Bolivia´s Commerce Code has existed since 1976. Since then it has not suffered any substantial modifications, other than small updates through executive decrees and resolutions. In a young country with so much economic potential, where two thousand new companies are created every month, the existence of a new statue that incorporates the legal scheme of a split off process is fundamental in order to avoid an economic pull-back that would slow down commercial development for companies and the country as a whole. However, this corporate restructuring is currently not regulated by the Commerce Code. Nevertheless, certain tax and financial related executive decrees and resolutions opened up the possibility of split offs in Bolivia, but the regulations were not clear in that aspect. In fact, the first approved split off process by the Commerce Registry was in 2008 and since then only 13 cases have been submitted.
"We have a new Constitution. They are altering the laws in many industries," says one partner....
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"We have a new Constitution. They are altering the laws in many industries," says one partner. "Many things are changing here in Bolivia."
Over the past year, President Morales issued a decree that revoked the decades old neoliberal charter passed by former President Victor Paz (Decreto Supremo 21060). The government also announced that numerous legal provisions, including laws in the banking, capital markets, mining, telecom, forestry, hydrocarbon and energy sectors, will be revised. The overhaul of different parts of the legal system, coupled with the government's nationalisation agenda, has stymied private investment and created uncertainty in the markets.
The shift away from the market economy of the 1990s has reshaped how law firms service their clients. For example, one partner points out that the new labour law regulations have had an effect on the operation of all businesses. "Regulation that affects labour law creates a system of stability," he concedes, but points out that the change "has affected the day-to-day life of most companies in Bolivia". One aspect that has come in for criticism is the decision to place the burden of proof on the employer to justify an employee's termination.
The lack of investment may also be taking a toll on what had been President Morales' comfortable political status. Fiscal necessities, including budgetary overruns and growing inflation, have forced the government to review popular fuel subsidies, presenting the administration with one of its greatest political challenges.
On a brighter note, the government announced gas concessions for the first time since it seized the industry's fields and refineries. Firms will be hoping to see more work relating to this after a relative drought, with no new mining contracts granted in the last two years.
The government's popularity is usually helped by nationalising key industries, namely in mining and hydrocarbons, and redistributing the country's wealth. In 2010, "the same pattern of nationalisation has continued," says one lawyer. But the constant threat of such procedures has frightened industry leaders and slowed economic activity. "People in Bolivia are very scared in industry right now -there is little legal security provided by the government," says a legal insider. "But high risk, high reward. There are record prices in minerals."
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