Saturday, October 28, 2006

Trouble in (Socialist) Paradise

Che Guevara must be turning over in his grave (and probably Castro, too). Bolivia's 'nationalization' of natural gas is not going well. And Chavez's buddy Evo Morales seems to be suffering at home because of it.

A case of socialism overpromising? Never!

Morales feels heat in negotiations over gas
By Hal Weitzman in Lima
Published: October 26 2006 19:43 | Last updated: October 26 2006 19:43

At two minutes past midnight on Friday – 180 days since Bolivia’s government decreed the state was to take back control of its natural gas reserves – President Evo Morales hopes to announce the nationalisation has been completed.

It is far from clear that the deadline will be met. Things have not gone smoothly since May 1, when Mr Morales donned a hard hat and entered the San Alberto gas field in south-eastern Bolivia operated by Petrobras, the Brazilian state-owned energy company, to declare that he was honouring a campaign pledge to renationalise the sector.

The nationalisation – the reserves are the second biggest in Latin America – provoked the wrath of governments in Brazil and Spain, and led to a drying up of international investment. It briefly boosted Mr Morales’s popularity at home, but since then his approval ratings have fallen steadily.

With foreign relations still fragile and his domestic agenda gridlocked in political infighting, Mr Morales desperately needs to be able to announce some good news on Friday.

One difficulty those in the industry frequently complain about was that in spite of the fanfare that accompanied the announcement, the administration did not initiate negotiations with most foreign investors until September. This was some seven weeks before the six-month ultimatum the companies were given to renegotiate operating contracts or pack their bags.

“The talks began 4½ months after they should have done,” says Ronald Fessy, a lawyer for the Bolivian Hydrocarbons Chamber, which represents foreign investors such as Repsol of Spain, France’s Total, British Gas and Royal Dutch Shell...

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