Indians Cheer Bolivia Nationalization, Big Oil Concerns

Location: Bolivia
Author: Ellen J. Silverman
Date: Friday, May 5, 2006
 

Oil companies in Bolivia reassessed their investment plans on Wednesday, as regional leaders prepared for an emergency summit to discuss President Evo Morales' nationalization of the energy industry.

In the poor city of El Alto, leaders offered up coca leaves in traditional ceremonies to cheer Morales for seizing control of oil and gas fields from foreign companies, signaling the strong domestic support for his decision.  But the leftist's action alarmed investors and worried Bolivia's South American neighbors and European allies whose companies operate in Bolivia.

Brazil is the largest investor in Bolivian energy through state oil company Petrobras with $1.5 billion in investments.  Brazilian President Luiz Inacio Lula da Silva played down any diplomatic friction between the two countries over Morales' decision.  "There is no crisis between Bolivia and Brazil and there will be no crisis," he told reporters. "Our differences will be resolved around a negotiating table."  But Petrobras Chief Executive Jose Sergio Gabrielli said the company was scrapping plans to expand a natural gas pipeline from the Andean country. The project would have increased capacity by 50 percent from the current 30 million cubic meters per day.

Spain's government said it would dispatch a delegation to La Paz to discuss Morales' nationalization which also calls for higher taxes and caps companies' revenues.  Morales has given foreign firms 180 days to sign new contracts with his government.  The nationalization is an "isolated problem" that requires "diplomatic and political efforts," Spanish Prime Minister Jose Luis Rodriguez Zapatero said.  Spain's Respol is a leading player in Bolivia.

On Thursday, Morales is expected to meet with Brazil's Lula, Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez to discuss the impact of the new energy rules.  Argentina is the second-biggest market for Bolivian gas.  Chavez arrived in La Paz late on Wednesday before the presidential summit.  Chavez and Morales emerged from a three-hour meeting to announce a "strategic alliance" between Bolivia's state-owned YPFB and Venezuela's PDVSA to develop gas industrialization projects, a partnership to be formalized later this month.  "Some companies have said they will not invest any more and they have the right to not invest, we have many offers for investment and calls from interested companies," Morales said.  When asked whether Venezuela would help YPFB operate Bolivia's natural gas fields in the short term, Chavez said PDVSA was "at their service."

During a visit to gas facilities earlier in the day, Bolivian Energy Minister Andres Soliz said the decree marked a break with past exploitation. "They always told us we didn't know how to manage our resources and because of that we needed foreign companies. All that's finished now," he said. 

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