The May 1 threat issued by Evo Morales, Bolivia’s president, to kick oil and gas majors out of his impoverished Andean country, was as surprising as it was expected. The nationalization is a bad deal for Brazil, and likely a bad deal for Bolivia, too. Worryingly, 75% of the natural gas consumed in the Brazilian megalopolis São Paulo comes from Bolivia. Given that Brazil has no alternative supply lines in place, in the short term it has to pay whatever price Bolivia asks, or face shortages. Morales plans to hike natural gas prices for Brazilians by $2 to $5.50 per million BTUs – a move that would net Bolivia half a billion dollars a year.
Despite the immediate cash benefit for Bolivia, the plan is shortsighted. Bolivia stands to lose a giant market for its most valuable export. Having burned the Chileans repeatedly in considering a Pacific route, landlocked Bolivia may have lost its two best options for gaining access to – and revenue from – the global market.
Natural gas companies in Bolivia have through November 1 to migrate to new contracts, and negotiation of the specific terms is underway. The harshest possible end-result would be an outright expropriation of foreign assets. Bolivia has bet the future well being of its people on nationalization Ecuador has made a similar move with a billion-dollar seizure of Occidental Petroleum assets in that country, and other nations in the region might follow suit. Is this the road to a better life for Latin Americans?