Sunday, June 10, 2007

Bolivia´s growth industry: contraband fuel

Bolivia is suffering from shortages of all kinds of fuel because its low, government-subsidized prices encourage transporting it across the border where prices are higher.
In October I was on the border near Brazil and saw lots of little roadside stands where families had set up shop to sell contraband gasoline. All of the official local gas stations had exhausted their supply, so the driver we had hired to take us to Brazil filled up a fuel can at one of these improvised stations (while one of the family members smoked a cigarette).
If they had been wearing suits and ties, these local folks would be called arbitrageurs. They go to service stations, buy fuel at the government-subsidized price of $1.75 a gallon, collect it in all kinds of improvised containers and sell it for $4 a gallon to Brazilians who come across the border. The Bolivians make a nice profit margin and the Brazilians get a big discount from the $6.50 they pay on their side. So there are spot shortages of gasoline in Bolivia.

This photo of a gasoline stand at the Brazilian border is from the daily El Deber. Who´s worried about safety?

On the other side of Bolivia, the border with Peru supports a thriving industry of contraband liquefied gas used in cooking and as fuel in vehicles. In Bolivia a 22-pound canister of this fuel sells for $2.82, a government-subsidized low price. The market price in Peru is nearly four times higher, or $10.
So enterprising Peruvians and Bolivians buy low on one side of the border and sell high on the other. That´s why Bolivians can´t always get this essential household fuel.
The smuggling is so institutionalized that the customs officials from both countries have a gentlemen´s agreement not to enforce the laws on Wednesdays and Saturdays. The canisters pass through unchecked. The authorities also benefit from the contraband.

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