Bolivian Oil Shock
28-minutes, 2006
Ref: 488

Bolivia's decision to nationalize the country's oil and gas fields on May Day 2006 rocked world oil markets, already suffering from soaring prices and political uncertainties. Nationalization hits Repsol-YPF, a Spanish-Argentine company, particularly hard. We travelled to Bolivia to discover what lies behind the move and the tensions between the government and the oil industry. President Morales promised to nationalize the country's oil and gas reserves during his election campaign, as well as to double the minimum wage. In October 2003, mass demonstrations in favor of nationalization had led to 60 deaths and the ouster of two presidents. But oil nationalization does not mean confiscation - just different ground rules. Until now, the oil companies pocketed 82% of the profits and paid 18% to the Bolivian government in royalties. Nationalization means that Bolivia will now get the lion's share as majority shareholder in the oil and gas companies operating there. The oil firms now have 6 months to cut a deal with the government. The Brazilian Petrobras is taking a tough stance and Brazil has said it wants to do without Bolivian gas by 2007. Repsol-YPF is willing to negotiate but has not ruled out legal action. Two of Repsol's senior managers were arrested recently for oil smuggling and the Bolivian authorities say the company's operations are illegal because they were not approved by parliament. While nationalization is seen as a populist measure abroad, Bolivia happens to be the poorest country in Latin America despite having the continent's second biggest oil and gas reserves. Most of Bolivia's voters staunchly support President Morales on the issue. The team accompanied Morales on his official engagements and interviewed him on some of the big challenges facing Bolivia: the referendum on regional autonomy, cocaine-growing, and the danger of populist government, among others.