Evo Nationalizes Energy Companies - Part 2

As reported before, Evo Nationalized several electrical companies.  Now Britiain's The Economist weighs in-

Another Bolivian nationalisation - Power grab - Evo Morales’s allies grow restive

Since taking office in 2006 Mr Morales, Bolivia’s first elected president of indigenous descent, has taken over oil and gas, mining and telecoms businesses. Partly as a result, he is popular. When campaigning for a second term in an election last year, he promised that power companies would be next. The targeted firms thought they had avoided this fate by negotiating a deal in which the government would take a bare majority stake. No such luck.
But the May Day nationalisation seems to be bringing Mr Morales diminishing returns. To his bemusement, workers at one of the nationalised companies, a co-operative in Cochabamba, staged a protest sit-in. Although Bolivia’s gas revenues have risen sharply, that has as much to do with higher prices and contracts signed before Mr Morales took office as with rolling back privatisation, according to Carlos Alberto López, an energy official in a previous government. Most of the newly state-run firms have performed poorly.

Evo Nationalizes Energy Companies

May Day Media Spectacle  "POWER!!!"

 Evo Morales following his previous May day tradition, has nationalized energy companies - from foreign and national owners, securing 80 percent of the electrical production and distribution is in state hands.

Note- This is not strictly a "nationalization" of a "private" or "privatized" company, the energy companies in Bolivia were never "privatized" or sold outright to foreign/private capital to begin with. . Most of the companies involved were companies where the Bolivian State held part ownership in association with private capital which managed them. Some companies had foreign investors, but others were Bolivian-owned, in the case of Cochabamba's company the workers held a large share of the stock. '
In fact, what the State is doing is a "forced" buyout of the rest of the stock in these companies, and assuming management control.


What this means,

First of all, there is always disputes over compensation for the value of these companies, inevitable in any transaction.

Potential international litigation. There are French and English companies who still have the right to contest this under investment-protection treaties.


Foreign Investment - The spectacle of soldiers taking over power plants, right after Evo Morales sent his Finance Minister to the U.S. to look for foreign investors, this simply confirms the governments unreliability, and double-talk.

This usually doesn't work. Venezuela bought out foreign and private interests in the energy sector under Chavez. Result - mismanagement with a power grid close to collapse. Colombia on the other hand, broke up its state monopoly, created a regulatory framework to ensure adequate delivery and consumer protection, and allowed private sector participation. It now produces enough energy to offer electrical power to blackout ridden Venezuela.  Bolivia's next door neighbor, Peru, also did something similar and has managed to accomodate that country's increased demand for power, reached remote customers, while offer stable rates for customers, 

Paradoxically, the MAS government has dismounted the regulatory bodies - Superintendencias- placing responsibility for supervision and consumer protection with the same ministry that will theoretically also be responsible for the entire chain of production, transportation, and sale of power to consumers and businesses.

Evo's record of running anything besides political campaigns is disastrous. this could result in politicized appointments, incompetent managent, less transparency and consumer protection, reduced independent oversight, and even corruption.  The classic case is the do-nothing Oil Company, YPFB which has been rocked by scandals, since Evo took over, and has turned Bolivia from being self-sufficient in oil products to buying even gas from Peru..