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«Ben Armstrong IPE Term Paper A Landlocked Bolivia: Disputes between Bolivia, Peru and Chile. Vast expanses of desert, rainforest, mountain, and ...»

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Armstrong 1

Ben Armstrong

IPE Term Paper

A Landlocked Bolivia: Disputes between Bolivia, Peru and Chile.

Vast expanses of desert, rainforest, mountain, and coastal biomes sprawl across Peru,

Bolivia and Chile. These diverse countries hold not only striking beauty throughout these

regions, but also vast natural resources. In the Atacama Desert region, the discovery of such

important natural resources have left residual problems lingering in the economic and political

relations between these South American nations, and still cause tensions today. This paper explores historic disputes over resources on the borders where all these nations meet, and how they affect current politics and economic relationships, specifically related to Bolivia’s desire to regain access to the sea. Then, current solutions and development of the problem are analyzed, and a suggested long-term solution is presented that could best address the border disputes.

Territorial controversies in the Atacama Desert region where Peru, Chile and Bolivia meet are not a recent development. Rather, many current disputes arise from arguably unresolved border issues from past wars treaties. In the 1940s, it was discovered that “valuable quantities of nitrate of soda could be extracted from guano and nitrates (saltpeter), both of which were abundant in Peru”, for use as a fertilizer and for making gunpowder (Foster, 190). These dual purposes forced demand for nitrates in developed countries, especially those in Europe, to greatly increase. Through this new market, the Atacama Desert area in southern Peru and parts of Bolivia and Chile transformed from an uninhabited desert to a desirable, profitable region.

Chileans attempted to take advantage of these profits by mining in the disputed region between Chile and Bolivia, so Bolivia “attempted to raise taxes on exports by Chilean intermediaries of nitrates”, breaking a past treaty (Foster, 190). This led Chile to declare war on both Bolivia and Peru, who were secret allies at the time. Through the victories of their superior navy and infantry, Chile was able to “seize Bolivia’s Atacama province and Peru’s Tarapacá”, including “all of the nitrate zones in Bolivia and Peru and most of Peru’s coastal guano deposits” (Foster, 191). This loss of resources and land caused Peru to lose one of their main exports and fall into a recession, as well as causing Bolivia to become landlocked. The tensions that arose from the war still exist between the three nations, causing social, political and economic strains on relations and current events in the region.

Armstrong 2 More recently, residual disputes from the War of the Pacific have manifested themselves

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boundary between the maritime zones of the two States in the Pacific Ocean, beginning at a point on the coast called Concordia” is where the maritime boundary actually lies as based on a treaty between the two nations from 1929 (ICJ, 1). Peru, still bitter about their past war and territory loss with Chile, still refuses to act diplomatically with regards to international politics. The grudge that they hold as a result of the War of the Pacific hinders them from working constructively with their neighbors. The two countries have now turned to the ICJ to mediate the dispute where Peru “has constantly met a refusal from Chile to enter into negotiations” (ICJ, 1).

Figure 1 shows the current maritime dispute; the blue line is the current border, and the red line represents the line that Peru claims. This dispute between Chile and Peru has not only proved problematic for these two nations and their maritime claims, but also for the economies and relations between Chile, Peru and Bolivia.

Morales (the Bolivian President) worried that “Peru’s maritime claim with Chile could put in jeopardy his country´s chances of ever getting an outlet to the Pacific Ocean” (Tessieri, 1).

The strains between Morales and Alan Garcia (the Peruvian President) lead to name calling where Morales commented on Garcia’s weight, causing Garcia to return by calling Morales “anti-Peruvian” (Tessieri, 1). Bolivia worried that any headway made between the already strained relations with Chile would be lost if Chile had to revoke ocean claimed to be high seas to Peru. Strained relations with Bolivia and Chile have strengthened nationalist beliefs that Peru should not trade liquid natural gas (LNG) with either nation, and has halted any progress towards Armstrong 3

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Though they have almost an equal amount of oil reserves as Peru, they excel in their reserves of natural gas, almost holding more than double the reserves of both Peru and Chile combined.

Currently, however, Bolivia exports the smallest amount of natural gas and oil of the three nations. Attributed to their restricted trading abilities because of their landlocked status, it seems that a port would boost their oil and natural gas exports, and therefore their economy and overall GDP. As mentioned, though, Bolivia would need to be careful about these exports if they were to receive a large area of land. The possible competition that would arise between Bolivia and Peru, but also to a large extent Chile, could create even worse political situations than the one currently in dispute. Especially if Bolivia did not gain full sovereignty over the land, the legal implications and attempts to restrict and control Bolivian exports could also be a source of dispute in the future.

The inability to trade with the Pacific Basin could prove somewhat advantageous for Bolivia in some respects. In regards to current account balance between the nations, Bolivia seems immune to large fluctuations that Peru and Chile show (see Figure 4 (Index Mundi)).

Chile and Peru’s current account follow a very similar pattern, mostly because of the similarities of their economies and trade partners. Their Peru, Bolivia, and Chile: Current Account Balances growing economies showed large current Current Account Balance

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immune to the Global Financial Crisis than Chile and Peru. Rather than depending on the U.S.

and China as trade partners like many developing nations, Bolivia instead trades with the quickly but steadily growing Brazil. From this data, it seems that all three nations look from a mercantilist perspective. They seem to only desire a positive current account, and are using politics to try to gain independence and control over the other nations. Because previously Peru and Chile have best achieved these goals, Bolivia desires an equal economic opportunity to increase its exports through access to the sea.

The GDP of the nations shows how Peru, Bolivia, and Chile: GDP (PPP) Bolivia could truly benefit from access to the

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Bolivia” (Taylor,1). Bolivia remains quite frustrated about their inability to change the situation, and seem trapped with their inability to get both of their neighbors to support their maritime claims. Bolivia, even with permission from Chile, needs to avoid “repeating the Peruvian veto that sank the last serious Bolivian-Chilean attempt to resolve the issue in the 1970s” (Taylor, 1).

Peru, however, has looked at the possibility for them to use the situation to “negotiate a clear and advantageous definition of Pacific maritime borders” that are disputed with Chile (Taylor, 1).

Peru and Chile have used Bolivia’s desperate position to further their political and economic motives, without actually following through with what they say. Though other nations in Central and South America often support Bolivia’s claims to regain access to the sea, there lies “unease at reopening century-old territorial questions arising from the War of the Pacific that also involve Peru, Brazil, Argentina, and Paraguay” (Taylor,1). The prospect of reopening past geopolitical disputes remaining from the War of the Pacific makes many nations hesitant to fully support Peru and Bolivia. This leaves Bolivia in a precarious position attempting to appease both of its neighbors. It must balance the tug of war of political tensions between Chile and Peru in order to truly persuade them to cede Bolivia land to access and establish itself on the ocean.

Most recently, though, Bolivia has accepted Peru’s offer for a “1.4 square mile patch of sand that La Paz will lease from Lima for 99 years” (Carroll, 1). Despite the tensions between these nations, and particularly the two leaders, both have seemed to overcome their past prejudices and taunts to agree on this solution. This temporary peace, however, also served as a “diplomatic poke at Chile” (Carroll, 1), to further the “multifaceted geostrategic struggle” (Bathing, 1) between all three nations. Though Chile stated that they were handling the situation in a responsible way and considering Bolivia’s plight and possibilities for a solution, Chilean resentment regarding the decision led Peru to suggest that certain Chilean leaders take “tranquilizers for their indignation over Peru’s offer to Bolivia” (Bathing, 1). Peru’s gracious offer makes Chile seem cruel and restrictive to Bolivia’s attempts to reconcile past prejudices, and may even gain Peru political support from other South American countries besides Bolivia.

Yet despite the continued strains in relations with Chile, reconciliation between “Peru's conservative, pro-business leader and Bolivia's outspoken socialist” (Carroll, 1) seem to have greatly improved with the generous act by Peru. Even if the port does not turn out to be everything that Bolivia hoped, it still pressures Chile to take some action on the matter that could Armstrong 8 benefit both Bolivia and Peru in their quest to reclaim at least some zones lost in the War of the Pacific.

Though many news articles portray this act as a huge improvement between the relations of Peru and Bolivia and in regards to Bolivia’s quest for access to the sea, I don’t believe Peru’s generous donation to aid its neighbor will solve the situation in the long term. One hindrance could be the inability for Bolivia to physically establish and build a port. As mentioned before, Bolivia had previously been offered land and had left it stagnant until the offer expired. Now, though, I do believe that Morales (with the excitement and hopes of a navy and port) will capitalize on this opportunity. Still, I don’t believe this to be enough to solve the long-engrained problems facing the actors. The port of Ilo ceded to Bolivia will expire after 90 years and does not provide a feasible, long term solution for Bolivia. At the end of such a term, Peru could decide to terminate the project, which could cause a political altercation of a much larger scale than the current issue. If Bolivia invests in the port and develops it, which it must to make a functional, beneficial port, then Peru and Bolivia will be left with quite a dilemma of ownership over land and capital on the land when the expiration of the treaty arrives.

From the countries’ mercantilist perspectives, if Peru no longer needs Bolivia as an ally to further their objectives with the Chilean government regarding maritime rights, Peru would no longer politically or economically want to host Bolivia on their coast. The issue of competition and restrictions might arise much earlier than the allotted 90 year period if Peru finds itself competing with Bolivia through its exports out of the new port. Bolivia’s potential to export large quantities of natural gas and oil reserves hold huge economic wealth and growth for the country. Yet if they act on this possibility, Peru might find itself competing in the same market.

In this scenario, I believe that Peru would try to greatly restrict the amount of exports Bolivia could channel through the Pacific coast, or even take back the back the land ceded to Bolivia.

For example, both nations contain large reserves of oil, and Peru might want to cap the amount of oil passing through the port to eliminate the added Bolivian competition. For any of these possibilities, the security threats and political and economic conflicts that could arise would cause problems of a much larger magnitude than the issue of Bolivia not having access to the sea. Though at any point Bolivia would have the small port already owned by Chile to fall back on, this would be a costly and politically dangerous situation that could destabilize relations in the whole southwestern region of South America. With such a dramatic shift in trade abilities Armstrong 9 and access, the border disputes could easily expand as South American nations choose which side they supported morally or economically. Nations across the Pacific basin with stakes in the new Bolivian market would not want to lose such an important natural resource partner, and these relationships might cause global disputes over what actions should be taken.

Bolivia already has some access on the Chilean cost to use as a port, and I don’t believe this new treaty will please Bolivia any more than the option they already have. Though initially it may seem like a prosperous option, Bolivia will soon return to the mindset that, for both the goals of mercantilist independence and liberal economic growth, it should have land area that connects mainland Bolivia to the Pacific Ocean. Bolivian persistence on the matter throughout history has shown their staunch demands for through access to the coast that does not leave the nation dependent on the country surrounding their island port. Bolivia is using their current situation as a gateway to the negotiations they hope to instigate. It could not reject Peru’s offer because it needed to protect the vast improvements in relations between Morales and Garcia, but will not settle with such a solution that leaves them dependent on the nation that holds the port as a viable long term solution.

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