Is Bolivia’s gas nationalization backfiring?

Dan Grech May 29, 2006


SCOTT JAGOW: Bolivia is nationalizing its gas industry. But iron ore is a little more up for grabs. The country just invited mining companies to bid on a huge deposit. That’s a hot business opportunity, considering there’s so much demand for iron ore in places like China. But the mining industry is pretty skittish.From the America’s Desk at WLRN, Dan Grech reports.

DAN GRECH: As China grows, so does its appetite for steel. That’s sent the price of iron ore through the roof. So when Bolivia put its massive El MutAºn iron ore deposit up for bid, you’d expect a huge response. But only one foreign company’s still at the table: the Jindal group from India.Economist Jerry Haar says Bolivia nationalized its natural gas plants earlier this month.That’s scared off foreign companies in other industries, such as mining.

JERRY HAAR: The region ought to be bending over backward to maintain local and foreign direct investment and to attract new investment. But what we’re seeing in some countries is just the opposite, creating an even more inhospitable environment.

Latin America made painful economic reforms to attract foreign investment in the ’90s. Now, just as those reforms are paying off, several countries are undoing them. Two weeks ago, Ecuador expelled US oil giant Occidental. It had been the country’s biggest investor.

Steve Johnson is with the Heritage Foundation. He says Bolivia and Ecuador are falling into a familiar pattern.

STEVE JOHNSON: When the prices go up, populism surges within these countries and there are movements to expropriate foreign assets to try and get more money out of them.

Tomorrow, when Bolivia announces the winner of its iron ore auction, it’s expected to reject the Indian bid. That way it can exploit the deposits itself, using a state-owned company it created with Venezuela.

I’m Dan Grech for Marketplace.

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