A farmer protests against fuel shortages in Santa Cruz, Bolivia, May 8. JUAN CARLOS FERNANDEZ (AFP)
Bolivia suffers from a constant outflow of three fuels: diesel, petrol and gas. The first two are smuggled into neighboring countries. The gas is diverted via secret private connections or used for illegal electricity production. The cause is the same: low Bolivian prices. Due to the subsidies, fuels are significantly cheaper than in neighboring countries or alternative energy sources. President Luis Arce launched an operation to “reverse” control of this contraband in hopes of saving the country $250 million. In response, traders and major users of hydrocarbons are protesting the restrictions imposed by the plan.
A liter of petrol costs 50 cents in Bolivia, less than half as much as in Argentina or Brazil and a third as much as in Paraguay, Peru and Chile. The inner values of fuels have been frozen since the end of the last century. At the same time, the international oil price has seen many ups and downs. The country was able to withstand the surges easily when it was a major exporter of gas and produced most of the gasoline it consumed (diesel, on the other hand, always had to be partly imported as its fields contained only a small amount). heavy with oil).
Then the Bolivian reservoirs “tired out,” as Arce recently acknowledged. In 2021, the country had to import almost the same value for gasoline and diesel as it exported for natural gas. And in 2022 it became an importer of hydrocarbons: it exported $3.4 billion worth of gas while importing $4.365 billion worth of gasoline and diesel. This mismatch is the main cause of the dollar shortage that the country suffered during this period. For them, the government just passed legislation authorizing the central bank to sell some of the gold in its reserves to preserve US currency.
Bolivian fuel imports saw an abrupt change between 2021, when it was $2,120 million, and 2022, the year when the value doubled. This increase was partly due to the increase in international oil prices, which rose from US$82 per barrel in September 2021 to US$108 per barrel in June 2022 (and then fell, but still stayed above US$70 per barrel). This was also due to the increase in the number of vehicles. The third reason was illegal: an “overcharge” for smuggling into neighboring countries across borders full of illegal border crossings.
How much is lost to smuggling has not yet been accurately measured, but the government estimates that better border control could save it around $250 million. “We found that by 2022, one motorcycle would carry more petrol than ten tankers,” said Franklin Molina, Secretary of State for Hydrocarbons, at a news conference. He said they also identified vendors who increased their fuel purchases by 100% and 200%.
Limit to 120 liters per month
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The government has mobilized the military and its officials under the sovereignty plan, which tightens controls on internal fuel purchases. This has existed since the state took over the oil business, but has so far only been followed very laxly. The mechanism is that consumers, who must be registered in an electronic surveillance system that identifies the license plates of their vehicles, buy a maximum of 120 liters per month per person. Anyone who needs more must obtain a separate permit.
Groups of producers from Santa Cruz, the country’s agro-industrial region, have organized “tractorazos”, i.e. road blockades with heavy machinery, to demand the lifting of the restrictions: “At harvest time, a single tractor uses 600 liters per year”. among other things, “We are producers, not processors”.
The petrol stations, the only link in the oil production chain that is privately owned, complained that they had been given the role of commissioners to prevent smuggling. The government threatened to intervene at gas stations that go against their orders.
Opposition economists are skeptical about what these measures can achieve. “Reverse” fuel smuggling also occurs in other countries with subsidized prices, such as Ecuador and Venezuela. As a structural response, various experts have suggested scrapping subsidies, which primarily benefit the car-owning middle class, while maintaining protections for the poorest. The government has ruled out this possibility. He prefers to build biodiesel plants that produce fuel from soybeans and other vegetables. Some public investments are already planned for this, but these are controversial due to their economic viability and environmental costs.
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