Thursday, July 22, 2004

Sustainable Development
Bolivia has just held a referendum on how its hydrocarbon resources should be managed.  The five-point ballot covered the future role of the state and whether gas and oil should be exported, and how.  The referendum passed with a large majority, based on returns so far.  This was the issue that brought down the last government, amidst violent protests, and President Mesa may see the result as a vote of confidence in his government.

On the surface, the issue might seem almost ridiculous.  Bolivia, a poor, landlocked country, has few other things to sell to the world besides the natural gas reserves developed over the last few years with significant foreign investment.  Keeping the gas "for Bolivians" or renationalizing it would cut off both inward investment and hard currency revenues that the country badly needs. 

Aside from the issues unique to Bolivia, relating to the loss of its access to the sea in a 19th century war with Chile, the situation is consistent with resource management issues throughout the developing world.  In Indonesia, Nigeria, and other oil-rich countries we see local populations, which enjoy less benefit from the exploitation of these resources than they expect, reacting in ways that imperil the viability of massive projects.  Ultimately, for a resource contract to endure over the time required for the investors to earn an attractive return, there must be equity in benefits not only for the host government, but for the host population. 

I don't mean to suggest that the whole burden of ensuring this should fall to the international companies that find and develop these resources.  Rather, this is a primary responsibility of the governments in question, and it creates a responsibility for the companies to see that the countries fulfill their duties to their people.  Sustainable development, with its "triple bottom line" of economic, social, and environmental indicators may not be quite as prominent as it was a few years ago, but it is one way to devise measurable goals and milestones to which all parties can be held accountable.  Such an approach might have even headed off the renewed fervor in Bolivia for nationalization, which will benefit no one.

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