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date: 16 August 2017

Oil in the Andes

Summary and Keywords

All of the Andean nations possess oil. Each has a unique historical relationship with petroleum, but there are also similarities between the histories of oil production in Bolivia, Ecuador, and Peru. First, oil was discovered in the countries at roughly the same time in the late 19th century when oil was gaining in global importance. Second, foreign companies came to control oil reserves in these three countries, with similar outcomes. One such outcome was the development of state oil companies so that the countries could capture more revenues from the oil deposits than they received from foreign companies. Third, many saw oil as a panacea for the region’s many social ills. Failures by oil producers, including the state oil companies, to use the oil to cure those ills has led to persistent social and political conflict. And fourth, but not finally, oil extraction in these countries has caused major struggles between indigenous people and the state since the onset of neoliberal economic schemes in the 1980s and 1990s.

There are many differences as well. The creation of state oil companies in Bolivia, Ecuador, and Peru occurred in different decades, and therefore, within different global and regional historical contexts. Only one of the countries, Ecuador, is a member of OPEC (Organization of Petroleum Exporting Countries). Bolivia has a stronger presence in regional energy distribution through its large deposits of natural gas. Peru has not turned away from the neoliberal model in the same ways that Bolivia and Ecuador have. Finally, indigenous people have had different levels of success in protecting their lands and cultures from the onslaught of oil production in the Andes. There is no question, however, that oil remains central to the development plans of each country.

Keywords: Petroecuador, Petroperu, YPFB (Yacimientos Petrolíferos Fiscales Bolivianos), oil, petroleum, Andes, oil nationalism

The Andes in the Age of Oil

Latin America has little coal. This left the region at a disadvantage as industrialism proliferated in the late 19th century. Latin American nations found it prohibitively expensive to develop industries with the same coal-fired technologies being employed by the rapidly industrializing countries of Europe, North America, and East Asia. Latin American leaders, not wanting to be left behind, purchased industrial goods and subsidized foreign companies to construct what turned out to be mostly a façade of modernity covering mass exploitation while enacting economic policies that followed the law of comparative advantage. Latin American countries adopted export-driven economies of monocultures—like copper, tin, beef, bananas, or wheat—in which they held an advantage in the global marketplace. The outcomes of this strategy included social upheaval as land use patterns were adapted to the export model, which increased dependency on imported agricultural and manufactured goods and led to land expropriation from peasants, gross inequality, runaway debt, and rampant corruption. The discovery of petroleum reserves in many areas of Latin America as the world shifted its energy consumption patterns from coal to oil inspired hope that the region might be able to diversify its economic base, compete with the more economically developed countries of the global north, and reduce persistent and pervasive inequality and social instability. Oil was more than an industrial resource; it was the promise of a prosperous future.

The Andean nations saw oil as a godsend but also an enigma, as the oil failed to meet expectations of rapid growth. In most cases, this had to do with dependent relationships with foreign oil companies that possessed the capital and technology to extract and refine the oil and were awarded generous oil concessions. Yet while foreign companies may have held advantages to produce and distribute petroleum and refined petroleum products, the Andean nations were not helpless victims. The countries maintained various degrees of control over their oil reserves and attempted to use the resource to construct strong nations. While there are other countries touched by the Andes Mountains, those countries that most embody Andean culture are Ecuador, Peru, and Bolivia. Each of these countries has a unique relationship with its oil, but they share similarities over the conflicts that emerged between the oil companies and nationalists. The three nations employed tax structures, nationalizations, and collaboration with other oil-producing countries of the developing world in attempts to sow their oil for nationalist ends. The outcomes have differed in each case.

Early Industrial Exploitation, 1870–1930

Petroleum, which has had practical and military uses for millennia, became a global commodity only in the late 19th century. Whale hunting had decimated global herds, causing a shortage of whale oil for lighting. Kerosene, a petroleum byproduct, became the replacement. During the age of industrialization, oil was increasingly used for machine lubrication. Global demand for the resource surged in the early 20th century with the invention of the internal combustion engine and mass production of passenger vehicles, alongside tractors and other industrial machinery. Petroleum became a global geostrategic resource with the introduction of diesel warships into the British navy prior to the First World War and the ensuing mechanized warfare that advanced on the ground and in the air. From that point onward, the race to secure supplies of oil shaped the competition between the world powers, and many would say it still does.1

The Andean nations possessed this resource and became embroiled in the competition. Indigenous groups had exploited oil for millennia in all the Andean countries, as did the Spanish during the colonial era. Oil explorers in the late 19th century relied on local knowledge to locate reserves. Often these were from seepages or springs where faults in the subsurface geology allowed oil to escape to the surface. Oil explorers also hunted for surface features, notably anticlines, which are ridge-shaped geologic structures that capture oil and natural gas as it flows through permeable rock layers toward the surface. Later, oil companies adopted seismology, using shock waves to locate oil reserves. Newer technologies include satellite imaging, gravity meters, magnetometers, and odor detectors called sniffers.

Peru

Only four years after the first oil well was drilled in Titusville, Pennsylvania, in 1859, the first oil well in Latin America was drilled at the site of indigenous and Spanish bitumen mines in coastal areas of northwestern Peru. Indigenous groups in Peru had dug pits near oil seepages to collect the black oozing substance and had allowed evaporation to leave behind tar. The tar had many uses including caulking canoes and rafts. Spaniards appropriated these pits, what they called bitumen mines, for the same purpose of caulking ships. In 1875, just to the south of the first drilling site in Peru, more drilling took place on the hacienda of La Brea and Pariñas. The privately owned hacienda had the rare designation of subsoil ownership rights. This was odd in Latin American countries because subsoil resources were typically owned by the state. This ownership system extended from Spanish colonial law wherein the Crown owned the subsoil resources whether oil, water, or gold, and miners paid a tax on the resource, usually 20 percent (the Royal Fifth). The owner of the hacienda at La Brea and Pariñas had purchased the property and subsoil rights from the indebted early republican government. The bitumen mine, and its oil, therefore, were owned by the hacienda and not subject to concession leasing by the state that governed other oil company contracts.

The owner of La Brea and Pariñas in the 1870s, Genaro Helguero, hired an engineer to explore and drill for oil. The venture was a success, and in the coming decades the hacienda became a major center of Peruvian petroleum production. In 1888, Helguero sold the property to British oil interests, who formed the London and Pacific Petroleum Company.2 The British increased production at the site from eight thousand to more than one million barrels by the First World War, at which point the company left Peru over a tax dispute with the state. The International Petroleum Company (IPC) purchased the property in 1914 and began negotiating with the state over a contract to operate an oil company in Peru.

IPC was based in Toronto, Canada, and was a subsidiary of the Standard Oil Company of New Jersey. Standard had formed IPC to avoid the U.S. Sherman Anti-Trust Act, which in 1911 broke the massive company into several separate entities. Standard also used IPC to obscure its involvement in other countries because of the company’s predatory reputation. When Ecuadorean nationalists discovered that Standard Oil was involved, they attempted to force new regulations on the company, including gaining control of the subsoil rights at La Brea and Pariñas. In 1922 an international arbitration, the Laudo Arbitral, settled the matter in favor of IPC, and the company began operations in 1924, about the same time Standard Oil began operating in Bolivia and Ecuador. Oil quickly became an important component of Peru’s economy, equaling 30 percent of its export revenues by 1929.3 Nationalists in Peru never conceded to the Laudo Arbitral, partly because it was not approved by the Peruvian legislature, and the matter would plague IPC until the late 1960s, when the state took over IPC operations.

Ecuador

The bitumen mines on the Santa Elena Peninsula near Guayaquil were well known for centuries before the granting of the first petroleum concession in Ecuador at that region in 1878.4 Both domestic and foreign companies obtained concessions in Santa Elena over the following decades, but production and export from the peninsula would not begin until after the First World War and the arrival of subsidiaries of Standard Oil Company and Anglo-Persian, the British company that would eventually become British Petroleum (BP).

A subsidiary of Anglo-Persian, Anglo Ecuadorian Oilfields Ltd., began producing and exporting from Santa Elena in 1918. Production from the coastal regions exceeded domestic consumption, which allowed a steady export market to emerge. Ecuador exported between one and two million barrels per year until the 1950s, mostly through Anglo Ecuadorian production at Santa Elena. Standard Oil Company of New Jersey entered Ecuador through a subsidiary based in Delaware, the Leonard Exploration Company. In 1921, Leonard received a fifty-year concession in the Amazonian region of eastern Ecuador (the Oriente). The contract was extended to Standard Oil in 1931, which then appeared to do very little to make the Oriente concession productive, much like in neighboring Bolivia. Ecuador’s oil, then, by 1930, was produced mostly on the Santa Elena Peninsula near Guayaquil and not in the Amazon where later strikes would reshape Ecuador into an oil state.

Bolivia

Bolivia granted its first oil concession to a national in the southern district of Tarija in the late 1870s. His hand-dug pits did not produce oil, and it would not be until 1896 that the first oil company began operating in that country. Dr. Manuel Cuéllar, a medical doctor from the central city and capital of Bolivia, Sucre, assembled partners and began to haul barrels of light crude from a seepage on the eastern slope of the Andes to light his city. His company survived into the late 1920s, but never produced much oil.5

Another Bolivian, Luis Lavadenz, gained multiple concessions, mostly in the eastern department of Santa Cruz. He drilled Bolivia’s first well in 1911. The well was unproductive and Lavadenz soon ran out of funding to continue operations. He booked passage on the Titanic to find investors, although he never got on board the ship, having been called away to a meeting at The Hague with the head of Royal Dutch Shell. In 1920, near his and Dr. Cuéllar’s holdings, multimillion-acre concessions were granted to two U.S.-based companies, which sold out to Standard Oil in 1921 and 1922. Over the strong objections of nationalists in the Bolivian legislature, now located in the highland city of La Paz, Standard Oil consolidated the concessions and signed a contract with the government in 1922, the same year it was engaged in the Laudo Arbitral in Peru and its subsidiary in Ecuador was in its first year of operations. Ten years later, despite controlling Bolivia’s best oil lands, establishing oil camps in four locations with productive wells, and constructing two small refineries, Standard Oil was not producing oil or revenues for Bolivia. The company claimed that the oil it produced there was only enough to supply internal company operations to continue its exploration and drilling. Low production levels also kept the company from paying higher taxes, and from building expensive infrastructure to ship the oil from its remote oil camps.

Oil Nationalism, 1930–1980

The fact that Standard Oil and its subsidiaries controlled enormous oil concessions in the Andes in the 1920s, was making huge profits in Peru while controlling subsoil rights at its site there, and was appearing to avoid producing oil in Ecuador and Bolivia, made the company a target for nationalists. The involvement of British companies that competed globally with Standard Oil invited conspiracy theories against the oil companies. This was a time of rising nationalism following revolutions in Mexico and Russia, the First World War, and the establishment of fascism in Italy. The Great Depression would advance these nationalist forces across Latin America.

The Great Depression devastated Latin American economies, which had spent decades developing export markets of primary goods to the developed world. When the developed countries stopped importing as many goods because of the economic downturn in the late 1920s, Latin America lost much of its global trade, both exports and imports, and had to look inward for solutions. Along with the economic troubles, the initial severity of the Great Depression accelerated the growth of nationalist forces that had been developing in Latin America since the Mexican Revolution, and in many cases, even earlier. New parties and populist leaders promised to rejuvenate the struggling nations, reshape the liberal economic agenda, and create jobs. Militaries overthrew elected leaders as strongmen emerged to guide the nations. Fascists and communists battled in the streets of Buenos Aires and Rio de Janeiro.

Oil emerged as one of the primary resources that Latin American leaders believed could lead them out of the throes of economic crisis, if only the countries could renegotiate contracts and gain control of the resource for nationalist ends. Oil nationalism grew across the region during the 1930s and 1940s. Oil nationalists pressed governments to form state oil companies, to renegotiate concession contracts with foreign companies, and to nationalize companies that would not comply. Argentina founded the first state oil company in the 1920s, and the company’s president, General Enrique Mosconi, traveled across Latin America promoting the idea of state oil companies to integrate the region. In 1937, Bolivia was first Latin American nation to take over the operations of a foreign oil company. Mexico followed one year later.

Nationalism and anti-imperialism erupted in Cuba in the 1950s. The successful revolution there in 1959 amid Cold War fears recalibrated the nationalist equation. The U.S. Alliance for Progress promoted capitalist development and provided counterinsurgency training to defeat left-wing nationalists. The result in many cases was the rise of right-wing military dictatorships that initiated brutal dirty wars against their own populations. Some countries opened their oil sectors to foreign companies; others promoted state oil companies in the name of national security. Oil-producing countries gained windfalls in the 1970s during the global oil crises initiated in the Middle East. The revenues, however, were often misspent by corrupt dictatorships, and the return of low oil prices in the 1980s led to crushing debt.

Peru

Peru defaulted on its foreign loans as exports dropped 72 percent at the onset of the Great Depression.6 Peru experienced political and social upheavals as in other countries, but recovered relatively quickly due to its diverse export products, which included petroleum. While some political change took place, the social structure and economic policies remained relatively intact after the downturn. Changes included the peaceful overthrow of the authoritarian government of Augusto B. Leguía, who had ruled over a corrupt and repressive regime for eleven years. In the political vacuum that followed, populist parties emerged or grew. Two of the most notable were the Peruvian Communist Party and the Alianza Popular Revolucionaria America (APRA), which became one of Peru’s largest political movements in the following decades. APRA’s violence against the military caused a repressive crackdown on the party that prevented it from assuming power, however, and the military and traditional oligarchs continued to run the country into the 1980s. These rulers mandated institutional and social changes that strengthened the state’s power and role in the economy without drastically altering the export-led model.7 The policies dampened the impact of the Depression and staved off popular support for radical leftist parties, much like the New Deal did in the United States.

Standard Oil subsidiary IPC dominated Peruvian oil production in the 1920s and 1930s. By 1926, IPC controlled 70 percent of oil production and 90 percent of oil exports.8 The overthrow of Leguía in 1930 led to attempts to gain back control of the oil sector by, among other things, suing to annul the 1922 Laudo Arbitral at the International Court of Justice. The court refused to hear the case, however, by claiming no jurisdiction over the matter. Petroleum production peaked for IPC in 1936, and exports declined into the 1950s as imports, oil consumption, and nationalist ire grew. In 1934, Peru formed a petroleum division that was renamed Empresa Petrolera Fiscal in 1948. The state oil company became the country’s fourth-largest producer.

Peru, like most oil-producing developing countries, mandated price controls that kept oil prices well below market rates as operating costs continued to rise. Low prices decreased incentives to explore, drill, and refine oil for the Peruvian market. IPC implemented tactics—cutting production and laying off workers—to pressure the government to increase prices in the 1950s. In response, the government granted new and generous concessions to an array of other foreign oil companies, but these companies found very little oil. By the late 1950s, IPC controlled 95 percent of production, the only refinery, and more than half of the country’s distribution. IPC’s tactics succeeded and the state raised prices. Political opposition emerged immediately from oil nationalists with yet another call to nullify the 1922 arbitration. Other significant events in the 1950s included IPC purchasing 50 percent of Lobitos Oilfields, a British firm operating in the country, and the granting of concessions to more foreign companies. Mobil Oil discovered reserves at a site in the Amazon, but did not develop the concession because of the costs involved in building a pipeline through the jungle and over the Andes.

In the aftermath of the Cuban Revolution, IPC faced more calls for nationalization of its properties in Peru. The company negotiated with the state, but the two sides could not reach an agreement over tax rates and the ownership of the subsoil at the La Brea and Pariñas site in the northwest. In the 1960s, different Peruvian military governments constructed a refinery north of Lima to compete with the IPC refinery. In 1968, General Juan Velasco Alvarado overthrew one of those governments and formed a new state oil company, Petroperu. The following year, he nationalized IPC. Petroperu then took control of the Peruvian oil sector in partnership with foreign firms.

Belco, one of the foreign partners, had major offshore concessions in Peru in the late 1960s. It sold its output to Petroperu.9 In 1972, Petroperu and Occidental Petroleum discovered large reserves of oil in the Peruvian Amazon. One year later, global oil prices quadrupled because of the Yom Kippur War. Petroperu and its foreign-owned partners invested in oil exploration, but rising production levels could not match the dramatic increase in consumption in the 1970s.10 Although prices grew for exports, and revenues from production, exploding populations in the urban areas offset the gains. Peru renegotiated contracts in 1979 to give the state a greater share of revenues. Oil production peaked in 1982.

Ecuador

Ecuador’s oil production on the Santa Elena Peninsula increased in the late 1920s to make up just over 20 percent of the country’s exports as oil nationalists began to question the favorable contracts granted to foreign companies like Anglo Ecuadorian Oilfields, Ltd. These companies were contributing only 6 percent of production to the state. Meanwhile, Ecuador’s total exports fell two-thirds between 1928 and 1932 as demand for cacao and bananas fell, thanks to the Great Depression.11 Coups and counter-coups marked the decade, while unemployment triggered mass discontent. Peru invaded Ecuador in 1941 and occupied parts of the country along the southern border until 1942. Some blamed foreign oil companies for instigating the invasion, much as happened in neighboring Bolivia during its 1932–1935 war with Paraguay.

The state wrote a new petroleum code in 1937 that imposed higher taxes and rents on the many oil companies operating in Ecuador at the time. The majority of production came from the Anglo Ecuadorian concessions on the Santa Elena Peninsula. Production on the peninsula increased into the 1950s. The Standard Oil subsidiary operating in the Oriente had still produced nothing by 1937, so in April of that year, the state canceled the contract. Bolivia had nationalized its Standard Oil subsidiary the month before. Ecuador then leased an enormous concession in the Amazon to a subsidiary of Royal Dutch Shell named Anglo Saxon Oil. Anglo Saxon explored and drilled for eleven years with minimal production for its efforts. The company turned over its concessions to the state in 1949. Throughout the 1950s and 1960s, bananas dominated Ecuador’s export market. Offshore exploration for natural gas also commenced.

A Texaco-Gulf consortium operating in the Amazonian region of Colombia on the border with Ecuador obtained an enormous concession in the Ecuadorean Oriente in 1964. Using new technologies, the company found commercial quantities of oil in 1967 where Standard and Shell had failed in earlier decades. An oil boom began. As leftist military governments nationalized oil companies in Peru and Bolivia in 1968 and 1969, Ecuador renegotiated its contract with Texaco-Gulf to gain more rents. In 1971, yet another military government in Ecuador wrote a new petroleum code, began construction of a state oil refinery to reduce imports, and created a state oil company, Corporación Estatal Petrolera Equatoriana (CEPE). An oil pipeline from the Oriente to the coastal city of Esmeraldas was completed in 1972. New petroleum codes came in 1972 and 1973 as Ecuador, no longer a banana republic, entered the period of the global oil crisis as an oil state. Ecuador joined OPEC in July 1973. CEPE became a part of the Texaco-Gulf consortium in 1974, greatly increasing state involvement in the sector and revenues to the state.

Bolivia

Bolivia’s reliance on tin mining proved devastating during the Great Depression as prices for tin plummeted by two-thirds on the international market. The country went bankrupt and defaulted on its loans as protesters filled the streets. The military overthrew the government and then held elections in 1931 won by elder statesman Daniel Salamanca. Salamanca used a heavy hand against striking tin miners. He also sent the military east into the Chaco Boreal to open that region of the country for development. The major economic presence in the east at that time was the camps and roads of Standard Oil Company of Bolivia, which had been operating along the western edge of the Chaco since 1922 but had yet to deliver oil to Bolivia. The confluence of events that included minor military engagements with Paraguay in the central Chaco, the tragic effects of the Great Depression, and the need for oil and oil revenues instigated the largest war in Latin America in the 20th century.12

Bolivia and Paraguay fought over the dry wasteland of the Chaco until 1935, with Paraguay gaining the military victory and most of the territory. The oil reserves remained on the Bolivian side of the new border. During the war, the Bolivian military took over one of the refineries that Standard Oil had operated and forced more production from the company’s four oil camps. Bolivians learned that Standard had been intentionally keeping production low to keep costs and taxes down even as consumption and imports grew, and had lied about being able to refine airplane fuel for the war effort. After the war, Bolivia created a state oil company, YPFB (Yacimientos Petrolíferos Fiscales Bolivianos). In 1937, Bolivia became the first Latin American country to nationalize the holdings of a major foreign company when it canceled the contract of Standard Oil Company of Bolivia for defrauding the state. YPFB then took over the operations.

YPFB faced many early setbacks, including the lack of trained personnel, a bankrupt state, and obsolete equipment. The state oil company also faced opposition from the traditional economic liberals who opposed state involvement in the oil sector. Despite these setbacks, YPFB made Bolivia energy independent and had even begun exporting oil by 1954. Bolivia had experienced a social revolution in 1952, and the revolutionary state had strongly supported the activities of the state oil company. By 1956, however, facing a severe fiscal crisis and trying to ameliorate the United States amid its Cold War hysteria, especially with what had recently happened in Iran and Guatemala, Bolivia began to open its oil sector to foreign companies. Gulf Oil discovered large reserves of natural gas and became the country’s largest producer and exporter, much to the chagrin of oil nationalists, who began to clamor for nationalization.

Left-leaning military dictators took over in Peru in 1968 and in Bolivia in 1969. Bolivia followed Peruvian General Juan Velasco’s lead, and nationalized Gulf’s holdings. YPFB took over the operations. The leftist dictatorship did not last long, and soon a right-wing dictator emerged and founded a national security state engaged in dirty wars against Bolivia’s left. General Hugo Suazo Banzer ruled Bolivia through the 1970s. He turned the state oil company into a corrupt and bloated organization, and both production and revenues declined. After the debt crisis hit Latin America in the early 1980s, Bolivia instituted neoliberal shock therapy to the economy and privatized YPFB.

The Neoliberal Agenda, 1980–2005

The debt crisis of the 1980s and the severe effects of hyperinflation forced countries in Latin America to recalibrate their economies. These efforts often went together with the end of military dictatorships and the return to democratic rule. The fledgling democracies brought in economic advisors and worked with international financial institutions including the World Bank and the International Monetary Fund (IMF). The countries of Latin America and the rest of the developing world took the advice of the economists and instituted neoliberal economic reforms known as structural adjustment policies.

Neoliberal ideologues believe that free markets solve all economic problems. To achieve this goal, they advocate devaluing the currencies of debt-ridden countries to increase the competitiveness of exports and reduce imports, returning the Andean countries to export-driven agendas. Neoliberals reduced the size and scopes of the governments to shrink spending, while also prioritizing debt payments. Revenues went to foreign banks and not to social spending. Reducing the size of governments included privatizing state industries. Finally, the neoliberals deregulated the economies to attract foreign investment. Neoliberal policies ended the painful cycles of hyperinflation but increased the debt burden, as revenues from state industries ended and tax breaks reduced payments from foreign industry. Inequality and unemployment grew as the austerity measures continued long beyond the crisis, and people took to the streets.

Peru

Peru, like the other Andean nations, instituted neoliberal economic reforms in the 1990s that included privatizing the state oil company. Peru carried out a liquidation through international auctions during the administration of the now-incarcerated Alberto Fujimori. Petroperu lost its monopoly over the hydrocarbon sector, and its many divisions were broken up and sold off, often for low cost, and even the profitable ones. Oil price subsidies ended.13

Peru’s most important hydrocarbon operation since the 1990s has arguably been the development of vast reserves of natural gas in the Camisea region. Initial production created international controversy due to the environmentally sensitive areas where the drilling occurred and the presence of indigenous communities, some of whom had remained isolated from the rest of Peru. Petroperu and its foreign partners tout the development of sustainable policies enacted to reduce the impact of the hydrocarbon extraction process, including not constructing roads to the region, but others have cited broken regulations and pipeline spills. Production at Camisea continues to invite controversy as it grows and expands.

Ecuador

Ecuador’s debt crisis of the 1980s was extreme, even by Latin American standards. The democratic governments of the 1980s felt compelled to follow the directions of the IMF and instituted economic austerity.14 The drop in world oil prices in the 1980s greatly enhanced Ecuador’s difficulties in managing its debt as the economy contracted. Earthquakes in 1987 ruptured a major oil pipeline and halted exports for months. Constitutional crises between the branches of government included an attempted coup and the kidnapping of the president. The state oil company was reorganized as Petroecuador in 1989.

Governments in Ecuador in the 1990s ramped up structural adjustment to deal with the continued economic problems as oil production declined or stagnated. Political turmoil continued as inequality grew amid rampant corruption. In 2000, as the Water War raged in neighboring Bolivia over the privatization of the city of Cochabamba’s water system, indigenous groups joined junior military officers to overthrow Ecuador’s neoliberal president. No president finished their term until the election of Rafael Correa in 2007. The confluence of neoliberal austerity, nationalism over natural resource extraction, and indigenous rights shaped the rise of leftist political movements in Ecuador and across Latin America in the 2000s.15

Correa rejected neoliberal orthodoxy and spouted anti-imperial rhetoric that proved wildly popular in Ecuador. He was elected to his third term in 2013. After successfully passing a new constitution in 2008, Correa invoked historic oil nationalism of the region to reform the hydrocarbon sector. Like neighboring Bolivia, he strengthened the state oil company and forced foreign companies operating in Ecuador to sign new contracts that returned more revenues to the state. Also like Bolivia and Peru, Correa has endured harsh criticism of his policies that have allowed oil extraction in environmentally sensitive areas that contain protected indigenous groups. All three countries struggle with the dilemma of increasing revenues through extractive industries while protecting sensitive lands and marginal communities.

Bolivia

The push to reduce spending, privatize, and deflate the currency in Bolivia negatively impacted employment and debt ratios, and eventually hit the state oil company, which was broken into units and sold off to foreign companies, including Enron. The oil and gas conglomerates gained overly generous concessions from the state and began exploring for natural gas in the eastern lowlands. They discovered huge reserves and developed a plan to build a pipeline to Chile, where a processing plant would produce liquefied gas for transport north. The plan was unpopular, and thousands laid siege to La Paz in what became known as the Gas War of 2003. Dozens of protesters lost their lives as the army fired into unarmed crowds. The president fled the country.

The Gas War, and other social movements against neoliberalism such as the Water War of 2000 in the city of Cochabamba, and the reorganization of coca growers by laid-off tin miners, galvanized the indigenous majority and set the conditions for the historic election of Evo Morales as the country’s first indigenous president in 2005. Morales returned majority control of the hydrocarbon resources to YPFB and forced the foreign oil and gas companies operating in the country to sign new contracts with much higher rents and royalties. The state capitalist model has generated billions in state revenues and helped to fund social programs that have alleviated some of the worst poverty in the hemisphere, even as corruption and claims of favoritism toward certain sectors have plagued Morales’s administration.

In conclusion, while global historical contexts have always shaped the directions taken by the transnational oil companies, national concerns have often propelled the outcomes of state oil policy in the Andes. The successes and failures of these policies have had more to do with geographic considerations of operating in the Amazon and the Andes, or with consumption patterns from rapidly growing urban populations than with the stereotypical criticisms of incompetence and corruption that emerge from the developed world. Andean state oil companies have proven time and again their competence to advance their mission for the people of the Andean countries. The overall trend of using extractive industry to develop the countries, however, especially in an era of dramatic climate change, is proving harder to address.

Discussion of the Literature

The energy needs of the Andean region have shaped economic and urban development, social movements, and environmental priorities amid growing populations over the last century. The deep roots of the relationships between energy and society have not been studied in the depth and scope of many other topics in Latin America and the Andes. Ignoring the historical development of oil sectors and oil nationalism puts blinders over the eyes of economic planners, and in the Andes, as in other areas, ignoring the environmental dangers and the effects on indigenous peoples has led to ongoing violence and unforeseen costs.

Few historical studies of the development of the oil and hydrocarbon sectors of Latin America exist in the English language, and fewer still of the Andes, despite the centrality of oil to many historical events such as the Chaco War, and of energy to ongoing social and economic development issues. For Peru, the most informative historical studies include Adalberto J. Pinelo, The Multinational Corporation as a Force in Latin American Politics: A Case Study of the International Petroleum Company in Peru, and George Ingram, Expropriation of U.S. Property in South America: Nationalization of Oil and Copper Companies in Peru, Bolivia, and Chile.16 These two books offer an informative discussion of the nationalization of IPC. They were written during a period of intense international oil nationalism and published during the first major global oil crisis. Neither, however, provides a comprehensive study of the history of the oil sectors. For Ecuador, there is John Martz’s Politics and Petroleum in Ecuador, which should now be followed up on and brought into the current period, and for Bolivia, there is Stephen Cote, Oil and Nation: A History of Bolivia’s Petroleum Sector.17 These books leave areas for further study, for example, research on the oil workers’ union. Much more has been written, and is being written, on more recent events. Anthropologists have done a great deal of work on the relationships between resources and communities, especially among the heavily indigenous populations of the Andean countries. For Ecuador, there is Suzana Sawyer, Crude Chronicles: Indigenous Politics, Multinational Oil, and Neoliberalism in Ecuador.18 For Bolivia’s lowland indigenous populations, see Nancy Postero, Now We Are Citizens: Indigenous Politics in Postmulticultural Bolivia, and Nicole Fabricant and Bret Gustafson, eds., Remapping Bolivia: Resources, Territory, and Indigeneity in a Plurinational State.19 For the whole region and in the field of geography, there is Anthony Bebbington and Jeffrey Bury, eds., Subterranean Struggles: New Dynamics of Mining, Oil, and Gas in Latin America.20

There is much more historical work in the Spanish language for each of the Andean countries and for the region as a whole. Many of these studies have been done by and for the state oil companies, or by former employees of the state oil companies, such as Carlos Royuela Comboni, Cien años de hidrocarburos en Bolivia: 1896–1996.21 These books often display the bias toward the state companies that one would expect, but they do contain valuable information and statistics on topics such as production levels.

The trends in the literature are twofold: the relationship between commodities and the marginal populations affected by extractive industries, and environmental history. These two necessarily overlap. Environmental history is a growing and dynamic subfield that has revealed the many outcomes, some unexpected, of human activities on the nonhuman natural world and in turn on human societies. For an environmental history on oil in Latin America, see Myrna Santiago, The Ecology of Oil: Environment, Labor, and the Mexican Revolution, 1900–1938.22

Primary Sources

Those looking to add to the body of literature on oil in the Andes will find many resources available to them within the three countries under discussion here, online, and in the foreign oil companies’ countries. Sources include documents and literature from the oil companies; propaganda from the state oil companies; documents from the oil workers’ unions and personal accounts of oil workers; local, regional, and state government correspondence and legal documents over concession contracts and compliance; and newspaper accounts of oil company activities. Many people involved in or struggling against oil company activity are still alive to provide oral histories.

Peru, Ecuador, and Bolivia have national archives and national libraries that hold collections of government documents, state and private oil company literature, periodicals, and secondary sources. Peru’s National Archives and National Library in Lima contain a great deal of material, as does the Peruvian Congress, which is augmented with an online digitization of legislation at Archivo Digital de la Legislación Peruana. Ecuador’s national archives are in Quito, with a branch in Ambato. Also, see collections at the Archivo-Biblioteca de la Función Legislativa and the Historical Archives at Ecuador’s Ministry of Culture. Bolivia’s library of its national legislature is in the vice president’s offices in La Paz, and has records pertaining to oil legislation and a collection of secondary sources on the oil sector. The National Library and Archives in Sucre, Bolivia, holds most of the documents from the executive branch, along with periodicals and secondary sources. The libraries and archives in the oil-producing departments of Santa Cruz and Tarija contained surprisingly little information on the history of the oil sector in Bolivia, although there were some brochures and literature from the state oil company in the former prefecture in Santa Cruz. The local library in the oil town of Camiri may be a good source of documents. Camiri was the center of oil production in the Bolivian lowlands for both Standard Oil Company and the state oil company. The state oil companies and private oil companies all have websites, many with company histories.

Standard Oil documents are located at the University of Texas in Austin at the ExxonMobil Historical Collection. Bolivia’s documents, however, are not there. Bolivia sued Standard Oil to have the documents returned to Bolivia in the 1940s, and they are likely at the state oil company headquarters in La Paz. For more on U.S. oil company activities in other countries, including the Andes, see Leonard Fanning, American Oil Operations Abroad.23 The book includes first-hand accounts from oil workers in the Andes.

Further Reading

Bebbington, Anthony, and Jeffrey Bury, eds. Subterranean Struggles: New Dynamics of Mining, Oil, and Gas in Latin America. Austin. University of Texas Press, 2014.Find this resource:

Cote, Stephen. Oil and Nation: A History of Bolivia’s Petroleum Sector. Morgantown, WV: West Virginia University Press, 2016.Find this resource:

Drinot, Paulo, and Alan Knight, eds. The Great Depression in Latin America. Durham, NC: Duke University Press, 2014.Find this resource:

Fabricant, Nicole, and Bret Gustafson, eds. Remapping Bolivia: Resources, Territory, and Indigeneity in a Plurinational State. Santa Fe, NM: School for Advanced Research Press, 2011.Find this resource:

Fanning, Leonard. American Oil Operations Abroad. New York: McGraw-Hill, 1947.Find this resource:

Gall, Norman, and Eleodoro Mayorga Alba. Brazil and Peru: Social and Economic Effects of Petroleum Production. Geneva: International Labour Office, 1987.Find this resource:

Gerlach, Allen. Indians, Oil, and Politics: A Recent History of Ecuador. Wilmington, DE, Scholarly Resources, 2003.Find this resource:

Gordillo García, Ramiro. ¿El oro del diablo? Ecuador: Historia del petróleo. Quito: Corporación Editorial Nacional, 2003.Find this resource:

Ingram, George M.Expropriation of U.S. Property in South America: Nationalization of Oil and Copper Companies in Peru, Bolivia, and Chile. New York: Praeger, 1974.Find this resource:

Larrea Oña, Irma, and Cornejo, Marco, eds. La actividad petrolera en el Ecuador: aspectos ambientales y sociales. Quito: Fundación Natura, 1996.Find this resource:

Manco Zaconetti, Jorge Eusebio. Privitazación e hidrocarburos: mito y realidad, Perú 1991–2002. Lima: Fondo Editorial de la UNMSM, 2002.Find this resource:

Manzetti, Luigi. Privatization South American Style. New York: Oxford University Press, 1999.Find this resource:

Martz, John D.Politics and Petroleum in Ecuador. New Brunswick, NJ: Transaction, 1987.Find this resource:

Philip, George. Oil and Politics in Latin America: Nationalist Movements and State Companies. Cambridge: Cambridge University Press, 1982.Find this resource:

Pinelo, Adalberto J.The Multinational Corporation as a Force in Latin American Politics: A Case Study of the International Petroleum Company in Peru. New York: Praeger, 1973.Find this resource:

Postero, Nancy. Now We Are Citizens: Indigenous Politics in Postmulticultural Bolivia. Stanford, CA: Stanford University Press, 2006.Find this resource:

Royuela Comboni, Carlos. Cien años de hidrocarburos en Bolivia: 1896–1996. La Paz: Los Amigos del Libro, 1996.Find this resource:

Santiago, Myrna. The Ecology of Oil: Environment, Labor, and the Mexican Revolution, 1900–1938. New York: Cambridge University Press, 2009.Find this resource:

Sawyer, Suzana. Crude Chronicles: Indigenous Politics, Multinational Oil, and Neoliberalism in Ecuador. Durham, NC: Duke University Press, 2004.Find this resource:

Thorp, Rosemary, and Geoffrey Bertram. Peru, 1890–1977: Growth and Policy in an Open Economy. New York: Columbia University Press, 1978.Find this resource:

Tobin, Brendan, Flavia Noejovich, and Carlos Yáñez. Petroleras, estado y pueblos indígenas: El juego de las expectivas. Lima: Defensoria del Pueblo, 1998.Find this resource:

Widener, Patricia. Oil Injustice: Resisting and Conceding a Pipeline in Ecuador. New York: Rowman and Littlefield, 2011.Find this resource:

Wirth, John D., ed. Latin American Oil Companies and the Politics of Energy. Lincoln: University of Nebraska Press, 1985.Find this resource:

Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon and Schuster, 1990.Find this resource:

Yergin, Daniel. The Quest: Energy, Security, and the Remaking of the Modern World. New York: Penguin, 2012.Find this resource:

Notes:

(1.) Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon and Schuster, 1990).

(2.) Much of the information on the early development of La Brea and Pariñas and the arrival of IPC is synthesized from the following two sources: Adalberto J. Pinelo, The Multinational Corporation as a Force in Latin American Politics: A Case Study of the International Petroleum Company in Peru (New York: Praeger, 1973), 6–10; and George Ingram, Expropriation of U.S. Property in South America: Nationalization of Oil and Copper Companies in Peru, Bolivia, and Chile (New York: Praeger, 1974), 27–41.

(3.) Nicole Spencer, “Energy in Peru: Opportunities and Challenges,” A Working Paper of the Americas Society/Council of the Americas Energy Action Group (Washington, DC: Americas Society and Council of the Americas, 2010), 6.

(4.) John D. Martz, Politics and Petroleum in Ecuador (New Brunswick, NJ: Transaction, 1987), 45–46.

(5.) See Stephen Cote, Oil and Nation: A History of Bolivia’s Petroleum Sector (Morgantown, WV: West Virginia University Press, 2016).

(6.) Ingram, Expropriation of U.S. Property, 28.

(7.) Paulo Drinot and Carlos Contreras, “The Great Depression in Peru,” in The Great Depression in Latin America, eds. Paulo Drinot and Alan Knight (Durham, NC: Duke University Press, 2014), 102–128.

(8.) Ingram, Expropriation of U.S. Property, 27.

(9.) Rosemary Thorp and Geoffrey Bertram, Peru, 1890–1977: Growth and Policy in an Open Economy (New York: Columbia University Press, 1978), 226.

(10.) Norman Gall and Eleodoro Mayorga Alba, Brazil and Peru: Social and Economic Effects of Petroleum Production (Geneva: International Labour Office, 1987), 84.

(11.) See Ramiro Gordillo García, ¿El oro del diablo? Ecuador: Historia del petróleo (Quito: Corporación Editorial Nacional, 2003); and Petroecuador, El petróleo en Ecuador (Quito: Empresa Estatal, 2009).

(12.) See Stephen Cote, “A War for Oil in the Chaco, 1932–1935,” Environmental History 18.4 (October 2013): 738–758.

(13.) Luigi Manzetti, Privatization South American Style (New York: Oxford University Press, 1999), 280–281.

(14.) See Ronn Pineo, Ecuador and the United States: Useful Strangers (Athens: University of Georgia Press, 2007), 189–213, for an explanation of Ecuador’s neoliberal agenda.

(15.) For more on the politics of the rise of indigenous movements in the Andes in the 1990s, see work by Deborah Yashar and Donna Lee Van Cott. For more on the ethnography, see work by Suzana Sawyer and Bret Gustafson.

(16.) Pinelo, The Multinational Corporation as a Force in Latin American Politics; and Ingram, Expropriation of U.S. Property.

(17.) Martz, Politics and Petroleum in Ecuador; and Cote, Oil and Nation.

(18.) Suzana Sawyer, Crude Chronicles: Indigenous Politics, Multinational Oil, and Neoliberalism in Ecuador (Durham, NC: Duke University Press, 2004).

(19.) Nancy Postero, Now We Are Citizens: Indigenous Politics in Postmulticultural Bolivia (Stanford, CA: Stanford University Press, 2006); and Nicole Fabricant and Bret Gustafson, eds., Remapping Bolivia: Resources, Territory, and Indigeneity in a Plurinational State (Santa Fe, NM: School for Advanced Research Press, 2011).

(20.) Anthony Bebbington and Jeffrey Bury, eds., Subterranean Struggles: New Dynamics of Mining, Oil, and Gas in Latin America (Austin: University of Texas Press, 2014).

(21.) Carlos Royuela Comboni, Cien años de hidrocarburos en Bolivia: 1896–1996 (La Paz: Los Amigos del Libro, 1996).

(22.) Myrna Santiago, The Ecology of Oil: Environment, Labor, and the Mexican Revolution, 1900–1938 (New York: Cambridge University Press, 2009).

(23.) Leonard Fanning, American Oil Operations Abroad (New York: McGraw-Hill, 1947).