The Nature of Oil in Bolivia, 1896-1952

A review of The Nature of Oil in Bolivia, 1896-1952, by Stephen Conrad Cote.

In October 2003 a popular rebellion in Bolivia’s highlands ousted President Gonzalo “Goni” Sánchez de Lozada, successfully halting the plan to export Bolivian natural gas through Chile that had triggered the revolt. The plan was a flashpoint for leftist social movements that saw the development of Bolivia’s gas and oil reserves as the country’s last chance to use its natural resources to pull its population out of poverty after the plunder of so many others. Goni’s overthrow marked a high point of a period of rebellion against neoliberalism that culminated in the 2005 election of Bolivia’s first indigenous president, Evo Morales. Since his election, Morales and the leftist social movements that brought him to power have met stiff opposition from elites, traditional political parties, and right-wing movements in the “media luna,” Bolivia’s eastern departments.

These recent events raise important historical questions about Bolivia’s east, particularly about the development of the petroleum industry, the division between the country’s east and west, and the origins of a distinct eastern “camba” culture. Stephen Cote’s dissertation, a history of the Bolivian petroleum industry in its formative years, helps to answer these contemporary questions as well as to shed light on more traditional concerns in Bolivian historiography—the causes of the disastrous Chaco War (1932-1935) and the significance of the 1952 national revolution.

Drawing on the work of U.S. environmental historians such as Richard White and William Cronon, Cote contributes to a growing literature on environmental history in Latin America. As John Soluri does for soil in his study of the banana industry in Honduras (John Soluri, Banana Cultures: Agriculture, Consumption, and Environmental Change in Honduras and the United States. Austin: University of Texas Press, 2005), Cote ascribes agency to petroleum. In the Bolivianist literature, studies of environmental history are especially scant in contrast to the burgeoning literature on environmental issues in other disciplines. The period in question, from the late nineteenth century through the national revolutionary period of the 1950s, has mainly been studied for dynamic changes in official and radical politics, the rise of tin mining and the labor movement, and, more recently, peasant and indigenous movements. Cote shifts our attention to the development of the oil industry in Bolivia, at the same time that he demonstrates the deeply political nature of this process.

The dissertation opens with the story of the pioneers of the Bolivian oil industry and the relationship of early efforts to develop the industry to racial thinking. Bolivia’s oil pioneers were a group of investors from the city of Sucre led by Manuel Cuéllar, a medical doctor who stumbled upon oil in Bolivia’s southeast while on a secret government mission to investigate reported Paraguayan incursions over the Bolivian border in 1896. While both the local indigenous population and various creoles had been aware of and made use of petroleum for centuries, and the first oil concession had been granted in 1865, Cuéllar’s group was the first company to attempt to extract and commercialize oil.

Throughout the dissertation Cote pays close attention to legislation dealing with petroleum. Early twentieth-century legislation encouraged speculation but also attempted to promote production and guarantee royalty payments to the state. Yet local pioneers lacked capital, technical capacity, and state support that instead went to foreign companies. Cote argues that elites’ racial anxieties prompted the government to invite foreign firms to develop the petroleum industry instead of supporting local investors. Oil, Cote writes, “was in the wrong place at the right time” (p. 65)—in regions difficult to access and without obvious export routes at a time when the state could provide neither information nor technical support.

In his second chapter, Cote examines the new landscapes that Standard Oil constructed in the early 1920s and makes his first major argument: that the division between Bolivia’s east and west is rooted in the oil camps built by Standard Oil in the 1920s and 1930s. Standard Oil acquired three million hectares of oil concessions between 1920 and 1922 and quickly gained a monopoly on oil production in Bolivia. While the company produced little oil in these years—only enough to keep its own operations running and meet minimum contractual commitments to the state—it did produce new spaces. The communities of Bermejo and Camiri grew up around Standard Oil’s camps and the small city of Santa Cruz gained strategic importance. On the one hand, these new spaces had little to do with the highland and valley cities where the vast majority of Bolivia’s population was concentrated. Yet, oil also served to connect the highlands and valleys to the east materially and economically, promoting industry and urban growth and helping to transform ideas about nature and nation. An area that had previously been seen as a backwater populated by degenerate indigenous groups now took on new importance and fueled hopes for modernizing Bolivia.

In the late 1920s, the state and Standard Oil began to clash as tensions grew between Bolivia and Paraguay in the border region. These conflicts are the subject of Cote’s third chapter. The company was content to sit on its oil concessions until prices rose enough to make production and export from this isolated region profitable. The state, however, was desperate to meet growing domestic demand and especially to supply the military. The national government took an increasingly hard line with the company over production and made increased efforts to organize and control the oil sector in this period, especially as tensions flared with Paraguay. As Cote writes, “Oil no longer just drove hopes for future potential, but had become an urgent military necessity” (p. 143).

The fourth chapter is the heart of the dissertation. Here Cote makes his most powerful argument—that oil caused the Chaco War. The Chaco War is grievously understudied, especially in English. Robert Alexander, James Dunkerly, and Herbert Klein took up the Chaco War in their work, but had little to say about the reasons for Bolivia’s seemingly blind march into the Chaco. The Chaco War, Cote establishes, was a war for oil—not, as the conspiracy theory popularized by “the Kingfish,” U.S. Senator Huey Long, would have it, that Bolivia and Paraguay were proxies for Standard Oil and Royal Dutch Shell. There were no oil deposits in the disputed region and both companies knew it. (In fact, Standard Oil declined to assist Bolivia in the war effort, failed to meet its contractual agreement to provide the state with oil in wartime, and apparently lied about its production capacity and ability to refine airplane fuel, as became evident when the state took over the Camiri refinery in 1933. After the war evidence surfaced that Standard Oil may have actually been assisting Paraguay.) Rather, Cote posits that oil’s potential to diversify the economy and modernize the country led the Bolivian state—through its military—to look east to the Paraguay River for an export route. Furthermore, in the war’s final battles Bolivia found itself defending its oil fields as Paraguayan troops neared Villa Montes and the sub-Andean range oil fields in August 1934. Even peace negotiations revolved around the location of oil reserves. As Cote writes, “The two sides agreed to a border based on where the oil lay, not where the troops were, previous treaty lines, or settlement activity” (p. 148). In the end, Bolivia kept its oil fields but failed to gain an outlet on the Paraguay River.

In the course of the war, ideas about race, nation, and nature were transformed. While the generals had sent highland Indian soldiers to the Chaco confident that their racial makeup made them more resistant to harsh natural conditions, by the end of the war Indian soldiers returned heroes—and politicized ones at that. It was nature that Bolivians fought more than the Paraguayans, Cote argues. Ignorance about the Chaco’s nature—and the nature of its own people—lost Bolivia the war, and led to the fall of the liberal order.

Chapter 5 takes up the nationalization of Standard Oil in 1937 and the early years of Bolivia’s state oil company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), founded in 1936. While Standard Oil had not pushed Bolivia into war, this widely held belief served as a highly effective founding myth of a new political order. The military socialist government’s nationalization of Standard Oil in 1937 was the first nationalization of a foreign oil company—or any major foreign company—in Latin America, and an open challenge to the United States’ recently adopted Good Neighbor policy. When the Bolivian Supreme Court ruled against Standard Oil, the U.S. government maintained its commitment to non-intervention and offered the company no assistance. In the early 1940s, however, when the U.S. began to refuse Bolivia development loans, President Peñaranda agreed to pay Standard Oil a $1,750,000 indemnification, about one-tenth of Standard Oil’s investment in the country, and to export Bolivian tin to the Allied nation.

In the final chapter, Cote makes his third major argument: that oil “fueled” the 1952 National Revolution. Studies by Laura Gotkowitz, Marta Irurozqui, Brooke Larson, and Silvia Rivera Cusicanqui (among others) have revealed the rural roots of the revolution while James Dunkerly and others have highlighted the importance of miners and labor unions in the revolutionary period. Inspired by Myrna Santiago’s study of oil workers’ protagonism in the Mexican Revolution and Mexico’s 1938 oil nationalization, Cote draws our attention to the oil sector. Given that tin—the largest source of state revenue—was prone to market fluctuations, oil offered an opportunity to diversify the nation’s economy and fuel transportation and industry, including the mining industry. And Bolivia needed oil, unlike tin, to develop industry, build its military, and urbanize. There is no clearer evidence of the importance the MNR placed on oil than the fact that the revolutionary state used revenues from the state mining company to fund YPFB. Furthermore, the state advertised the possibility of foreign investment in oil to quiet the fears of the U.S. government and foreign investors and demonstrate that Bolivia would be a responsible loan recipient and secure site for foreign investment.

Cote’s dissertation is a significant contribution to the Bolivianist historiography. He is a pioneer in Bolivian environmental history, yet he also makes clear the importance of the history of this natural resource to traditional historiographical concerns. He shows that oil was at the center of debates over nation-building and modernization in the early to mid-twentieth century, discussions that revolved around elite anxieties about the racial makeup of the country’s population and the character of its geography. His vivid descriptions of the nature and natural history of oil illustrate that oil has its own dynamic history. While humans have only recently entered into that story, it is the relationship between oil and Bolivian politics and culture that is at the heart of Cote’s story.

Sarah T. Hines
Ph.D. Candidate
Department of History
University of California, Berkeley
sarahthines@berkeley.edu

Primary Sources

Archivo y Biblioteca Nacionales de Bolivia (Sucre, Bolivia)
Biblioteca y Archivo Histórico del Congreso de Bolivia (Sucre, Bolivia)
Biblioteca Arturo de la Costa (La Paz, Bolivia)
Archivo de La Paz, Universidad Mayor de San Andrés (La Paz, Bolivia)
www.hidrocarburosbolivia.com

Dissertation Information

University of California, Davis. 2011. 289pp. Primary Advisor: Charles Walker.

Image: Demonstration at Plaza Murillo in 2009 celebrating the passage of the new constitution. Photograph by Steve Cote.