Bolivia Takes Control Of Energy Reserves From Foreign Firms

Forty-four contracts signed with 10 international companies give Boliva a majority of revenue from its energy sector.

April 26, 2007 -- Contracts ceding control of Bolivia's energy reserves from foreign companies to its government have come into force, as President Evo Morales nationalizes the impoverished state's hydrocarbon industry. The 44 new contracts were signed in October with 10 companies including Repsol of Spain, Petrobras of Brazil, Total of France, Vintage and ExxonMobil of the U.S. as well as BP and British Gas of Britain. They came officially into force on April 24 when Morales signed them.

In May 2006, after he was elected on promises to share the gas wealth with Bolivians, Morales nationalized the industry, scrapping the old contracts on the grounds that they were not enforceable under Bolivia's constitution, which prohibits the state from selling or leasing mineral wealth.

His nationalization decree forced foreign companies to negotiate new contracts giving Bolivia a majority share of revenues generated in the energy sector. Bolivia's Congress formally approved the new contracts on April 19 after political disagreements and mistakes in the documents had caused major delays.

South America's poorest country, Bolivia has the region's second-largest natural gas reserves, after Venezuela. Under the new contracts, the Bolivian YPFB hydrocarbon company owns the reserves, while the foreign companies act as service providers. No major foreign companies left the country rather than accept the new deals, despite a loss of profits.