7.500
%
Negative
92
mm boe
11
%
The endemic corruption and pernicious nationalisation mean that the investment environment is poor. Once democratic process is restored, and the country moves away from socialism, will there be an appreciable change in the investment climate.
June 16, 2021
Americas - South
mm bbl
bcf
Central South America, southwest of Brazil
Multiple (PSC/Concession)
An 18% royalty and 32% IDH (Direct Tax on Hydrocarbons) applies to each field, creating a combined 50% effective royalty on each field. Cost recovery in any given month is the lower of allowable recoverable costs and the net revenue multiplied by a factor (100% for most fields, certain fields have lower limits). Profit oil splits are on a sliding scale, based on production levels and a so-called B-factor, measuring cumulative revenues and depreciations over cumulative investments and taxes/royalties paid (excluding VAT). Rates vary from field to field, under the principle of increasing government take with increasing project level of payback. Following the profit split, an operator's income (not including cost recovery) is also subject to corporation tax.
The investment environment is still dominated by Bolivia's termination of the Bilateral Investment Treaties (BITs) it signed with various countries in 2012. The Bolivian Government claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution. Companies that invested under the BITs will be covered until June 10, 2022, but investments made after June 10, 2012 are not covered. Notwithstanding the uncertain political situation, Bolivia’s investment climate has remained relatively steady over the past several years. Lack of legal security, corruption allegations, and unclear investment incentives are all impediments to investment in Bolivia. At the moment, there is no significant foreign direct investment in Bolivia, and there are no initiatives designed specifically to encourage external investment. The Ministry of Foreign Affairs and Ministry of Planning are leading efforts to attract more foreign investment (including the launching of a new website, http://www.investbolivia.gob.bo/), but it is not clear if they will be successful, given recent re-run elections. But Bolivia’s current macroeconomic stability, abundant natural resources, and strategic location in the heart of South America make it a country to watch.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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