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Bolivia Targets Energy Revenues with Nationalization


Troops in Bolivia are standing guard at natural gas fields now that Bolivia President has declared all natural gas projects belong to the state and not to the private sector. Political leaders in Europe and throughout South America are alarmed at this nationalization, as NPR's Adam Davidson reports.

ADAM DAVIDSON reporting:

Bolivia's president certainly piled on the symbolism this week. He spent the weekend in Havana, joining with Fidel Castro and declaring a new anti-U.S. trade agreement. Then on May 1, May Day, he sent troops to gas fields to plant the Bolivian flag. It was not what anyone expected.

Mr. PATRICK ESTERUELAS (Oil Industry Analyst, Eurasia Group): No. I think it took everybody by surprise.

DAVIDSON: Patrick Esteruelas is an oil industry analyst at the Eurasia Group. He knew that Morales ran on a populous platform. Morales promised to take back the gas fields from foreign oil companies. Several, especially companies from Spain and Brazil, own and operate Bolivia's fields. Many Bolivians have demanded that state, and not private companies, take over those fields.

But Morales was only expected to take only a modest step this year. Esteruelas never thought Morales would be so aggressive. Esteruelas learned about the new rules on a phone call with a source in Bolivia.

Mr. ESTERUELAS: I mean, I certainly was surprised. I thought the person had gotten it wrong and had him to repeat it to me.

DAVIDSON: Many thought Morales would simply tell oil companies that they needed to sign new contracts, ones that would the Bolivian government a 51 percent stake in all fields. But his decree this week went much further. Morales raised taxes dramatically, and he declared that Bolivia now, effectively, owns all the gas.

The foreign companies will become nothing more than hired workers doing the government's bidding. David Goldwyn, author of Energy and Security, says Bolivia will be hurt a lot more than the foreign companies.

Mr. DAVID GOLDWYN (Author, "Energy and Security: Toward a New Foreign Policy Strategy): Bolivia has, I think, taken itself now out of the reasonable-country to-invest-in category by changing these kinds of terms. I don't see any kind of investment in any sector going forward in Bolivia.

DAVIDSON: Goldwyn says this is, ultimately, a sad story. Bolivia's Morales hasn't really hurt the foreign companies terribly; they'll lose some money, but not that much. What Bolivia has done is hurt itself. It's already desperately poor and undeveloped. It doesn't have the money, manpower or technology to develop its natural gas fields on its own.

President Morales has said so himself. So, Goldwyn says, it needs foreign companies to do the work. But now foreign energy companies will see Bolivia as unpredictable. So, Goldwyn says, they'll send their investment somewhere else. According to analyst Esteruelas, Morales was copying his friend, Hugo Chavez of Venezuela, who also recently announced a change in how foreign oil companies will work in his country.

Mr. GOLDWYN: But what Morales doesn't realize is that Bolivia doesn't have as much leverage as Venezuela has.

DAVIDSON: Venezuela has huge reserves of crude oil. It's easy to transport oil anywhere in the world. Bolivia doesn't have much oil. It has natural gas, which is much harder to ship abroad. And Bolivia is landlocked, so it can't ship anything anyway. It can sell to its neighbors, Brazil or Argentina or Chile, not to anyone else.

That's why, Goldwyn says, foreign companies will probably keep investing in Venezuela, even if Chavez changes the rules on them. Not so for Bolivia. Bolivia might soon find itself all alone.

Adam Davidson, NPR News. Transcript provided by NPR, Copyright NPR.

Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.