Foreign Companies In Bolivia: Resource Extraction Rights?

Bolivia is open to foreign direct investment, with a 2014 investment law guaranteeing equal treatment for national and foreign firms. However, the law also stipulates that public investment takes priority over private investment and that the Bolivian government will determine which sectors require private investment. Foreign companies are allowed to extract resources in Bolivia, but the country's economy remains heavily reliant on its extractive resource exports, particularly in the mining and gas industries, which contribute 14% of its GDP and 80% of its exports. Bolivia's government has also re-nationalised several mining facilities and the hydrocarbon sector.

Foreign companies in Bolivia's mining industry

Bolivia is open to foreign direct investment, with a 2014 investment law guaranteeing equal treatment for national and foreign firms. However, the law also states that public investment takes priority over private investment, and the Bolivian government will determine which sectors require private investment. Foreign investment is highly concentrated in natural resources, especially the mining and hydrocarbons sectors, which account for nearly two-thirds of foreign direct investment.

The mining industry in Bolivia is organised into three main sectors: the government-owned sector, small mining cooperatives, and medium and large-scale private enterprises. In 2013, private enterprises, including foreign-owned companies, produced the largest share of minerals by mass and value.

Foreign-owned mines in Bolivia include the San Cristóbal mine, which is operated by the Japanese company Sumitomo Corporation. The mine produces approximately 1,300 metric tons of zinc-silver ore and 300 tons of lead-silver ore per day. Another large mining company operating in Bolivia is the Australian firm Republic Gold Limited, which is drilling for gold in the Amayapampa Gold Project.

In 2010, the Bolivian government nationalised several mining facilities, including the Huanuni mines and the smelting facilities in Vinto and Karachipampa. However, the government has also faced criticism for its handling of the mining industry, with some arguing that it has not done enough to attract foreign investment.

While foreign investment in Bolivia's mining industry is allowed, there are some restrictions and challenges. For example, foreign companies must comply with environmental regulations and obtain the necessary approvals, which can be a lengthy process. Additionally, the Bolivian Constitution grants the government control over natural resources and prioritises public investment over private investment. There have also been concerns about corruption, a lack of legal security, and unclear arbitration measures.

Foreign companies in Bolivia's hydrocarbon industry

Foreign companies have played a significant role in Bolivia's hydrocarbon industry, which has experienced nationalisation, privatisation, and periods of foreign investment throughout its history.

History of Foreign Investment in Bolivia's Hydrocarbon Industry

Bolivia's petroleum resources have been exploited by foreign companies since 1920, when the Standard Oil Company of the United States acquired a concession to explore and extract oil in southeastern Bolivia. This operation was nationalised in 1937, forming the state-owned Yacimientos Petrolíferos Fiscales Bolivianos (YPFB). In the mid-1950s, North American companies resumed operations, and in 1956, the Bolivian Gulf Oil Company began a decade of successful oil and natural gas extraction in the Santa Cruz region. However, political uncertainties disrupted the industry, and in 1969, Bolivia nationalised Gulf Oil's operations.

Current Foreign Investment Landscape

Bolivia is generally open to foreign direct investment and guarantees equal treatment for national and foreign firms under the 2014 investment promotion law. However, this law also stipulates that public investment takes priority over private investment, and the Bolivian government determines which sectors require private investment. Foreign companies have successfully sold supporting machinery and equipment to Bolivia, particularly in the hydrocarbons sector.

Joint Ventures with YPFB

The state-owned hydrocarbons company, YPFB, typically forms joint ventures with private companies for extraction services. These joint ventures operate on a 55-45 percent sharing basis, with the state owning the majority share for a limited period of 40 years. Hydrocarbons laws require companies to sell all production to YPFB and prioritise domestic market demand before exporting.

Challenges and Opportunities

Bolivia's decline in proven natural gas reserves presents investment opportunities for foreign firms as the government seeks to fulfil export contracts and meet increasing domestic demand. Exploration and drilling for natural gas have been government priorities since 2011, and future opportunities may lie in these areas, as well as natural gas production. However, Bolivia's investment climate faces challenges due to a lack of legal security, corruption, and unclear arbitration measures.

In summary, while Bolivia's hydrocarbon industry has a history of nationalisation and privatisation, foreign companies continue to play a role through joint ventures with YPFB and the sale of machinery and equipment. The current investment landscape offers opportunities, particularly in natural gas exploration and production, but it is important to consider the challenges posed by the country's investment climate.

Foreign companies in Bolivia's agriculture industry

Bolivia is open to foreign direct investment, with a 2014 investment law guaranteeing equal treatment for national and foreign firms. However, the same law also states that public investment takes priority over private investment, and that the Bolivian government will determine which sectors require private investment. Foreign investment in Bolivia is primarily concentrated in the hydrocarbons and mining sectors, with no significant investment from the United States.

The agriculture sector contributed 14% of the value-added share to Bolivia's GDP in 2020, an increase from 2019. While agriculture is an integral part of the Bolivian economy, the country does not produce agricultural machinery and pesticides, instead importing them from the United States, China, Argentina, and Brazil. Bolivian agricultural yields are among the lowest in the region, and farmers and the government are working to increase productivity through the adoption of modern equipment and technology. Most commercial agriculture is concentrated in the Department of Santa Cruz, while agriculture in the western highlands is mainly carried out by small farmers.

Bolivia's 2009 constitution nationalized companies in "strategic" sectors, including extractive industries, telecommunications, and electricity. The Movement Towards Socialism (MAS) government favours nationalization and an "import substitution model" for its statist economic model. However, enforcement of laws regarding dispute settlements, intellectual property, and real property are lacking, creating an uncertain investment climate. Additionally, Bolivia's judicial system is compromised, and the country's weak judicial security, complicated regulatory systems, cumbersome bureaucratic procedures, and corruption adversely affect the private sector and impede investment.

Foreign companies in Bolivia's forestry industry

Bolivia is open to foreign direct investment, with a 2014 investment law guaranteeing equal treatment for national and foreign firms. However, the law also stipulates that public investment takes priority over private investment, and that the Bolivian government will determine which sectors require private investment. Foreign companies interested in investing in Bolivia should note that the country abrogated its Bilateral Investment Treaties (BIT) with the US and several other countries in 2012.

The forestry industry in Bolivia is largely owned by the national or federal states, with only a small proportion in the hands of indigenous communities and local social groups. Bolivia has a high level of biodiversity, with several ecoregions featuring enormous variations in altitude. The country's biomes include jungle, forest, savannah, tundra, steppe, desert, and wetlands.

The Directorate General of Forests within the Ministry of Environment and Water is responsible for the country's forest policy and the national forestry regime. The Authority of Fiscalization and Social Control of Forest and Land (ABT) regulates, supervises, and controls forestry production, transformation, and transport.

Bolivia has the largest area of certified natural forest in Latin America, with over 10,000 square kilometres. The country's timber industry accounted for 2.9% of GDP in 2013, generating US$560 million in total gross value added. There are over 1,300 forestry companies registered with the Bolivian Forest Authority, with around 6,000 forest products production units.

• Santa Cruz Securities Agencia de Bolsa: A member of the SCFG Group, a network of companies working in the financial services industry, including banking, insurance, investments, and real estate.
• Sumitomo Corporation: A Japanese mining company that extracts lead, silver, and zinc from a mineral deposit near the town of San Cristobal.
• Tigo Bolivia: The second-largest telecommunications company in the country, with around 30% market share.

Foreign companies in Bolivia's water supply industry

Bolivia has the lowest coverage of drinking water and sanitation services in South America, and the quality of these services is low. In 1999, the privatisation of water supply and sanitation took place in Bolivia during the second mandate of President Hugo Banzer. This involved two major private concessions: one in La Paz/El Alto to Aguas del Illimani S.A. (AISA), a subsidiary of the French company Suez, and a second one in Cochabamba to Aguas del Tunari, a subsidiary of the multinationals Biwater and Bechtel.

The privatisation of water supply and sanitation in Bolivia was encouraged by the World Bank and the International Development Bank, who made it a requirement for the Bolivian government to retain ongoing state loans. The Bechtel Corporation offered a deal with the Bolivian government to privatise water and turn a profit. Renouncing the deal was seen as unthinkable to the country's leaders, who felt pressured to keep the trust of international investors.

The privatisation process was met with protests, particularly from those in the poorest neighbourhoods, who were not connected to the network of water systems and had to pay more for lower-quality water from trucks and handcarts. In early 2000, protests against the raised price of water due to privatisation grew, and martial law was declared. In April 2000, a seventeen-year-old student, Víctor Hugo Daza, was shot in the face by the Bolivian Army while protesting the increase in local water rates. This sparked further demonstrations, with tens of thousands of people marching downtown and battling the police. One civilian was killed, and thousands occupied the central plaza in Cochabamba.

Following two popular uprisings against water privatisation, the first in Cochabamba in April 2000 and the second in La Paz/El Alto in January 2005, the two concessions were terminated. In La Paz/El Alto, Aguas de Illimani was replaced by the public utility Empresa Pública Social de Agua y Saneamiento (EPSAS). However, the public water utility faced criticism in 2008 due to water shortages, accounting errors, tariff increases, and poor disaster preparedness. As a result, representatives of the La Paz neighbourhood association announced their intention to create their own service provider.

The Evo Morales administration is currently developing an institutional and legal framework aimed at increasing participation, especially for rural and indigenous communities, and separating the sector from previous privatisation policies. In 2009, the new Environment and Water Resources Ministry was created, absorbing the responsibilities previously under the Water Ministry. The Bolivian Government is in the process of creating a new Water Law to replace the current law, which was created in 1906, and increasing much-needed investment in hydraulic infrastructure.

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