Bolivia power sector nationalization signals distrust of elite

LA PAZ, Bolivia, May 3 (UPI) -- The latest nationalization in Bolivia follows a pattern seen earlier with previous state takeovers -- a government-led drive to achieve control of key economic sectors and redistribute wealth among the underprivileged indigenous people.

Four power companies with British, French and Bolivian corporate holdings were nationalized as part of what President Evo Morales termed a strategy to secure complete control of the electricity generation sector.

The companies affected by the nationalization are Corani, controlled by a subsidiary of GDF Suez, of France; Guaracachi, controlled by Rurelec of the United Kingdom, and Valle Hermosa, run by the Bolivian Generating Group and Empresa de Luz y Fuerza Electrica de Cochabamba.

Empresa de Luz y Fuerza Electrica de Cochabamba will go under state control within four months even though it is 80 percent owned by its workers, the government announced.

Morales nationalized Bolivia's hydrocarbon industries soon after he was elected in a landslide in 2006. In 2008 he took over the telecommunications company Entel, which was formerly owned by Telecom Italia.

Although foreign ownership was clearly targeted in all three nationalizations, Morales also made clear he wanted to redistribute wealth concentrated in the ethnic non-indigenous -- mostly European -- minority of the business elite.

Bolivia has the lowest gross domestic product per capita in South America, despite having the second largest natural gas reserves in South America. The 2010 Index of Economic Freedom rated Bolivia as "repressed" mainly because of poor representation of indigenous communities.

Support for Morales, who won a second term last year, remains concentrated among the 80 percent of the population that is made up of indigenous communities.

"We're fulfilling the thunderous request of the people to recover and nationalize natural resources and basic services, which previously belonged to the state," said Morales, Bolivia's first indigenous president.

He said the government had tried to negotiate the purchase of controlling stakes in the companies before going ahead with the nationalization.

"We made an effort to reach an agreement with the private multinational companies but  they were unwilling to reach an accord," he said.

Previous nationalizations have boosted government revenues but resistance to change among Bolivia's technocrats and elites means that progress on poverty reduction programs remains slow.

The nationalizations in Bolivia followed by a week warnings by President Rafael Correa of neighboring Ecuador, a friend of Morales, that he would nationalize the country's oil fields if companies refused to sign new service provision contracts.

Correa wants a higher share of oil revenues, which Morales secured when he took over Bolivia's hydrocarbon sector in 2006.