The Global Gas Company (GGC) is headquartered in Norway. The CEO is aware that V

Question

The Global Gas Company (GGC) is headquartered in Norway. The CEO is aware that
Venezuela and Bolivia have some of the world’s largest gas reserves (State University
of Michigan, 2001-2010). In order to provide abundant supply for the future to some of their clients in South America, they want to tap into these vast reserves. But both
countries have difficult political situations at present.
The CEO has called you in as a consultant to analyze the political and economic risk
factors in both countries. The CEO knows that the GGC should start trying to develop a long term relationship to increase the possibility that the company can partner to supply gas to clients over the long term (10 + years). Remember, you are working for a Norwegian company.
Analyze the economic and political risk factors involved in the business scenario.

I did do some research into it regarding managerial benefits, risks, costs and
advantages. We are asked to compare the economic and political “pros and cons” of investing in the gas industry Bolivia and Venezuela.

Here is a major business concept I found and the pros and cons to each country investment-wise: A country’s economic system and property rights regime are reasonably good predictors of economic prospects. Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than command economies or economies where property rights are poorly protected.

Bolivia’s Pros and Cons:
Pros: Bolivia has the second-largest natural gas reserves in South America. Bolivian tariffs are low. President Morales nationalized the hydrocarbon sector. Bolivian exports were approximately $5.3 billion for 2009, up from $652 million in 1991. Imports were $4.4 billion in 2009. Bolivia enjoyed an estimated $900 million trade surplus in 2009. Hydrocarbons made up 38.6% of the exports.

Cons: Foreign direct investment (FDI) inflows have dwindled, as has long-term investment across most industrial sectors. Gas production stagnated; increasing by less than 10% over four years. Companies appeared to be investing only what was necessary to maintain current operations. The Government of Bolivia remains heavily dependent on foreign assistance to finance development projects. Estimations of debt were in the billions.

Venezuela’s Pros and Cons:
Pros: economic growth has been impressive. Government of Venezuela opened up much of the hydrocarbon sector to foreign investment, promoting multi-billion dollar investment in heavy oil production, reactivation of old fields, and investment in several petrochemical joint ventures.

Cons: a largely command economy in which the central government directs the economy regarding the production and distribution of goods. The Venezuelan Government dominates the economy. Environment is characterized by high inflation and foreign exchange controls, have led to reduced space for the private sector and low levels of private investment.

The second part to this is: Based on your analysis, explain which country you would start establishing a relationship with as a basis for potential future business in the gas industry and why.

I have an opinion as to which I would choose, but have some uncertainty and just hoping to post all of this here, to get another (and a more expert based) opinion on this. Sorry for this being so lengthy, and I do appreciate your take on this no matter how short or long it may be. Thank You!

Explanation / Answer

A smart strategy would be to deal with Bolivia due to the fact that Bolivia is less likely to seize your corporate assets as compare to Venezuela. Hugo Chavez/ the president of Venezuela has seize numerous corporate assets without compensation (essentially robbing private investment). President Morales would be easier to deal with and less likely to pull BS.

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