I give Colombian oil companies a lot of scrutiny because I see the hype and excitement sometimes blinding investors to possible problems. But this chart shows why there is excitement.
This is mostly a picture of a policy gone right — the country wanted to boost output and it’s done so. A question this raises for me is when nationalist, rentier populists are going to start raising more of a stink in Colombia’s oil regions with the usual argument that the foreign investors are getting rich while locals remain poor. It’s a cycle, according to people who are smarter than me.
there is an observable tendency of cycling back and forth between nationalization and privatization in both regions.
Latin America has seen cycles of investment and expropriation. For example, in Venezuela large oil investments were made throughout the 1940s and 1950s; then starting in the late fifties a process of systematic increase in the government-take began. The fiscal-take on profits rose from levels around 50%, which prevailed in 1943-1958, to a maximum of 94% in 1974, the year before nationalization (Monaldi, 2002). In different periods, similar episodes have occurred in Argentina, Bolivia, Ecuador, Mexico, Peru, and other developing countries.
It’s possible that Colombia got it just right, and its fiscal take is going to be enough to keep the public happy without diminishing investment. We shall see.
UPDATE: The Wall Street Journal notes this same cycle, in Brazil.