This isn’t going to end well.
Bolivia’s president-elect said his government plans to seize oil and gas reserves owned by international companies, leaving other assets such as pipelines and refineries in the hands of foreign operators.
“The state will exercise its right of ownership, and that means it will decide on the use of those resources,” Evo Morales told reporters yesterday in Pretoria, South Africa, where he is visiting the country’s President Thabo Mbeki. Oil companies “will be partners, not owners,” he said.
The comments clarify plans Morales has discussed since his election Dec. 18 to “nationalize” Bolivia’s oil and gas reserves and boost government revenue on output. All reserves are now in the hands of foreign companies such as Spain’s Repsol YPF SA, which owns 35 percent of the country’s 55 trillion cubic feet of natural gas, and Brazil’s Petroleos Brasileiros SA (Petrobras), which holds 17.5 percent. Bolivia has Latin America’s second-largest gas reserves.
Morales said he will cancel any contract that gives foreign companies ownership rights to oil and gas. His plans do not call for confiscation of multinationals’ technology or other assets, he said.
Bolivia attracted $3 billion of investment for its oil and gas industry since privatizing the state energy company in 1996, helping increase its natural gas reserves sevenfold, according to the Bolivian Hydrocarbon Chamber. Investment in the oil and gas industry dropped to $135 million in 2005 from $236 million in 2004. In 2002, the year Morales lost a presidential runoff against Sanchez de Lozada, investment reached $345 million.
Will socialists ever realize that state-run monopolies aren’t the most efficient method of distribution? Destroy contract and property rights and incentive disappears. The dream is always that everyone will suddenly prosper and receive a “fair” share of the nation’s wealth, but all it does is divide a now-finite amount of wealth. Factor in that most of that wealth transfers to the few in power, the dream doesn’t seem so brilliant.