Bolivian Leader Nationalizes Fuel Industry

SANTA CRUZ, Bolivia — President Evo Morales, who won a landslide election victory in December vowing an end to foreign “looting” of the country’s natural resources, nationalized Bolivia’s crucial natural gas and oil industry Monday, the latest indication of Latin America’s leftward drift.

Morales ordered soldiers to secure Bolivia’s natural gas fields and installations, the media here reported, and he threatened to throw out foreign companies unless they agreed to new contracts within six months giving the state control of energy production.

“The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of its natural resources,” Morales declared in a speech from the San Alberto petroleum field in the country’s south.

Negotiations are to begin immediately with affected firms, mostly from Europe and other South American countries. Experts said the move should not affect U.S. energy prices because the United States is not a major consumer of Bolivian natural gas or oil.

Morales is closely allied with Cuba’s Fidel Castro and Venezuela’s Hugo Chavez, both outspoken critics of U.S. policy. The Bolivian leader signed the nationalization decree after returning from a trip to Havana, where he was warmly welcomed by Castro and Chavez.

The trio proposed a new trade bloc to counter what they called U.S. domination in the region.

Left-leaning governments are also in charge in Brazil, Argentina, Chile and Uruguay, but all are on better terms with Washington than Morales and his allies -- and role models -- in Havana and Caracas.

Elsewhere in Latin America, left-wing nationalist and Chavez admirer Ollanta Humala, a former army officer, is in a runoff election for Peru’s presidency, and leftist Andres Manuel Lopez Obrador is making a strong bid for the presidency of Mexico.

In Bolivia, Morales, wearing a helmet of the state energy firm, chose May 1, International Day of the Workers and a national holiday here, to unveil his nationalization plan.

There was little overt reaction on the streets of this bustling eastern Bolivian city, a stronghold of anti-Morales sentiment where a civic shutdown is planned this week to protest Morales’ governance.

On Monday evening, Morales addressed a roaring crowd in La Paz, the Andean administrative capital where he has strong support, especially among the poor and working class tired of the lack of social progress in South America’s most impoverished nation.

Television here aired footage of soldiers and police standing guard outside some gas installations, along with images of gas stations with banners proclaiming the sites had been nationalized.

Thousands gathered to celebrate the president’s move in La Paz’s central Plaza Murillo, where Morales addressed an enthusiastic crowd and folk singers chanted nationalist anthems.

The government’s plan appeared to be less of an outright takeover of foreign assets than a mandatory sale of most assets to the government energy concern. Morales had said he would not take the expropriation route and has indicated a willingness to allow some foreign companies to remain as minority shareholders under his new terms.

Bolivia has the continent’s second-largest natural gas reserves, after Venezuela, but most of its capacity remains untapped because of a lack of infrastructure and investment. Much of its gas is sold to neighboring Brazil and Argentina.

Petroleum production is less significant.

U.S. energy firms including Exxon Mobil, which holds a partial stake in a currently non-producing field, have relatively small interests here. But European and South American companies -- including Brazil’s Petrobras, the Spanish-Argentine Repsol, Britain’s BG Group and France’s Total -- have significant holdings.

Morales indicated that some major producers would be able to retain 18% of their production, but he did not name which firms would qualify.

The move could presage friction with neighboring nations as well as European investors.

In Madrid, the Associated Press reported, Spain’s Foreign Ministry expressed “deep concern” about the decree to nationalize the hydrocarbons sector, which includes significant Spanish investment.

“The government hopes ... there is authentic negotiation and dialogue between the government and the different companies in which each other’s interests are respected,” the ministry said in a statement.

Morales and his aides depicted the move as a bold stroke for a man who rose in 10 years from a regional representative of growers of coca leaf -- the raw ingredient in cocaine -- to the first Indian president of a nation that is largely of Indian and mixed-race origin.

Morales has been waging an escalating war of words with Washington, which is worried about his vow to decriminalize the cultivation of coca and his friendships with Castro and Chavez. Morales has accused Washington of working to undermine his government, a charge denied by U.S. officials.

It remained unclear where Bolivia would secure the funds to purchase the private assets for its state energy concern, Yacimientos Petroliferos Fiscales Bolivianos, and how much the government would be willing to pay -- market value or a price dictated by the Bolivian government.

“The big question is where the money is going to come from, and who will set the prices,” said Eduardo Gamarra, a Bolivia expert at Florida International University in Miami.

International companies say they have invested about $3.5 billion in the Bolivian energy sector since the mid-1990s, when the formerly state-run industry was privatized in a move Morales harshly criticized during his election campaign. Investors worry they won’t be able to recoup the massive amounts of money they plowed into Bolivia’s gas fields, pipelines and other infrastructure since the government shed what was viewed by many as an inefficient and plodding state monopoly a decade ago. YPFB, the state entity, has since become largely administrative in nature, and a major unknown is how it will perform as a dominant force in the dynamic energy sector.

In recent years, two Bolivian presidents have been chased from office in large part because of protests by those who believed that gas and other natural resources were being siphoned off by foreign concerns and wealthy Bolivian allies. Morales’ allies had called for a quick nationalization of gas and oil reserves.

Morales’ election had already sent shock waves through the international investment community, and Monday’s announcement seemed likely to make foreign companies hesitate even more to pump money into Bolivia.

“I think foreign investors will read this is in the correct way: Your investment is not safe in Bolivia,” Gamarra said. “That’s problematic for a country that needs investment.”

But Morales and his supporters have argued that a new way of doing business is needed because foreign companies have plundered the national resources for decades without reducing a poverty rate that tops 60%.

“They have robbed us of our national patrimony,” Morales said during his campaign. “We cannot continue to allow our most precious resources in the hands of foreign companies.”

Morales won 54% of the vote in December’s presidential election and assumed office in mid-January with a pledge to return resources to the people, rewrite the constitution and restore rights to Bolivia’s long-repressed Indian population.

His popularity has declined in recent months, polls show, but he still enjoys more than 60% support after 100 days in office, much of it in La Paz, the altiplano that is the Indian heartland, and the coca-growing regions.

Andres D’Alessandro of The Times’ Buenos Aires Bureau and special correspondent Oscar Ordonez Arteaga in La Paz contributed to this report.