What Can NFL Football Teach Us

By Matt Badiali
September 7, 2006

It began like a bad action movie, with Bolivian troops seizing control of oil infrastructure.

That’s how Evo Morales celebrated his 100th day in office, by declaring all Bolivian oil state property. His idea is neither unique nor new. It springs from a basic human flaw: greed.

Greed takes center stage in the press these days because everybody wants more... Take professional football for example.

The current standoff between the New England Patriots and star wide receiver Deion Branch is rooted in greed. Branch is a former Super Bowl XXXIX MVP and, at least in his mind, significantly underpaid.

But Branch is currently under contract. He and New England signed a five-year contract when he was an untested rookie. Since then the Patriots have not only paid him roughly $1 million a year, but have “invested” significant coaching and training in Branch. The contract expires next year.

If Branch is unhappy with the deal today and the Patriots aren’t, that’s life. Next time, negotiate harder.
Instead Branch refuses to work. He’s trying to force the Patriots to trade him, which would get him a new contract.

This parallels events in Bolivia. Foreign companies have made huge investments in Bolivia since the mid-1990s. In fact, foreign technology and investments increased Bolivia’s gas reserves sevenfold.
Bolivia repaid that investment with confiscation and trumped-up “tax” charges.

Bolivia and other countries of its ilk don’t hesitate to break contracts and steal assets. The leaders of these countries think it’s fine to let companies spend capital developing infrastructure and finding reserves.

However, when the money starts coming in, that asset belongs to “The People.”
How’s that for honoring your word?

Events in Bolivia derailed Morales’ bid at nationalization before it got very far.

Recently, a wave of resignations, backbiting, and recrimination within the Morales government foiled his attempted theft. The state was forced to announce that the plans for nationalization were on hold due to lack of funds and expertise. Morales found out that without trained experts, the oil and gas won’t flow.
For investors, majors offer the most protection during this period of Latin American nationalization.

Although companies such as BP, Total, and Petrobras have invested heavily in the region by Bolivian standards, the global scope of their operations minimizes risks posed by instability in a single country.

For example, only 3% to 4% of BP Group’s proven reserves lie in Bolivia. In contrast, smaller companies with a presence in South America are more vulnerable to a single greedy dictator upsetting their apple carts.

When evaluating oil companies doing business around the globe, it is important to understand the nature of the parties they deal with. With some people, not only is their word not their bond, they won’t even honor signed contracts!