Morales creates Cabinet post to defend nationalizations of companies in Bolivia

The Associated Press, June 6, 2008

Bolivia has created a new cabinet-level ministry to defend the country from legal battles sparked by President Evo Morales' drive to nationalize key sectors of the economy.

To be led by Hector Arce, a 37-year-old lawyer and former government coordination minister, the new agency will back state efforts to reclaim control of petroleum, mining, telecommunications and other companies that were privatized during the 1990s, Morales said late Thursday.

Details on the ministry's powers and responsibilities were not immediately available, but it appears set to lead often testy takeover talks with foreign companies, now handled by the foreign ministry.

Morales has sought control of many privatized industries, boosting state ownership of Bolivia's oil and gas sector in 2006 — a so-called "nationalization" that grabbed headlines but allowed most foreign companies to continue operations.

This year, he fully nationalized several natural gas producers and logistics companies, including subsidiaries of the Spanish company Repsol YPF and British Petroleum. He nationalized Bolivia's few railroads in 2007.

Some companies have threatened to challenge the takeovers in international court, prompting Bolivia to withdraw last year from a World Bank tribunal that hears disputes between governments and foreign businesses. The court's rulings are often biased in favor of transnational companies, Bolivian officials claimed.

But still pending before the tribunal is an arbitration request from Italy's Euro Telecom International, which is disputing Bolivia's move to nationalize its subsidiary, Entel. The company was Bolivia's state telephone company until it was privatized in 1995.

Swiss mining company Glencore International has also disputed Morales' nationalization of a Bolivian tin smelter last year, citing an investment treaty between the two countries. The case will likely be resolved in ongoing talks over two other Glencore mines, said a mining ministry official who spoke on condition of anonymity because he was not authorized to discuss the negotiations.

At the urging of the World Bank and International Monetary Fund, Bolivia underwent sweeping privatizations in the mid-1990s, selling state-owned oil and gas, water, power, railroad and telecommunications companies, along with the national airline and state pension plan.

But the policy's mixed results largely failed to spur the economic growth the international creditors had hoped for, instead prompting the anti-privatization sentiments that drive Morales' economic policies.

Republished from IHT