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Tuesday, September 04, 2007

Dangerous Policies for Latin America

The big losers of the anti-investment policies of Latin America's leftist governments are the people.
Nicaragua's president Daniel Ortega (top); Presidents Rafael Correa of Ecuador and Hugo Chavez (above). (Photos: Nicaraguan President's Office, MinCi Venezuela)


These are difficult times for foreign energy companies in Latin America. In Argentina, the government of President Nestor Kirchner is threatening to jail executives of Shell, while continuing to provide a hostile environment for energy and non-energy companies alike. ExxonMobil is reportedly planning on leaving Argentina due to the difficult climate.

Meanwhile, in Nicaragua - the second-poorest country in Latin America - the government of president Daniel Ortega has confiscated a fuel terminal belonging to ExxonMobil, claiming the company owes back taxes. ExxonMobil denies that it owes any taxes and says Nicaraguan law prohibits the government from confiscating property during a legal dispute. That follows repeated threats to expel Union Fenosa, the Spanish firm that controls Nicaragua's two distribution companies. The latest action has sent a chilling signal to foreign investors that Ortega may return to his old anti-business policies from his previous government (1979-90).


And in Ecuador, Chevron is facing a $6 billion lawsuit from a group that claims the U.S. company contaminated the Amazon area where it operated from 1964 to 1990. The company has denied all wrongdoing, but is worried about the judicial process in Ecuador, which includes a court-appointed investigator with a bias against Chevron and a lack of technical expertise. The Chevron lawsuit comes on top of investor-hostile policies by Ecuador's president Rafael Correa, who is restricting exploration in the Ishpingo, Tambococha, Tiputini (ITT) field to state-owned companies from Latin America and Asia. Correa has also stated that he would stop all future exploration if the international community gave Ecuador $350 million per year to do so - a proposal Bear Stearns rightly has called "naive."

Bolivia - the third-poorest country in Latin America - has also tried its best to make sure that foreign energy companies leave and is trying to spread its 2006 energy nationalization to other sectors of the economy.  

And then there's Venezuela, where president Hugo Chavez forced ExxonMobil and ConocoPhillips to leave the Orinoco fields after the two companies refused to accept new contract terms that reduced their control.


The anti-business policies of the leftist presidents stand in contrast with pro-business policies in Brazil, Colombia and Peru, which are drawing increased investments from foreign energy companies. Last week, for example, Colombia's state-owned oil company Ecopetrol launched the country's biggest-ever IPO aimed at bringing more - not less - private and foreign investment.

It is sad to see that the nationalist-populist economic policies in Latin America in the 1970s have made a come-back in certain countries. Just as they failed then, they will fail now.

The big losers, however, are not the foreign oil companies. The biggest losers are the people in the affected countries. They will see reduced foreign investment, growing energy problems and increased poverty as a result of the misguided policies of their governments. 

 © Copyright Latin Business Chronicle

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From: K Gratt

Brooklyn, NY, USA
So a government prosecuting a company for wrongfully dumping toxins into rivers and other sensitive environmental areas is grounds for your "proof" that Ecuador is anti-foreign investment? Hmmm, I would hate to see your editors in charge of the Environmental Protection Agency in the USA.

From: Edgar

Naperville, IL
I guess the people who wrote this have never seen how sad the destruction of the Amazon Rain Forest by the multinational oil companies is, have never been in the Amazon Rain Forest or, most probably, have never even seen pictures of it.
President Rafael Correa has come up with a revolutionary idea and he is called "naive". Well, I'd say someone has to think differently, someone has to do the thinking in this world. We need to start thinking seriously about global warming cause it's not a hoax!

From: Lawrence DeVooght

Oil companies are like dogs gnawing on a carcass; even if they are chased away they will continue to return for any bit and pieces left laying around they can lap up.

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