Latin America Split over Bolivian Natural Gas Move

After President Evo Morales nationalized Bolivia's natural gas industry, Brazil froze investments in Bolivia's energy sector. Some leaders in the region are wary of Morales' move toward Cuba's Castro and Venezuela's Hugo Chavez.

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This week Bolivia nationalized its oil and gas reserves. That nation now joins a growing list of governments across South America who are asserting greater control over their energy resources. But as NPR's Julie McCarthy reports from La Paz, Bolivia's decision is now straining relations between left-leaning governments on the continent.

JULIE MCCARTHY reporting:

Events of the past week show how energy is fast becoming the preoccupation of South America's leaders. The region reeled after Bolivian President Evo Morales declared that foreign energy companies had six months to renegotiate their contracts or leave. No sooner did Bolivia announce its plan than Venezuelan President Hugo Chavez swooped into La Paz extolling the virtues of nations demanding a greater share of the profits from their oil and gas industries.

President HUGO CHAVEZ (Venezuela) (Foreign language spoken)

MCCARTHY: What Bolivia has done, Chavez said, is to carry out the mandate of the people, and those presidents, he said, who comply with the people's wishes are few. Most, Chavez added, bend their knee to the Empire, an apparent reference to the United States. Venezuela just re-wrote its energy contracts with foreign companies demanding a majority share for the state. Across South America, Chavez is cheered for his audacity.

(Soundbite of crowd cheering)

MCCARTHY: As he was this night by a small band in La Paz. His rhetoric has helped create an image of Chavez as the region's most ardent anti-capitalist after Cuba's Fidel Castro. Some Bolivians fear that Chavez is influencing their president too much. Critics have made much about a trip Morales made to Havana to meet with Chavez and Castro days before he signed the decree to nationalize Bolivia's oil and gas. But economist Gonzalo Chavez says what pushed nationalization was not outside forces, but rather the fact that Bolivia had failed for 20 years to fix its own social and economic inequities. As for ties with Castro and Chavez, Gonzalo Chavez says...

Mr. GONZALO CHAVEZ (Economist, Catholic University of La Paz, Bolivia): Of course, in international relations you build political blocks in order to defend your ideas, and probably Morales is doing this.

MCCARTHY: But Bolivia's biggest neighbors are wary. Brazil and Argentina, moderate leftist governments, are at odds with Bolivia and Venezuela, the more radical administrations, over the new nationalization plan. A cartoon in a leading Bolivian newspaper yesterday depicted Morales and Chavez suited up on a soccer field, tying each other's shoes while Brazil's President Lula da Silva and Argentina's Nestor Kirchner stood by stunned. Brazil is Bolivia's biggest natural gas consumer. Its state energy giant, Petrobras, controls 45 percent of the Bolivian gas reserves. Without those reserves, analysts say Brazil's economy would stumble.

Under Bolivia's plan, Petrobras will have to negotiate a new contract at higher prices. Brazil's business leaders fear Bolivia will impose a drastic increase. La Paz says the price of gas has been discounted too long. A hastily arranged summit along the Argentina/Brazil border this week managed to diffuse some of the tension. Chavez played the go-between. Brazil's President Lula played the statesmen...

President LULA DA SILVA (Brazil): (Foreign language spoken)

MCCARTHY: ...emphasizing the need to help Bolivia improve the livelihood of the impoverished people. But Brazilian businesses and editorials assailed Lula for not taking a harder line with his more radical counterparts. The Brazilian leader is expected to seek re-election this year and image is all. Oil consultant and former energy secretary Carlos Alberto Lopez says the populist Chavez is out-flanking Lula in the battle of who will lead the region.

Mr. CARLOS ALBERTO LOPEZ (Oil Consultant and Former Energy Secretary): Brazil is always very careful in not being seen as a bully or in throwing their weight around in the region. The difference is that Mr. Chavez has no qualms about being extremely aggressive and open with his geo-political agenda.

MCCARTHY: Chavez is also moving Venezuela into Bolivia's hydrocarbon market, a step that analysts say could further roil the region. Julie McCarthy, NPR News, La Paz, Bolivia.

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