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Analysis: Morales gives foreigns ultimatum

By CARMEN GENTILE, UPI Energy Correspondent   |   May 28, 2008 at 8:54 AM
MIAMI, May 28 (UPI) -- Bolivian President Evo Morales is demanding that foreign companies increase their investment in petroleum production or face the possibility of being taken over by the state.

The leftist Morales, who just over two years ago partially nationalized the country's gas industry, said foreign firms must be able to boost production capacity to meet growing domestic and foreign demand.

"I want to warn those companies that sabotage the investments, I have ordered my ministers to prepare a decree with an ultimatum to those companies that don't invest," said an angry Morales earlier this month.

The Bolivian president said companies that don't invest in improving their output in Bolivia would have their projects taken over by Bolivian state-run energy company YPFB.

While Morales' call for greater investment could prompt some foreign firms to pony up extra money toward increasing output in Bolivia, some say his heavy-handed approach to increasing output could in fact send some companies packing.

"It's certainly an unorthodox way to work with the private sector to increase exports," Eric Farnsworth, vice president of the Council of Americas, told United Press International.

Farnsworth noted that since the nationalization of Bolivia's gas sector on May 1, 2006, foreign investment in the sector has dropped off considerably, based on concerns that Morales could wrest further control of the industry and further diminish its already reduced profit margins.

Meanwhile, the future of Bolivia's gas industry is in possible peril because of the lack of investment in exploration for new wells.

"There aren't foreign companies who are going to go in there and take the risk without a better guarantee of a sizable return," he noted.

Considering the troubled history of Bolivia's petroleum industry, it's a risk some might consider too great to take.

Bolivia's gas sector has been the center of controversy in the poor South American nation for decades.

Most recently, several eastern provinces, home to Bolivia's gas deposits, voted in favor of greater autonomy from the central government, noting how their profits go largely to pay for Bolivian social programs that benefit the largest indigenous population in the west.

Morales denounced the vote earlier this month, calling it illegal and vowing it would not be recognized by his government. He also called on governors from other provinces in eastern Bolivia to sit down to talks before carrying out their own autonomy votes.

Several eastern provinces have expressed displeasure with Morales and his nationalization efforts, saying the country's wealthy are unfairly taxed to pay for his social programs.

More than 80 percent of Santa Cruz residents voted for more autonomy for the province.

Morales is not the only Bolivian leader to feel the wrath of his country's citizenry over the handling of the gas industry.

In 2003 President Gonzalo Sanchez de Lozada was forced from office during widespread violence that left dozens dead after he suggested Bolivia sell natural gas to its longstanding rival and neighbor Chile, to whom his country lost its coastline during a 19th century war.

The gas issue was eventually the undoing of Carlos Mesa as well. In June 2005 the Bolivian leader faced a round of violent protests over how the gas revenue was being spent. Mesa eventually stepped down, opening the door for Morales' eventual victory and decision to nationalize the gas industry.

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(e-mail: energy@upi.com)

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