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06 March 2006
Bolivia is experiencing a transition in its energy policy as a result of ideas proposed by the new government, led by Evo Morales. In the short period since Morales became president, he has announced major changes for the energy sector through the Hydrocarbons Ministry.
The current Hydrocarbons Law (3058/2005) was approved during Carlos D Mesa's presidency by virtue of a binding referendum of November 2004. However, this law has not yet come into force as the regulations necessary to implement it were not approved. As a result, currently all hydrocarbon activities (with the exception of the tax regime) are governed by the regulations corresponding to Law 1689/1996, which has actually been repealed. This obviously creates problems as the implementing regulations for Law 1689/1996 are not tailored to the new law.
According to the latest official government notices, the new regulations are expected to be approved shortly as the majority of the gas and oil industry is willing to abide by the new rules. Nonetheless, the government is facing negotiations with the industry because the industry claims that arbitrary changes have been made to the law.
It is possible that, due to these inconsistencies in the law, and the fact that the government and the energy sector have already identified problems with its application, changes to the law may be made in the near future. However, such changes will have to reflect the results of the 2004 referendum.
The governments of several countries have expressed their willingness to contribute their experience to the new Bolivian energy policy. However, this cooperation should not modify substantially the ruling by the Morales government that the state should take a more active role in the natural resources sector.
One probable modification to the law, despite criticism by the private sector, is the closure of the Hydrocarbons Superintendency. The superintendency's responsibilities include:
According to reports, the powers currently held by the Hydrocarbons Superintendence, as set out in Law 3058/2005 and the SIRESE Law (which regulates certain sectors, including hydrocarbons), would be transferred to Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), which would then be the main player in the industry. The private sector would have to enter into partnership with YPFB in order to continue operations, as this state enterprise would have complete control over the hydrocarbons.
If this happened, YPFB would be both regulator and participant in the market - a situation that should not happen in a state of law such as Bolivia. For this reason, there are reasonable doubts regarding the total elimination of the powers of the Hydrocarbons Superintendency.
If things continue on the current path, within the next few months Bolivian hydrocarbon policy will be established, at least for the reign of Morales. This should clarify the doubts expressed by the private sector regarding the availability and handling of these resources, and provide a clearer perspective on how to handle future investments in Bolivia.
Entities incorporated in Bolivia, as well as others that might become so in the future, are keen to carry out hydrocarbon activities in the country, provided there are adequate incentives for investments and the rules of the game are maintained.
For further information on this topic please contact Rodrigo A Henriquez Essmann at Indacochea & Asociados, Abogados by telephone (+591 3 535 356) or by fax (+591 3 581 200) or by email (firstname.lastname@example.org).
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Rodrigo A Henriquez Essmann