Tuesday, May 02, 2006
Bolivia's Leftward Lurch
In a move sure to endear Bolivia's new President Evo Morales to the leftist socialist political movement slowly spreading across the South American continent, Bolivia announced today the nationalization of all Bolivian natural gas reserves.
Fresh off his visit with Fidel Castro and Venezuela's paranoid Hugo Chavez, the newly elected Morales decreed:
The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources. The looting by the foreign companies has endedAlgore was reported to have been spotted singing Morales' praises from a rooftop somewhere in Tennessee.
Bolivian soldiers were dispatched to gas fields and refineries to "ensure the steady flow and refining of hydrocarbons."
Under the new government decree, the corporations which have gone to great expense to develop the oil and gas fields will see the give the government majority stake in 67 oil and gas fields and raise the tax and royalty rate from 50 percent to 82 percent in Bolivia's two biggest fields.
Its important for you to understand Bolivia has done little if anything to exploit this natural resource. Most of the development in these oil and gas fields has been accomplished by foreign investment - a lot of it. Petrobras, Brazil's oil company, alone has invested some $1.6 billion dollars in Bolivia since the 1990's. Bolivia has little, if any, home grown expertise in the area of oil and gas exploration and reclamation.
Up until yesterday they were prepared to invest another $5 billion. As of today, that investment in Bolivia's economy is on hold. In addition Spain has stated through Deputy Prime Minister Maria Teresa Fernandez de la Vega that the nationalization "is definitely negative for Bolivia" and would likely deter foreign investment.
Morales has given into a temptation faced by many socialist politicians. They believe all wrongs can be righted if they take control of the evil industries and "return" to the people the resources which are being exploited by evil corporations. Never mind the fact said natural resources would still be sitting underground but for the investment of those same evil corporations.
These same politicians who ride into town on the white horses of progressive politics are the same guys who are shocked when the evil capitalistic corporations take one look at the contracts imposed upon them and subsequently tell the white horsed politicians to pound sand.
Case and point - also from Latin America, this time from Brazil. A major US based auto maker had gone to great lengths to begin building a plant in southern Brazil. The foundation had been poured and work had started on the actual structure. The left leaning state and local governments came up with the idea to "renegotiate" the tax incentives and other details of the deal - thinking that the auto maker would have no choice but to build the plant and submit to their demands.
The government boneheads were wrong. The auto maker packed his bags and left - ultimately building the plant in another state.
That's how capitalism works. For some strange reason, socialists, communists, and other like minded people can never seem to understand this simple fact of life.
Here's another fact they don't understand: Nationalized industries most often fail. They have no incentive to turn a profit.
Morales and his cronies have given the foreign oil companies 6 months to acquiesce to his demands or be kicked out of the country. If the corporations know what's best for them, they'll call his bluff.
Here endeth the lesson.