Video Transcript
Bolivian President Evo Morales suggested yesterday that Latin American countries should consider nationalizing all natural resources and that public utilities should never be in private hands. The statements are a continuation of rising nationalization rhetoric in Bolivia and in the region. Though it is unlikely Morales will nationalize all resources in Bolivia due to the country's unavoidable need for foreign investment, targeted nationalizations can be expected to continue, particularly of utilities companies.
Despite being rich in mineral and agricultural resources, Bolivia is, per capita, the poorest country in South America. This is in large part a result of the 1879-1883 War of the Pacific, which left Bolivia landlocked when Chile seized the Atacama Desert. Bolivia also faces serious barriers to internal unity as a result of the demographic and geographic differences between the largely indigenous-populated and mineral-rich Andean highlands and the more European and agriculturally-rich lowlands.
Bolivia’s one cash cow is its natural resource deposits, and in particular its metal and hydrocarbon reserves. Bolivia has rich deposits of many internationally traded minerals, including natural gas, oil, silver, zinc and antimony. Bolivia’s 2007 constitutional revision formed the legal basis for the country's use of nationalization to secure greater control and higher revenues from the production and sale of these resources.
Nevertheless, the country relies heavily on foreign investment for the capital and technological expertise required for exploration and development. As a result, Bolivia has had to be flexible in how it approaches foreign companies and in many cases nationalizations are in name only. Just recently, Bolivia nationalized Pan American’s stake in the Caipipendi natural gas project, but then later announced that the nationalization would not be enforced. In this case, nationalization was used a negotiating tool to encourage Pan American to invest more heavily in Bolivia.
Another sector that can be expected to continue feeling government pressure is the public utilities sector. Whereas fights between the government and natural resource extractors can be seen as a way to increase public revenue, utilities companies find themselves at odds with the government for largely political reasons. Utilities like water and electricity in Bolivia are considered by many to be a human right that should not be a source of profit for private firms. Case in point, Spanish electricity firm Red Electrica was nationalized in May, and other electricity firms like Spain's Iberdrola may face similar challenges. Nationalizations of these companies are a way for the government to gain greater control over an important public good in order to ensure that key constituencies are being served.
In Morales' case, he derives much of his support from the poorest areas of Bolivia, where the ability of communities to pay for services is limited. Morales’ comments this week point to the government’s intention to continue solidifying control over the Bolivian economy. With such a heavy reliance on foreign investment in the resource sectors, a blanket nationalization is unlikely. The continued piecemeal nationalization of utility companies in Bolivia can, however, be expected to continue.
