Pubdate: Tue, 20 Dec 2005
Source: Wall Street Journal (US)
Page: A13
Copyright: 2005 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Jose De Cordoba, Staff Reporter of the Wall Street Journal
Bookmark: http://www.mapinc.org/people/Evo+Morales
Bookmark: http://www.mapinc.org/topics/Bolivia
Bookmark: http://www.mapinc.org/coke.htm (Cocaine)

BOLIVIA ELECTION PORTENDS FOREIGN-INVESTOR CLASH

Outright Presidential Win Gives Morales Clout to Push for Gas Nationalization

LA PAZ, Bolivia -- Evo Morales's outright victory in Sunday's
presidential election will give him more muscle to push the
nationalization of the country's natural-gas industry and unfettered
coca cultivation, issues likely to cause confrontations with foreign
investors and foreign governments.

Nationalization of the gas industry was Mr. Morales's top campaign
demand. Before the election, the 46-year-old Mr. Morales said he would
void the more than 70 contracts allowing gas exploration by foreign
companies in Bolivia. Although his proposals have been vague and have
differed at times, his strong victory is likely to embolden his most
aggressive allies to continue seeking nationalization without
compensation.

At a news conference yesterday, Mr. Morales said Bolivia needed
"partners, not owners." But he said his government wouldn't resort to
"expropriating or confiscating" assets such as refineries. "We need
technology to explore and prospect. We will pay for the service of
those multinationals," he said.

Since opening its energy sector in 1996, Bolivia has attracted $3.5
billion in investment and increased its reserves to 52 trillion cubic
feet, the second largest in South America after Venezuela.

But the the impoverished majority has seen few gains from the nation's
energy riches. In 2003, Mr. Morales and others led violent protests,
over a proposed gas pipeline to Chile, which toppled the president.

Growing uncertainty over Bolivia's energy sector had caused investment
to plummet from a peak of $608 million in 1998 to just $62.5 million
in the first half of 2005.

In May, Bolivia's congress ratcheted up the pressure by increasing
company taxes by 32 percentage points and requiring that companies
renegotiate their original contracts signed in the 1990s. "There's
nervousness, a wait-and-see, cross-your-fingers, pray-every-night
attitude," an energy company executive said.

Spain's Repsol YPF SA, United Kingdom gas and oil producer BG Group
PLC , and France's Total SA, among other companies, have balked at
contract renegotiations and sought refuge in bilateral
investment-protection treaties.

Julio Gavito, the head of Repsol's Bolivian operations, said his
company is in discussions with the Bolivian government. "We've come
under certain rules of the game, and have invested accordingly," Mr.
Gavito said. "And if they change the rules of the game, we have the
right, under both Bolivian and international laws, to protect
ourselves." Repsol, he said, has invested $1.08 billion in Bolivia
since 1997.

Tension with Washington is likely to arise over a different issue:
Bolivia's U.S.-funded program to eradicate coca, which is used to make
cocaine. Mr. Morales, who rose to prominence as a leader of Bolivia's
coca growers, has said he plans to reverse the program.

Coca has been used in religious ceremonies and to assuage hunger pangs
in some Andean regions of Bolivia for thousands of years. But since
the 1980s, coca cultivation has exploded in Bolivia's tropical Chapare
plains, with most of the crop used to make cocaine.

At a news conference Sunday night, Mr. Morales renewed promises to
stop coca eradication. Standing behind a table where piles of coca
leaves were spread atop a Bolivian flag, he said his political
movement was born from the coca leaf.

Nevertheless, his running mate, Alvaro Garcia Linera, said the new
government would increase penalties for drug trafficking and would
involve coca growers in the war against drug trafficking.

The U.S. government appeared to be taking a wait-and-see stance. "The
quality of our relationship will depend on the policies of the new
government on a wide range of issues, most importantly on strong
respect for democratic institutions," a State Department statement
said. 
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MAP posted-by: Richard Lake