After a year of record gas revenues in 2006, Bolivia has achieved a fiscal surplus for the first time in three decades. In a period in which high oil prices have given Chavez more room to manoeuvre to shift its policy towards nationalisation and authoritarianism (see recent LACG Blog), there is the suspicion that windfall revenues may allow the Morales administration to take the same turn in Bolivia.

A new ODI Opinion argues that this is unlikely to be the case and that Evo Morales is actually departing from Chavez-type policy-making, acting more pragmatically and to some extent escaping his influence. For example, the new agreement in the gas sector proposed by the government to the foreign companies appears to be favourable for the companies as well and it is quite far from the nationalisation publicised by the government. In general the Morales-led government is showing a more accommodating attitude with foreign partners than the Chavez administration. This is particularly true with respect to the US (e.g. Bolivia recently offered to co-operate with the US in the eradication of coca plantations, which had previously been opposed by Mr. Morales himself). Morales’ administration is also planning to follow the example of Chile in establishing a stabilisation fund to save part of the windfall revenues from the gas boom for leaner times. This strategy is profoundly different from that of Venezuela, where windfall revenues are mainly directed to social spending.

I would argue that the factors behind this ‘unexpected’ accommodating behaviour by Evo Morales are both political and economic. The instability of conflict-prone Bolivia has been a limiting factor on governability and governments’ political control during the country’s recent democratic history. By contrast, Venezuela has historically enjoyed greater political stability and governments have been able to exert more control over political institutions (and Chavez is turning this control into authoritarianism).

Economic factors imply that Bolivia is more dependent than Venezuela on its foreign partners and international markets. First, unlike Venezuela, Bolivia largely lacks domestic capacity to exploit gas resources. Second, Bolivia relies on foreign partners (both countries and multilateral institutions) in financing its public debt while Venezuela does not. Third, the oil and gas markets differ. The level of surplus guaranteed by oil is usually higher than that obtained through gas. Hence, it may be more difficult to build a sustainable economy on gas than it is to do it with oil, especially given the oil reserves that Venezuela has.

However, this is only the beginning of the path for Bolivia and it remains to be seen whether the types of incentives described may work in the same direction throughout the entire presidency of Morales in a historically unstable country.