Bolivian nationalization bid may affect foreign investment
LIMA, Jul 09, 2012 (Xinhua via COMTEX) -- The Bolivian government has picked up its pace in nationalizing private corporations this year, a bid that analysts said may have a limited negative impact on the country's worsening investment environment as feared by multinational corporations.
The South American country has witnessed two waves of major nationalization in the past two months, as the Bolivian government, headed by President Evo Morales, has taken up the ownership of the Colquiri Mines and an electric company.
The mining company had belonged to the Swiss Glencore International AG while the electric company was owned by Red Electrica, the Spanish state grid.
The two acquisitions were seen as part of the Morales government's long-term effort to secure strategic resources and sectors, but the move has so far drawn only skepticism from private owners.
Daniel Sanchez, president of the Bolivian Confederation of Private Entrepreneurs (CEPB), said the nationalization process was a "bad omen" for investors, as it will "breed doubts over the investment environment and distrust of the government."
Gary Rodriguez, general manager of the Bolivian Institute of Exterior Commerce (IBCE), said repeated merging would only scare off foreign investment, as Bolivia had never ranked among the most attractive destinations for investment.
Morales, who came to power in 2006, steered the country to the left with his anti-liberalism and anti-colonialism ideology. He maintained that the state must control companies in the natural resource sector to ensure that the country's resources benefited the people.
The profit of these strategic companies must be used to improve living standards of the people instead of falling into private purses, he said.
In the six years with Morales in power, the nationalization initiatives have claimed more than 30 multinational companies, covering such sectors as petroleum and natural gas, metal mining, manufacturing, electricity and telecommunications.
Bolivian analyst believed the increased revenue generated by the nationalization bid played an important role in enhancing social welfare and the medical, insurance and education network in the country.
According to statistics from the Finance Department, 60.6 percent of Bolivians lived in poverty in 2005, while the number has shrunk to 48.5 percent last year. The percentage of population that lived in extreme poverty also dropped from 38.2 percent to 24.3 percent.
While trying to win the hearts of the general public, Morales also worked hard to soothe jittering investors, who both craved a slice of the country's rich mines and feared that they would get in the middle of the government and its leftist goals.
Bolivia maintains a policy that welcomes foreign investments, Morales reiterated, stressing that though the government needs to control core corporations and resources in the economy, it will not nationalize all natural resources in the country.
A new policy also states that Bolivian state-owned companies must be the major share-holder of any new investment projects and that foreign companies may become no more than cooperation partners, lowering the risk of any new projects being claimed by the nationalization initiative.
Moreover, with its abundant oil, gas and mineral resources and its primitive infrastructure, Bolivia, as the poorest country in the region, still proves to be a promising haven for foreign capital, which encourages investors to seek fortune here amid a sluggish global economy.