Bolivia's gas reserves run dry two decades after nationalization

Bolivia's natural gas reserves are running dry, and the country that once exported fuel across South America is now importing it. Gas exports have fallen almost 60 percent over the past decade, and with gas supplying around 70 percent of the electricity mix, the shortage has pushed inflation up and made imported goods unaffordable for many Bolivians — a situation worsened by global energy prices driven higher by the ongoing war in Iran.

The origins of the crisis trace to 2006, when then-president Evo Morales nationalized the fossil fuel industry and renegotiated contracts with international oil and gas companies. The revenue that followed funded public spending programs, expensive fuel subsidies and a dollar peg, and it underwrote a GDP expansion that helped halve poverty rates. What it did not fund, in any comparable measure, was exploration. Bolivia still holds an estimated 3.7 trillion cubic feet of proven reserves as of April, but the country consumed its income stream rather than replenishing the capital that produced it. "We failed to take advantage of a historic opportunity that brought in immense revenue," Luis Fernando Romero, former head of an association of economists in southern Bolivia, told reporters.

The bill has now arrived. In September, Bolivia's Congress approved a $1.9 billion IMF loan, accepted by the IMF's executive board on October 2, whose terms require strict austerity: cutting fuel subsidies and sharply reducing public spending. The government has already raised fuel prices and is expected to scrap further gasoline subsidies from the start of next year. The last subsidy reduction, in December, triggered widespread protests. The loan is expected to unlock up to $4 billion more from the World Bank and other lenders. President Rodrigo Paz warned: "International prices are forcing us to make complex choices."

The country has made little progress developing green energy to replace gas, leaving it with neither the old export revenue nor a new source of power. Two decades of treating exploration as a future concern ended with a state living off the interest of finite capital — and the IMF now setting its fuel prices.