bolivian civil society organizations. A Bolivian delegation also attended a December 2009 seminar in Peru organized by the EITI, though one of the key ministers involved in EITI discussions, Tamer Media, has since resigned from the transparency ministry, leaving the pace of further discussions in question.
Revenue Transparency
The significance of the extractive industries in Bolivian exports and fiscal revenues has increased steadily over the past few years. Between 2005 and 2008, mineral and hydrocarbon exports rose from US$1.9 billion to $5.4 billion, while payments to the state by extractive companies (royalties and the Direct Tax on Hydrocarbons (IDH)) increased from US $448 million in 2005 to $1.7 billion in 2008. Extractive industries have grown to represent over 30% of all tax revenues, making transparency in this sector especially crucial.
Revenue transparency is mandated by the Law of Transparency and Access to Government Information, which established that all institutions in the executive branch must publish their revenues on the web or through other media, and must respond to information requests in a timely manner. Additional hydrocarbon legislation also establishes citizens' rights to information about extractive revenues. But these legislatively-mandated reports are only given at the end of the year, making it difficult to track revenue collection on a monthly or quarterly basis.
Different civil society organizations in Bolivia have been developing their capacity to carry out citizen monitoring of company payments to the state and the management of related revenues at the national and subnational level. Some of these organizations include Centro de Estudios para el Desarrollo Laboral y Agrario (CEDLA), Fundación Jubileo and Fundación Tierra.
Expenditure Transparency
The Open Budget Index (OBI) ranks Bolivia as the 12th least transparent country for annual government budget and financial activities. According to this report, several key budget documents remain unavailable to the public. For example, the executive's budget proposal is not published, effectively barring citizens from the debate about expenditures planned for the coming year.
Budget audits are also not made public, making it impossible to track the implementation of recommendations by the supreme audit institution made after expenditure performance is compared to the original budget. But the most alarming point in the OBI review is the absence of detail in the publicly available budget information, which prevents citizens from tracking the progress of specific government projects or activities.2
The surge in Bolivia's extractive industry revenues has increased subnational budgets. The laws controlling royalties in the mining and hydrocarbon sectors and the IDH dictate that a percentage of such revenues must go to subnational governments in producing regions, which results in decentralization, but also generates huge budget differences across the regions.
Mining royalties account for 11% of the value of mineral production, and 85% of that revenue is transferred to the Prefecturas—the intermediate level of government—and 15% to Municipalidades (local level), where extraction takes place. For hydrocarbon production, the royalty rate is 18%, of which 11% goes to producing regions, 6% to the central government, and the rest to compensate the non-producing regions of Beni and Pando.
The 2005 IDH tax has also contributed to an increase in subnational budgets, initially providing large sums to subnational governments in both producing and non-producing areas. Indeed, between 2005 and 2008, the total collected by the IDH grew from US $288 million to $1.1 billion. But the IDH distribution rules have undergone several amendments since their inception, first increasing the amount received by Prefecturas and Municipalidades, but then recentralizing this revenue to the central government to finance new direct cash transfers created by Morales. This sparked violent conflicts in producing areas in July and August of 2008.
The fall in international hydrocarbon and mineral prices has also affected subnational budgets, as extractive industry revenues reportedly dropped by 40% in the first half of 2009.
Re-nationalization and Promotion of the National Oil Company
As mentioned earlier, on May 1, 2007, in Supreme Decree 28701, President Morales announced the nationalization of all hydrocarbon resources, a step that had been in widespread demand for some time. Morales further established that the state would keep 82% of hydrocarbon revenues while companies would receive the remaining 18% to cover operating costs and provide some profit. While companies were not expropriated, the state did recover the ownership of all oil and natural gas extracted in the country. The change was in fact a move towards a service agreement structure between the state and private foreign companies, and represented an increase in government take from 33% in 1996 to 82% as of 2007.
Decree 28701 also established the state as a dominant presence across all stages of the hydrocarbon value chain. To achieve this, the government nationalized just over 50% ownership in companies including Chaco S.A, Andina S.A, Transredes S.A, Petrobras Bolivia and Compañía Logística de Hidrocarburos de Bolivia S.A. With these stakes now transferred to state-owned YPFB, the national oil company was effectively put in control of refining and distribution.
As YPFB has come to dominate the sector, two challenges have emerged. The concentration of power and control in government hands has increased the likelihood of corruption and inefficient management, as demonstrated by the recent bribery controversy, or the sharp fall in gas production since nationalization (gas production has dropped by over 5 million cubic meters per day). The consolidation of government control could also have a strong chilling effect on foreign investment. The long term outcomes of these recent measures thus remain to be seen.
