The Bolivian government decided to boost fuel prices so that they will be close to those of neighbouring countries. To give a break to consumers the government had kept prices below those in adjacent countries. As a result there was brisk business in smuggling the cheap fuel over the border to Peru, Brazil, Argentina, and Chile. The prices of liquefied petroleum gas and natural gas will remain frozen.
The Bolivian vice president said:"We can no longer subsidize either smugglers or the powerful who have five or six cars. What we want to do is to use the money for fuel subsidy for the benefit of the Bolivians, for the neediest,"
The price of gas in Bolivia was 3.74 bolivianos per litre. NOTE: The Boliviano is a bit more than 14 cent U.S.. In Chile a liter of gas costs 9.36. In Brazil 10.5 bolivianos and in Peru 7.28. Obviously there is room for a big profit margin and smuggled fuel. The situation is similar for diesel prices.
The gas price will rise from 3.74 bolivianos to 6.47 and of diesel from 3.72 to 6.80 bolivianos per liter. Although no doubt the price rise was reasonable in order to stop the smuggling no doubt many Bolivians will be upset by losing access to very cheap fuel.
Garcia Linera the vice president said:"We don't want that trend to continue. Our model of development needs to be protected. We will continue to grow and invest, but we cannot continue to bleed," Linera announced that the government will provide incentives to increase oil production. Prices of basic services such as electricity, water, and telephone will be frozen. The government ofis opposed by many of the elite in Bolivia.
However not only the elite are protesting the price increases. Transport unions are also opposed. No doubt oppnents of the regime will help foment public demonstrations against the move. Many fear that the move will also increase the cost of goods that need to be transported. The foreign oil companies in Bolivia receive much less per barrel than those in neighbouring countries. However there has been a type of nationalisation of the oil industry but agreed to by ten large companies. One would think that a full nationalization would make more sense: YPFB is the state oil and gas company.
""""Which companies did the government sign with?
The government signed contracts with 10 companies: Spanish Repsol, French Total, two affiliates of Brazilian Petrobras, Argentinian companies Matpetrol and Pluspetrol, Andina (controlled by Repsol), British Gas, Chaco (controlled by British Petroleum), and US Vintage (controlled by Occidental).
What kind of contracts are they?
The contracts are for exploration and development. Contracts covering transportation, or establishing export volumes are still to be negotiated. The type of contract agreement is called an “operation” contract. The private company handles the extraction of Bolivia’s gas- using their own machinery and personnel. The gas is handed over to YPFB who then compensates the company for its costs, investments, and a profit margin.""""