President Morales has nationalised two electricity distribution companies owned by Spain’s Iberdrola in retaliation for the Spanish company’s subsidiaries overcharging consumers in rural areas. The move is not surprising. As a matter of fact, since his election in 2006, the leftist president has already nationalised oil, telecommunications, mining and energy-generating companies. Moreover, according to the Bolivian constitution, public interest prevails over private interest when it comes to energy supply. An independent arbiter will decide how much compensation Iberdola will get for its assets.
Impact on country risk
The expropriation risk is very high in Bolivia. In 2007, the country withdrew from the International Centre for the Settlement of Investment Disputes (ICSID), which implies that investors are no longer entitled to have recourse to an international arbitration and must rather sue the Bolivian government within its own courts.
Analyst: Pascaline della Faille, email@example.com