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.
|Challenges Remain In 2013|
|2013 Short Term Political Rating & Business Environment Rating|
Data Confirms Negative Outlook
Recent production and export data confirm our negative outlook on Bolivia ' s mining industry. Bolivia's government disclosed recently that production at the Colquiri mine has dropped 21% from June to December 2012, falling from 429 tonnes of output per month to 337 tonnes. During the same period, the state-controlled miner workforce increased 30%. Available production and export data for Bolivia's main metals commodities - silver, zinc, tin, and lead - also confirm our view that the sector is suffering. Total zinc and lead exports from January to November 2012 were down 8.8% and 11.8%, respectively, from the same period in 2011. Production for zinc and lead also fell 1.4% and 8%, respectively, over the same time frame. Similarly, s ilver production fell 9.8%.