Summary

Latin America has seen recurrent episodes of resource nationalism, particularly in oil and gas, characterized by increased state control over the industry and investment expropriation. These episodes tend to occur in cycles induced by structural forces, in particular high resource prices and the end of successful investment cycles, increasing production and reserves. State-owned enterprises tend to play a dominant role in the region, which is magnified during the resource nationalism episodes. During such episodes, governments increase taxes and renege on contracts with private investors. Ideology and institutions can limit or exacerbate the intensity of these events in each country, but the cycle is largely driven by the structural factors. The reverse occurs with resource price busts and when a new investment cycle is needed, countries liberalize the oil sector and the state retreats.

Between 2002 and 2012, the production boost produced by the liberalizations of the 1990s, combined with the oil price boom, led to a powerful wave of resource nationalism, including contract renegotiations and nationalizations, in Argentina, Bolivia, Ecuador, and Venezuela. Even in Brazil, the country with the most successful and stable oil policy in the region, state-control increased. In contrast, after 2014, a new liberalization period has been prompted throughout the region by the decline in commodity prices, the financial weakness of state-owned companies, and the need for a new private investment cycle. Understanding the dynamics behind resource nationalism in the region is crucial for designing institutional frameworks that limit the cycles and induce long term resource policies that foster the development of the abundant resource endowments in the region.

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