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Oil and Nation
Energy and Society
Brian Black, Series Editor

Titles in the Series

Oil and Nation: A History of Bolivia’s Petroleum Sector
Stephen C. Cote
Oil a nd Nat ion

A History of Bolivia’s Petroleum Sector

Stephen C. Cote

West ­Virginia University Press

Morgantown 2016
Copyright 2016 West ­Virginia University Press
All rights reserved
First edition published 2016 by West ­Virginia University Press
Printed in the United States of Amer­i­ca

24 ​23 ​22 ​21 ​20 ​19 ​18 ​17 ​16 1 ​2 ​3 ​4 ​5 ​6 ​7 ​8 ​9

ISBN:
cloth 978-1-943665-46-4
paper 978-1-943665-47-1
epub 978-1-943665-48-8
pdf 978-1-943665-49-5

Library of Congress Cataloging-­in-­Publication Data

is available from the Library of Congress

Cover design by Than Saffel

Cover image by Than Saffel
contents

Introduction  ix

1. Discovery: The Sucre Pioneers   1

2. Standard Oil and the Reshaping of Eastern Bolivia   30
3. Oil and the Chaco War   62
4. Oil and Nation   92
5. Oil and the Revolutionary State   121
6. Fall and Rise of the Oil State   140

Notes  155
Bibliography  183
Index  195
-1—
0—
+1—

562-65182_ch00_7P.indd vi 09/20/16 10:06 am

Figure 1. Bolivia, administrative divisions. (Washington, D.C.,
Central Intelligence Agency, 2006). Courtesy of the U.S. Library of
Congress Geography and Maps Division. G5321.F7 2006 .U5.
Figure 2. Bolivia, physical landscapes. (Washington, D.C., Central
Intelligence Agency, 2006). Courtesy of the U.S. Library of Congress
Geography and Maps Division. G5320 2006 .U5.
int ro du c t ion

In May 2006, Bolivian president Evo Morales renationalized his

Andean country’s gas and oil reserves. He named the decree
Heroes of the Chaco, invoking the indigenous soldiers of the
Chaco War of the 1930s, who defended Bolivia’s petroleum fields
from advancing Paraguayan troops. Morales declared to the
nation and the world, “For more than 500 years our resources have
been pillaged. This has to end now.”1 As the country’s first indig-
enous president, Morales understood the historical connections
between Bolivia’s natu­ral resources, Bolivian nationalism, and
indigenous identity politics. He exploited historical constructions
and memories of the Chaco War, of per­sis­tent economic de­pen­
dency, and of the long indigenous strug­gle for basic rights and
dignity to build the po­liti­cal capital necessary to demand more
from the hydrocarbon sector to fund his economic and social
goals. Hydrocarbons (oil and natu­ral gas) hold special significance
to Bolivians ­today, as they are one of a cluster of commoditized
natu­ral resources, along with ­water and coca, that both galvanized
social movements to overthrow the neoliberal regime of Gonzalo
Sánchez de Lozada in the Gas War of 2003 and set the stage for
the historic election of Evo Morales in 2005.
I watched the Gas War unfold when I was a gradu­ate student
earning my master of arts at the University of Connecticut. I
became captivated by the images of indigenous peasants and
miners leaving their homes and work to encircle the La Paz basin
to protest a proposed natu­ral gas pipeline. The pipeline was not yet
­under construction, but Bolivians w ­ ere out in the streets facing
down their military. Dozens lost their lives. I learned how the
pipeline protest was part of a larger historical strug­gle to protect
x Oil and Nation

national resources from foreign companies, how the proposal to

send the pipeline through Chile set off strong nationalist feelings
against the country that had taken Bolivia’s seacoast in the late
1800s, and some of the ways in which the pipeline provoked emo-
tional responses to racial and ethnic inequalities and injustices
heightened by neoliberal economic policies enacted since the 1980s.
I began to delve deeper into the role hydrocarbons have played in
Bolivian history, which led to my 2011 dissertation at the Univer-
sity of California, Davis, and this book. ­Today, hydrocarbons
make up more than half the country’s exports—­surpassing min-
erals by nearly 20 ­percent—­demonstrating the need to write a
comprehensive and dedicated study of the hydrocarbon sector
and its historical context.2 Tin, which made up more than half
the country’s exports from the early 1900s u ­ ntil the 1980s, now
accounts for just 4 ­percent. Much has been written about Boliv-
ia’s tin, but oil’s story should now be added to the canon.
Bolivia’s historic oil nationalizations help to clarify the connec-
tions between energy and society. The 2006 nationalization was
not the first attempt by a Bolivian leader to harness the country’s
oil for social purposes. It was, in fact, Bolivia’s third oil national-
ization, although it was carried out in a dif­fer­ent form from the
­others, as I w­ ill explain in chapter 6. The first nationalization came
in 1936 and 1937, when the post–­Chaco War “military socialist”
government, as they called themselves, formed a state oil com­pany
and canceled Standard Oil Com­pany of Bolivia’s contract. The
second was the expropriation of Gulf Oil properties in 1969. In
this text, I ­w ill examine the nationalizations within a broader his-
tory of Bolivia’s oil sector. Oil, though not often associated with
Bolivia, profoundly ­shaped the country’s social and natu­ral land-
scapes beginning in the late nineteenth c­ entury. The development
of Bolivia’s oil sector opened the eastern regions of the country to
colonization and development, instigated the largest international
war in twentieth-­century Latin Amer­i­ca, led to Latin Amer­i­ca’s
first nationalization of a major foreign com­pany, and ­shaped the
 Stephen C. Cote xi

Bolivian National Revolution of 1952. In 1954, Bolivia’s state oil

com­pany achieved energy in­de­pen­dence for the country.
­These dramatic events occurred during, and b ­ ecause of, the
global shift in energy regimes to oil.3 The transition to petroleum
reshaped power relationships around the world as countries
integrated the new energy source into domestic markets, export-­
growth policies, and military machines, in some cases leading to
the paradoxical “resource curse,” which triggered negative eco-
nomic and po­liti­cal effects in oil-­producing countries.4 Oil, which
powered machines, was also a source of economic and po­liti­cal
power. Nations that controlled oil reserves, refining pro­cesses, and
supply chains grew in geostrategic importance, especially with the
advent of mechanized warfare in the early twentieth c­ entury. As
James Malloy and Eduardo Gamarra note in reference to Bolivia’s
military dictatorships of the 1960s and 1970s, “­Because oil went to
the heart of strategic questions and to critical notions of national
security, the question was obviously of some significance to the
military.”5 Less developed countries like Bolivia that possessed oil
came to view the resource as a pos­si­ble cure for their social ills as
well. The potential for growth, modernization, and power from oil
fired imaginations and fueled conflicts.6
An oil-­based economy operates on a dif­fer­ent scale than previ-
ous energy regimes, as oil is more efficient and cleaner burning
than wood or coal, although it is certainly not what we would con-
sider to be “clean” energy. Oil-­based technologies “sped up felt
time” by intensifying transportation, communication, and indus-
trial development throughout the world.7 Oil-­based technologies
­were, as John McNeill writes, “something new ­under the sun.”8
To be part of that emerging petroleum-­based modernity, Bolivia
had to secure access to sources of oil at home and abroad. The
outcome of the strategic dependence on this new energy source
had tremendous po­liti­cal and social consequences, including the
Chaco War, the nationalization of Standard Oil, and the Revolu-
tion of 1952. Oil production also had environmental consequences
xii Oil and Nation

for Bolivia, including reshaping of the eastern lowlands and urban

landscapes, as well as melting glaciers due to climate change.
One of the most impor­tant consequences of the transition to
petroleum in Bolivia was the development of the eastern lowlands.
Santa Cruz de la Sierra grew from a small frontier city on the east-
ern edge of the Andes in the first de­cades of the twentieth ­century
to Bolivia’s largest city t­oday. The development of the petroleum
industry in the eastern lowlands of Bolivia also led to a cultural
dissonance between easterners and western highland Bolivians,
even as the oil itself physically integrated the regions. A conse-
quence of this cultural difference in Santa Cruz is the presence of
right-­w ing opposition to Evo Morales’s government. The opposi-
tion has used terms such as “productive” and “Western” to describe
their outlook t­oward social and economic development, in con-
trast to the highlands, which become, in this discourse, “less pro-
ductive” and “less Western.”9 The historically constructed racist
overtones of this rhe­toric ­toward the majority indigenous high-
landers, however, neglect to account for the large indigenous
highland populations who inhabit Santa Cruz and work, produc-
tively, throughout the eastern lowland departments and the rest of
the country; the institutional barriers that the indigenous ­peoples
have faced in Bolivia and throughout the Amer­i­c as since the
arrival of Eu­ro­pe­ans; and the enormous economic obstacles con-
fronting developing countries.
Regionalism and racism have determined internal po­liti­cal
dynamics in Bolivia since in­de­pen­dence and help to define the
colonial legacy of the area then known as Upper Peru. Rosanna
Barragán explains the complicated relationship between Santa
Cruz and La Paz as “an opposition of east and west, collas (from
the Altiplano) and cambas (from the lowlands), indigenous ­peoples,
whites and mestizos, tradition and modernity, collectivism and
private initiative, p­ eoples and oligarchs.”10 Barragán underscores
the role of the central government in supporting the development
of the lowland departments through increased revenues from
 Stephen C. Cote xiii

mineral extraction a­ fter 1938 by state oil and mining companies,

turning on its head the argument from Santa Cruz autonomistas
(­t hose advocating regional autonomy) that the state has blocked
lowland development and takes too much revenue from the
resource-­rich lowland departments. She accurately points out,
however, that the hydrocarbon wealth is not legally the property
of the department where it resides but of the state.
While demonstrating the importance of hydrocarbon revenues
from the state to Santa Cruz a­ fter 1938, Barragán does not ade-
quately explain the origins of the po­liti­cal differences between
east and west before that period. The roots of east–­west divi-
sions, I argue, can be found in the built landscapes of roads and
oil camps constructed by Standard Oil Com­pany in the 1920s
and 1930s. Geography s­ haped the approach taken by Standard Oil
in its development strategy and, subsequently, the construction of
eastern Bolivian cultures that gazed away from the western high-
lands and the large Aymara and Quechua populations that reside
­there, and t­oward the Western Eu­ro­pean and North American
cap­i­tal­ist markets. In that way, the east identified more with pre-
vailing ideas of global cap­i­tal­ist integration. ­Others wanted to
protect Bolivia’s natu­ral resources from continued foreign exploi-
tation, which had increased the country’s economic (and po­liti­
cal) de­pen­dency on the developed cap­i­tal­ist nations.
While shaping the eastern lowlands, oil instigated the largest
international war in Latin Amer­i­ca in the twentieth ­century. The
Chaco War between Bolivia and Paraguay in the 1930s was a piv-
otal moment in Bolivia’s history that “made the Revolution of 1952
inevitable.”11 I have argued that the conflict was a war for oil,
though not in the ways in which it has been depicted.12 The need
for the increasingly strategic resource drove Bolivia eastward
­toward the Paraguay River to gain an outlet to export oil across
the Atlantic Ocean. The defense of the oil fields during the war,
despite the loss of significant territory, gave Bolivians a victory on
which to build their nation a­ fter the war. Still, as James Dunkerly
xiv Oil and Nation

argues, the “sense of common betrayal, shared suffering, a Man-

ichaean vision of cowardice and heroism, a generational divide
and ideological displacement compounded by the collective
trauma of defeat in war,” drove reform efforts in the postwar
period that culminated in the National Revolution of 1952.13
Oil contributed to the Chaco War and its aftermath in other
ways. First, the demand for oil during war­time changed the per-
ceptions of many about the wisdom of granting concessions to for-
eign companies, especially when Standard Oil declared neutrality
in the conflict and did not increase production for the war effort.
Second, the site of the oil fields, at first far from the front lines,
became a strategic target for advancing Paraguayan troops and
the focus of debates during peace negotiations. And third, the
geography, climate, and diseases of the oil regions contributed to
Bolivia’s losses, as did the racial constructs that permeated the oil
fields and front lines. Bolivia’s entrenched oligarchy of mine ­owners
and hacienda o ­ wners in La Paz, known collectively as the rosca,
seemed out of touch with the country and its mostly indigenous
populations, leading to demands for social changes a­ fter the war.
The historiography and lit­er­a­ture of the Chaco War in the 1930s
and 1940s was highly critical of the liberal economic and po­liti­cal
order that the authors of dozens of novels, poems, and autobiog-
raphies blamed not only for the war but for all of Bolivia’s po­liti­
cal, social, and economic prob­lems.14
Oil and the role it played during and ­a fter the Chaco War
­shaped the Bolivian National Revolution of 1952. Scholars have
written much about the role of miners and indigenous peasants in
the revolution, and for good reason. Tin miners and indigenous
peasants had strug­gled in the highlands for de­cades to improve
their living and working conditions and to gain basic rights, such
as access to education. Many scholars have studied the strug­gle of
the highland indigenous p ­ eoples in Bolivia over the course of the
late nineteenth and early twentieth centuries to bring attention
to a sector formerly portrayed as passive subjects exploited by
 Stephen C. Cote xv

landowners, mine o ­ wners, and the state.15 Laura Gotkowitz broad-

ened the scope of this work and demonstrated that indigenous
groups throughout the highlands ­were instrumental in the Revo-
lution of 1952, while acknowledging their limits to social mobility
­after the revolution. ­Others, such as James Dunkerly, studied the
role of l­abor unions—­and especially the Trotskyite tin miners—
in the revolution. Robert Alexander notes the revolutionary links
forged in the mining camps, reminding us that indigenous ­peoples
worked in the mines as well as on the land and maintained con-
nections between the two worlds, which grew in importance during
the revolution.
I argue that oil also ­shaped the revolution. Indians and miners,
and Indian miners, fought the army in the highlands in April 1952
and achieved a quick victory over the military and the La Paz oli-
garchy. But the ­middle-­class Chaco War veterans who controlled
the revolutionary state apparatus believed that oil, and not tin,
would provide the economic base for Bolivia’s ­f uture. Economic
in­de­pen­dence drove early revolutionary policy and discourse,
with the first president, economist Víctor Paz Estenssoro, saying,
“If the government of the national revolution can consolidate itself
with a sufficient economic and social base, the reactionaries, the
Rosca, and their servants w ­ ill have lost all hope of returning to
power in Bolivia.”16 But attempts to reconcile the demands of the
revolutionary miners with the moderate vision of the party lead-
ers contributed to further instability and eventual conflict.
If the Chaco War was a war for oil, and the Chaco War made
the revolution “inevitable,” then we should look at the role oil
played in the revolution. Together, the importance of oil to the
Chaco War and its outcome; the ­actual and mythological role of
the state oil com­pany in the postwar years as part of the reformist,
nationalist, and revolutionary discourse; and the significance of
oil to the revolutionary state form a largely untold story. While
major social achievements did take place a­ fter 1952, the revolu-
tionary state decapitalized the new state mining com­pany and
 xvi Oil and Nation

took a tepid approach toward an agrarian reform forced on it by

peasants seeking long overdue social justice, but it enthusiastically
funded oil exploration, first with the state oil company and then
by opening the sector to foreign companies to increase produc-
tion. Leftists such as Guillermo Lora decried the latter act as “nation-
selling.”17
While focusing on oil, omitting either the mining sector or the
indigenous populations would ignore the largest segment of state
revenues in the twentieth century and the majority of the coun-
try’s population. To do so would also provide an incomplete story
of the oil sector. Oil policy grew out of mining codes and experi-
ence with mining and other natural resource extraction, while the
struggle by indigenous populations for land, education, and politi-
cal inclusion shaped economic development policies and warped
the country’s hierarchical social structure. If mining and the
struggles of the indigenous populations are so impor tant to Boliv-
ian history, then why focus on oil? Oil hastened transformations
in rural indigenous communities, urban built environments, and
the mining economy. Oil contributed to regional, racial, and other
persistent political, social, and economic divisions. Elite anxiety
over the majority indigenous populations and the distinct geog-
raphy of the landlocked Andean country heightened the sense
of urgency to develop the resource. This anxiety, combined with
Bolivia’s impoverished condition, built the foundations for war,
nationalization, and revolution that are discussed here. Oil became
so important to the country that it nationalized this resource first,
before the tin mines, even though mining was by far the largest
source of state revenue at the time; this has to do with both the
nature of oil and the political power of the oligarchy, the rosca. Oil
was necessary to develop domestic industry and to build military
strength. Bolivia’s mining equipment, electricity generation, trains,
tractors, and automobiles required oil or coal, but coal was mostly
-1— absent from Latin America. For marginal Bolivia to become a
0—
+1—

562-65182_ch00_7P.indd xvi 09/20/16 10:06 am

 Stephen C. Cote xvii

modern nation, it needed to break the stranglehold of the rosca,

and it needed oil.

Bolivia in Historical Context

Bolivia’s extraordinary and complex history is woven through
with the majority indigenous populations and the country’s rich
natu­ral resource base. The Spanish Empire extracted silver from
the mountain at the famed Imperial City of Potosí in colonial
Upper Peru using Natives in corvée ­labor regimens called “mitas,”
­a fter Incan practices. Many thousands of Indians died in the
mines while the silver went overseas to finance a warring and fre-
quently bankrupt empire. The silver began to run out in the late
eigh­teenth ­century, contributing to economic decline in the cen-
tral Andes and growing unrest among the indigenous ­peoples and
the Creoles (­those of Eu­ro­pean descent born in the Amer­i­cas). The
long and brutal wars of in­de­pen­dence in the early nineteenth
­century, following on the heels of the Tupac Amaru and Tupac
Katari revolts in the late eigh­teenth ­century, devastated the area
of Upper Peru that became Bolivia, named for the liberator Simón
Bolívar a­ fter the wars.18 A de­cade of fighting across the Altiplano—­
the high exposed plains over thirteen thousand feet in altitude
between the eastern and western ranges of the Andes—­laid waste
to villages, farmlands, and animal herds, while the mines flooded.
It took the fledgling nation of Bolivia de­cades to recover.
In the nineteenth c­ entury, Bolivia faced obstacles to growth the
size of the Andes Mountains, which divided the country in two.
The new republic did not possess the financial resources to restart
the mines or to develop other industry. Transporting goods
over the Andes by mule and llama was costly, time consuming,
and dangerous. Much of the northern and eastern territory was
unmapped, sparsely inhabited, and controlled by autonomous
indigenous groups that had never been conquered by Spain. In the
xviii Oil and Nation

late nineteenth c­ entury, Bolivia lost its seacoast in a war with Chile
that left the country landlocked and even more geo­graph­i­cally iso-
lated. The introduction of steam-­powered technology in the late
nineteenth c­ entury allowed silver mines to reopen and invigorate
an economy based u ­ ntil then on an Indian head tax. Silver mining
began to slowly revive the economy in the 1860s, followed by a
short-­lived rubber boom and then tin mining. Railroads ran west
to the Pacific to export ore, haciendas grew and encroached on tra-
ditional communal lands throughout the highlands, and ethnic
tensions ­rose.
Bolivia was a poor country in the 1800s. The majority indige-
nous populations living on Bolivia’s Altiplano and in the central
highlands worked the land and the mines in neo­co­lo­nial and
semifeudal conditions, as their ancestors had done for centuries.
Indigenous ­peoples strug­gled with the state and local landowners
for land and basic rights, negotiated changing social conditions, and
survived, while a small group of white and mestizo elites, descen-
dants of the Eu­ro­pean colonists, ran the government in f­ avor of the
interests of the mines and haciendas that they owned. ­Today,
nearly two-­t hirds of Bolivia’s populations identify themselves as
indigenous. The two major indigenous language groups are the
Quechua and Aymara of the Bolivian highlands, who constitute
more than 50% of Bolivia’s ten million inhabitants.19 Thirty other
ethnic groups live scattered throughout Bolivia’s vast lowland
territories. The Chiriguanos are the majority ethnic group in the
l­ owlands.20
Nineteenth-­century Bolivian politics mirrored trends through-
out Latin Amer­i­ca, where liberal and conservative caudillos
(regional strongmen) battled for control of the executive branch of
government. In Bolivia, t­ here was ­little to distinguish the Conser-
vative Party from the opposition Liberal Party. They w ­ ere both
exclusive parties of white elites with similar policy objectives,
which we would identify as classic liberal economics. Both parties
focused on expanding the mining sector, building infrastructure
 Stephen C. Cote xix

to export ore to the Pacific Ocean, and gaining control over the
large communal indigenous landholdings in the highlands, which
they labeled unproductive. Through corruption and occasional
vio­lence, the Conservatives held on to power in the capital city,
Sucre, ­a fter the resurgence of the silver-­mining economy in the
1860s. The frustrated Liberals eventually or­ga­nized a rebellion.
The 1899 Federalist Revolution of the Liberal Party ended Conser-
vative rule and shifted both economic and po­liti­cal power north
to La Paz and the tin mines.21 Tin became the major export and
primary source of government revenues in the early twentieth
­century as silver declined, though the Indian head tax remained
an impor­tant source of revenue for de­cades. The Liberals, and off-
shoot parties who called themselves Republicans and Genuine
Republicans, held power in La Paz ­until the ­middle of the 1930s.
During that period, Bolivians discovered oil in the sub-­Andes.
The Cenozoic-­era Andean uplift that slowly drained the Atlan-
tic Ocean eastward and left the Amazon Basin ­behind gave South
Amer­i­ca its pres­ent topography.22 In between the high mountains
and the expansive lowlands w ­ ere the geo­graph­i­cally complex foot-
hills of the eastern sub-­Andes, a chain of north–­south mountain
ranges compressed by power­ful geological forces into deep creases
scrunched like an accordion. The oil was entombed for millennia
­under impervious layers of rock, referred to by petroleum geolo-
gists as capstone, deep inside the sub-­Andean zone. According to
one geologist, the zone is “characterized by per­sis­tent longitudinal,
overthrust asymmetrical anticlines that have eroded to a distinc-
tive topography of parallel ridges and valleys.”23 Anticlines are
domed formations coveted by petroleum geologists, but the sub-­
Andean terrain is difficult to traverse due to the thick vegetation
and steep-­walled valleys. Even ­today, few roads connect eastern
Bolivia to the west, and ­t hose that do endure flooding and mud-
slides throughout the rainy season, making access to the oil
regions challenging and costly. East of the sub-­A ndean zone and
south of the Amazon Basin lies the Gran Chaco, a grassy and
xx Oil and Nation

wooded savanna classified as dry tropical forest that crosses the

borders of Bolivia, Paraguay, and Argentina.24 The sandy and clay
soils of the Bolivian Chaco washed down from the Andes over
millennia, leaving poor growing conditions for the indigenous
groups that had migrated ­there. The Native ­peoples fished, hunted,
and gathered edible plants in their dispersed communities.
Oil traveled upward through the faults and cracks of the sub-­
Andean geography and out to the surface of the deep canyons
and hillsides, where ­people discovered it and found uses for it.
Natives smeared the oil on themselves and on their animals to
heal wounds. They ingested it to cure sicknesses. They used it to
light torches and to light the ends of the arrows they fired at their
enemies’ huts. Spanish conquistadores knew of Bolivia’s oil, as did
ranchers in ­later times. This story begins in 1896, when a medical
doctor, on a secret government mission, discovered an oil spring
and started a kerosene com­pany with the intention of bringing
Bolivia out of the darkness of poverty and backwardness and into
a modern enlightened world.

Overview by Chapter
Chapter 1 questions how the experiences of Bolivia’s petroleum
pioneers ­shaped the direction of oil policy, while analyzing the
obstacles the pioneers faced developing a v­ iable oil sector. The
attempts by the pioneers to find and exploit oil exposed them to
the diverse geography, biota, cultures, and po­liti­cal persuasions
of this landlocked Andean country. B ­ ecause of this, the chapter
serves as an introduction to Bolivian history and to the formation
of oil nationalism. The petroleum pioneers ­were mostly Bolivian
and Chilean, although o ­ thers, including Eu­ro­pe­a ns and North
Americans, found their way into the remote southeastern oil zones.
Many w ­ ere speculators, but some, like Dr. Manuel Cuéllar of
Sucre, had serious intent to develop ­v iable petroleum enterprises.
None ­imagined the difficulties that awaited them, which serve to
 Stephen C. Cote xxi

demonstrate some of the structural prob­lems that have thwarted

Bolivian economic development. While domestic businessmen
strug­gled to drill oil, the country’s leaders focused mostly on their
personal mining and land interests in the highlands, ignoring a
sector with the potential to transform the nation. Th ­ ose who lam-
basted the government for this oversight became the forebears of
Bolivian oil nationalism, the sentiment b ­ ehind using oil to build
the nation.
Chapter 2 examines the ways in which John D. Rocke­fel­ler’s
Standard Oil Com­pany (New Jersey) was able to gain control over
Bolivia’s most impor­tant oil concessions, and the ways in which
its activities constructed new landscapes and identities in eastern
Bolivia. The isolated oil regions built connections to the outside
world through the transportation and communication infrastruc-
ture erected by the oil com­pany. New businesses arose to ser­v ice
the oil camps, and cultural influences from outside found their
way into the isolated Bolivian Oriente (East). Eastern Bolivians
began to construct separate and distinct identities from the west-
ern highlanders. And as the state began to pay more attention to
the east and the oil sector as demand for oil grew during the 1920s,
conflicts between the state and Standard Oil also grew, as the oil
com­pany, with dif­fer­ent priorities than Bolivia, did not meet that
demand. The tensions reached a breaking point with the collapse
of the tin market at the onset of the ­Great Depression. Po­liti­cal and
­legal ­battles stretched on for de­cades and created more divisions,
not only between the state and Standard Oil but also between the
eastern lowlands, where the oil was located, and the western high-
lands, where the government, increasingly seen by the eastern
regions as ­either neglectful or obstructionist, was centered. Oil
nationalism in the east took on dif­fer­ent tones than oil nationalism
in the west, although both regions had g­ rand ideas about oil’s
potential to build the nation.
Chapter 3 asks how the Chaco War was, and was not, a war
for oil, and questions the ways in which petroleum s­ haped the
xxii Oil and Nation

conduct and outcomes of the war. The chapter reexamines the

­causes of the war, discusses the oil politics, and reveals the develop-
ment of social movements that agitated for nationalization of the
oil reserves. Bolivians discovered the strategic and social signifi-
cance of their oil during the campaign as motorized vehicles sped
into the Chaco Boreal, as Paraguayans advanced ­toward the oil
camps, and as Bolivians—­mostly indigenous highland conscripts—­
shed blood defending the oil reserves. The war remade the country’s
oil into a sacred symbol of the nation. The war also fundamentally
reshaped relationships between the indigenous highlanders and
the state, ­labor relations, and the role of the state in the economy.
Chapter 4 examines the ways in which the foundation of the
state oil com­pany and the cancellation of Standard Oil’s contract
transformed the role played by the state in the oil sector. As the
post-­Chaco governments seesawed between reformers and the tra-
ditional oligarchy, the semiautonomous state oil com­pany accom-
plished remarkable achievements in the areas of production and
distribution. The experience demonstrated that Bolivians could do
a better job at exploiting the country’s resources than could a for-
eign com­pany, bolstering the prestige and influence of the oil
nationalists. But to demonstrate that point, the state oil com­pany
had to overcome tremendous internal divisions, which foreshad-
owed the revolutionary state’s prob­lems r­ unning the country.
Chapter 5 discusses the role oil played in the National Revolu-
tion of 1952. While the tin miners who fought in the revolution
achieved their goal of nationalizing the large tin mines, the revo-
lutionary state defunded the new state mining com­pany in ­favor
of the state oil com­pany. Tin revenues bolstered oil exploration
and distribution networks to the culmination in 1954 of Bolivian
energy in­de­pen­dence. The state oil com­pany not only satisfied
domestic demand but also began exporting small quantities of oil.
Oil also became a tool for the revolutionary state to gain credit
from international lenders, but using oil as a bargaining chip
allowed the United States to gain influence and enact loan
 Stephen C. Cote xxiii

conditions that threatened the state oil com­pany, oil nationalists,

and the revolution itself.
Chapter 6 is a brief overview of the hydrocarbon sector from
1956 to the pres­ent. The active role played by the state in the hydro-
carbon sector continued to divide eastern lowlanders from La Paz
over the distribution of revenues and control of the reserves. The
chapter examines the ways in which the fight over control of the
oil reserves ­shaped conflicts that continue to divide the country.
The conclusion sums up the importance of oil to understand-
ing the regional, po­liti­cal, racial, and environmental conflicts that
mark Bolivia’s landscape t­ oday. Even as the hydrocarbon resources
have given the state the means to fund social programs, improve
its international economic standing, and diversify its economic
base, the state oil com­pany requires new sources of oil and natu­
ral gas in order to continue to serve this role, putting the state at
odds with populations, usually poor and indigenous, affected by
extraction.
-1—
0—
+1—

562-65182_ch00_7P.indd vi 09/20/16 10:06 am

cha p ter 1

Discovery
The Sucre Pioneers

Dr. Manuel Cuéllar read and reread the letter from his ­brother,
José, with alarm. The year was 1896 in Bolivia’s capital city, Sucre,
located at nine thousand feet in a beautiful valley in the central
eastern Andes. José was living in Asunción, the capital of Para-
guay, as a fugitive from justice ­after murdering a Chilean diplo-
mat whom he had accused of having an affair with his wife.1 José
had written the letter in Quechua, the language of the Inca Empire
spoken by José and Manuel’s ­mother and still spoken by 30 ­percent
of Bolivia’s population. He used Quechua to hide the letter’s contents
from the Paraguayans, few of whom would have understood the
Andean language. José warned his ­brother of Paraguayan troops
crossing into Bolivian territory in the lowland plains of the Chaco
Boreal, an area in dispute between Bolivia and Paraguay since
the m­ iddle of the nineteenth c­ entury. Dr. Cuéllar deci­ded to act
on the information.
Cuéllar, like his f­ ather, was a surgeon trained in Paris. Also like
his f­ ather, who had seen action in the Bolivian military, Cuéllar
had a strong sense of nationalism in a country that was deeply
divided by race, ethnicity, class, and region. Nationalism, accord-
ing to social anthropologist and theorist of nationalism Ernest
Gellner, is “a po­liti­cal princi­ple, which holds that the po­liti­cal and
national unit should be congruent.”2 Bolivia was anything but. A
majority indigenous country, the indigenous p ­ eople had been
2 Oil and Nation

marginalized, subjugated, and discriminated against since long

before the founding of the republic. Most of Bolivia is lowland
tropics, but most of the population live in the central valleys and
high plains of the Andes Mountains. The cultural and geographic
diversity led to isolated, separate, and competing regions and iden-
tities, while the minority ethnic and racial rule led to per­sis­tent
vio­lence and conflict. Gellner went on to define nationalist senti-
ment as “the feeling of anger aroused by the violation of the
princi­ple [nationalism], or the feeling of satisfaction aroused by
its fulfillment.” Few Bolivians felt satisfaction at the state of their
country in the late nineteenth c­ entury. Some would or­ga­nize into
nationalist movements, defined, again by Gellner, as “actuated by
a sentiment of this kind [nationalist].” The nationalist movements
included groups formed by Dr. Cuéllar and his patriotic sucreño
(residents of Sucre) brethren.
Dr. Cuéllar hoped to cure his nation of its many social and bio-
logical ills. In 1895, along with other doctors and faculty of Sucre’s
prestigious San Francisco Xavier University, Cuéllar founded a
medical institute. The institute contained the country’s first bac-
teriological laboratory at a time when many still questioned germ
theory. Doctors at the laboratory developed vaccines that greatly
improved health conditions in Sucre’s department of Chuquisaca, a
large area stretching from the Andes to the southeastern l­owlands.3
The institute also had scientific sections for metallurgy, astron-
omy, and chemistry, and a library that can still be visited. As the
Instituto Médico Sucre (Sucre Medical Institute) began its diffi-
cult task of improving Bolivia with the latest medical science,
Cuéllar became consumed with stopping Paraguay from threat-
ening the country’s territorial integrity. He saw both missions as
having the same ultimate goal of building a strong and modern
Bolivia.
Bolivia had suffered a major territorial loss just fifteen years
earlier in the War of the Pacific. Chile took Bolivia’s nitrate-­rich
department on the Pacific coast, leaving the country landlocked.
 Stephen C. Cote 3

Losing territory to Paraguay in the east would have been painful

with the lingering memory of the stinging loss to Chile in the west.
Dr. Cuéllar deci­ded to take his ­brother’s letter to Bolivia’s presi-
dent, Mariano Baptista Caserta (in office 1892–1896), and offered
to lead an expedition disguised as a scientific mission to verify
the alleged Paraguayan intervention.4 The president referred the
­matter to his Council of Ministers, which approved the expedition
but provided l­ ittle funding. The doctor would pay most of the costs
for the supplies, guides, and mules out of his own pocket.
Although the Council of Ministers was certainly concerned
about the Paraguayans, Bolivia had few resources to contribute to
the mission. The silver-­mining economy of the famed mountain
of Cerro Rico at Potosí, which had helped feed the coffers of the
Spanish Empire in the colonial era, had collapsed during the wars
for in­de­pen­dence in the early 1800s. The mines had filled with
­water and would require heavy capital investment to drain them.
New steam-­powered technology drove a resurgence of mining in
Potosí and throughout Latin Amer­i­ca in the latter half of the nine-
teenth ­century. In Sucre—­t he administrative center for the mines
of Potosí—­a particularly self-­aware group of elites arose, who
modeled themselves on high Eu­ro­pean culture.5 But by 1896, when
Dr. Cuéllar began the expedition east from Sucre, the silver ore
was again depleted, along with the country’s trea­sury, and the elite
became much less self-­assured.
The expedition spent weeks crossing the arduous terrain of the
sub-­Andean mountains, composed of ten thickly forested chains
­r unning from north to south between Sucre and the lowland
plains of the Chaco Boreal. While lush and beautiful, travel across
the mountains was challenging. Hardly any roads ran through the
deep valleys or along the steep ridges, and ­t hose that did would
wash out in the rainy season, which varies greatly in intensity
between November and April. Few towns existed in the area, and
many of the indigenous populations shunned outsiders as a result
of missionary activity and colonization over the centuries that had
4 Oil and Nation

violently encroached on their lands and introduced devastating

epidemics. A series of missions ran like a line of forts along the
frontal range of the sub-­Andes and protected colonizers from
groups such as the Tobas and Matacos, who controlled much of
the area.6 Some indigenous ­people took advantage of the missions
and the ser­v ices that they provided. Coincidentally, the line of
missions would closely mirror the ­later location of oil camps.
Natives attacked Cuéllar’s expedition on the edge of the Chaco
near the town of D’Orbigny, named for the French scientist who
had explored the region earlier in the nineteenth ­century and
provided its first paleontological and geological studies. Cuéllar
retreated to Sucre without learning of any Paraguayan advance
into the disputed territory, although the topic would recur ­until
war broke out in the 1930s.
The trip back must have been even more challenging. The
group, dejected at their failure, had to climb thousands of feet up
primitive trails into the subtropical forests. Some of the mules devel-
oped sores from carry­ing the heavy loads over the poorly main-
tained paths. Dr. Cuéllar’s guides suggested a remedy. The cambas—­a
general term for ­people living in eastern Bolivia—­showed the doctor
a nearby spring with a dark viscous liquid oozing from the ground.7
They applied the liquid to the sores to help them heal. Dr. Cuéllar
suspected that the substance was petroleum and brought samples
back with him for testing.
Laboratory analy­sis confirmed that the substance was petro-
leum and of a high quality. Dr. Cuéllar gathered investors to start
Bolivia’s first oil com­pany. Like the medical institute and the mis-
sion to defend Bolivia’s territorial integrity, the oil com­pany had a
grander nationalist scope. Cuéllar and his partners hoped to mod-
ernize their country with the petroleum they had discovered (or,
more accurately, been shown). The other investors also lived in
Sucre and participated in scientific and civic organ­izations, such
as Sucre’s Geo­graph­i­cal Society. Many had been educated in Eu­rope
and influenced by con­temporary pseudoscientific concepts, such as
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