Introduction

Over the past 25 years, Latin American governments have undertaken a structural-adjustment process including, among other actions, the elimination of trade barriers, privatization of large public domestic firms and deregulation of markets. This move towards deregulation and market reform has included a new embrace of foreign direct investment, even in the strategic oil and gas industries. Considering the former regulations and polices in this sector introduced during the nationalization wave of the 1970s, the transformation has been amazing: foreign investors have not only been welcomed but have even granted proprietary rights over extracted oil. Most Latin American oiland- gas-producing countries agreed to fix royalties at very low levels. Furthermore, the 1990s witnessed the rise of bilateralism (bilateral investment treaties (BITs) plus International Centre for Settlement of Investment Disputes (ICSID) jurisdiction), which transformed the institutional framework governing the relationship between foreign investors and host states.

Paradoxically, after a decade of market-friendly reforms and neoliberal policies, the beginning of the new millennium was marked by economic crisis, social conflict, and political turmoil.

The Andean countries (Bolivia, Colombia, Ecuador, Peru and Venezuela) are usually grouped together for analytic purposes. However, the countries on which this chapter focuses (Bolivia, Ecuador and Venezuela) share some particularities, calling for an analysis separate from the rest (Colombia and Peru).