Imagine this story. It begins with soldiers in Kevlar and balaclavas, hefting assault rifles. They stand guard over a recently-nationalised energy company, protecting its infrastructure until new state owners take over. Meanwhile, the soldiers’ President gives a speech to the nation. He describes the expropriation as evidence that he fights for the “recovery of natural resources and basic services.” Promises are extended that the company will be compensated – though the French and English counterparts that suffered this fate in 2010 are still waiting for theirs. The President legalises the action with a flourish of his signature, all set to the grin of the Vice-President – a Marxist ex-guerrilla calling himself the ‘last Jacobin.’
The President later arrives at another speech mere hours later. He has come to celebrate the opening ceremony of a natural gas refinery capable of producing nine million cubic metres per day. He praises the work undertaken by the company that built this feat of engineering; moreover, he promises that its “investment will forever be respected.” The refinery will primarily boost gas exports to a neighbouring country – which ironically only two weeks prior expropriated some of the gas company’s major holdings. In short, the story you imagine is a farce; a gross distortion of legality.
…avoiding debate over a potential third Presidency for Morales.
Only, this was no story. On 1 May, President Evo Morales of Bolivia seized the property of Red Eléctrica Española (REE), a Spanish energy distribution company, originally acquired in 2002 for $91million. Morales, just after proclaiming theft on a grand scale, then went to play gracious host to an undoubtedly tremulous Repsol delegation. Repsol, as noted, recently suffered a similar experience at the hands of Argentina – now once again enjoying the fruits of Repsol’s labour.
Considering REE had invested some $74million between 2002-2011, the company ought to have been safe from so unilateral abrogation of its rights. Conversely La Razón, a Spanish newspaper, highlights the range of anti-government protests – and the nationalisation’s value in avoiding debate over a potential third Presidency for Morales. REE simply made for a convenient distraction. But even so, why should we care about some under-reported curiosity?
…we need to learn the value of such people…
Firstly, as an analysis piece by Strategic Forecasting (StratFor) underlines, Spain’s economic situation is dire. Much as in the UK, a shrill left consistently undermines struggling conservatives beset by a profligate legacy. Unlike in the UK, however, Spanish youth unemployment stands at 45% while the Bank of Spain predicts further GDP contraction of 1.5% this year. Fortunately, Spanish enterprise stands to make vast profits in Latin America. The anti-business stance of Bolivia, Venezuela and Argentina impinges this, however, and – as StratFor points out – Spain’s economy is large and integrated enough with Europe for its problems to spread readily. In short, Morales’s avarice could hurt an already-vulnerable Spain, with knock-on effects for the rest of us.
Secondly, the story of this theft highlights critical lessons more relevant than ever. That is, it shows us where growth comes from. Repsol’s engineering and economic accomplishment; the functioning of the market on principles of right and legality – such things are what allow nations to prosper. The intervention of Morales’s government, by contrast, resulted merely in the loss of tens of millions of investment, compounding economic woe. Indeed, if anything, we see a vindication of Ayn Rand’s idea of ‘those who move the world’ – the creators, builders, inventors that no economy can do without. If we want a return to growth, we need to learn the value of such people – and the importance of protecting them from Morales and his ilk.