Tension That Can Often Exist

¶ … tension that can often exist between multi-national corporations (MNC's) and their host countries. The actors involved in this story include the government of Bolivia, whose current president is Carlos Mesa, the Movement to Socialism Party, an indigenous group mainly responsible for pressuring the government to get tough with the MNC's, and the foreign gas companies that came to the country because of its large gas deposits. These major corporations include Petrobras of Brazil, Repsol of Spain, Total of France and British Gas.

The story of what occurred in Bolivia was that President Mesa recently approved a bill that would drastically raise the taxes incurred by the foreign gas companies. It was passed on Tuesday May 17, 2005 and took place in the city of La Paz and within the Bolivian Congress. The companies would have to now pay a 32% tax in addition to the 18% fee they already pay. They are also required to form more partnerships with the Bolivian government.

In terms of why this happened, this bill was made in response to pressures from groups like the Movement to Socialism Party, which consists mainly of Bolivia's peasants and laborers, who believe that MNC's are robbing their country of its natural resources. While it was hoped that the bill would placate these groups, it was instead hailed as too soft a measure against the MNC's and now Bolivia's anti-globalization movement is promising more protests.

The MNC's meanwhile have become alarmed at the government's actions and are now admonishing it that any further anti-MNC bills would force the corporations to flee the country, leaving many abandoned and unexplored gas fields behind. The concepts discussed in class that can be related to this story are those regarding what multi-national corporations are, why they often invest abroad, and why they may experience tensions with their host countries.

A multi-national corporation is composed of businesses that control production assets in various countries, but maintain their headquarters in one particular country. Usually the country where the MNC's ownership is located is part of the industrialized world and the countries where the production assets are located are part of the developing world. In this particular instance, the various MNC's had their headquarters in Brazil, France, Spain, and the UK.

One of the reasons why MNC's may invest abroad is so that they can utilize the natural resources located within a particular country. Often a third-world country may be rich in resources but has no means to extract those resources for use. MNC's come in to provide those means and make a profit for themselves while doing so. In this case the country of Bolivia is Latin America's second-largest source of gas deposits but it has no indigenous corporations to extract them.

The MNC's came and invested $3.5 billion worth of performing this function. The tension that often comes to exist between the MNC's and their host countries is due to various reasons. One of the foremost reasons is that oftentimes, the country's citizens believe that the MNC is cheating them of the wealth derived from the country's resources. This would lead to public pressure on.