Trade knowledge / Bolivia and the Impact of Nationalization
Date: 2013-08-05
Bolivia and the Impact of Nationalization
by Machlin Fink
In a move that always stirs controversy and can enflame international relations President Evo Morales, of Bolivia, has moved to nationalize the energy sector by overtaking the largely Spanish owned company, Electropaz. President Morales has accused the Iberdrola, the company based in Spain that owns the majority of Electropaz, of charging artificially high prices to residents in rural areas of the country. Morales argues that under the constitution this move is permissible by acting in the public’s interest.
Spain is dismayed by this move, of course, and believes this move has deeper implications then just the government takeover of Electropaz. The Spanish believe this sets a precedent that will deter future investment in Bolivian companies from specifically the Spanish but also the rest of the world. John Clancy, the European Trade Commission’s spokesperson remarked, “Actions like this one necessarily send a negative signal to international investors over the business and investment climate in Bolivia.” These concerns arise whenever a government decides to take control of a company or an industry and the international community usually meets it with universal distain for the impact it has on investor confidence.
Where does this leave Bolivia? The negativity surrounding these types of circumstances usually falls most heavily on the country who nationalizes a company or industry. This makes global investors weary about a country and its leadership and as a consequence slows the amount of foreign investment in the country. For a country like Bolivia who could really use the investment this can have major side effects. While the move may be seen as positive among the working class and politically popular the ramifications could hurt Bolivia’s attractiveness as an investment long into the future. That may prove to cost a lot more then Bolivia expects.
( Vivian )07 Jan,2013
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