• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Morales Seizes Control of Natural Gas Industry

Posted on: Tuesday, 2 May 2006, 06:00 CDT

By Tyler Bridges, The Miami Herald

May 02--LIMA -- Bolivian President Evo Morales Monday decreed that foreign companies must give his government a majority stake in his country's natural gas industry, and said the state will decide who can buy the gas and at what price.

Morales also said he would quickly deploy soldiers and engineers with Bolivia's state-owned oil company to guard gas fields and processing plants, and gave the foreign companies six months to agree to the changes or leave the country.

His move is likely to displease Brazil, France, Spain and Great Britain, all of which are home to major energy companies hit by Morales' move. But it is likely to win favor in Cuba and Venezuela, Morales' closest allies and Washington's two least favorite countries in Latin America.

Speaking at an international Workers Day rally in the San Alberto gas field in southern Bolivia, Morales called the move a "nationalization." But the phrase is a misnomer since the government didn't take total control of the foreign companies as Latin American governments have done in the past.

What Morales decreed was drastic enough, however. Even though the foreign companies could continue to operate in Bolivia, they will have to allow the government to take 51 percent ownership of several companies and two refineries. The government also will decide who will buy the gas and at what price. Analysts were quick to note that the exact details of his decree remained unclear. Morales didn't explain, for example, how his nearly bankrupt government will reimburse the companies for their share of the production facilities.

POPULIST

Morales, an Aymara Indian elected in December on a populist platform, also raised taxes from about 66 percent to 82 percent on the operators of the two biggest gas fields, Brazil's Petrobras and Spain's Repsol.

"The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources," Morales said in the San Alberto field, operated by Petrobras in association with the Spanish-Argentine Repsol YPF and Total of France.

"The looting by the foreign companies has ended," he declared.

His announcement was expected to be wildly popular among Bolivia's nine million people, but be greeted with hostility by the foreign companies, which had already nearly frozen their investments in Bolivia under this government.

Losing those foreign investments risks sending the economy into a tailspin because the government has been counting on taxes from natural gas production to build schools, pave roads and create jobs.

"I think the companies will end up selling their assets," said Juan Cariaga, a former finance minister, speaking by telephone from La Paz. "Who will stay here to have your capital run by someone else? Who will stay under those conditions?"

The Spanish government expressed "deep concern."

Analysts long had been anticipating a Morales decree on the natural gas industry because he pledged during the presidential campaign that he would "nationalize" the industry. In the past three years, debates over how to manage Bolivia's natural gas reserves, the second biggest in Latin America after Venezuela's, have helped topple two presidents who were seen as too cozy with the foreign companies.

But Monday's decree went further than expected, perhaps for political reasons, said Roseanne Franco, an energy analyst with PFC Consulting in Washington. "The government has been facing more protests -- strikes by medical workers and others," she said. "This may have been a tool to strengthen him." Approaching 100 days in office, Morales has seen his popularity drop from 80 percent to a still-enviable 60 percent.

POLITICAL BATTLE

He also may be looking for increased support for an upcoming political fight. On July 2, Bolivians will elect representatives to a convention that will rewrite the country's constitution, and the official campaign kicks off today. Morales wants a new constitution that he says will better serve the country's Indian majority.

Morales "is making political speeches to win votes for the Constituent Assembly," said Eduardo Bracamonte, head of an association of exporters from the Bolivian capital city of La Paz.

Bolivian Vice President Alvaro Garcia told The Miami Herald by telephone from La Paz the decree was not influenced by politics and added that foreign companies should not be upset because they will be allowed to continue to make a profit. "This is not an expropriation," Garcia said. "We simply want to know what they're doing and have a greater say in what they do."

Monday's decree should have no impact on natural gas prices in the United States. U.S.-based companies have little presence in Bolivia. And while the State Department is expected to be unhappy with Morales' decision, it is not likely to provoke a strong response from Washington. More likely will be a response from Brazilian President Luiz Inacio Lula da Silva, who has tried to cultivate a relationship with Morales.

The leftist Lula da Silva has counseled Morales to follow his lead and get along with business and industry. Instead, Morales has joined Venezuela's Hugo Chavez and Cuba's Fidel Castro as ardent opponents of free trade agreements with the United States. He was in Havana Saturday to sign a trade agreement with those countries.

Garcia said Bolivia wants to retain close ties with Brazil, the biggest buyer of Bolivia's gas, but that Petrobras "long ago recouped its investment in Bolivia. Making windfall profits is no longer sustainable."

-----

Copyright (c) 2006, The Miami Herald

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

NYSE:PBR, NYSE:REP,

Source: The Miami Herald

More News in this Category