POLICY IMPLICATIONS OF NATIONALIZATION OF OIL AND NATURAL GAS INDUSTRY IN LATIN AMERICA

Nationalization is a particular type of organizational structure where the state or nation controlsthe industry as opposed to private companies or multinational organizations. If one imagines acontinuum of organizational structure, nationalization and privatization would be at oppositeends. Nationalization could include joint ventures where the state controls the industry butallows for private companies to participate in the resource extraction and retain some of theprofit. Within the past few years, Venezuela and Bolivia have announced plans to renationalizetheir oil and natural gas industry.The first part of this project seeks to perform a qualitative analysis to discern the commoncharacteristics of a nationalized country focusing specifically on four countries – Bolivia,Venezuela, Mexico and Nigeria. There are various components influencing the efficiency of anationalized industry including civil society, regionalism, and reliance on oil. The main findingswere that a nationalized country with a high reliance on oil or natural gas and weak financialinstitutions will have an authoritarian form of government, and that there will likely be moreincidences of Latin American countries nationalizing in the near future if oil prices remain high.The project also performs a quantitative analysis on indirect measures of efficiency usingsubsidies and also analyzes the effect of nationalization on social development using the Ginicoefficient (a measure of income equality) and public spending on education. Nationalization isfound to have a positive effect on income equality and a negative effect on public spending oneducation.The project culminates with policy recommendations specifically focused on the four selectedcountries with implications for broader applications. The main objectives of therecommendations are to strengthen financial institutions, diversify the economy, and increasetransparency and accountability of the industry.