Los Tiempos: British Minister thinks Bolivia doesn’t have much instinct for outside investment

19 Mar

Here is what is hopefully the first of several features I will write for Los Tiempos, a daily broadsheet newspaper in Cochabamba, Bolivia. This article was published today (Monday 19 March 2012), encapsulating an interview I conducted with Britain’s Minister for Latin America, Jeremy Browne, after a speech he gave in London about his trip to Bolivia last summer.

The published Spanish version of this is below (there may be slight differences that occurred in translation), but this is my original English-language article.

Seven months after his first diplomatic mission to Bolivia, Britain’s Minister for Latin America, Jeremy Browne, has spoken of his reflections of the country as too hamstrung by the notion of preserving its traditions to actively pursue important inward investment. He believes many British companies would not consider doing business in Bolivia while the spectre of expropriation remains.

UK Minister for Latin America, Jeremy Browne, on his first visit to the country in summer 2011. Pic courtesy Flickr/UK In Bolivia

UK Minister for Latin America, Jeremy Browne, on his first visit to the country in summer 2011. Pic courtesy Flickr/UK In Bolivia

Presenting his reflections on the visit at a meeting of London’s Anglo-Bolivian Society, a group of Bolivians living in England and British citizens with an interest in the country, the Minister said Bolivian people and the Bolivian government “had less of an instinct for attracting inward investment” than other Latin American nations. “Mercantile leaders in Bolivia have an insular character and a degree of caution about engaging with places as far away as the UK,” he said. “Bolivians seem very keen to preserve their traditions and way of life.”

Asked about the progress made in exploiting and processing the lithium in the Salar de Uyuni, the Minister said that in contrast to Peru he perceived Bolivians as “cautious about opportunities of that kind”, pointing to Peru’s rates of growth as a result of recent gains in its mining industry and his impression that Peruvian citizens had benefitted from that, in contrast to Bolivians. He also pointed to Chile and Panama City as noteworthy examples of economies that welcome inward investment in the region.

Arguably, the single most critical hurdle to the future of the bi-lateral relationship is the outcome of the legal dispute between the Bolivian government and British power generating company Rurelec. Its Guaracachi operations in Santa Cruz were abruptly expropriated in May 2010 – by a gang of men in balaclavas, brandishing machine guns, according to Rurelec’s claim filed with The Hague – and in March Rurelec confirmed that it was seeking compensation from Bolivia of $142.3 million.

The Minister said that the spectre of expropriations by the government “has a negative impact” on British appetite for investing in the country. Though he denies that it has eroded trust between the two nations, that is a diplomatic turn too far. Rurelec’s chief executive Peter Earl says that he would use part of a settlement to make a “significant” buy-back of Rurelec shares so that the company “can focus on paying dividends from operating power plants, rather than seeking redress for wrongs suffered”. (It is worth noting that he is the single largest shareholder in Rurelec, so it is personal.) It does not help smooth the path back to trust for British or other European companies operating in Bolivia when Morales, in the same breath as telling Petrobras and Total executives that their Bolivian investments “will always either be protected or guaranteed”, he also threatened further nationalisations if any foreign companies in the hydrocarbons sector are, in his opinion, found to be “boycotting or sabotaging their investments”, as was reported by EFE in February this year.

British companies are as unaccustomed to bands of men in balaclavas storming their businesses on behalf of the state, as they are unfamiliar with the notion that they are not the one ‘on top’ in any business arrangement, nor that they have legal redress. Meanwhile, Morales needs their expertise and investment to open up Bolivia’s natural resources, to make good on the 2009 Constitution’s statements that the country will preserve sovereignty by keeping more of the benefits of those investments for its citizens. It is embarrassment enough that, having taken over the power plant, the Cuban operatives who Morales’ people called to run it thereafter blew up the generator and the government was forced to call Rurelec’s own people back to Bolivia to help get it operational again.

Browne says that the Rurelec case, in addition to unexpected nationalisations of other businesses operated jointly by YPFB and foreign companies, spooked British investors, because in some cases they resulted in disputes between the Bolivian government and British investors. “A satisfactory solution to ongoing disputes will be the key to attracting further British investment in Bolivia – investment the Bolivian government has said it wishes to pursue,” he says. Though vice minister Alvaro Garcia Linera has said that the size of Rurelec’s compensation claim is “abusive” and that “talk of [compensation] more than $100 million would be unjustified”, a settlement around that figure is thought likely to be reached before the ruling date in April 2013. That will set an expensive precedent for any future nationalisations Morales may choose to make.

With that case in progress, Browne says the British government is keen to see the proposed new Bolivian Investment Law brought in to guarantee “fair and proportionate settlement of disputes” in cases of nationalisation. He thinks this is the framework British companies seek, “so long as it allows for some form of arbitration and other provisions currently held within bi-lateral trade treaties,” he added. “A fair and predictable legal framework is essential to encouraging more investment.”

British investments in Bolivia span hydrocarbons, mining equipment, and financial services to the Bolivian banking and insurance markets, and together are worth a lot of money. He issued a challenge to Morales to visit Britain for discussions around this topic. “When I am speaking with businesspeople in Britain, it barely crosses anyone’s mind to invest in Bolivia,” the Minister admitted. But he added: “the president of Panama visited the UK before Christmas; if Morales wants to visit us too…but Bolivia isn’t associated with a hunger for inward investment.”

 The issue of coca

The Minister did not try chewing coca when he was in Bolivia – after all, that is not illegal and could have been a useful insight on why the practice continues. He may have not appreciated the integral part coca plays in the life of many poor Bolivians working the land or the mines. But the Minister believes the proposed laws to replace the existing Counter-narcotics Law 1008 must be expedited if the government seeks to genuinely demonstrate a commitment to reducing narco-traffic. The UK is the single biggest consumer of cocaine in Europe according to the United Nations Office on Drugs and Crime, so the British government addresses spends a significant amount of money addressing cocaine production and export in Peru, Colombia and Bolivia as the main originating sources.

The Minister believes it evident that Bolivia is producing more coca than it needs for traditional consumption, though he also concedes that it is difficult to measure that. But he recognises that external interest in the coca trade touches a raw nerve about the protection of Bolivian sovereignty. “It is clear that significant quantities of excess, illegal and unregulated coca are diverted to the cocaine trade,” he said. “We are not in the business of challenging sovereignty,” he added.

And in Spanish….



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