Bolivia - Mining Sector Woes Likely To Continue
BMI View: We maintain a pessimistic outlook on Bolivia ' s mining sector under the administration of Evo Morales ' government. Resource nationalism remains the primary threat to private mining operations in the country in 2013. Recent data indicates both mine production and metal exports have decreased, a trend likely to continue.
We maintain our view, first highlighted in Q3 2012, that Bolivia's business environment for mining firms has substantially worsened following a wave of nationalizations and regulatory obstacles ( see our online service, 'Mining Firms: Proceed With Caution', September 20, 2012). High-profile expropriations by the Morales administration include the Colquiri tin and zinc mine in late-June 2012 from Glencore and two electricity distribution companies owned by the Spanish firm Iberdrola in December 2012 . Bolivia has both weak rule of law and legal institutions, giving the Morales administration significant executive discretion to nationalize assets as it sees fit. We view nationalization threats as one of the key regulatory themes in Latin America in 2013. As we wrote previously ( see our online service, ' Latin America - Regulatory Themes 2013' January 9, 2013), we expect resource nationalism will continue to vex mining firms in the region. Though we forecast decreasing prices for industrial metals, prices will remain heightened by historical standards, giving incentive to governments to pursue a range of policies, from higher tax and royalty regimes to outright expropriation. Though we expect the latter to be less common, it will remain a threat in Bolivia.
Data Confirms Negative Outlook
|Challenges Remain In 2013|
|2013 Short Term Political Rating & Business Environment Rating|