Chavez Increases Grip in Bolivia With $1.5 Bln Plan

Chavez Increases Grip in Bolivia With $1.5 Bln Plan (Update5)

May 26 (Bloomberg) -- Venezuelan President Hugo Chavez pledged to step
up investment in Bolivia's energy industry and protect its citizens from
``American imperialism,'' moving to strengthen his grip over the Andean
nation.

Chavez, 51, today used a visit to South America's poorest country to
promise more than $1.5 billion of new investments for Bolivia and other
assistance, from diesel fuel to no-interest loans. He also embraced Cuba
as a partner to help Bolivia's healthcare and education systems.

The growing alliance between Chavez and Bolivian President Evo Morales
is part of a wider Venezuelan effort to challenge U.S. policy in the
region and curb the role of multinational oil companies. Morales on May
1 seized international oil company assets in Bolivia and gave producers
180 days to renegotiate agreements with the state oil company, mimicking
Chavez's own policies.

``We must save the world from American imperialism,'' Chavez, bedecked
with flower garlands and dressed in native Bolivian clothes, told a
crowd in Shinahota, Bolivia in a more than hour- long speech.
``Venezuela, Cuba and Bolivia embrace forever.''

By stepping up investment in Bolivia, Chavez also will limit Brazilian
control of the country's energy industry, said David Fleischer, a
political science professor at the Federal University of Brasilia.
Brazilian state-controlled Petroleo Brasileiro SA is Bolivia's biggest
company.

Undermining Brazil

``The main objective here is for Chavez to undermine Brazil's leadership
in South America and reinforce his anti-U.S. bloc,'' Fleischer said in
an interview.

Venezuela's state oil company plans to form joint ventures with its
Bolivian counterpart and invest in a natural gas separation plant and in
oil and gas exploration. Along with representatives from Cuba, they also
plan projects in health, chemicals, mining, trade and road construction,
Chavez said.

Chavez, whose country is the world's fifth-largest oil exporter, also
said he will provide 200,000 barrels a month of diesel to Bolivia,
create the BancoSur to make no-interest loans to the poor and give $100
million of credit to small farmers in Bolivia. Venezuela and Cuba agreed
to pay for training of 10,000 doctors.

Venezuela, Cuba and Bolivia's Bolivarian Alternative for the Americas
and People's Trade Treaty are aimed at countering U.S. efforts to expand
the U.S., Mexico and Canada trade area to the rest of the hemisphere.

``We don't want our alliance to benefit the world market,'' said Carlos
Lage, Cuba's vice president, who was in Bolivia for today's meetings, in
an interview on Bolivia's TVB television network. ``The Bolivarian
alternative is based on solidarity, not profit.''

Cubans

The Cubans have sent 750 people to Bolivia, 600 of them doctors, to set
up 20 hospitals and open free health clinics across the country, Lage
said adding that Cuba is helping set up 30,000 video learning centers to
fight illiteracy.

``A certain emperor, or I should say president, is watching,'' Lage said
at the Shinahota, Bolivia event that was originally called to promote
Bolivia's plan to rewrite its constitution. U.S. President George W.
Bush ``should come here and see how the people of this region embrace
Hugo and Evo,'' he said.

Petroleos de Venezuela plans to set up a joint venture with Bolivian
state oil company YPF Bolivianos SA and invest $1.5 billion to explore
for oil and gas and to build 14 service stations, a petrochemical plant
and a facility to separate petroleum liquids from natural gas to feed
vehicle fuels refineries, according to Bolivia's presidential press office.

The joint venture will be 51 percent controlled by YPF Bolivianos. The
amount Petroleos de Venezuela plans to invest is about equal to what
Brazilian state-controlled Petroleo Brasileiro SA has spent in the
country since 1995.

The countries also plan to create Cia. Mineira del Sur, a
Bolivian-Venezuelan venture aimed at helping Bolivia take control of its
mining resources

Bolivia's biggest company, Petrobras, the most traded foreign company on
the New York stock exchange, produces most of Bolivia's gas, refines all
its gasoline, 60 percent of its diesel fuel and pays a quarter of all
Bolivian taxes.

To contact the reporter on this story:
Jeb Blount in La Paz jblount@bloomberg.net

Last Updated: May 26, 2006 16:38 EDT

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