Scoop!
New York Times yesterday...seems Latin American countries are looking at high commodities prices and trying to get a cut of the cash by raising royalties...
July 5, 2005
Energy-Rich Nations Are Raising Price of Foreign Admittance
By JUAN FORERO
LA PAZ, Bolivia - For centuries, this country made it easy for prospectors to mine - from the Spaniards who plundered gold to the tin barons of the 19th century to the multinational energy companies that flocked here in the 1990's to develop Latin America's second-largest natural gas deposits. But like many energy-producing countries these days, Bolivia has pulled back the welcome mat. With an angry population demanding a larger share of the benefits, and some groups even calling for expropriation, the government recently raised royalties and taxes to among the highest levels in Latin America.
It might appear to be an exceptional episode of revolutionary zeal translated into energy policy. But Bolivia is just the latest of several oil-and-gas-producing countries in Latin America and beyond that are squeezing energy companies as never before. With prices of crude oil and natural gas at record highs, and ideology increasingly propelling government policy makers, producing nations are demanding a larger part of the mineral wealth. In some cases, they are canceling long-term contracts that gave energy companies highly favorable terms. "They think that since there is more revenue coming in, they can take a much harder line in negotiations," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, an industry-financed analysis group in New York. "In some cases, they don't even need to negotiate."
More (registration required)...
Latin Trade in our June issue, reported, edited and off to the presses months before...thanks to a great idea from Jorge Garretón in Chile, excellent multi-country reporting from Paulo Prada in Rio, and the dilligence and energy of News Editor Forrest Jones to pull it all together...well done indeed!
A Royal Mess
Commodities have long been the bread and butter of Latin American economies, but the price of political instability in decades past has been ironclad promises of investment security and, always, low taxes. As Chinese demand has spiraled upward, however, doubling prices on staples like oil and minerals, politicians both left and right across the region are looking for ways to rewrite their longstanding royalties deals with foreign extraction companies.
Political leaders in Venezuela have forced royalties on foreign oil companies up to nearly 16.7% from 1%. (A royalty is the cut of a profit a country takes from an oil or mining project.) Chile, which put promises of non-interference in its Constitution to lure mining investment, is considering an increase to 5% from zero now. Brazilian politicians want to raise royalties to 10% from 3%. Everywhere you look, the push is the same: High prices mean different rules.
Nowhere is the debate more divisive than in Bolivia, a country where calls for higher royalties on natural gas - an effective 50% cut in profits - have escalated into protests, crippling the country repeatedly. In March, President Carlos Mesa, a political moderate, offered to resign amid roadblocks and marches as protestors urged the government to hike the fees foreign companies pay for extracting natural gas. His predecessor, former President Gonzalo Sánchez de Lozada, resigned in 2003 after similar protests turned violent.
The intensity of the debate in Bolivia underscores the dilemma governments face when considering raising royalties: Will the short-term income derived from higher payments outweigh the cost of increasing the burden on potential foreign investors? "Governments have to decide between the quick money higher royalties can bring and the broader economic good that long-term commitments by investors can provide,'' says Mark T. Nesbitt, a natural resources attorney in Denver, Colorado.
More...
July 5, 2005
Energy-Rich Nations Are Raising Price of Foreign Admittance
By JUAN FORERO
LA PAZ, Bolivia - For centuries, this country made it easy for prospectors to mine - from the Spaniards who plundered gold to the tin barons of the 19th century to the multinational energy companies that flocked here in the 1990's to develop Latin America's second-largest natural gas deposits. But like many energy-producing countries these days, Bolivia has pulled back the welcome mat. With an angry population demanding a larger share of the benefits, and some groups even calling for expropriation, the government recently raised royalties and taxes to among the highest levels in Latin America.
It might appear to be an exceptional episode of revolutionary zeal translated into energy policy. But Bolivia is just the latest of several oil-and-gas-producing countries in Latin America and beyond that are squeezing energy companies as never before. With prices of crude oil and natural gas at record highs, and ideology increasingly propelling government policy makers, producing nations are demanding a larger part of the mineral wealth. In some cases, they are canceling long-term contracts that gave energy companies highly favorable terms. "They think that since there is more revenue coming in, they can take a much harder line in negotiations," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation, an industry-financed analysis group in New York. "In some cases, they don't even need to negotiate."
More (registration required)...
Latin Trade in our June issue, reported, edited and off to the presses months before...thanks to a great idea from Jorge Garretón in Chile, excellent multi-country reporting from Paulo Prada in Rio, and the dilligence and energy of News Editor Forrest Jones to pull it all together...well done indeed!
A Royal Mess
Commodities have long been the bread and butter of Latin American economies, but the price of political instability in decades past has been ironclad promises of investment security and, always, low taxes. As Chinese demand has spiraled upward, however, doubling prices on staples like oil and minerals, politicians both left and right across the region are looking for ways to rewrite their longstanding royalties deals with foreign extraction companies.
Political leaders in Venezuela have forced royalties on foreign oil companies up to nearly 16.7% from 1%. (A royalty is the cut of a profit a country takes from an oil or mining project.) Chile, which put promises of non-interference in its Constitution to lure mining investment, is considering an increase to 5% from zero now. Brazilian politicians want to raise royalties to 10% from 3%. Everywhere you look, the push is the same: High prices mean different rules.
Nowhere is the debate more divisive than in Bolivia, a country where calls for higher royalties on natural gas - an effective 50% cut in profits - have escalated into protests, crippling the country repeatedly. In March, President Carlos Mesa, a political moderate, offered to resign amid roadblocks and marches as protestors urged the government to hike the fees foreign companies pay for extracting natural gas. His predecessor, former President Gonzalo Sánchez de Lozada, resigned in 2003 after similar protests turned violent.
The intensity of the debate in Bolivia underscores the dilemma governments face when considering raising royalties: Will the short-term income derived from higher payments outweigh the cost of increasing the burden on potential foreign investors? "Governments have to decide between the quick money higher royalties can bring and the broader economic good that long-term commitments by investors can provide,'' says Mark T. Nesbitt, a natural resources attorney in Denver, Colorado.
More...
posted by Greg Brown at 10:16 AM
0 Comments:
Post a Comment
<< Home