The Andean country’s natural gas sector will be a casualty of a second vote being pushed back yet again
The rapid spread of Covid-19 throughout Latin America has fanned flames of political discord in many of its countries this year. Government in-fighting over their pandemic responses has seen a revolving door of new Brazilian and Chilean health ministers. And, in Suriname and Guyana, strongman leaders have used coronavirus disruption as an excuse to refuse to accept election defeats.
For Bolivia, the election re-run failed to even take place. In late July, the supreme electoral tribunal (TSE), responsible for overseeing the election, ruled that a return to the ballot box should be rescheduled to 18 October. It was the third time the election has been pushed back since last year’s controversial poll resulted in President Evo Morales fleeing the country and Bolivia’s second vice-president Jeanine Anez assuming the reins of power.
Rising Covid-19 infections is the driver behind yet another postponement. Medical advice suggested that Bolivia’s peak will likely reach its height by the end of August or early September, although the TSE failed to consult any of the major parties on the decision. The previous timetable for the election was 6 September, before new infections surged and Anez testing positive for the virus—the third Latin American leader to do so after Brazil’s President Jair Bolsonaro and Honduras’ President Juan Orlando Hernandez.
The decision saw crowds of protestors took to the streets of La Paz and Cochabamba, among other major cities, voicing their frustration with the government. “The decision has fueled political instability and unrest as it is perceived to be an arbitrary and manipulated decision influenced by the interim government in its attempt to remain in power,” says Claudia Navas, an analyst at risk consultancy Control Risks.
As Bolivia’s political crisis rumbles on, the likely effect is further turmoil for the country’s energy sector and economy. “While Anez is in government, her lack of legitimacy among key constituents, as well as its minimal legislative support, will limit her ability to pass legislation aimed at attracting foreign investors,” says Navas.
“The decision has fueled political instability and unrest as it is perceived to be an arbitrary and manipulated decision influenced by the interim government in its attempt to remain in power” Navas, Control Risks
Bolivia’s economy was already struggling with the impact of Covid-19 on global energy demand and resultant price collapse. Natural gas is a crucial sector for the country’s economy, with exports representing 32pc of Bolivia’s total and 27.6pc of the national budget.
At the height of global economic lockdowns in April, national production of gas and marketed gas fell by almost half from levels recorded at the start of the year, according to data from the National Institute of Statistics of Bolivia. “Bolivian gas prices fell 69pc due to the price collapse in oil,” adds Navas.
And while volumes have marginally ticked back up with easing of global lockdowns and a gradual recovery of market conditions, gas contract negotiations with Brazil have further depressed the economy. Brazilian state oil company Petrobras reduced its natural gas import supply from 14-20mn m3/d down to a minimum take of just 10mn m3/d. Previously, the company had agreed to 24-30mn m3/d.
Future gas supply from Bolivia to Brazil could also be at risk if Latin America’s largest country continues its drive to promote imported LNG as a lower-cost alternative. Similarly, Brazil wants to expand its own natural gas sector by developing the midstream infrastructure needed to bring associated pre-salt gas to market.
Rising gas production in Argentina, and the potential of the Vaca Muerta shale basin, also raises long-term fears for the future of Bolivia’s other main gas export destination. Last year, Argentina’s gas export contract was amended to reflect lower demand for gas in summer and 16-18mn m3/d in the winter.