Bolivia still sees major investment into energy and mining sectors

Apr 10, 2005 02:00 AM

Bolivian President Carlos Mesa said the Andean nation is expecting $ 4 bn in investment through 2010, the vast majority of which will flow into the energy and mining sectors.
Mining sector projects worth $ 920 mm are already under way, he told participants at the 2005 Inter-American Development Bank meeting taking place on the southern Japanese island of Okinawa.

More importantly for Bolivia's energy-hungry neighbours, major investments are also in store for the energy sector, Mesa said. He pointed to a new natural gas pipeline project that would expand the 6 mm cmpd that Argentina now receives from Bolivia to 28 mm cmpd.
Brazil, he added, is interested in "almost doubling" the 21 mm cfpd that it now receives through the Bolivia- Brazil pipeline, the current capacity of which at 30 mm cmpd would need to be expanded.

But the Argentina pipeline project is currently suspended, given uncertainty surrounding the future tax regime for energy sector investment. Bolivia's Lower House of Congress, against Mesa's will, approved a proposal in March for a new hydrocarbons law that would raise levies on oil and gas production at the well-head to 50 %, with 18 % as direct royalty and 32 % as a non-deductible tax. That compares with a current tax level of around 38 %.
The proposal now is with the Senate, which is expected to hold a final vote on the law in April. The Senate is unlikely to make any significant changes in the proposal, Senate President Hormando Vaca Diez was quoted as saying earlier.

Mesa said that an effective 50 % tax rate, although high, would be acceptable, reversing previous declarations in which he characterized the bill as disastrous and said it would provoke lawsuits from foreign companies for breach of contract.
It certainly already seems to be dissuading potential investment. In addition to the suspension of the proposed pipeline to Argentina, Brazil's state-run oil company, Petroleo Brasileiro, or Petrobras, recently said it's reviewing a $ 1.5 bn petrochemicalscomplex at the Brazil-Bolivia border that would use Bolivian hydrocarbons as feedstock if Bolivian lawmakers enact the effective 50 % levy. But following Mesa's remarks, Finance Minister Luis Jemio said the Senate may still soften the legislation to make it more favourable to foreign investors.

Source: Dow Jones
Market Research

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