Bolivia Nationalizes the Oil and Gas Sector

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Case Details:

Case Code : BENV006
Case Length : 20 Pages
Period : 2001-2006
Pub Date : 2006
Teaching Note : Available
Organization : Microsoft
Industry : Oil & Natural Gas
Countries : Bolivia

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Nationalization Spree Contd...

Many European companies, especially those from Spain, had operations in Bolivia. Spain expressed concern over the announcement and said that the step would not be in the best interests of Bolivia. Brazil too expressed deep concern over the announcement. Brazil's President, Luiz Incio Lula da Silva (Lula da Silva) immediately convened a meeting with the CEO of Petroleo Brasileiro SA (Petrobras) and other senior officials from the mines and energy department to discuss the impact of this announcement on Brazil. The trend of government control over energy resources in South America started in Venuzeula, the fifth largest oil exporter in the world, when Hugo Chavez (Chavez), President of Venezuela, imposed heavy taxes and other conditions on foreign companies operating in this sector.

Antoine Halff, energy analyst at Fimat International Banque SA,⁷ said, "This is a continuation of the trend toward increasingly aggressive resource nationalization that we have seen across many countries in Latin America, starting in Venezuela. The measure is in line with the populist tone of the new regime in Bolivia; however, how it is carried out in practice still seems somewhat unclear."⁸

It was reported that another South American country, Ecuador, was also considering nationalizing the oil and gas sector.

Some analysts saw the nationalization in Bolivia as an attempt to control vital energy resources against the backdrop of the rising oil and gas prices worldwide and to derive political mileage from it.

They felt that this trend of resource nationalization was a disturbing one as it would not only discourage potential investors but could also hamper development of the sector...

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7] Fimat International Banque S.A is one of the largest global brokerage companies in the world. is a wholly owned subsidiary of Société Générale Group. It offers services to a vast majority of financial institutions, large global industry players on listed or OTC derivatives, cash products such as fixed income, tangible commodities, forex, and equities. (Source: http://www.fimat.com/fimat/).

8] Carlos Alberto Quiroga, "Bolivia: Gas Nationalization Just the Start,"www.today.reuters.com, May 01, 2006.