January 14, 2006

Preliminary Balance of Evo Morales' World Tour

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Mr Morales returned this past weekend from his world tour. A tour which took the president-elect to Cuba and Venezuela, to Western Europe, China, Sourth Africa and Brazil. No other Bolivian official (althoug he is not official yet) has headed such a world tour not had such a coverage by the international press. On the way, Morales met with presidents, prime ministers, other high officials and even kings. The topics of speculation and interests were of course the natural gas reserves of Bolivia and Mr Morales' sweater.

As he returns to Bolivia, the question arises, what has he achieved with this trip? He is not even the president and yet and he went on a world tour? Why? This small and preliminary article pretends to extract a sort of balance to Evo Morales' trip.

Among the most significant result of Morales' trip seems to be the support he has secured from other governments (Spain, France, the EU, China and South Africa, and of course Cuba and Venezuela). Among the most significant shows of support he got we can count the financial offerings of Hugo Chavez, the condonation of half of the debt owed to Spain, and the promises of investment by the government of China.

First, Morales traveled to Cuba, where aside from calling Fidel Castro "maestro" (master), he secured assistance from the Cuban government to help people with eye problems and a promise to help eradicate analphabetism in 30 months.

Second, Morales arrived in Caracas, where he signed an agreement of cooperation with Chavez of US$ 30 million and he also received assurances from Chavez of plentiful oil supplies for Bolivia.

The third stop was Spain. It was there where his sweater made more news than his policies. He was received by King Juan Carlos, afterwards he met with the Spanish head of government, Jose Luis Rodriguez Zapatero (the real one) and confirmed the condonation of half of the US$ 120 million debt to that country.

In Brussels, he met with the foreign minister of the Euroean Union, Javier Solana. Morales left Brussels empty handed, but not without being warned and with promises of moral support.

In France, Morales met with Jacques Chirac, and there he received assurances of support and an offer to condone some €US 20 million in debt.

Morales' sixth stop was Beijing, where he met Hu Jintao and also got assurances of significant investments from the part of Chinese companies to develop the Bolivian natural gas resources.

In Pretoria, South Africa, Morales was received by president Thabo Mbeki, but does not get to see another one of his heroes, Nelson Mandela. However, he does not leave empty handed. Aside from getting suppor and an understanding to tighten relations between the two countries, Morales receives notice that the US government is interested in talking with him over the drug eradication program, and later on that it will be attending his inauguration. This was a result of Morales' statement forgiving the US for, as Morales puts it, earlier humiliations and verbal attacks against his persona.

Lastly, in Brazil, Morales convinced Lula Da Silva to agree with the renegotiation of the contracts signed with Petrobras. There is also a second agreement of increasing Petrobras' participation and investment in the hydrocarbons industry. Apparently, Petrobras controls 46% of the proved and probable reserves of Bolivian natural gas.

Ensuing the aforementioned agreement, Repsol-YPF (the Argentinean/Spanish consortium) has expressed its intention to increase investment and its desire to become Bolivia's principal partner in the exploitation and industrialization of the natural gas reserves.

On top of it all, and in spite of Vicent Fox's comments about Bolivia and its gas, the Mexican government has expressed its interested in buying Bolivian gas. A Mexican offical has express Fox's desire to meeting with Morales next May in Vienna.

Additionally, there were a few clarifications (statements made by Morales) to his government's domestic policy.

Morales repeatedly stated that he will not confiscate the property of the transnationals operating in Bolivia. There was much speculation on Morales' policiy of nationalization. Did that mean confiscation or not? For now, at least, it is clear that confiscation will not be an option.

What is also clear is that the government will be increasing its share of the benefits. How? it is not yet known.

It was also confirmed by Morales, once again, that he will pursue the legalization of the production of the Coca leaf. That would mean to, in some significant way, affect the current eradication program backed by the US.

On the foreign policy front, Morales opened the doors to the possibility of some kind of relationship with the US government. He had previously said that his government would be a nightmare for the Bush administration.

Overall the balance of Morales' world tour can be qualified as positive. With significant financial contributions (in different forms) and many diplomatic victories. Morales must be coming home satisfied and more self-assured.

The most immediate issues requiring his attention now, up until his inauguration, are: the construction of his government and the presidency of the Senate.

7 comments:

Jonathan said...

Miguel, do you know when do the debt reductions go into effect? (exact date or average period)from:

Spain
France
IMF

thanks

Jonathan

Miguel said...

For starters, here is a press release from the IMF itself.

IMF to Extend 100 Percent Debt Relief to Bolivia
Under the Multilateral Debt Relief Initiative

Mr. Simón Cueva, the Resident Representative of the International Monetary Fund in Bolivia, issued the following statement on December 22 in La Paz:

"Under the Multilateral Debt Relief Initiative, the IMF Executive Board has approved debt relief for Bolivia (see Press Release No 05/286). As part of the Initiative, the IMF will provide 100 percent debt relief on all debt incurred by Bolivia to the IMF before January 1, 2005 that remains outstanding. This amounts to approximately US$231 million, or US$222 million excluding remaining assistance under the Heavily Indebted Poor Country Initiative (HIPC). This debt relief should become available in early January as soon as the remaining consents of the contributors to the PRGF Trust Subsidy Account have been received. The international community has made these additional resources available to help Bolivia make progress toward its Millennium Development Goals (MDGs).

"Bolivia has qualified for IMF debt relief because of its overall satisfactory recent macroeconomic performance, favorable trends in poverty reduction, and sound initiatives to improve public expenditure management. In recent years, Bolivia has enjoyed economic expansion with low rates of inflation, the government has made progress in implementing its poverty reduction strategy, and it has moved forward to address weaknesses in public expenditure management, including efforts to improve the tracking of poverty-related spending. Performance in these areas provides assurance that resources made available under the Multilateral Debt Relief Initiative will be used effectively.

"The IMF looks forward to working with Bolivia to help it develop a strong and stable economy and to make sustained progress toward the MDGs," he said.

Miguel said...

details on the Spain promise I have not seen.

The French offer was just that, an offer. I am guessing there is nothing concrete yet.

Jonathan said...

Thank you for the response, I think I should have been more specific though; I meant at what point in time are they written off by the Bolivian Central Bank.

I know that in accounting you recognize revenues when they are collected and expenses before they are extended. However, who knows if GAAP rules are obeyed in Bolivia or if they will use the money to tweak the numbers for political reasons.

miguel said...

Well, the central bank doesn't do that. In doesn't deal with finances. Rather it deals with monetary policy, like money demand, the problem of liquidity, inflation, system of payments, etc.

The ministry of finance would be the one who takes care of the debt payments, in the name of the Bolivian government.

As for the specific time, I am not sure, but I think it will be a process covering several years. What they are doing is, they are not receiving the payments Bolivia makes periodically on its debt. Instead that money gets deposited in another account. That money will be used to fulfill the purposes of the agreement. So they won't be writing them off, but they will be transfering them to another account.

I guess, the exact date will be the day the Bolivian government starts transfering the money into that account.

Bolivia does use the double entry system of accounting and I would be inclined to think that there are many people in the ministry of finance that know the GAAP rules. I would even be willing to bet that the people who are working there studied in US universities. I know at least one person. :-)

Saludos.

Jonathan said...

True, I'm typing too quickly and forgeting the essentials, monetary policy, fiscal policy, who does what, who doesn't, double entry for internal uses IASB for external, blahh

In any case BCB has a pretty cool utility to monitor foreign debt:

http://www.bcb.gov.bo/deudaexterna/loader.php

Thanks for replying, keep up the good work, you have one of Bolivia's most valuable blogs.

Jonathan

Miguel said...

Thank you Jonathan, I do appreciate comments like that and visitor like you.

Be well!