Confiscating hope in South America

Bolivia's energy nationalisation affected not only American investors, but investments by, and contracts with, fellow socialist governments, says Investor's Business Daily (IBD). For democracies like Brazil, it could be a turning point, says IBD.

President Evo Morales "nationalised" Bolivia's natural gas resources – not just by decree, but also by force. The military seized 56 natural gas fields as well as private gas stations owned by Bolivians, with troops triumphantly placing "nationalised" banners across the installations they had "won."

Losers included not just the hated United States, but also the accommodating socialist states of Brazil, Argentina and Spain, which have now forfeited state assets for their trouble. All remain in a state of shock that a fellow socialist could turn on them so fast.

Brazil had delivered $1.6 billion in technology, infrastructure, markets and jobs through its investments.

Spain had just announced $120 million in Bolivian debt relief last January.
After pillaging their assets, Morales vowed to raise their gas prices.

For Brazil, the hikes not only broke contracts, they also were a blow at an emerging country whose lower costs and efficiencies are its international competitive advantage.

Brazil's Sao Paulo region, which is its economic powerhouse, depends on Bolivia for about half the natural gas that lights its city and powers its factories.

Tomorrow, Morales will want something more – like forests, mines or other assets, as he has said, or maybe Chile's land, warns IBD.

Source: Editorial, Confiscating Hope In South America, Investor's Business Daily, May 8, 2006.

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FMF Policy Bulletin/ 16 May 2006