The Political Economy of Oil Production in Latin America

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Abstract
In contrast, in the last five years, there has been a new wave of resource nationalism in the region, with increases in the government-take and state control. Oil taxes have been significantly increased in Argentina, Bolivia, Ecuador, and Venezuela. In addition, in Bolivia and Venezuela there has been a partial nationalization of oil projects. In this paper, we argue that the recent trend is largely the outcome of the rise in the international price of oil. Furthermore, we show how the likelihood of expropriation increased after a period of successful investment in exploration and production. Nevertheless, there has been significant divergence in the timing and direction in which the sector has evolved across the region. In contrast to most other countries in the region; in Brazil, Colombia, and Peru, the institutional framework and the property rights of private oil producers have been generally strengthened. In the paper we provide a political economy rationale for the divergent evolution. The general pattern of development that we are witnessing in the oil sector is not new. Historically, the evolution of oil and gas production in Latin America has seen cycles of