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Theft Or People Power: The Battle Over Bolivia's Nationalization Spree

Article illustrative image Partner logo Mineral extraction in Potosi, Bolivia

LA PAZ - Nationalization is in the air -- and on the ground -- in Bolivia.

On May 1, the country's armed forces were sent to the offices of TDE, a Spanish company that manages three-quarters of Bolivia's electricity network, to "take control of management and administration." On June 20, the Colquiri pewter mine, held by the Swiss Glencore company for the past 12 years, was seized "with immediate effect" to be administered by Comibol, a state-owned company. On August 2, Canadian mining company South American Silver was dispossessed of its indium mine. And last July, Bolivia breached its contract with Jindal, an Indian company that was supposed to run the Mutun iron mine. 

Four expropriations of multinational companies in less than four months. Since May  2006, President Evo Morales has also nationalized 16 companies seen as strategic for hydrocarbons, water, metalworking, electricity and mining - a pewter foundry and an antimony exploitation managed by Glencore had already been nationalized in 2007.

On August 6, for Independence Day, a holiday celebrating Bolivia’s independence from Spain, he reasserted his suspicion towards foreign investors: "We have an obligation to reclaim the natural resources that have fallen into private hands; the Bolivian people don’t want these landowners."

A dangerous escalation

It's a radical position that hides a more complex reality. "They seize foreign companies’ assets and call these expropriations ‘nationalizations’," says economist Julio Alvarado.

"Morales wants to reinforce his country's independence, but in fact the opposite is happening. Before the so-called nationalization of hydrocarbons, Bolivia produced its own gasoline and liquefied petroleum gas, which is not the case anymore. We used to drill 20 wells a year, now we are down to 10," he says. 

Observers are worried about this escalation, and see Morales’ motivation as much political as it is economic.

If nationalizing the hydrocarbons sector was a big part of Morales’ last electoral campaign, the recent expropriation of foreign mining companies was dictated by the necessity to put an end to conflicts between Comibol and powerful private mining unions. This is what happened in particular to Glencore: when the nationalization of the rich Colquiri zinc mine was announced, the mineworkers’ union, which supported the move, clashed violently with members of four independent mining cooperatives exploiting the same site and were worried about having their mine dispossessed.

Over 1,000 policemen and 600 soldiers were deployed, neighboring roads were cut off and 17 people were injured. After approximately $1 million in losses, production has picked up again, and on August 14 Comibol presented a $90 million five-year plan aimed at increasing production and building a foundry. 

Foreign investment flees

But this instability is starting to put off international mining companies present in Bolivia. According to a Glencore spokesperson, "the decision to nationalize the Colquiri mine raises serious questions about the government's future policy on foreign investors." The Swiss group had invested $300 million into the country for its operations, including $70 million for the Colquiri mine. For Glencore, the loss of Colquiri comes at a time when it was finalizing new mining contracts with the government. 

According to the Bolivian Institute of Foreign Trade, Bolivia has already started to suffer from its policies: out of the $154 billion of foreign investment in Latin America for 2011, only 859 million, or 0.6 percent, came to Bolivia. One official from the Bolivian Institute said, "Our Foreign Affairs Minister joked about the end of Coca-Cola in Bolivia in December 2012, when the Mayan calendar enters a new cycle. Well, that went around the world and was picked up by all the media as serious information… It goes to show what kind of reputation the country has abroad."

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