Bolivia
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Summary
The article in the New York Times talks about the agreement between the Energy companies and the government of Bolivia based on which the energy companies will now be giving a larger share of their revenues to the Bolivian government.
Bolivia, the poorest country in the South American region has been waging a hard battle to get the control of its natural resources. Its President Evo Morales has finally clinched the deal with the companies that makes his position stronger and will in the long run help the economy of Bolivia. He claimed that the revenues from the sector to the government will go up from $1 Billion to $4 Billion in the next 4 years. This also marks as a major win for his political career as most people were critical about his plans saying that they will not succeed. He has embarked on a journey to get back the natural resources of Bolivia from the foreign companies and strengthen the economy.
In a signing ceremony he said “What we are doing here is exercising our property rights, as Bolivians, over our natural resources without evicting anyone, without confiscating,” he said. “With these new contracts we want to generate more economic resources to solve the economic and social problems of our country. Thats our great wish.”
However, as a part of South America it is setting and following a precedent set by Venezuela and Ecuador. Whether this is something that will go on in other countries is a discussion I will have in the next section.
The talks started after the declaration by Mr. Morales that his government will take over the Energy Resources of the country and the companies were given a 6 month time frame where they must hand over their majority stakes to the government or move out of Bolivia. The article also talks about the time consuming and tense talks and how the agreement was signed a few minutes before the deadline.
Relevance to the Module (Globalization)
Globalization as we know it means that trade prospers across all borders and helps the world get richer and be a better place for everyone. However, in case of some countries, this is not true and that is why we have a lot of people opposing world trade.
World trade and the WTO would rather find the case in Bolivia to be alarming. If foreign investors are forced to partake with their earnings only because they are doing business in another country, then in a few years, all the poorer countries of the world will start asking all the rich organizations to give all their profits to them as taxes. Of course, this is not possible. However, till a few years back until Venezuela Ecuador and a few other countries started forcing foreign companies to give up their rights and share more with the governments nobody would have thought of this being possible. World trade and Globalization cannot work if governments start forcing foreign companies to give up stakes and start sharing profits.
When a company makes an investment in another country, it makes its decision based on many factors. One of them is safety and profitability. If the country is deemed dangerous, most companies will aim for a higher profit to justify the investment. However, with the progress that we are making, in a few years, most companies will have lots of choice about where they can invest – economies will open up and the communication systems have helped the world economy grow big as distances have become smaller.
However, in this case, the resource is Oil and Natural Gas and with the scarcity and the high demand forcing prices of oil higher and higher, there is continued need and desperation by everyone to make money in the oil business. It is no surprise that the Bolivian government has made that decision in spite of knowing that will alienate many other investors to the country. The profits from the take over of the oil and gas resources are going to be $4 Billion a year in 4 years time, and that is a big number for $10 Billion economy (World Bank, 2005 GDP). The additional 3 Billion a year mean that the government will have an additional $3 Billion a year to spend on the infrastructure and many other areas of improvement in Bolivia.
Article Critique
The article does not capture the picture in the holistic sense of Bolivia as a country. The article remains at a high level talking about he politics and the timing of the talks etc but loses out completely on talking about how this will positively impact the economy of the country. It also fails to look at how this might affect the countries in Africa, where the poverty level are much worse and there are already issues about oil companies not doing enough in the country of operation. Nigeria is an example where Shell is continuously having issues with the locals and even has at times had to shut down its plants to ensure the safety of its employees.
Overall, the article misses to talk about anything apart from just reporting