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Glencore on Friday warned the Bolivian government that its move to nationalise one of the commodity trader’s mines would endanger foreign investment in the crucial mining sector.
Glencore “strongly protests” about the move, it said in a statement after receiving a decree from the government ordering the nationalisation of the Colquiri tin and zinc mine.
The London-listed trader said that the nationalisation “will pose a number of serious questions relating to the government’s future policy towards foreign investment in the mining sector”.
The move is the latest in a series of nationalisations by the leftwing government of President Evo Morales. It follows violent clashes between different groups of miners at Colquiri, which is owned by the state mining company but operated by Glencore’s Bolivian subsidiary under a long-term licence. Mining is one of the most important sectors in the Bolivian economy, accounting for about 15 per cent of gross domestic product. The country is the world’s fourth-largest miner of tin, used in soldering, and the seventh-largest producer of lead, used mainly in batteries.
But foreign investment in the mining sector has dwindled amid uncertainty about government policy, with companies focusing their attention on existing mines rather than developing new ones.
Glencore said that it reserved the right “to seek fair compensation pursuant to all available domestic and international remedies”. While the Bolivian government has said it will compensate Glencore for the value of the equipment at the mine, the trader could also seek compensation for the value of its operating lease, analysts said.
Colquiri is the largest of five mining concessions held by Glencore’s Bolivian subsidiary. While the company does not separately publish the earnings of its Bolivian subsidiary, analysts estimate that it contributed about 1 per cent of the company’s profits of $4bn last year. Glencore has invested a total of $80m in Bolivia and $22m in Colquiri since 2005.
Mr Morales ordered a reform of Bolivia’s mining code in March last year, intended to give the state a greater role. The push comes amid a trend of resource nationalism as countries from Australia to Mongolia seek a greater share of the profits of the commodities boom. In April, Argentina expropriated the oil company YPF from Spain’s Repsol, a move that drew international condemnation.
Glencore said that before the nationalisation it had been finalising an agreement which would have given the Bolivian government participation of up to 55 per cent of profits. The company had also been planning to pledge investments of $160m in the country over the next five years, it added.
Since he came to power six years ago, Mr Morales has nationalised the Bolivian operations of Brazil’s Petrobras in 2006; a telecommunications company owned by Telecom Italia in 2008; four electricity companies in 2010; and, most recently, the Spanish electricity grid operator Red Eléctrica’s business last month.
Jindal Steel & Power of India, another major investor, has threatened to pull out of the country over a long-running dispute over natural gas supply to its $2.1bn steel project. Other investors in the Bolivian mining sector include the North American groups Pan American Silver, Coeur d’Alene Mines and New World Resources as well as China National Gold Group.