Bolivians tap fertilizers revenue to build new plant while equally gas-rich Peruvians pay up for urea imports, smuggled LPG

While farmers in nearby, gas-rich Peru struggled in 2022 to find and buy fertilizers and citizens paid dearly for refined products needed daily like LPG for cooking, Bolivians not only had access to affordable domestic urea and five times cheaper LPG cooking fuel but the country´s chemical export revenue will finance a new nitrogen, phosphorus, potassium fertilizer plant.

Bolivia´s fertilizer plant. Image courtesy of Bolivia´s hydrocarbon ministry

Officials in Bolivia announced in July the construction of a state-owned Nitrogen-Phosphorous and Potassium (NPK) plant with 60,000 tonnes-per-year capacity. In Peru, officials announced they were able to complete a bid process to buy urea just in time for the season.  

Besides NPK, the planned Bolivian plant will also produce granulated urea, Bolivia´s Minister of Hydrocarbons and Energy Franklin Molina said, according to a July 13 release.

Most homes in Peru and Bolivia use refillable metal gas canisters for cooking that hold LPG (propane butane) and get attached through hoses to stoves. Bolivians call the canisters "garrafas" and Peruvians "balones" and these are sold by mutiple distributors with several per neighborhood that can within a few minutes deliver the canisters in bikes, or loaded trucks that normally deliver, install and check, and take the empty canister.

Bolivia´s El Deber newspaper reported on June 13, 2022 that smugglers can buy on the Bolivian side a 10-kilogram LPG canister containing cooking fuel at $3 that can be easily sold across the border, once in Peru, at $15 and still undercut the Peruvian domestic production or LPG imports through the group of authorized importers.

Bolivian officials have deployed 600 soldiers to try to prevent this. They have found canisters hidden in trucks supposedly taking other cargoes, in passenger buses transporting nothing but canisters in seats and every space, and seen them simply rolled across through the Lake Titicaca shallow waters in the border, keeping them just underwater and out of customs sight, as they crossed in large numbers on their way to Peruvian kitchens.

Preventing hard-currency flight

“This will make it possible to produce more food, reduce production costs, avoid inflation, and guarantee nutrition,” Bolivia´s Molina said discussing the new fertilizers plant.

Bolivian President Luis Arce has said that the project won´t just strengthen national agriculture and indirectly livestock but “prevent hard currency flight” by eliminating imports.  

Bolivia resorted to costly fertilizer imports and had to shed hard currency temporarily after its urea and ammonia plant, that had been inaugurated in 2017, saw a 22-month interruption starting in 2019.

Arce´s government restarted the plant in Sep. 2021 and said the stoppage had been politically motivated to discredit investments in downstream made under former President Evo Morales (2006-2019).

Synergies with other state companies

EBIH will work with state natural gas company YPFB, and the state lithium production company YLB to supply the new plant, Molina said.  

“The NPK plant needs urea, potassium chloride. YPFB and YLB will jointly supply the cooperatives,” Molina added.

The estimated project cost is about $10 million. Arce said on July 15 that YLB earned about $35 million so far this year compared with $27 million for all of 2021.

“YLB marketed in this period 18,700 tonnes of potassium chloride and 400 tonnes of lithium carbonate,” he said, about a third of it sold in Bolivia and the rest exported to Brazil, Chile and Peru.

Morales nationalized the hydrocarbon industry in 2006. This allowed Bolivians control of pricing and earnings from sales of gas from deposits found in the 1990s in the Tarija region estimated to hold up to 13 Tcf of reserves.

Coincidentally, the giant Peruvian Camisea fields were also estimated to contain about 13 Tcf in the late 1990s. Reserves estimates since then have varied.

Peru at the time had the advantage of ocean access for LNG shipping whereas landlocked Bolivia had the advantage of gas pipeline connections including to other big regional markets, such as Brazil. The Bolivia-Brazil Gas Pipeline extends 2,000 miles and is the biggest in South America.

Peru´s Camisea

Former Peruvian President General Juan Velasco (1968-1975) established in 1969 the Peruvian state oil company Petroperu after the expropriation of old fields and refining capacity.  Once under state ownership extensive investment in seismic and drilling was carried out in Peru in the 1970s. The Camisea fields gas discovery was made public in the early 1980s.

Assets organized in Peru in the late 1960s and 1970s by Velasco as state companies in mining, power generation, air, rail, hotels, and across many industries, and all the improvements and acquisitions since then, were nearly all sold or given in concessions to private groups under former President Alberto Fujimori (1990-2000).

In one of those processes, Fujimori, currently 82 years old, reached an agreement with Shell in the mid-1990s, after a public bidding, for Shell to build an extraction well in the Camisea natural gas fields deep in the Peruvian southeast Amazon, and to have the option to decide during that time whether it wanted to continue to develop the deposit located at the southern edge of the Ucayali basin in southeastern Peru. 

Under terms of that accord, Shell returned the asset to Peru with the development of the Camisea well included. This occurred amid a period of unusually intense political volatility that was to soon include Fujimori´s flight to Japan and sudden resignation.

This left Peru´s new authorities free to call a new bidding for Camisea that was won by a consortium that currently exploits the fields and includes companies from North America, South America, North Africa, Europe and Asia.

Camisea´s pipeline and contracts

The Camisea fields were developed through agreements during the government of former President Alejandro Toledo (2001-2006).

Toledo, now 76, awaits in San Francisco as of July 2022 the results of an extradition process to see if he must travel back to Peru to face charges of taking bribes related to the Brazilian Odebrecht group. The process has so far taken about four years.

The high point of Toledo´s presidency was on March 23, 2002 when former U.S. President George W. Bush (2001-2009) was in Lima for a few hours, with all traffic blocked amid extreme security, and this way became the first U.S. sitting president to visit Peru. 

On Sep. 10, 2003 the board of directors of the Inter-American Development Bank approved $135 million in financing to TGP Peru in the transaction that got Camisea started after a paralyzation of several years since Shell had left. TGP Peru quickly used those funds to pay the selected private groups for the engineering, materials and construction spending. At the time exports had not been compromised. TGP Peru is the organization set up under Peruvian laws responsible for the design, construction and operation of the Camisea pipeline.

The IDB said at the time the lending was to support part of the $811 million cost of two pipelines to carry natural gas and natural gas liquids (NGLs) from the rainforest to the coast. It said benefits to Peru from Camisea were to include improved trade, more industry, higher tax collections, royalties, jobs, and "the strengthening of the government’s institutional capacity to monitor and enforce."

The participation in Camisea of Toledo´s former Finance Minister and also former Cabinet Chief Pedro Pablo Kuczynski, now 83, who later became Peruvian president (2016-2018), occurred as in the early 2000s Kuczynski held a role as board director of the company that supplied the steel tubes and built the main Camisea 454-mile pipeline duct connecting the field to Peru´s central coast, and immediately afterwards became a top Peruvian official.

Kuczynski is currently under house arrest in Peru not for charges related to Camisea, which in Peru has not been and is not currently object of any investigation, but instead to corruption related to Brazilian group Odebrecht.

Camisea steel tube supplier Tenaris told the U.S. Securities and Exchange Commission in April 2004 that on Feb. 17, 2004 Kuczynski resigned to its board of directors "as a result of being appointed Minister of Finance of the Government of Peru."

Kuczynski was Finance minister of Peru from Feb. 16, 2004 to Aug. 16, 2005 and then President of the Council of Ministers, a position also known as Cabinet Chief that commands leadership over all other ministers, between Aug. 16, 2005 and the end of Toledo´s term on July 28, 2006.

The day Peru´s destiny  changed

The contract that made exports from Camisea possible was signed on Sep. 7, 2004, and it was the agreement for the "Exploitation of Hydrocarbons in Block 56" subscribed between the Peruvian government represented by state licensing agency Perupetro and the Central Bank of Reserve of Peru with officials from private companies Pluspetrol, Hunt, SK, Sonatrach. The Central Bank of Reserve of Peru was represented by its legal chief Manuel Monteagudo Valdez.

Monteagudo Valdez, along with five other Peruvians, was elected on May 10, 2022 by majority vote in the Peruvian Congress to become Magistrate of the Peruvian Constitutional Tribunal. In Peru the Constitutional Tribunal is the country´s maximum interpreter of the Constitution and has very broad powers. According to background information on him in government websites, Monteagudo Valdez has a master in law studies from the University of Houston, as well as a doctorate in law from Paris 1 Pantehon Sorbonne.

Monteagudo Valdez, according to official Peruvian documents presented to access the position, is a member of the Accion Popular party, same political group as the one to which the President of Peruvian Congress during July 2021-July 2022, legislator Maricarmen Alva, belongs and one of the oldest in the country, founded on July 7, 1956.

Information Monteagudo Valdez supplied to the comptroller´s office indicated that he has had since 2011 a power of attorney from the Central Bank of Reserve of Peru, and listed in 2022 as still valid, to allow "to subscribe agreements for the investment in petrochemical plants" and another since 2008 to subscribe investment accords related to oil, gas and mining. He also listed other work as external consultant for the International Monetary Fund, as well as legal arbiter in disputes, besides listing also work as legal chief at The Peruvian Central Bank of Reserve.

A magistrate of that court is arguably the most powerful position in the nation. Its powers sometimes appear only limited by international treaties Peru signed. Its mandates, that can appear illogical to many Peruvians, can erase extensive work done by the judiciary or create instability. For example, in April 2022 the Constitutional Tribunal ordered Peruvian officials to free Alberto Fujimori, sentenced to 25 years in 2009 for his role in killings and kidnappings by a death squad in the 1990s with victims that included university students. This sparked multiple protests. The Costa Rica-based InterAmerican Human Rights Court warned Peru freeing Fujimori would violate rights of the surviving families of victims.

So on May 10, 2022 the Junta de Portavoces (speakers assembly) of the one-chamber Peruvian Congress agreed to carry out the vote to name magistrates  "without debate about the matter" and there was a relatively quick but noisy vote. A small group of legislators protested for the lack of public debate to discuss the background of the candidates and the vote over a small group of individuals relatively little known to most Peruvians, in comparison to politicians, was quickly pushed. A total of 102 legislators voted in favor of Monteagudo, and 8 abstained, while 14 legislators opposed his naming.  That vote fractured one of the leading parties, Peru Libre, with several members leaving the group to form another to protest the lack of transparency in the Constitutional Tribunal election.

The original, first Peruvian Constitutional Tribunal of Guarantees was created through the Constitutional Assembly of 1978-1979 to solve conflicts related to constitutional law and had in total nine members. That tribunal functioned for nearly a decade since 1982 but on April 8, 1992 Fujimori, who had dissolved the Peruvian legislature on April 5, 1992 with the support of troops and tanks at the doors of Congress, eliminated that tribunal.  Fujimori then called for elections of a new constitutional assembly that wrote another constitution and set up another tribunal, this time with fewer members. The first newer members of the new tribunal were elected in 1996.

With the legal work completed and the door open for exports and without any government campaign during the past 20 years to educate Peruvian citizens or students about national hydrocarbon resources, formulas used for royalties, as other countries and Peru itself did in the 1970s when hydrocarbons education was part of school programs, the consortium exported the rich Camisea natural gas liquids (NGLs) as well as propane and butane mix (LPG) from Peru in the first years as stocks lasted. Exports later shifted to mainly LNG, which is methane cryogenically processed to reduce the volume 600 times for easier shipping. LNG is decompressed and used mostly for power generation once at destination. In the case of Peruvian LNG exports, the export mix include a high component of ethane, that has been estimated at about 7%, that isn´t fractioned and just adds calories. In countries like the U.S. the ethane is used to produce ethylene, a building block of the petrochemical industry.

Golden bureaucracy reported on Oct. 2018, citing the at the time Peruvian legislator Manuel Dammert, that many Peruvian legislators, regulators, and top officials have appeared to favor the interests of pro-hydrocarbon exports lobbies instead of adhering to any responsible energy policy considering the future needs of Peruvians.  He described extensive institutional damage as a result of Camisea.

Dammert, author of books on Camisea such as The Lobbying Republic and the Bicentennial Nation (2009), has described consortium royalties as irrisory in relation to final sales prices. Meantime, benefits including special customs treatment for all sorts of imports by the consortium members as well as tax benefits allegedly coexisted and fluorished along with a fast growing “golden Peruvian bureaucracy” of regulators and administrators, Dammert told 

His publications, unique in Peru, did result in long legal battles. In Nov. 2009 Lima´s Superior Court absolved Dammert of accusations of "aggravated difamation" presented in 2006 by Kuczynski. At the time the Superior Court of Lima invoked rights of expression in matters of public interest and took the additional step of asking the Supreme Court to remove Kuczynski from its groups of advisers as he was a plaintiff and his case could reach that instance leading to potential conflict of interest. Dammert said at the time Kuczynski had sought preemptively such position.

Dammert told in 2019 that Peruvian oil officials enjoyed privileges including high salaries even as Peru´s liquid crude oil production has been in recent years meager at only about 40,000 bpd or often even below. 

Dammert argued in his book that laws to allow Camisea´s financial structure in relation to taxes and obligations, approved by decree from the Executive under Toledo with Kuczynski as his most powerful official, contradicted and replaced the country´s existing laws. Laws cannot be changed with just a presidential or ministerial decree and this violated the country´s constitution, he argued. Dammert died from Covid complications in March 2021 at 72.

Some Peruvians, including former legislator Fredy Serna, have also considered agreements related to Camisea´s exports violated the country´s constitution. In 2009 Serna tried to get the nullification of the export contract for Block 56 signed by Monteagudo Valdez on Sep. 2004 on grounds it didn´t meet the law, which required certifying gas reserves were sufficient for Peruvians for decades ahead before any export agreement could take place. Such reserves certification, and transparent efforts to communicate the real level of reserves, didn´t take place so the contract is null, he argued back in 2009.

Without any apparent interest on certifying current reserves in Camisea, Peruvians may only learn with time and through a surprise, as soon as within one generation, about the real level of reserves left in Camisea. According to historians, such destiny for resources found in Peru, learning about depletion by surprise, isn´t unprecedented. Guano, or natural fertilizer resources, were exhausted in the second half of the 1800s in a few decades, at irrisory export prices, amid Peruvian ignorance of reserves.

Meantime, the country´s only oil pipeline, built half a century ago under Velasco´s presidency, continued for nearly two decades to often cause spills and river pollution that Natives and other Amazon rainforest residents blame on lack of maintenance spending while Petroperu has issued releases for years blaming spills on alleged sabotage attacks.

Such administrative and regulatory distortions may have prevented quality private investment downstream. Initiatives to massify natural gas use by constructing a network of gas pipelines to reach rural Peruvian cities and feed mines and mineral refineries, agroindustrial plants and homes, or to develop a downstream plastic resins or chemical industry, or to power transit in rugged moutainous terrain, all efforts that could rival the Peru LNG future demand for natural gas, or to produce fertilizers, were quickly lost in the mist.

Peru LNG

Repsol´s Chairman Antonio Brufau and former Peruvian President Alan Garcia (1985-1990, and 2006-2011) inaugurated in June 2010 the Peru LNG plan with about 4 million tonnes per year capacity, where Repsol owned a 20% stake, and with Hunt Oil as the leading partner.  Garcia killed himself in 2019, at 69 years of age, after authorities entered the first floor of his house to arrest him amid investigations of corruption, not related to Camisea.

Repsol announced at the time of the inauguration it had exclusive rights to market the LNG, under a private contract for 18 years, with the Camisea consortium.

Soon the plant was shipping four to five LNG monthly cargoes globally. At the time there were only 14 such plants. The Peru LNG plant was perhaps unique for its location is within only 120 miles from a city of more than 10 million but opposition from environmental groups was more directed to the plant´s location near a marine reserve. A newer LNG plant like Australia´s Prelude is a floating facility in the open ocean in part to avoid objections from potential neighbors considering the significant carbon emissions footprint of LNG plants.

Amazon Watch said in July 27, 2003 in a release that U.S. lending agencies, and multilateral organizations, favored approvals related to releases of funds for Camisea´s development despite threats to the rainforest and "Peru´s only marine sanctuary for endangered birds and mammals."

The group also questioned in that release the use of U.S. government funds and influence to finance a private project with the participation of Texas-based companies that had contributed to political campaigns. Amazon Watch is a non-profit organization founded in 1996 in California that raises awareness of environmental threats to the rainforest.

The environmental threats from Camisea have in Peru been shadowed by crude oil spills that have frequently occurred in the northern Amazon rainforest, particularly in the past two decades, as the assets have aged. Pluspetrol Norte, as its name indicates, is a company related to the Camisea operator but that worked with liquid crude oil and in the north of the country. 

Crude oil spills have often polluted rainforest rivers. One of the most heavily impacted areas in Peru is the Corrientes basin, home of the Achuar tribe. In 1996 Pluspetrol Norte started to operate in the basins of the Pastaza, Corrientes and Tigre rivers, and in 2000 it expanded its area of operations.  Corrients in Peru, and Lago Agrio in Ecuador, are arguably the two most crude-oil polluted areas in the entire Amazon.

Amazon Native leaders have criticized government authorities for not doing work to prevent nor effectively clean up frequent spills. Sometimes residents get small payments from oil operations as compensation for efforts to clean the pollution. This happened in the Peruvian capital in January 2022 when residents there endured for once one of the oil spills that frequently occur in the Amazon.

A tanker unloading oil for Peru´s main refinery in the country´s main port  on Jan. 2022 caused a spill incident that captured the attention of Lima´s 10 million residents. The current took the oil north, affecting for the most part only large groups of low-income and little organized artisanal (low technology, low investment) fishermen and sparing the capital´s fashionable coastal districts.  

The Argentine company started operations to run old Peruvian fields producing the Loreto grade in 1996 mainly for export to Chile´s ENAP through the Petroperu pipeline to the northern coast for later ocean shipping. 

Protests in Peru to oppose the Camisea gas export sales were frequent in the Peruvian eastern rainforest region particularly during the first years of exports and in some cases turned deadly or required costly security forces deployment. Occupations of the Camisea concession area by unknown attackers and armed groups, and later military operations to restore security, occurred in the first years. 

In 2014 Shell bought Peru LNG assets, and rights, from Spain-based Repsol. That represented a 20% stake in the plant and rights to market the output. Shell overcame some mechanical problems at Peru LNG in 2021 and shipments have continued in time to benefit from strong LNG pricing this year.

Peru´s new president

Peruvian President Pedro Castillo, 52, was elected in 2021 for a five-year term starting on July 28 of that year with a campaign where he promised to overcome corruption and find ways to use resources to help all Peruvians, not just elites.  The Peruvian opposition delayed for months the recognition of his victory and have sought to remove him from office through multiple means, including at least two attempts through a Congress vote but failed to secure enough support.

During his first year, the president, his family, ministers and friends have been objects of investigations by the country´s state attorney, in many cases with state attorney and police inspections of their property and confiscation of digital data, and required to testify over different things nearly weekly. Many of his minister choices were repeatedly called for questioning in Congress and often removed.

On Feb. 12, 2022 El Comercio newspaper reported that Peruvian antigraft state attorney officials had entered the Secretary of the Palace of Government, headquarters of the Executive, and searched even the trash cans and removed data that was stored in the computer terminals there as part of one of many investigations. Such treatment of a new president in function in Peru is unprecedented and Castillo´s defense and some argue may be even illegal in the Andean country.

Anibal Torres, 79, Peru´s Cabinet Chief, said during a mid-July speech in Celendin, Cajamarca as part of a decentralized ministerial meeting (Castillo has made a point to hold minister meetings in diverse towns away from the capital) that the accusations against Castillo are part of a plan by politicians in Peru from the groups that have been in power in the past, and that he said respond to private interests, to oust Castillo and take over power by means of false accusations because they can no longer win the vote through clean elections, as he said it became evident in 2021.

Torres asked the Peruvian opposition to instead work and use their influences to solve issues of corruption, and pointed to the monopolies or oligopolies such as those of public notaries in Peruvian Andean cities like Celendin, a town of 30,000 with only one authorized public notary.

"What freshness...!" Torres said at the time referring to the Celendin market for public notary services. Public notaries in Peru must be lawyers, authorized to be notaries, and charge very high rates that are variable depending on the services. They are necessary for just about every legal transaction like sales or contracts. Often those authorized work limited hours or can take days to certify signatures.  Torres blames monopolies and oligopolies, that he said make the country´s markets and economy structurally inefficient, for the economic support of the efforts to remove Castillo. Many towns often endure such limitations, as the case of the provincial Andean city of Celendin.

Castillo, who worked as a rural elementary school teacher in his hometown Chota, Cajamarca, about 600 miles north of Lima, often repeated during his first year that he is not a thief nor "communist" as he was portrayed by Peruvian mainstream media and members of political organizations that have occupied the legislature for decades.

Castillo, who was a leader of teacher unions when he started in Peruvian politics in recent years, often repeated in his campaign and first months that not just Peruvian children, but teachers, suffer malnutrition and those needs must be addressed. Besides spending part of his first months in office assuring worried Peruvians he was not going to expropriate their homes or cars, he also had to fend from a campaign of accusations of fraud from abroad by one of the most prominent Peruvians.

Electoral fraud accusations

Peruvian born writer and the 2010 Literature Nobel Prize winner Mario Vargas Llosa, also a citizen of Spain who has received a Kingdom of Spain´s condecoration for "extraordinary contribution," led efforts along with Peruvian politicians to organize conferences in 2021 in Spain and other countries to warn about alleged dangers posed by Castillo to democracy and freedom. From his Madrid residency, Vargas Llosa had supported Castillo´s elections opponent, Keiko Fujimori, daughter of Alberto Fujimori, still jailed in Peru but in special conditions.

Peru´s La Republica newspaper reported on May 14, 2022 that in a conference in Montevideo, Uruguay, Vargas Llosa changed his position for the first time regarding supporting claims the political group behind Castillo, Peru Libre, had won the vote through fraud. Vargas Llosa said for the first time the Peru 2021 elections were "clean" but Peruvians had "not elected well," the daily noted. This was a dramatic change from his previous position as expressed in an editorial in leading Spain-based newspaper El Pais in July 2021 where he had said that the Castillo victory in Peru was apparently being approved by Peruvian electoral authorities "despite the fraud." 

La Republica also pointed in that report that even months after the elections Vargas Llosa had also said in a conference in Mexico that "fraudulent" elections in Peru had allegedly turned the country into a member of the group "that defend 21st century socialism," wording he had used in three other international conferences around that time.  This occurred even as the Organization of American States had observers that witnessed the elections and validated the results.

Vargas Llosa won the first round vote for the presidential elections in 1990 when he was 54 but lost the runoff, with Alberto Fujimori getting 62% of the votes and Vargas Llosa´s coalition, which included the Accion Popular group, only 38%. Vargas Llosa´s Frente Democratico coalition was a union of the Accion Popular and the Partido Popular Cristiano, with the writer´s new group Movimiento Libertad. Luis Bedoya Reyes, leader of PPC, had been minister of Justice in 1963 during the first government of Accion Popular´s founder Fernando Belaunde Terry, before running, with the backing of Belaunde, for mayor of LIma. Belaunde´s term abruptly ended on Oct. 3, 1968. Bedoya remained as mayor until 1969. When Bedoya and Belaunde run against each other in the 1980 elections, Belaunde won.

Vargas Llosa´s voters were very concentrated in the middle class areas of the Peruvian capital. Lima is home to a third of the country´s 30-million population.

Vargas Llosa has used that political capital in every election since that time. In 2001 Vargas Llosa returned to political campaign meetings in Peru but to support Toledo´s presidential bid, with his son Alvaro, a journalist, being part of Toledo´s closest advisers in the campaign. Mario Vargas Llosa actively participated giving speeches in podiums next to Toledo.

Later, Vargas Llosa told CNN in an April 2011 interview that he backed Toledo again for the Peruvian presidential elections taking place in that year. Toledo didn´t run in 2006 as the Peruvian laws don´t allow immediate reelection but when he participated in 2011, with Vargas Llosa´s explicit backing, he lost to Ollanta Humala (2011-2016).

Humala, who had presented himself as a nationalist candidate from the left and was seen by the middle class of Lima as very threatening, won the runoff vote against Keiko Fujimori largely thanks to Vargas Llosa´s backing. On April 21, 2011 Humala thanked Vargas Llosa for his support that he considered crucial to win the close runoff vote. Vargas Llosa helped dissipate fear to Humala.

Then on March 1, 2016 Kuczynski thanked Vargas Llosa for his political backing ahead of the presidential vote.

In May 2021 Vargas Llosa didn´t take part in political campaign meetings to support Keiko as he had done with Toledo in 2001 but his son Alvaro did participate in Keiko´s political appearances. Mario Vargas Llosa asked Keiko Fujimori to "save" the Peruvian democracy from Castillo, according to information from Spain´s El Pais newspaper on May 24, 2021. 

Keiko Fujimori, 47, narrowly lost presidential elections in 2011, 2016 and 2021 but her political groups have had very strong representation in Congress and other institutions. In 2021-2022 Keiko´s group played a key role in the opposition´s failed efforts to remove Castillo during his first year by means of corruption accusations, even as she faced at the time up to 30 years in jail over charges including potential links to the Odebrecht group cases. The judiciary in June 2022 allowed her to continue her legal defense while free. She had been in preventive prison but got out in 2020 just in time for the electoral campaigns and authorities allowed her participation. Legislators of her group, and of Accion Popular, have repeatedly asked Castillo to resign or voted to remove him from office.

Accion Popular was the party of the President of Congress in July 2021-2022 Maricarmen Alva, and of Monteagudo Valdez, who put his signature on the Sep. 2004 controversial contract for Camisea´s exports. Monteagudo Valdez identified that membership in documents presented with Peruvian authorities in 2022. That Accion Popular party also had a strong presence in Toledo´s government (2001-2006). Toledo´s first vice president was Raul Diez Canseco Terry, a prominent member of the group and with the same family name on mother side, of the founder of Accion Popular, former Peruvian President Alberto Belaude Terry (1963-1968, 1980-1985). 

Belaude was removed from office by Velasco in the military coup of Oct. 3,1968 according to reports sparked by alleged lack of transparency in accords between Belaunde´s government and the International Petroleum Company, a subsidiary of New Jersey-based Standard Oil active between 1914 and 1969. Before the Oct. 3, 1968 coup, when Velasco removed Fernando Belaunde from office, one of the advisers of Belaunde, who during his term became manager of the Peruvian Central Bank of Reserve, was Kuczynski. More than a decade later Kuczynski was also minister of Energy and Mines during Belaunde´s second term.

Camisea gridlocked

Given the current political context, any change possibility on Camisea appears gridlocked with the president occupied in multiple legal processes his lawyers have repeatedly said are just meant to get him to resign as he may get tired to see his wife, 25-year old sister in law (and sibling to his own children) criminalized in local media that daily shows the president´s family in their crime reports. Comedy shows mock the president, his wife and family for their peasant and Native American origins, or Spanish spoken with an Andean accent. 

Castillo arrived to the presidency as a candidate that had participated in the April 2021 elections at the invitation of a party, Peru Libre, to lead their list of legislators to Congress but didn´t have strong ties to the group and is no longer officially a member of the party led by Vladimir Cerron. Members of the group of Cerron, a politician from central Peru who graduated in 1997 as a medical doctor in Cuba, have since found some coincidences with Fujimori´s group in key votes such as the Constitutional Tribunal election of Monteagudo Valdez. 

Only a couple of months before the 2021 vote Castillo wasn´t even in the list of five favorites of most pollsters and his victory was a surprise. He has also surprisingly proved equally resilient in his first year. The president has said he looks forward to finishing his mandate in 2026.  

In the June 2021 runoff vote against Keiko Fujimori Castillo´s vote was mostly in rural central and southern Peru while Fujimori had a strong showing in the capital. Castillo makes frequent trips to the interior of the country and holds public sessions with ministers in different cities in part to keep connection to his voters and also to allow regional authorities opportunities to talk to all ministers.

On Oct. 6, 2021 Castillo, who started his mandate on July 28, 2021, asked for the resignation of his first choice for Cabinet Chief Guido Bellido after Bellido had declared publicly he had sought contract changes with the Camisea consortium for more favorable terms for Peruvians, sparking an outcry in the country´s media and much alarm with accusations by media personalities of creating instability and upsetting equity and currency markets.  

Bellido resigned and his replacements have not insisted on negotiations nor taken any actions related to Camisea, even to just start to bring more transparency to contracts and educate citizens about pricing of gas and its derived products, as other gas-rich countries with policies that seek to be more accountable to citizens, like Trinidad and Tobago, have done.

Peruvian media, and myriad experts, mainly former government officials, have described any pretension of changes related to Camisea as a prelude to interventions of all property that would make Peruvians flee their nation in hordes. Venezuela is often cited as the example of what could happen to Peru if the contract is changed or Peru upsets oil and gas businessmen backed by more powerful countries. 

Smuggled LPG

The particular market dynamics that make it possible for anyone anywhere near the Peruvian-Bolivian border with a little initiative and $3 to turn a quick profit, or even build up an operation like those described by El Deber newspaper on its June 13 report on Bolivian LPG smuggling to Peru, had brewed for a long time and were well known by current importers, according to a news report from the middle of the past decade.

According to a 2015 report from RPP radio in Peru, LPG production in Peru in that year was about 57,000 bpd of LPG. Of that, “50,000 bpd from Camisea and 5,000 bpd” came from the country existing refineries with national demand at 47,000 bpd and expanding about 11% annually.

The projections were for LPG imports to start to be necessary in 2016, without capacity additions. The study was commissioned by Pluspetrol, the Camisea operator, RPP said.

Peruvian highways and roads are some of the world´s deadliest and filled with trucks transporting fuels to towns, mines, and also the bigger cities. Lacking for the most part infrastructure network of refined product pipelines, Peru relies on such road transport for domestic use not just for the smuggled, illegal cargo but also for most fuels distributed from refineries and gas fractioning. There is also some refined fuel distribution by rail but limited to some regions.

Peruvians have for many years lacked capacity to effectively control smuggling of multiple goods from Bolivia but LPG has perhaps become the most popular smuggled item from Bolivia since the Camisea stocks started to be insufficient following intensive propane butane exports. Along with LPG, the consortium also exported the rich natural gasoline that comes from natural gas liquids (NGLs), in the first years, as long as it lasted.

Limited expansion

According to a news report published in March 2021 by Peruvian state news agency Andina, Argentina-based Pluspetrol received authorization to import and market LPG in Peru through privately owned Solgas installations in the main Peruvian port of Callao, located close to Repsol´s La Pampilla refinery.

Chile´s COPEC paid $263 million to Spain´s Repsol in 2016 for Solgas, which had 26% of the Peruvian LPG market at the time. A controlling stake of Solgas, formerly the Peruvian national LPG company, was sold by Fujimori´s government to Repsol in December 1996.

Soon after its Solgas purchase, Repsol, the Spain-based company, also became owner of Peru´s biggest refinery of La Pampilla, located in the country´s capital´s greater metropolitan area and right next to one of South America´s busiest airport hubs.

Since Repsol´s acquisition about two decades ago of La Pampilla, the formerly state owned, and Peru´s biggest crude refinery, has increased capacity from 102,000 bpd to 117,000 bpd, or about 15%.

Such limited expansion in a fast growing economy assured the need for imports. In that time, the country´s GDP expanded from $56 billion in 1996 to an estimated $238 billion by the end of 2022 while the population in the capital grew from about seven million to over 10 million, leading to a surge in fuel demand.

Other differences and similarities between Bolivia and Peru

Besides their capacities to supply vital oil and gas products to their populations, one other important difference between Bolivian and Peruvian energy institutions and authorities has been their access to financing in international bond markets.

While Bolivian chances to borrow were hit with the 2006 hydrocarbons nationalization, Peruvian state oil Petroperu enjoyed ratings from top agencies reflecting the condition of being a relatively safe investment even as Petroperu borrowed about $5 billion for a controversial project mainly to increase refining capacity by only 30,000 bpd.

Such spending in the country´s Talara refinery, 684 miles north of Lima, was unleashed with a majority vote in the 130-member Peruvian Congress when the legislature was under the presidency of Fredy Otarola Penaranda (July 26, 2013-July 22, 2014) to approve what was in that year projected to cost just $3.5 billion, but that later had to be adjusted upwards. Otarola is no longer in Congress but still a member of the so-called Nationalist Party of former President Ollanta Humala (2011-2016). As of 2022, Otarola is a public notary in the Peruvian Andean city of Huaraz.

Most Peruvian borrowing for Talara occurred during 2017-2020 with the work to prepare the transactions starting nearly a decade before that, based on an initial project estimate that was $1.3 billion. 

In contrast, Mexico´s Pemex in July 2022 completed construction of a new refinery in three years with 340,000 bpd capacity with $10 billion.

One thing Bolivia and Peru have in common is their dependency for all plastic resins on imports. Both countries rely on plastic resin that either comes from North American, Middle East or Asian importers, or more likely from the top regional plastic resin producer and exporter Braskem, majority owned by Brazil´s Novonor, name adopted by Odebrecht since Dec. 2020. State oil Petrobras is the biggest minority partner in Braskem with Odebrecht (now Novonor), a company founded and still majority owned by the Odebrecht family.

Odebrecht changed its name after it had been associated for several years in reports worlwide of high profile corruption cases but mostly across Latin America. According to a U.S. Department of Justice release on Dec. 21, 2016, both Odebrecht and its subsidiary Braskem agreed to pay at least $3.5 billion to solve charges in the U.S. , Switzerland and Brazil "arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world." 

Both Bolivia, a nation of 12 million or roughly a third of Peru´s population, and its neighbor have significant segments of their nations living in conditions of extreme poverty, according to World Data Lab entry into a blog on June 2019.

The data group estimated 10% of the combined populations in Bolivia and Peru lived with under about $3 per day. This compared with under 3% living with about $3 per day in countries like Argentina, home country of Pluspetrol Resources when it was awarded Camisea fields (Block 88) in a consortium with Hunt Oil from Dallas and SK from South Korea. The Camisea fields are in Blocks 88 and 56, with 56 for export.

The Techint group that supplied the pipes and built the gas pipeline, or Tenaris, is also from Argentina, a country of 45 million. Spain only had about 1% of its 47 million population living with about $3 per day in the report.

Another similarity is that both countries, Bolivia and Peru, lost nitrate-rich land, and hefty fertilizer export revenue for many decades, to Chile during the four-year Saltpeter War that started in 1879.

Spain ruled the two lands as one single political region during the colonial period through the Viceroyalty of Peru from 1542 to 1776, the year when part of that territory (which included today´s Paraguay and Argentina) was split to create the Viceroyalty of La Plata. After the independence wars Bolivia later received the name to honor Simon Bolivar, a Venezuela-born military leader who led South America´s central and northern regions independence fights against Spanish colonial rule.

There were efforts early in the history of the two countries to regain synergies that may have been present since ancient times and most of the colonial period.

At one time there was a Bolivian-Peruvian Confederation (1836-1839), led by Marshal Andres de Santa Cruz.  Chilean soldiers led by Chilean general Manuel Bulnes, later President of Chile (1841-1846, 1846-1851) and with some Peruvian allies, mainly former Peruvian President Agustin Gamarra (1829-1833, 1839-1841), penetrated deep into the Peruvian northern Andes reaching the province of Yungay where they defeated the Bolivian-Peruvian army in 1839, politically separating Bolivia and Peru again. 

Gamarra, born in Cuzco in 1785 when it was still part of the Viceroyalty of Peru, remained as president of the Republic of Peru until 1841, when he tried to enter Bolivia with an invading army taking advantage of political disruption. However, different political groups joined forces to defeat the invading Peruvian army and killed Gamarra in what is known as the battle of Ingavi, conmemorated in Bolivia´s national anthem. 

By Renzo Pipoli