The Increasing Impact of the Resource Oriented MNC’s Political Risk in the Investment Decision Process* - Focused on the Bolivian Case -

This paper presents increasing impact of MNC’s political risk in Latin America focusing on the Bolivian case. Morales, the president of Bolivia, announced nationalization of foreign-owned assets on May 1, 2006. In the 1960～1970s, political risks have occurred repeatedly and have led to the nationalization of foreign-owned assets in Latin America and Africa. In the 1980～1990s, political risk did not occurred in the global economy environment. However, political risks happening in recent years such as nationalization are much more serious than previous political actions. Even if political risk is an unusual event in the world economic environment, but it is still increasing in Latin America in particular. This paper analyzes when political risk happens it is seriously unfavorable to investors and can even result in heavy loss. Therefore, Bolivia’s nationalization intimates to Korean firms exploring natural resources to strengthen its global competitiveness.