Vanderbilt Journal of Transnational Law


Henry B. Steele

First Page



This paper constitutes an attempt, in a very brief compass, to provide an historical survey of the traditional roles of government and private enterprise in the exploitation of Latin American petroleum resources, to evaluate the current situation, and to speculate in a limited manner on the future implications of present developments. The basic analytical frame of reference is that of economics, but since the petroleum industry is a world industry, developments in the Latin American petroleum industry must be placed in the wider context of world oil industry economics and politics. From the standpoint of economic analysis, the major conflict between companies and governments appears to be their divergent goals: the companies strive to minimize costs, while the governments insist upon maximizing the companies' contribution to national treasuries. Expropriation is of course the most dramatic of the recurring themes in Latin American petroleum, and can be understood not only in terms of the vulnerability of foreign private investment to local military force, but also as a matter of economic logic in an extractive industry such as petroleum. In addition, the decision to expropriate may reflect the belief that the nation's oil industry is growing too rapidly. This growth may seem excessive relative to reserves, or it may be feared that unchecked growth over too long a time may produce an industry too large for the state to control. Regardless of intentions, expropriation generally reduces the role of a nation's oil industry in world trade and orients it increasingly toward domestic consumption rather than export specialization.