Investors should beware of banks refusing to issue letters of credit (L/Cs) to natural resource companies operating in politically volatile countries where leaders are threatening to nationalise metal and mineral resources.

The warning appears in MoneyWeek, the fast growing four-year-old British financial magazine that has tripled its circulation in the past three years.

Political manoeuvres

Investors should be wary of metals or oil stocks - particularly those that exist only to exploit one natural resource project - exposed to the unpredictable policy decisions of governments in Bolivia, Venezuela and the former Soviet Union, MoneyWeek recommends.

Citing the nationalisation of oil assets in Bolivia by its President Evo Morales, the magazine suggests that such political manoeuvres motivated by leaders' desire to cure economic hardship could backfire.

L/C warning

"What if the banks start withdrawing L/Cs for Bolivian companies?" asks MoneyWeek, adding that Morales has promised to renationalise the local mining industry too.

Morales' point of view is simple to understand. "Bolivia's natural resources have been exploited for 500 years and it ends now," he has said.

His comments may play well to the domestic audience but foreign investors and their bankers will not find the Bolivian leaders' words so comforting, suggests MoneyWeek.

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