Saturday, May 27, 2006

Venezuela aids Bolivia gas nationalization

The Associated Press/SHINAHOTA, Bolivia
Associated Press Writer

Venezuela aids Bolivia gas nationalization

MAY. 26 3:59 P.M. ET Oil-rich Venezuela's increasing influence in
Bolivia will be sealed with a penstroke Friday when presidents Hugo
Chavez and Evo Morales sign another set of accords, this time to secure
Venezuela's role in Bolivia's recently nationalized energy industry.

"Bolivia and Venezuela are embracing forever, taking the path of
equality and justice," Chavez told crowds in tropical heat, dressed in a
traditional Bolivian poncho and wooly hat identical to Morales.

The two leftist leaders are creating a joint mining company called
Minesur and a fertilizer company called Fertisur, and Venezuela is
pledging more university scholarships, asphalt to pave Bolivian roads,
credit for businesses and trees for reforestation.


But Bolivia's huge natural gas reserves are the real prize, and Morales
clearly needs outside help. Negotiations with a half-dozen foreign
energy firms have slowed since Morales nationalized the industry earlier
this month, sending in troops to occupy energy installations, and
Bolivia's cash-strapped state energy company won't be able to extract
and profit from this resource without major new investments.

Venezuela will sink $500 million into Bolivia's gas industry in the
short term and up to $1.5 billion long term. Rich with petrodollars and
eager to expand Venezuela's economic reach throughout Latin America,
Chavez has already pledged more than $140 million in donations and loans
to Bolivia. Venezuelans are helping provide national identity cards for
those who don't have one and will pay for 109 rural radio stations.

"Like never before in history, a foreign country is here visiting,
orchestrating and deciding on issues that belong to Bolivians," said
Fernando Messmer, a former foreign minister and opposition congressman.

Now Chavez is pledging even more support, promising to make Venezuela's
state-owned energy firm, PDVSA, a minority partner with Bolivia to
explore for gas and certify Bolivia's reserves, as well as build a gas
processing plant and three asphalt factories. They will also help run
state-owned gas stations in a venture to be called Petroandina.

In exchange for all this largesse, Bolivia will send Venezuela soy
beans, as well as pay some cash for diesel shipments and fertilizer.

The deal is so lopsided that critics suspect Chavez is seeking other
advantages at the expense of Bolivia and other South American countries,
using his largesse to exert influence over Morales and strengthen his
role as a regional energy player. Chavez and Morales say that's
nonsense, and that both countries will gain plenty.

But Bolivia has long been dependent on foreign aid, and the money always
causes political repercussions.

The United States, for example, remains Bolivia's largest donor, giving
approximately $150 million annually. But much of the money is tied to
the war on drugs, which Morales has said unfairly targets poor coca leaf
farmers and gives the U.S too much sway with Bolivia's military.

Chavez is more interested in Bolivia's gas. While Brazil's Petroleos
Brasileiro SA is Bolivia's largest investor, Petrobras has frozen its
investments since the nationalization and now says it's seeking natural
gas elsewhere.

Friday's accords could be Venezuela's most assertive move yet to
challenge Brazil's energy dominance in Bolivia, although Chavez also
denies this.

While some critics say Chavez is encroaching upon Bolivia's sovereignty,
others say he's helping to lift the poor Andean nation out of poverty by
helping Morales follow through on his pledge to fight corruption and

"He very much believes in what Evo is doing -- Chavez has a vision of an
independent Latin America that has growth and development and is based
on solidarity," said Mark Weisbrot, an economist at the Washington-based
Center for Economic and Policy Research.

The strengthening alliance prompted President George W. Bush to say
Monday that he's "concerned about the erosion of democracy" in both
Bolivia and Venezuela.

But Washington's words don't weigh as heavily as they once did in the

"The reality in Latin America has really changed dramatically," Weisbrot
said. "The availability of alternative sources of credit and finance
have contributed to a drastic drop in U.S. influence."

And Chavez is not just threatening U.S. power -- he's also challenging
the region's established leaders, Brazil and Argentina, with his
constant advice to Morales, who also nationalized the Bolivian
operations of Repsol YPF, the Spanish-Argentine energy company.

"It has to do with a strategic dispute in the world about the energy
resources in the long term," said Horst Grebe, a social scientist and a
former Bolivian economic development minister.

And that's because Venezuela could eventually become Bolivia's top
competitor in feeding gas-hungry Brazil and Argentina. Venezuela has the
continent's largest natural gas reserves, followed by Bolivia, and
Chavez would like to send Venezuelan gas to Brazil and Argentina in a
proposed multibillion dollar natural gas pipeline.

For now, they insist they're the closest of allies. Morales calls Chavez
a "tutor," and refers to his alliance with Chavez and Cuba's Fidel
Castro as an "axis of good."


Associated Press Writer Carlos Valdez in La Paz contributed to this report.

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