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. - --- MAP posted-by: Richard Lake