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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Bolivian oil and gas tax to go into effect

Knight Ridder

LA PAZ, Bolivia – In a surprise reversal, Bolivian President Carlos Mesa allowed a highly controversial oil and gas law to take effect Tuesday without his signature only days after promising to reject the measure.

Mesa’s decision is likely to calm some but not all of the gathering protests against him and the legislation, which has become the country’s most contentious political issue. By not acting on the bill, he shifts public pressure away from him and toward Congress.

But the president’s decision is also likely to prompt big-dollar lawsuits by several foreign oil companies that say the measure breaks existing contracts by unilaterally increasing their taxes. And foreign observers say it will chill foreign investment that could help create badly needed jobs.

At the heart of the dispute is the feeling by most Bolivians that the natural gas reserves – the second largest in Latin America after Venezuela’s – could generate enough taxes and investment to lift the country out of poverty.

“He’s following the first law of a political leader: Do everything you can to survive,” said Alvaro Garcia, a leading political analyst in Bolivia. “He was faced with trying to maintain political stability while angering the foreign community by letting the measure become law or just the opposite by rejecting it. He chose the former.”

Jose Galindo, minister of the presidency, speaking at the presidential palace, gave no explanation why Mesa did not follow through on his promise to veto legislation that 10 days earlier he said would divide the country.

Nor did Galindo address whether the president’s decision would only reinforce the increasing perception that he is weak, indecisive and unable to set the country’s agenda.

Senate President Hormando Vaca Diez had no qualms about criticizing the president in an address to a joint session of Congress, where in his dual role as president of the body he formally signed the measure into law.

Mesa found himself in a political fix Tuesday, with the moderate left complaining that the law should have raised the foreign companies’ taxes even higher, and the radical left saying Congress should nationalize the foreign gas reserves outright.

Meanwhile, the foreign oil companies and their business allies in Santa Cruz – the country’s economic engine – objected to the higher taxes and other provisions that will limit the companies’ flexibility when they try to export natural gas.