January 4, 2006

Spain cancels Bolivian debt as Morales tour starts

By Joe Ortiz

MADRID (Reuters) - Bolivian president-elect Evo Morales
said on Wednesday that Spain had agreed to forgive most of its
$120 million debt burden and support the South American
country's aim to fight poverty.

Speaking on the first leg of a 10-nation tour after his
election win, the former coca leaf farmer was nevertheless
adamant about the South American country's desire to regain
control of its wealth.

"Bolivia needs economic partners, not owners of its natural
resources," he told a news conference.

Following a meeting with Spanish Prime Minister Jose Luis
Rodriguez Zapatero, Spain agreed to cancel "most" of Bolivia's
debt in exchange for spending on education. Further details
would be provided in coming days, officials said.

Madrid would also help Bolivia to develop more modern
farming methods, the president-elect said, especially in the
area of irrigation.

But Morales warned off foreign businesses in Bolivia who he
described as "smugglers" and said the government would be
"radical" with companies who did not respect the rules and
especially those who try and avoid tax payments.

Morales has said energy companies will have to renegotiate
operating conditions in the country, and will lose their rights
to extract natural gas at the well head.

He has also spoken of nationalizing the oil industry by
decree, but has said he will not seize assets and therefore not
compensate foreign companies.

"We won't confiscate or expropriate or expel companies,"
Morales said, adding that the wish of companies to see a strong
legal framework in the country would only be possible if
Bolivians also gained social justice.

Morales told reporters that Bolivia would consider seeking
full membership of the Mercosur trade bloc but only after he
was convinced that it would be beneficial for Bolivia.


Morales also had lunch with Spanish business leaders,
including officials at energy group Repsol YPF, which has oil
and gas rights at stake in Bolivia.

"(Morales) was very receptive, above all the Bolivians
wanted to know the point of view of Spanish businessmen. It has
helped to calm people down," a source present at the lunch

That chimed with comments from Spain's Industry Minister
Jose Montilla, who said Morales had taken a "prudent" line on
the possible nationalization of his country's gas industry.

Asked if Morales had mentioned nationalization or
expropriation of foreign company assets during their meeting,
Montilla told reporters: "No. He was very prudent."

"There will be certain changes to the rules of the game ...
but it's too soon to talk about that," Montilla said. "He
hasn't taken office yet."

Morales arrived in Spain from Venezuela and a warm
reception from President Hugo Chavez. Last week he saw Cuban
President Fidel Castro.

The three leaders have forged tight links thanks to their
leftist ideologies and deep opposition to what they see as U.S.
imperialism in the region.

As a former leader of Bolivia's coca farmers, Morales also
wants support for his plans to protect coca crops to help
Indians, the main point of contention with Washington which has
heavily financed coca eradication campaigns to cut down on
trafficking from the third-largest cocaine producer.

Zapatero for his part had to make amends for an
embarrassing radio hoax in December when a Spanish
church-controlled station called Morales, pretending to be the
Spanish prime minister, to congratulate him on his election

Morales took the call seriously and the radio said he
reminded the spoof Zapatero of Spain's promise to double aid to
Bolivia. The Bolivian government later protested to Spain.

The Spanish premier has strengthened ties with Bolivia's
strongest ally Venezuela and openly defied U.S. policies.

Zapatero's first move when elected in 2004 was to pull
Spanish troops out of Iraq. He has further angered Washington
in recent months by selling military ships and planes to
Venezuela despite U.S. pressure to scrap the deal.

Zapatero promised to visit Bolivia soon.