Since 1 May 2006, Bolivian President Evo Morales has undertaken a program of “nationalization” of the petroleum industry. By drastically cutting the profits to Brazil’s Petrobras, Spain’s Repsol YPF, UK’s BG Group Plc and France’s Total, Morales changed the relationship between Bolivia and these companies. The companies had to change their outlook from investors to essentially contract workers in their own companies. Morales was now responsible for investment in order to meet production obligations. Instead of setting money on the side to pay for these expenses he has continued to try to pressure these companies into resuming investment while spending the profits. Excluding some spending to maintain production at near previous levels, profits simply no longer justify the investment for the foreign firms. Vice President Álvaro García announced that the government’s energy-related revenue jumped $780 million after the “nationalization” considering all the money to be profits. Compounding the effects of reduced investment is the fact the Bolivia as always negotiated its gas contracts on a national level, instead of allowing the companies to negotiate the deals. This has created a situation in which one buyer negotiates with 2 sellers, instead of multiple international firms with multiple skilled negotiating teams selling to th international market.

Today Bolivia faces declining production and missed contract deliveries which according to the contracts signed by President Morales may result in fines. As a result of uncertain production, Argentina are looking elsewere for sources of gas. Argentina has invested $1.5 billion in a new natural gas port in Uruguay, and Brazil has found 2 of the largest oil and gas fields to be discovered in decades.