February 2012

The Riches that could've been

Bolivia is a country rich in natural resources. It has, after Venezuela, the most petroleum and natural gas in South America. It was an important colony for Spain because of its enormous resources of silver and it has also many other minerals. Many of these resources have been or are exploited. Nevertheless, Bolivia is the poorest country in South America. Why could Bolivia never profit from this natural richness?

By: Svea Niestroj
Projects Abroad Volunteer
Rotenburg - Germany

Photo: Melle Bos

The Richest City in the World

In the 16th century the first natural resources of Bolivia were exploited. In this time the Spanish conquistadors discovered the Cerro Rico, the rich mountain in Potosí. They made the indigenous people cut out the enormous amounts of silver. For the Spanish people, it was not important how many people would die doing this work, because there were plenty who could replace them. The silver was brought to Spain, where the king used it to finance his national budget. But the budget got higher and higher, so he needed more and more silver from the Cerro Rico. They took so much that the mountain was actually shrinking, being perforated like a sponge. How many people lost their lives in this mountain is unclear. Some say a few thousands, other say a few million. For this reason the mountain is also called the “mountain that eats people”.

Potosí became the richest city in the world, in just one century it produced so much silver, that it would have been possible to build a bridge with it to Madrid1. But the indigenous people did not belong to this society of the new richest city in the world in which the rich built big houses and beautiful streets. Soon all the silver that was easy to get was gone and everyone who could, left the city.

Why could Bolivia never profit from this natural richness?

They left behind the workers who continued working in the mines because they didn’t know another way to earn money in order to keep their families alive. When Simón Bolívar together with Antonio José de Sucre liberated the country in 1825 from Spain, the production of silver did not stop, but because there was not that much left it was harder to get than in the past. And the life in the mines continued, without a chance for the new founded Bolivia to gain profit. There were too many other problems to solve, such as the confederation with Peru in 1836, and the war because of this confederation with Chile and Argentina in the following years. Then, in 1900, the situation changed. Now, the main product was no longer silver but tin.



Working inside the mine
Photo: Sjoerd Smidt

According to the legend, Simón Iturri Patiño became a mine owner either thanks to a deal made in the shop where he worked or because he lent money to an owner of a mine. In any case, he ended up owning a mine. There, he found a tin lode in 1900 and the advancement began. In the following years, the price of tin got higher, making Patiño rich. He bought other mines and companies in Europe that produced things made of tin. He bought mines in Africa and in 1934 he controlled about ten percent of the worldwide tin production. The great demand for tin during the First and Second World War due to the arms industry made his wealth grow until his death in 1947. Patiño had created a great fortune, which he got for the most part thanks to the mines in Bolivia. Perhaps he could get that rich because there were nearly no taxes. Instead, he paid the president and the ministers2. Patiño only had a minimum of workers, so it was hard to find work in his company. Also, the people who worked there did not earn a lot of money. In the same way the situation was really good for other people, like Moritz Hochschild and Carlos Victor Aramayo, who amassed their fortune in the same time with Bolivian tin.

How many people lost their lives in this mountain is unclear. Some say a few thousands, other say a few million.

The situation changed in 1952. The Movimiento Nacionalista Revolucionario (MNR) overthrew the government and nationalized the mines. For this reason, the remaining giants in the tin production lost their mines, but they got a few million dollars to compensate their losses. After that, the mines belonged to the government, which started the company Corporación Minera de Bolivia (Comibol) to control mines. The workers were given a say in that company. In 1956, when the presidency changed, this right was canceled again, but the mines remained nationalized. However, Comibol needed fifteen years to produce the same amount as it was before the revolution of 19523. That caused Bolivia to fall from the second rank of worldwide tin production to the fifth rank. The crash of the tin market in 1985 also touched the Bolivian industry, and the private sector that existed again. After that, the production started up again, the mines split up into the mines of Comibol, of private companies and of smaller associations.

Since Evo Morales became president, a few mines have been nationalized, but not the whole sector. In 2007 for example, Vinto was nationalized, in 2011 Karachipampa, when the Bolivian government had to pay 750 thousand dollars to Atlas Precious Metals as compensation. As of today, Bolivia is in the fourth rank of the worldwide greatest tin producers4 and it remains an important part of Bolivian industry.

The Oil that went back and forth

The history of gas and oil is a bit different. The many different governments of the 20th century, when the production of gas and oil began, acted in different ways with these resources. In the first half of the past century the chaos began. The Oil industry was nationalized from 1916 to 1920, then again privatized until 1937 and then partly nationalized again. After the revolution of 1952 the new government nationalized the Standard Oil and put things in the hands of Comibol5. A few years later, after some changes in government again, whole fields of oil were nationalized.

During the following years, the economical problems became serious and the nationalization was canceled in 1989 because it could not enhance the situation of Bolivia. From that point on, foreign companies started to control the oil and gas resources of Bolivia. But also with this method, the country could not manage to gain from the situation because the companies did not have to consult the Bolivian government.

By voting Evo Morales for president, the people also voted for a repeated nationalization of the gas and oil resources. In the same year, this promise of the election campaign was realized. This time, with the difference that the foreign companies had 180 days to remake their contracts with Bolivia. The companies accepted that they will earn much less money, because at least half of the gains will remain in Bolivia. Perhaps the government left this possibility because Bolivia itself needs the knowledge and technology of the foreign companies to be able to continue exploiting gas and oil. Nevertheless, it shows that the government tries hard to change the old situation of exhausting the resources. Whether it will work, whether it will really change something, we will see in the future.

  1. http://www.globalresearch.ca/index.php?context=va&aid=27137
  2. http://www.ag-friedensforschung.de/regionen/Bolivien/galeano.html
  3. http://countrystudies.us/bolivia/62.htm
  4. http://www.metalprices.com/FreeSite/metals/sn/sn.asp
  5. http://www.photius.com/countries/bolivia/economy/bolivia_economy_petroleum_and_natura~139.html
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