Bolivia Nationalizes the Oil and Gas Sector

Case Details Case Introduction 1 Case Introduction 2 Case Excerpts

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Benefits of Nationalization

The first and foremost benefit to Bolivia from the nationalization of the oil and gas sector was an expected increase in the share of profits of the foreign companies, which could be diverted to state welfare programs......

Nationalization sought to channel the wealth of Bolivia's natural resources for the benefit of the local populace instead of filling the coffers of the foreign companies. After the nationalization, the tax on profit on production was increased from 50% to 82%. Analysts expected that this would result in growth of income to the government of between US$320 million and US$780 million.

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The Criticism

Some analysts said that Morales had done more harm than good to Bolivia by nationalizing the oil and gas sector. The nationalization had imposed such severe business conditions on the foreign companies that it would make oil and gas exploration and production unprofitable for most of them. Also, foreign companies would have brought in the latest techniques and technologies in exploration and production and that would have helped in easy location and quality production of oil and gas....

The Two Summits

On May 04, 2006, a summit was hurriedly organized in Argentina between Lula da Silva, Nestor Kirchner (Argentina's President,), Chavez, and Morales to discuss the nationalization in Bolivia. It was essentially organized to allay the fears of Brazil and Argentina, the two largest customers of the Bolivian gas, and to prevent any possible regional crisis..........

The Road Ahead

According to Alvaro Garcia Linera (Linera), Vice-President of Bolivia and one of the important ideologues of Morales, a road map called 'Andean-Amazonian Capitalism' was required to build a strong Bolivian state that would regulate the growth of the industrial economy and transfer the surpluses to the communities........


Exhibit I (a): Map of Bolivia
Exhibit I (b): Bolivia - A Brief Profile
Exhibit II: Bolivia GDP Growth by Sectors Till 2003
Exhibit III: Oil Production and Consumption in Bolivia: 1980 - 2005*
Exhibit IV: History of Oil in Bolivia
Exhibit V: History of Natural Gas in Bolivia
Exhibit VI: Bolivia's Natural Gas Reserves: 1997-2005
Exhibit VII: Gas Production and Consumption in Bolivia: 1980 - 2003
Exhibit VIII: Results of the Referendum
Exhibit IX: Complete Text of the Presidential Decree (28701) on Nationalization of Oil and Gas Sector