23 Jun The so-called “nationalizations” of hydrocarbons in Bolivia: 1937, 1969, and 2006
Nearly three months after my last post on this old and forgotten blog, I feel encouraged to write a few lines about the beloved hydrocarbons sector. This time, I want to share information soon to be presented in a joint publication with colleagues on 100 years of the Bolivian economy, where I authored the hydrocarbons section. I extend my gratitude to Konrad for this opportunity.
I wish to present some data on the three so-called nationalizations of hydrocarbons that occurred within less than a century in our country. Naturally, I do not aim for an exhaustive study (which would require significant time and space); rather, I simply want to share some data that might be of interest.
The first nationalization occurred in 1937, when the March 13 Resolution declared “…the expiration of all properties of The Standard Oil Co of Bolivia…” Various technical, political, and economic reasons may have led the Bolivian government to take this action. Insightful discussions on this matter can be found in Hoz de Vila (1988), Royuela (1996), Prada (1985), and Miranda (1999). This measure resulted in a compensation of US$1.8 million paid by the Bolivian government to the company, agreed upon in January 1942, taking the form of the “acquisition of geological studies.” Adjusted for inflation using the U.S. Bureau of Labor Statistics’ Consumer Price Index, this compensation would be valued today at approximately US$27.9 million, equivalent to 2.7% of Bolivia’s total exports in 1942.
The second nationalization took place in 1969, through Supreme Decree 08956 of October 17, 1969. The Bolivian government ordered the reversion of all concessions granted to Bolivian Gulf Oil Company and the nationalization of all its assets. According to Miranda (1999) and Hoz de Vila (1988), the final compensation paid to BOGOC was US$78.6 million. However, the World Energy Council (1992) cites a total payment of US$60.8 million, financed through export revenues to Argentina, made between 1973 and 1979. Adjusted for present value, the total compensation amounted to US$344.4 million.
It is noteworthy that Bolivian Gulf Company had significantly higher activity than The Standard Oil Co., as reflected in the number of wells drilled and operational efficiency metrics, see the next Table. This data suggests that the cost to the country, in terms of technological transfer, market closure, and future investment, was greater in the second nationalization.
Finally, on May 1, 2006, the Bolivian government issued Supreme Decree No. 28701 “Héroes del Chaco” or the “Nationalization of Hydrocarbons.” Unlike the previous two cases, the 2006 measure did not involve capital expropriation or the expulsion of operating companies. Instead, new contracts were signed with private operators, increasing the state’s revenue share by 10% to 15%, leading to a total state participation of 60% to 65% (considering the 50% approved in the hydrocarbons law).
Following the 2006 measure, the state acquired stakes in private operators, repurchased the two main refineries, and bought shares in pipeline transport systems. A summary of these policies can be found in Zaratti (2009).
The hydrocarbons sector involves long-term projects, making it difficult to link performance directly to contemporary public policies. One could hypothesize that public policies promoting consensus yield long-term results, while those damaging sector performance have more immediate effects. Therefore, the fiscal sector’s “success” in recent years cannot be attributed to the so-called “nationalization” of 2006.
Friends, this text may be less casual than my previous posts, but I found it important to present both the legal frameworks and the data associated with these processes. My time in Kabul has been challenging. At the end of May, we faced one of the deadliest attacks in recent years, with unofficial reports citing over 100 dead and nearly 400 injured. I cannot wait to return home, hug my Santi tightly, and tell him how much I love him.
S. Mauricio Medinaceli Monrroy
Kabul
June 23, 2017
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Hoz de Vila, V. (1988). PETRÓLEO Referencias y su legislación en Bolivia. Editorial Los Amigos del Libro. Segunda Edición. La Paz – Cochabamba, Bolivia.
Medinaceli. (2006). “Aspectos Tributarios de la Ley de Hidrocarburos No. 3058 y del Decreto Supremo Nº 28701”. Boletín Económico: Análisis de Coyuntura. La Nacionalización Bajo la Lupa. Fundación Milenio.
Medinaceli, M. (2007). La Nacionalización del Nuevo Milenio: cuando el precio fue un aliado. Fundemos. Primera Edición. La Paz – Bolivia.
Miranda, C. (1999). “Petróleo – del descubrimiento petrolífero a la explosión del gas” en Bolivia en el siglo XX: La formación de la Bolivia contemporánea. Fernando Campero Prudencio compilador. Harvard Club de Bolivia.
Prada, R. (1985). Apuntes sobre el sector hidrocarburos. Wayar y Soux. Primera edición. La Paz, Bolivia.
Royuela, C. (1996). 100 años de hidrocarburos en Bolivia (1896-1996). Editorial Los Amigos del Libro. La Paz, Bolivia.
World Energy Council. (1992). Veinte Años de Exportación de Gas. Comité Boliviano del Consejo Mundial de Energía. Boletín Nº 3. La Paz, Bolivia.
Zaratti, F. (2009). “La descapitalización. Cómo se hizo y cuánto costó” en Nacionalización: los costos de una ilusión. Molina F. editor. Primera Edición. Cochabamba, Bolivia.
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