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Bolivia nationalizes oil, gas industry

Populist leader vows to establish control of natural resources

SANTA CRUZ, Bolivia -- President Evo Morales, who won a landslide election in December vowing an end to foreign ''looting" of the country's natural resources, nationalized Bolivia's crucial natural gas and oil industry yesterday in the latest indication of Latin America's leftward drift.

Morales ordered soldiers to occupy Bolivia's natural gas fields and the president threatened to throw out foreign companies unless they agree to new contracts within six months giving the state control of energy production.

''The time has come, the awaited day, a historic day in which Bolivia retakes absolutely control of its natural resources," Morales declared in a speech from the San Alberto petroleum field in southern Bolivia.

Negotiations are to begin immediately with affected firms, mostly from European and other South American countries. The move should not affect US energy prices because the United States is not a major consumer of Bolivian natural gas or oil, specialists said.

Bolivia's decision is the latest signal of the growing leftist orientation in Latin America, where Morales is closely allied with Cuba's Fidel Castro and Venezuela's Hugo Chavéz, both critics of US policy. Morales signed the nationalization decree after returning from a trip to Havana, where he was welcomed by both Castro and Chavéz. The trio proposed a new trade block to counter what they called US domination in the region.

Morales, wearing a helmet of the state energy firm, chose May 1, International Day of the Workers and a national holiday here, to unveil his nationalization plan. There was little overt reaction on the streets of this bustling eastern Bolivian city, a stronghold of anti-Morales sentiment where a civic shutdown is planned later this week to protest Morales' governance.

Last evening, Morales addressed a roaring crowd in La Paz, the Andean capital where he has strong support, especially among the poor and working classes tired of a lack of social progress in South America's poorest nation.

The Bolivian government's plan appeared to be less of an outright takeover of foreign assets than a mandatory sale of most assets to the government energy concern. Morales has indicated a willingness to allow some foreign companies to remain as minority shareholders under his new terms.

Bolivia has the continent's second-largest natural gas reserves, after Venezuela, but most of its capacity remains untapped because of a lack of infrastructure and investment. Much of its gas is sold to Brazil and Argentina. Petroleum production is less significant.

Morales and his aides depicted the move as a bold stroke for the man who rose in 10 years from a regional representative of coca leaf growers -- the raw ingredient in cocaine -- to become the first Indian president of a nation that is largely of Indian and mixed-race origins.

It remained unclear where Bolivia would secure the funds to purchase the private assets for its state energy concern, Yacimientos Petroliferos Fiscales Bolivianos, and how much the government would be willing to pay -- market value or a price dictated by the Bolivian government.

''The big question is where the money is going to come from, and, who will set the prices," said Eduardo Gamarra, a Bolivia specialist at Florida International University in Miami.

International companies say they have invested some $3.5 billion in the Bolivian energy sector since the mid-1990s, when the formerly state-run industry was privatized in a move that Morales harshly criticized during his successful campaign. Investors worry that they will not be able to recoup the monetary resources they plowed into Bolivian gas fields, pipeline and other infrastructure since the government shed what was viewed by many as an inefficient and plodding state monopoly a decade ago.

In recent years, two Bolivian presidents have been chased from office because of protests emanating from citizens' perceptions that gas and other natural resources were being siphoned off by foreign concerns and wealthy Bolivian allies. Morales' allies had called for a quick nationalization of gas and oil reserves.

Morales' election has already sent a shock wave to international investors, and yesterday's announcement seemed likely to make foreign companies hesitate even more to pump money into Bolivia, the poorest nation in South America.

But Morales and his supporters have argued that a new way of doing business is needed, because foreign companies have plundered the national resources for decades without reducing a poverty rate topping 60 percent.

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