Bolivia is currently experiencing a major internal conflict between the energy producing lowlands and the more impoverished highlands which are a social and economic drain on the economy. The President, Evo Morales, is from the highland region himself and was elected in large part because of his campaign promise to enact wealth redistribution programs to assist the impoverished highlands. This, of course, does not appeal to the lowland occupants who feel that he is promising what is rightfully theirs (energy revenues come from the lowlands, after all) to people who do nothing for it other than sit around and wait to vote — Robin Hood-type governments are never popular with the economically endowed. This sort of problem would not be a cause for domestic unrest in a more highly diversified economy such as Japan or the United States, but Boliva derives nearly all of its GDP from natural gas exports, and the vast majority of those exports are to Boliva’s huge neighbor, Brazil.
Brazil imports around half of its natural gas from Boliva. Natural gas is an energy commodity Brazil simply cannot do without and there are no alternative sources Brazil has available should the Bolivian situation result in a drastic reduction or stoppage in the flow. The social unrest in Bolivia has waxed and waned over the course of the last several weeks and has already included armed protests, violence in the streets, cities under siege by both the government and opposition groups and pipeline facility attacks and blockades. Brazil could care less about what happens to Evo Morales or to Bolivia in general, but when the pipelines running to Brazil are attacked or blockaded, a problem there is.
Brazil has already taken steps to attempt to stabilize Bolivia politically and economically (mainly with public statements and loans to the hurting Bolivian economy and State), but should these efforts prove meaningless or futile, or a civil war erupt in Bolivia — not an entirely remote possibility — then Brazil’s interests rest strictly with the lowlanders. Because of this in the event or even the high potentiality of a civil war we could expect to see Brazil taking sides quite quickly against Morale’s supporters and his regime on the condition that a Brazilian-sponsored lowland government guarantees uninterrupted natural gas supplies.
With Brazil’s recent discovery of billions of barrels of oil and billions of cubic meters of natural gas in offshore deposits in mind it is easy to ask the question of why Brazil holds Bolivian natural gas to be so important and why I would state that Brazil has “no alternatives” if Bolivian flows should cease. There is a world of difference between discovering a huge energy reserve and being able to exploit it. Geological structures must be mapped, wells must be drilled (in this case thousands of feet below the sea to depths tens of thousands of feet below the crust), transfer infrastructure must be built, an entire exploitation enterprise must be constructed and this costs billions of dollars in the simplest of circumstances and times. Brazil’s offshore desposites — which are enormous — and state-run oil company, Petrobras — which is the best-run state oil company around, give Brazil a huge boost in its long-term position as an oil and gas producer but are several years and at least $100 billion in investment funds away from bringing the new-found capacity online.
$100 billion is no small sum to raise in the best of economic times, and indeed Brazil had anticipated and even begun to experience a huge influx of hungry-eyed investors from the world over rushing to exploit thus lucrative find. But that was back in August when oil had climbed to around $140 per barrel, the massive dysfunction and weak position of nearly every European bank had not been fully revealed, Russia had not yet fully asserted that it was going to play Cold War II and a global credit crunch was not yet entirely obvious. Times are different now — though only four months stands between now and then — and with oil falling below $60 today and a massive global credit crunch in full swing, Brazilian oil looks for the moment like a money-sink, not a money-tree.
The world of Man is fickle and ever changing and this situation will pass and with it the importance of Bolivian natural gas for Brazil. But for now at least, Brazil needs Bolivian energy — whether it has to stick its finger in Bolivian affairs for it or not.