Bolivia's mining dilemmas.

Author:Fuentes, Federico
Position:Less of What We Don't Need

Perhaps no other sector better exemplifies the challenge the Bolivian government faces in lifting the country out of the poverty and dependency afflicting South America's poorest nation than its all-important mining industry. Mining minister and former miners' union leader Jose Pimentel told Green Left Weekly: "Bolivia has been a mining country for more than 500 years, ever since the Spanish came and discovered the legendary wealth [of the silver mines] of Potosi. And when we look at the situation today, we can say that a large part of the country continues to depend on mining."

For example, Pimentel said an estimated 90,000 workers affiliated to hundreds of cooperatives are attempting to subsist from mining "in a rudimentary manner. This sector impacts on important cities such as Potosi and Oruro, where practically the only productive activity is mining. So to get rid of mining in one blow would not only bring with it social problems, but could even create situations of rebellions because large groups of people would be directly affected."

Moreover, revenue from mining has also become increasingly important for the government's social spending aimed at lifting up the poor majority.

Rising global prices meant that mineral export revenue jumped in the first quarter of 2010 to $464 million. This represented 32% of Bolivia's total export revenue--a 77.7% jump in revenue compared to the same quarter last year.

With companies now forced to pay higher royalties and the state playing a more active role in the sector, the government has been able to redistribute a greater share of this wealth via its pro-poor social programs. But the government is facing pressure from local indigenous communities demanding that it comply with its environmental discourse.

It also faces troubles in its relations with mining multinationals and the challenge of using a weakened state that was privatized and dismantled by previous neoliberal governments to promote its industrialization drive. One example is the project to extract and process iron ore from Mutun, the eighth-largest iron ore mine in the world.

In 2007, the government signed a contract with Indian company Jindal to exploit 50% of the Mutun mine. The agreement included the construction of an iron smelter and steel factory to ensure that value-added products would be exported (not just raw materials, as is often the case with poor nations).

The project, involving a projected investment of $2.1 billon by...

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