New Bolivia leader vows to nationalize natural gas but says he’s open to free-trade zone

Money Sense, Canada

New Bolivia Leader Vows to Nationalize Natural Gas but Says He’s Open to Free-Trade Zone

January 22, 2006

By ALAN CLENDENNING

LA PAZ, Bolivia (AP) - Bolivian President Evo Morales used his inaugural address Sunday to renew his pledge to nationalize the country’s vast natural gas reserves, but said he’s open to the idea of a large U.S.-sponsored trade zone he harshly criticized last year during his campaign.

He suggested the country could seek loans from Latin American lenders, such as the Inter-American Development Bank, and repeatedly vowed to "recover our natural resources" at his inauguration before Congress and later while addressing 100,000 supporters at an open air plaza.

"They told us 15 years ago the private sector was going to resolve our problems of corruption and unemployment, but years have passed and we have more unemployment and more corruption," Morales said.

And while he accused foreigners of looting Bolivia’s national resources since Bolivia was colonized by the Spanish in the 16th century, Morales repeated his pledge to respect property rights that he made after winning the presidency last month in a landslide. He also promised his administration would treat all sectors of society fairly, without "rancor or vengeance."

While analysts say it will probably take months to determine how Morales will govern and what that will mean for foreign investment, his speech showed that he does not want to be perceived as a socialist prepared to seize control of sectors of Bolivia’s economy.

"Those words must have been welcome to anxious business groups, who feared a fiercely confrontational tone," said Michael Shifter, a Latin American expert at the Inter-American Dialogue think tank in Washington. "He hit some conciliatory notes."

Bolivia has the second largest natural gas reserves in South America, second only to Venezuela. Petroleum companies have invested $3.5 billion in Bolivia since the mid-1990s, and the biggest players include Brazil’s Petroleo Brasileiro SA; Britain’s BG Group PLC; France’s Total SA; and the Spanish-Argentine Repsol YPF SA.

During his campaign, Morales also blasted the proposed 34-nation Free Trade Area of the Americas, saying the idea was a sure way to enslave Latin Americans to the interests of big American business.

But in his inaugural speech, Morales softened his position toward the U.S.-backed bloc, which would slash tariffs and other trade barriers from Canada to Chile.

He also said his administration would study the benefits Bolivia might get by joining a separate zone that would link the economies of the United States with Colombia, Ecuador and Peru, or by become a member the Mercosur trade zone — made up of Argentina, Brazil, Paraguay and Uruguay.

If any one of the trade zones "guarantees markets for the poor, well, welcome," Morales said.

The statement suggests Morales, now that he’s president and no longer a candidate, is thinking in more practical terms about how Bolivia can develop closer links with the international economy to create jobs in a country where most live in dire poverty, Shifter said.

And Morales seemed to be sending a message to foreign investors when he said that he recently met with unspecified banking sector officials who "aren’t afraid of Evo Morales."

Financial players are keenly interested in who Morales will name to his cabinet on Monday, when he must reveal the names by law, but should feel somewhat soothed by his speech, said Riorden Roett, director of Western Hemisphere studies at Johns Hopkins University.

Morales, a former leader of Bolivia’s coca growers union, rose to power leading protests, as Bolivia’s poor became disillusioned with free market reforms and the privatization of everything from oil to water. He is an admirer of Fidel Castro and Venezuela’s Hugo Chavez, an avowed socialist.

But in recent weeks, Morales has repeatedly said his job as president is to do good business for Bolivians. That has led to speculation he may govern less like Chavez and more like Brazil’s Luiz Inacio Lula da Silva, who was elected on a leftist platform but has become liked on Wall Street for embracing orthodox fiscal policy.

But Roett and Shifter said Morales’ comments were not detailed enough to determine whether he’ll turn toward a free market path, take a radical approach or try to fashion some sort of combination.

"It remains unclear how pragmatic Morales will actually be once in office, and whether he’ll be able to strike the formula of accommodating both his base and national and foreign capital that have a strong stake in Bolivia’s economy," Shifter said. "Finding that balance will pose the most severe test of Morales’s political skills."

source: Money Sense