September 23, 2007

Bolivia Has a Shortage of Natural Gas

MABB © ®

If you follow Bolivian affairs you'll get a kick out of this photo. In it you can see arch rivals and now best friends Evo Morales and Ruben Costas, Santa Cruz Prefect. The photo was taken during Morales' visit to Santa Cruz, where the biggest industrial fair has started this weekend, ExpoCruz 2007.

While the Santa Cruz economy seems to be sailing with good wind, the rest of the country is experiencing troublesome trends. For example, the most important natural resource for Bolivia today is natural gas. As you probably already know, the government recently nationalized it and the current government is planning to use it to develop the Bolivian economy. However, in the last months Bolivia has been suffering a shortage of natural gas. Of course, people asked themselves (perplexed, because Bolivia was said to have the second biggest natural gas reserve of the region) how is that possible? Some were quick to point out to the demand from Brazil and Argentina, to whom Bolivia exports natural gas. In fact, these two countries have been asking Bolivia to increase its production, because they need more gas.

But, now there seems to be another culprit. It seems that internal demand is also increasing. The talk is not only about the traditional household demand, but also of industry and cars. Especially affected are the industries in the city of El Alto and La Paz. Also, the amount of cars using natural gas as fuel is increasing. This last point is the one I find interesting. Below you can see an nice graph outlining the increase of cars that use natural gas and the corresponding increase of the demand for natural gas.

After my last visit, I am not surprised that La Paz is running behind this trend. Apparently, Cochabamba is leading and Santa Cruz is behind.

The lack of natural gas has an important effect on the rise of prices. Many 'first necessity' products such as bread are affected by this situation. Inflation is expected to hit double digits for this year.

To that, another worrisome news is the down trend of the trade surplus. This year is gone down 13%, as reported by La Razón. That means Bolivians are selling less to the rest of the world. I am afraid some link exists between natural gas shortage and export decrease. The impact is not good on the Bolivian economy.

From here on it doesn't look as the Bolivian economy is in trouble for now, but some red lights are definitely there.