Don't Cry for Bolivia
jimrogers.com
In 1544, an Indian named Diego Haul discovered CERN Rico, which means rich hill in Spanish. This mountain overlooking Potosi was virtually solid silver and within 30 years, Potosi was the largest and richest city in the Western Hemisphere and even richer than London, Paris, Rome and Madrid. At 12,600 feet above sea level, Potosi still is the world's highest city with more than 100,000 people.
Silver from the mountain -- analysts now estimate as much as 2 billion ounces of silver have been mined over history -- supported the Spanish Empire. By 1580, the Spaniards, relying on the cheap Indian labor, were mining 13 million ounces from the mountain 15,000 feet above sea level.
Because of its importance in history, I have always wanted to visit Potosi. Grand churches were built some with walls of gold gilt work overlooking silver altars and exquisite pulpits, which took years to carve. Residents dined on plates of solid silver and the Spanish controlled the flow by requiring all shipments go through government ports and mints both in South America and Spain.
Once miners began using mercury to improve the process, the Spanish created a government monopoly to control its sale. Governments always have found a way to tax innovation.
Spaniards still use the phrase "It's a Potosi" to describe extravagant wealth, but little money is left from riches to maintain the fabulous old buildings, which have been left to crumble in disrepair.
Today, as many as 20,000 cooperative miners, many of them chewing coca leaves to keep up their endurance in the high altitude, rely on 400-year-old technology to chip away silver from the surface and the labyrinth of narrow, twisting tunnels that lace the mountain.
............................................................................................................................
For one, the mine is one of many of on the government's privatization list. Several international companies are vying for the chance to use modern technologies to reach deposits that experts still think are rich enough to build a bridge of silver from South America to Europe. The government estimates in the mountain alone, not to mention rich veins which crisscross the region, 266 million ounces of silver could be mined during the next 25 years.
The mountain falls under World Heritage Site rules designed to protect it for historical purposes, but the government is working to overcome those obstacles. More daunting challenges are posed by the miners who have lived in a legacy left by the Spaniards that mining only wants to take the wealth and leave behind poverty. They fear mining conglomerates will mean the loss of what meager livelihood they now have.
...........................................................................................................................
The mining and hydrocarbon industries are seeing successes similar to those in the telecommunications industry. With major international players investing in exploration, consortiums are announcing new finds of minerals and natural gas almost daily. Proven and probable gas reserves jumped from 9.79 trillion cubic feet in 1998 to 70.01 trillion cubic feet at the beginning of 2001. Recent discoveries in the Tarija and Santa Cruz regions, among other places, have pushed that total even higher.
Hydrocarbon exports are expected to increase 250 percent by 2005 as demand grows in Brazil and other countries.
.............................................................................................................................
Tin, historically the country's major mineral product until low prices forced the government to shut down many sites, remains depressed but silver, gold and copper operations are growing as international companies invest in modern technologies that make mining the country's huge deposits more cost efficient and productive. Large gold and copper finds in the eastern lowlands are just a few of the latest signs of promise.
Under privatization, even little-known minerals are offering promise to investors. General Minerals, for instance, hopes to join the world's top producers of tantalum, which is a critical element in diverse products ranging from cell phones to automotive electronics.
Deferred taxes and one of the best mining codes in Latin America have projected Bolivia into the forefront of mineral exploration. In 2000, the country exported $432 million worth of minerals; that figure could be significantly higher by the end of this year.
...........................................................................................................................
Vanishing coca fields -- the country's potential for producing cocaine dropped from 245 tons in 1995 to 40 tons in 2000 - are being replaced by a variety of traditional crops, most notably soybeans which have seen production more than double in the last five years. By 2006, production is expected to spread to more than a million hectares.
..........................................................................................................................
Oil seeds, coffee, cotton and cereal grains also have seen significant production increases with oil seed harvests more than tripling in five years. As in mining, new investors, many of them Brazilian, are pumping money and new technology into the country, especially the Santa Cruz region. From 1996 through 2000, the agriculture sector enjoyed growth of more than 10 percent a year even during a period when prices were down.
Soybean prices are just one example of what improving commodity rates can mean for the country. Since I am bullish on commodities, the sky could be the limit for this natural resource-rich country.
Likewise, consider that Bolivia annually exports 12.5 tons of gold, the second most important mineral to zinc. If prices hold, exports could jump to 36 tons a year by 2003
...........................................................................................................................
Banzer and Quirogo have actively promoted the Mercusor and Andean Community trade pacts to develop trade among South and Central American nations. The presidents of Brazil, Peru and Columbia all have visited recently for extensive trade talks. In June, Brazilian President Fernando Cardosa agreed to raise imports of Bolivian natural gas to 40 million cubic meters a day with further increases anticipated. In 2002, Bolivia is expected to export $425 million in natural gas to Brazil alone. With a GDP of $8 billion, that is no small amount. |
