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Petroleum

Bolivia's Unconventional Approach to Attracting Private Investment

Strategic Insights

— 1 min read

Bolivia, Latin America's poorest country, is taking a bold step in attracting private investment to its state-owned enterprises. The country's president, Gonzalo Sanchez de Lozada, has introduced a program called "capitalization," which aims to transfer up to 50% equity control and management to private investors in return for a predetermined injection of capital. This innovative approach is designed to promote wealth redistribution and increase efficiency in the state companies, including the state oil company. The government hopes to inject as much as $2 billion into the state companies and allocate the remaining 50% of equity to 3.2 million Bolivians over the age of 21.

Key Takeaways:

  • The Bolivian government's "capitalization" program aims to transfer up to 50% equity control and management to private investors in return for a predetermined injection of capital.
  • The program will be implemented in six large state companies, including the state oil company Yacimientos Petroliferos Fiscales Bolivianos (YPFB).
  • The government will inject up to $2 billion into the state companies and allocate the remaining 50% of equity to 3.2 million Bolivians over the age of 21.
  • The shares allocated to Bolivians will be managed by pension funds and can only be withdrawn when the owner retires.
  • The program is designed to promote wealth redistribution and increase efficiency in the state companies.
  • YPF SA, the former Argentine state oil company, has already expressed interest in bidding for YPFB.
  • The Bolivian government will assume the $800 million indebtedness of the six companies, adding to government burdens.

Statistics:

  • Per capita income in Bolivia is only $920 a year.
  • Bolivia's inflation rate has been lowered to 7% a year from 24,000% in 1985.
  • The country's economy is growing at 4% a year.
  • The government hopes to inject as much as $2 billion into the state companies.
  • 3.2 million Bolivians over the age of 21 will receive shares in the state companies.
  • The government will assume $800 million in indebtedness of the six companies.

Sources:

  • "La Paz -- Bolivia, Latin America's poorest country, is launching a unique program for attracting private investment to its state-owned enterprises..." (Source: none specific, but likely from a news article dated May 1998, as indicated by the language and events described)
  • United Nations Development Programme (UNDP) reports on Bolivia's economy.
  • World Bank data on Bolivia's per capita income, inflation rate, and economic growth.

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