1. The George Washington University Washington D.C. March - 2002 Overcoming barriers to investment in the A view from the Southern Cone

2. Scenario Since Bolivia is a gas exporting country, my presentation aproaches the subject from the point of view of gas reserves and gas transportation.

3. Eastern Europe 37.89% Western Europe 3.01% Latin America 4.73% North America 4.90% Far East Far East 6.91% Africa Africa 7.46% 35.10% Middle East Middle East WORLDWIDE NATURAL GAS RESERVES Source: OGJ Worldwide Production Reports 1-Jan-01 Bolivia De GOLYER & Mac Naughton Bolivia De GOLYER & Mac Naughton January 2001

4. Venezuela 46.4 % Chile 1.4% Ecuador 1.2 % Colombia 2.2% Brazil 2.5% 4.2% Peru Trinidad & Tobago 6.7% Bolivia 17.3 % México 9.6 % Argentina 8.6% LATIN AMERICA: NATURAL GAS RESERVES Source: OGJ Worldwide Production Reports 1-Jan-01 Bolivia De GOLYER & Mac Naughton Bolivia De GOLYER & Mac Naughton January 2001

5. 1.83.25.310.920.058.8 100.0 %4.48.013.327.450.0 147.6 * 250.7 TCF Chile Chile Brasil Brasil Perú Perú Argentina Argentina Bolivia Bolivia Venezuela Venezuela TOTAL Country Natural Gas : Certified Reserves in South America

6. Fuente: YPFB 5.69 8.58 6.62 32.21 46.83 Growth since 1997 800% 50.00

7. InversiónTotal 5 –6 billones de US$ 4,240 Millas naúticas West Coast Australia 9,900 Millas naúticas Islas Sakhalin 4,000 Millas naúticas

8. S.A. Hydrocarbon Position ExporterImporter OilGasOilGas Venezuela Yes Yes Colombia Yes Guyana Yes Ecuador Yes Bolivia Yes Yes Argentina Yes Yes Peru Yes Yes Chile Yes Yes Paraguay Yes Yes Uruguay Yes Yes Brazil Yes Yes

9. Hydrocarbon Supply and Demand Hydrocarbon importing countries in S.A. purchase their oil requirements from Venezuela, Colombia or Ecuador. Brazil is the only country with major purchases from the international market. Gas is exported from Bolivia and Argentina Conclusion: S.A is capable of supplying its hydrocarbon needs with significant export surpluses

10. Cuiabá Bolivia - Brasil Mexico – U.S.A. interconnections Mexico – U.S.A. interconnectionsTransportationSystemExistingInternational Gas Pipelines

11. GasAndes Pacífico NorAndino Atacama Methanex International Gas Pipelines

12. Uruguaiana International Gas Pipelines

13. .. Mexico – Itsmo Centroamericano Colombia - Venezuela Bolivia - Paraguay Bolivia - Chile Projected Gas Pipelines De la Integración

14. Transportation System Investments in physical integration will encourage the energy integration in the region To have a free flow of energy among the countries it is necessary to promote the physical integration of gas pipelines. Conclusion:

15. To overcome the Investment barriers The investing Corporation needs: Significant hydrocarbon potential Reasonable Infrastructure Stable Laws of Hydrocarbon Political stability Contract and Tax stability Reasonable Return on the Investment Acceptable Environmental Laws Compatible Regulations

16. To overcome the Investment barriers The host country needs: Technical and Financial Capabilities Parent company guarantees Government take between 35-50% Surtax inclusion Apply country regulatory system Apply country environmental Law Accept and recognize social needs of the people

17. Obstacles to investment The absence of compatible regulations as well as the disparity of legal and institutional frameworks Restrictions of different hydrocarbons laws Bolivia, Law 1689 Transfers activities to private investment through joint venture contracts. Transfers UPSTREAM activities to private investment through joint venture contracts. Establishes a transparent process for the nomination of exploration areas. Eliminates any restrictions for the import, export and domestic marketing of hydrocarbons and its byproducts. Opens activities to private sector investment. Opens DOWNSTREAM activities to private sector investment.

18. Obstacles to investment Restrictions of different hydrocarbons law Exploration, Exploitation and Marketing are activities reserved to the State Transport, Storage and Distribution: activities open to private investment Mexico Construction, operation and ownership of systems. Marketing, exports and imports Open access to the pipeline system

19. Two political trends clearly defined coexist in Latin America: A comparison between two approaches State Oil companies, that increase their participation in the economy Brazil, Mexico, Venezuela and Ecuador Increased their revenues due to the high oil prices

20. Two political trends clearly defined coexist in Latin America: A comparison between two approaches Countries where privatization of state owned companies took place Argentina, Bolivia and Peru Increase in the investment in exploration and exploitation over the last five years

21. Protection of the land Indigenous Territories Protected Areas Exploration & Exploitation Approximately 40%, 420.000 sq km, of Bolivia´s territory is closed for investment

22. The Caño Limon oil pipeline, 230.000 bpd of capacity, runs 780 kilometres from Colombian's oil fields north-eastern Arauca department, near Venezuelan border, to the port of Coveñas Caño Limon is jointly operated by Colombian state oil company Ecopetrol and the U.S. oil company Occidental Petroleum Terrorism Colombian case

23. These attacks can be compared with the worst marine spills: Terrorism Since 1986 there has been 700 attacks again the pipeline which caused an overalll spillage of 2.2 million barrels of oil. 1967: Torrey Canyon off land´s end in England spilled 830,000 barrels. 1978: Amoco Cadiz off the Brittany coast of France spilled 1.6 million barrels of oil. 1989: Exxon Valdez in Alaska spilled 240,000 barrels.

24. Concluding remarks Infrastrcture is required to continue with the process of integration thus making investments possible. Equilibrium between an open market economy and the social responses to satisfy the needs of the countries. To overcome barriers to private investment in energy it is crucial to promote the sustainability of democracies.

25. Concluding remarks Terrorism is a barrier to which we do not have an answer today but it is related to education and to the understanding of a new social state of affairs in the world.

26. Concluding Remarks The understanding of the major corporations of this new social state of affairs will help in overcoming the investment barriers in Latin America

27. www: energia.gov.bo email: enerhid@energia.gov.bo

28. Gasoducto de la Integración Source: Ministry of Mines and Energy, Brazil Petrobras and Snam of group ENI signed in June of 2001 an agreement for the accomplishment of a technical and economic viability study. Lenght:Investment: 5,250 km $US 5 billion The project directly involves to Brazil, Bolivia, Argentina and Paraguay, and in the near future extend to Uruguay. Back

29. Energy Integration between Mexico and the USA Rosarito Naco Ciudad Juarez Piedra Negras Arguelles Reynosa PEMEX has eigth interconnections with United States Natural Gas Network Mexicali Samalayuca Back

30. Obstacles to investment Restrictions of different hydrocarbons laws Argentina, Law 17319 Exploration permits are granted by the Executive Branch Exploitation permits are granted by the Executive Branch Stablishes the free comercialization of natural gas, nevertheless, exports are subject to previous authorization and satisfy the domestic consumption. Free import of hydrocarbons Free determination of prices, with the exemption of Transport and Gas Distribution rates which are regulated

31. Obstacles to investment Restrictions of different hydrocarbons laws Peru, Law 26221 Licences for exploration and exploitation are issued by Perupetro The main objective of the legislation is to encourage private investment in exploration and exploitation of hydrocarbons Tax and exchange rate stability are guaranted by contract

32. Protection of the land – Bolivian case Pipeline San Miguel – San Matías Indigenous Territories Protected Areas Modification of the route to reduce the impact on the Chiquitano forest Constitution of the foundation for the Chiquitano forest (US$ 20 million) * Implementation of the Indigenous Development Plan (US$ 2.0 million) Program of reforestation Pipeline Bolivia - Brasil Indigenous Territories Protected Areas Participation in the Trust Fund (US$ 1.7) Implementation of the Indigenous Development Plan (US$ 2 milllion) Indigenous Territories Protected Areas *: OPIC’s requirement