Monday, September 25, 2006

Bolivia to Oil Companies: "Come Back, We Didn't Mean It"

From a September 1, 2006 Wall Street Journal Article, "Bolivian Witch Hunts" regarding President Evo Morales lack of respect for civil liberties.

Evo has already badly mishandled the economy. Exhibit A is his decision on May 1, amidst the biggest energy boom in the history of humankind, to nationalize the investments of foreign energy companies in his gas-rich country. Perhaps such bravado felt good to the country's first indigenous leader in modern times. But if he was making a political calculation, he left out one important variable: Bolivia is poor. So poor, it seems, that it hasn't the funding or expertise to exploit the gas itself.

On Aug. 11 the government announced the suspension of the full takeover of the oil fields "owing to a lack of economic resources." But it's a little late. Some 30 energy companies are reported to have ceased operations, and there has been no new investment. Bolivia has been converted into an unreliable energy supplier, badly wounding the only goose that lays hard-currency eggs.

This is what happens with leftist governments who have no understanding of what economic factors create wealth. Individual liberties, private property rights, and lassez faire capitalism, this is the fertile ground that must exist in order for rational investors to apply their capital and their intellect. Morales however thinks that oil refineries are something in nature, to be plucked and sucked at leisure like a ripe peach.

Oops, forgot. Bolivia doesn't have either the capital or the trained businessmen to effectively run these businesses. "Wait! Come back! We didn't mean it!". Now that they've shown the respect they hold for private property, and individual liberties no sane investor is going to come near the country.

This one is a bit personal. I'm Bolivian. My mother was an American teaching at an international school, the sort that American ex-pats send their kids to, when I was born. She stood at the entrance of the school in 1969 and watched the Bolivian army march in and nationalize the assets of Gulf Oil. How many times can the same mistake be repeated?