In 2006, Bolivia elected its first ever indigenous president, Evo Morales, who was quick to denounce external interference in national affairs. This included foreign economic interests in the country. Strategic natural resources – natural gas, oil and water – were brought under state ownership and declared the dominion of the people of Bolivia in a new constitution in 2009.

Yet seven years on, the question remains: how well is this resource nationalism implementedele on the ground – does it represent a complete rejection of foreign investment? And what are the implications of this focus on natural resources for political instability?

In reality, Bolivia’s economy comprises public and private elements, and Morales has in recent years launched an extractive agenda, whereby the state manages profits. Natural gas and mining comprise Bolivia’s two most productive sectors, and revenues are used to fund large-scale social welfare projects. Fifty percent of the country’s budget comes from gas. Bolivian regulatory frameworks are still unevenly applied; although, notably, the government is looking to promote foreign investment in specific areas of the economy. At present, in the extractives sector, only two major mines are foreign-owned (Japanese and Chinese) and the state company YPFB is the sole producer of gas. However, it has recently been discovered that Bolivia holds the largest lithium deposits in the world. This lucrative metal is being coveted by China and India, due to it being the key material for lithium-ion batteries – the leading technology for electric car and mobile phone batteries. Analysts are dubbing Bolivia a potential ‘Saudi Arabia of lithium’, while foreign companies have already bid for investment rights for processing plants.

As in many other resource-rich states, Bolivia’s abundance of natural resources is not without its socio-political consequences. The country’s turbulent history, punctuated by several ‘resource wars’, indicates that resource politics can be a highly contentious matter. Indeed, in August 2016, the deputy interior minister was kidnapped and subsequently murdered by disillusioned workers from mining cooperatives. The protesters have been demanding the right to work for private companies, and some of Morales’ core indigenous supporters perceive the regime as becoming increasingly authoritarian. The president’s commitment to an extractive agenda is criticised for being at odds with written statements in the constitution, which advocate conservation and indigenous rights to native community lands. The negative impacts on the environment from extractive activities can trigger sharp resentment from indigenous communities. This is especially the case since the government altered the law of ‘prior consultation’, which has been reduced to a requirement of only three meetings between the stakeholders concerned.

As proven, the localised disputes between government and citizens can quickly turn violent and the frequent road blockades are detrimental to economic productivity. These backlashes underline the importance of having a social licence to operate. Failure to account for the impacts and risks from the viewpoint of local communities can create new risks and hence incurable losses for investors.

Given the irregular and changeable institutional framework, broader national political developments should be monitored closely. Investors would be advised to build relationships with key government departments. Following this, it is important to consult thoroughly at a local level with affected communities, and keep informed of potentially volatile local politics.