As with many privatizations elsewhere, there are questions as to whether the foreign investors have kept their side of the bargain. Bolivia contributed to these joint enterprises not only with resources, but also with previous investments. The foreign companies' contribution was supposed to be further investment. But did they fully live up to their commitments? Are accounting gimmicks being used to overstate the true value of foreign capital contributions? Bolivia's government has, so far, simply raised questions, and set in motion a process for ascertaining the answer.
The problem in Bolivia is a lack of transparency when contracts are signed and afterwards. Without transparency, it is easy for citizens to feel they are being cheated -- and they often are. When foreign companies get a deal that is too good to be true, there is often something underhanded going on. Around the world, oil and gas companies have themselves to blame: too often, they have resisted calls for greater transparency. In the future, companies and countries should agree on a simple principle: there should be, to paraphrase President Woodrow Wilson's memorable words, "open contracts, openly and transparently arrived at."
If the Bolivians do not get fair value for their country's natural wealth, their prospects are bleak. Even if they do, they will need assistance, not only to extract their resources, but also to improve the health and education of all Bolivians -- to ensure long-term economic growth and social welfare.
For now, the world should celebrate the fact that Bolivia has a democratically elected leader attempting to represent the interests of the poor people of his country. It is a historic moment.
Joseph Stiglitz, a Nobel laureate in economics, is professor of economics at Columbia University.
Copyright: Project Syndicate
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