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BOLIVIA: Bolivia threatens to seize energy assets

by Juan ForeroInternational Herald Tribune
May 4th, 2006

Bolivian authorities plan to scour the financial records of foreign energy companies and have threatened explicitly for the first time to seize company assets if new contracts giving the state greater control can not be negotiated.

Wearing a hard hat and flanked by uniformed police officers, Andres Soliz Rada, the energy minister, reiterated Wednesday that multinational companies had six months to negotiate new contracts, many of which would be likely to vastly increase the state's take.

"If the negotiations do not go well, we could go to the next step, expropriation," he said, adding that the companies would be compensated. But the first step, he said, was an audit of foreign company documents: "It's time to open the black boxes of the petroleum companies."

Soliz Rada spoke at a news conference at a refinery run by Petrobras of Brazil, the company with the most to lose in Bolivia. Here, as at other private oil installations, military police guarded the entrances, searching cars to make sure no documents were being removed.

Bolivian officials said the briefing was intended to reassure foreign multinationals here, but it seemed to have the opposite effect, and the message was unmistakable: the government is now in charge, and the companies can take it or leave it.

President Hugo Chávez of Venezuela, who dreams of uniting Latin America as a buffer to American influence, arrived in La Paz Wednesday night and congratulated the new Bolivian president, Evo Morales, on the nationalization move.

As a first step, auditors from Petróleos de Venezuela visited three foreign companies in Bolivia and announced that they would be involved in the audits, an executive of one company said.

The Venezuelan company is also providing technical help to Bolivian authorities and is to sign a contract to build a gas separation plant.

Bolivian authorities seemed to underestimate the impact of the steps that Morales announced Monday, both on their own government and on foreign companies, particularly for an impoverished country of just nine million people that is still far from being the energy giant it wishes to be.

Bolivia may have Latin America's second-largest gas reserves after Venezuela, but much of its wealth is far from being developed. The landlocked country also has limited sales outlets.

It stands in great contrast to Venezuela, a major oil producer that has squeezed oil companies at will with little risk that they would leave, because of the huge profits to be made there.

"It's one thing to produce petroleum at $72 a barrel and have access to many markets, and it's another thing to produce gas that has only one market in the region, Brazil," said Carlos Alberto López, a consultant for foreign oil companies.

The decree puts the Bolivian government's energy firm, Yacimientos Petrolíferos Fiscales Bolivianos, also known as YPFB, front and center. Instead of a small auditing firm, Yacimientos would, under Morales's decree, become an equal partner with giants like Repsol YPF of Spain and Total of France.

In an interview, Jorge Alvarado, the president of the Bolivian company, who stood beside Soliz Rada at the news conference, admitted that Yacimientos had no money. Asked how it would develop the country's gas fields if foreign investment evaporated, Alvarado said he was sure foreign companies remained eager to continue in Bolivia.

"I want to be sincere," he said. "YPFB, because of the neoliberal model, has been reduced to a minimum. It has no economic resources. But we see that there is much interest by foreign companies that want to invest in the country."

Foreign companies, though, expressed increasing indignation over the measures.

The Spanish prime minister, José Luis Rodríguez Zapatero, said the move could affect the amount of assistance Madrid provided to Bolivia, Agence France-Presse reported, and he is sending a delegation to La Paz to meet with Bolivian officials.

Other companies were considering international arbitration or a court fight.

Petrobras, in a letter from its director in Bolivia to Alvarado, said that while the company would continue operating in Bolivia, it was worried and he hinted that the company could take legal action to protect its investments.

Under the decree, the state would be entitled to 82 percent of production in the biggest fields, up from the share of less than 18 percent that the companies first agreed to when they began developing the fields.

Yacimientos also would take a majority stake in three companies - Chaco, Andina and Transredes - that once were state-owned but are now run by foreign companies.

Petrobras also appears to be losing control of two refineries, including the one where the briefing was held Wednesday.

On Thursday, Morales and Chávez were to travel to Argentina and meet with Presidents Luiz Inácio Lula da Silva of Brazil and Néstor Kirchner of Argentina.

At the briefing, Alvarado and Soliz Rada offered assurances that current contracts with the state still were legally secure. But at the same time, they highlighted the new measures as a sign of Bolivian dignity and sovereignty and complained about the lack of Bolivian employees at foreign companies.

"Give me the names of Bolivians in Transredes, in Chaco, in Andina," said Soliz Rada. Bolivian officials also contend that foreign oil companies, which have invested more than $4 billion since 1997, have recovered their money.

It is an assertion that the companies deny. The Margarita field, for instance, operated by Repsol of Spain with its British partners, cost more than $300 million to develop.

"You're just now going on market," said one foreign executive here who has worked on the project, asking that his name not be used for fear that his relationship with the government would be damaged.

"How can you say that the consortium has recovered their investment in Bolivia?"





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