Bolivia’s population. The history of colonial exploitation is still etched in the minds of Bolivia’s poor, especially the indigenous population. Much of the Spanish empire’s wealth was financed by Bolivia’s rich deposits of silver and tin, mined by indigenous people forced to work as slaves. Thousands of indigenous peoples were also forced to work under nearly feudal conditions on large agricultural estates, denied the right to freely chosen work, the right to education and the right to vote. Even today, the vast majority of Bolivians are still extremely poor and struggling to feed their families and they question why they do not seem to benefit from Bolivia’s wealth of natural and mineral resources. Recent protests have centred on opposition to privatization which is perceived as a new form of colonialism and the appropriation of Bolivia’s wealth by foreign investors. 18. Bolivia’s wealth of mineral resources includes silver, tin, zinc, tungsten, antimony, iron and gold, as well as oil and natural gas. Since the discovery of vast reserves in the 1990s, natural gas now dominates the country’s exports (43 per cent of total exports in 2006). Natural gas and oil production have been increasing. Bolivia produces about 355 billion cubic feet of natural gas and has the second largest reserve of natural gas in South America, after Venezuela (with reserves estimated at between 24 and 53 trillion cubic feet).[22] More than 85 per cent of these natural gas reserves are located in the department of Tarija, with a further 10.6 per cent in Santa Cruz and 2.5 per cent in Cochabamba. Bolivia also has substantial oil reserves of at least 440 million barrels (proven reserves as of 2006) and produces about 64,000 barrels per day. Most of the oil is also located in south-western Bolivia, with 80 per cent in the department of Tarija. Rising international prices of natural gas and oil promise rising revenues, but the privatization of oil and gas reserves under the Sanchez de Lozada Government in the mid-1990s led to a decline in revenues accruing to the State. Following privatization, the Brazilian company, Petrobras, and Spanish Repsol-YPF became the dominant producers of both oil and natural gas in Bolivia, but the French company, Total, Exxon of the United States of America, British Petroleum and British Gas, and other consortia are also involved in Bolivia. 19. However, growing public disillusionment with privatization led to protests against plans to export natural gas to the United States and Mexico via a Chilean pipeline and escalated into the “gas war” of September and October 2003. During a month of social protests and blockades, social movements, representing indigenous peoples, peasant farmers and workers, fought street battles against the authorities. These protests were forcibly repressed and at least 59 people were killed in September and October 2003.[23] President Sanchez de Lozada was forced to resign from office and his Vice-President Carlos Mesa assumed the Presidency. Social movements drew up a list of demands called the October Agenda. They demanded the establishment of a Constituent Assembly to draw up a new constitution to re-establish participatory democracy as well as demanding the nationalization of Bolivia’s national resources so that Bolivian wealth could finally benefit the Bolivian people. 20. Mesa acceded to these demands, including revising the constitution and holding a binding referendum on the export of natural gas. The Bolivian people voted overwhelmingly in the referendum for the development of oil and gas resources and for the imposition of a 50 per cent tax on extraction on all multinational companies. In May 2005, Congress passed the 2005 Hydrocarbons Law which introduced a direct tax on hydrocarbons of 32 per cent, adding to the 18 per cent royalty already paid and requiring a total tax contribution of 50 per cent. This led to huge increases in revenue to the Bolivian State, as the new tax was imposed across the industry. However, when more than 80,000 protestors surrounded the presidential palace to demand the full nationalization of the gas industry, Mesa was in turn forced to resign. 21. The elections of December 2005 marked a turning point as Bolivians elected Evo Morales Ayma with an absolute majority of almost 54 per cent, unprecedented in Bolivian elections.[24] He was sworn in on 22 January 2006, the first indigenous President in a nation with a majority indigenous population. Morales promised fundamental change for the large majority of Bolivians, especially indigenous peoples, long excluded from such simple freedoms as the freedom from hunger and poverty. He promised that 500 years of colonialism were now over and that sovereignty would be re-established over resources for the benefit of the Bolivian people. On 1 May 2006 he announced the renationalization of the oil and natural gas industries. Under the terms of this 2006 nationalization decree (Decree 28701), foreign companies are not allowed to own the reserves (ownership is reserved for the State), but will be permitted to operate the fields for the Government. This affected mainly the production of Brazil’s Petrobras in the largest gas fields of San Antonio and Sabalo, Spain’s Repsol which operates the Margarity field, France’s Total in Itau, and Britain’s British Gas which operates in the La Vertiente, Escondido and Los Suris fields. Under new operational agreements signed in November 2006, the resources will formally lie in the hands of the Bolivian State gas company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), but the foreign companies will operate as providers of services to YPFB and will be subject to new tax arrangements. Tax and royalties of 50 per cent of the income will be paid directly to the State, as well as a further tax, taking the total tax bill up to a maximum of 82 per cent, although when this is calculated after deduction of costs and investment, it is estimated that total tax bills will not exceed 60 per cent. All the foreign corporations have agreed to these demands and will continue to operate in Bolivia. 22. Under these new agreements successfully negotiated by the Government of President Evo Morales, there has been a massive increase in State revenues, which reached US$ 1.3 billion in 2006 and may reach US$ 1.5 billion in 2007, an enormous increase on revenues of only US$ 220 million in 2003.[25] This means that State revenues from oil and gas amounted to 9.7 per cent of GDP in 2006, compared to only 2.8 per cent in 2003.[26] The massive injection of revenue into State resources has already allowed the President to reverse a spiralling public deficit, reduce public debt and will allow increased investments in fighting hunger and poverty. Despite strong opposition from the traditional white and mestizo elites of the Oriente, Morales has publicly committed to make the fight against malnutrition, food insecurity, and poverty the key element of his agenda. Morales has announced that new expenditure will give priority to the Zero Malnutrition Programme. The 2007 National Development Plan also reflects commitments to sharply increase public expenditure, up to 14 per cent of GDP for the five-year period 2007-2012, compared to 10.5 per cent in 2006.[27] 23. Development expenditures at the local level will also increase as, under decentralization and the 2005 Hydrocarbons Law, two-thirds of the proceeds of taxes and royalties from oil and gas will be transferred directly to Bolivia’s regional departments (municipalities and prefecturas), which will see revenues rise to US$ 782 million in 2007 (compared to US$ 140 million in 2004).[28] The 2005 Law expressly establishes that resources from the hydrocarbon tax should be directed to health, education, roads and local development for employment generation. However, so far, there has been very little concrete investment at the local level and huge resources remain in bank accounts. There is a risk that under this decentralized revenue distribution, the central Government will not be able to ensure that municipalities prioritize expenditure on the Zero Malnutrition Programme or other