Bolivia seizes funds moved by Telecom Italia

Mon Jul 14, 2008

LA PAZ, July 14 (Reuters) - Bolivia has seized some $49 million that Telecom Italia transferred to a British bank before the company's Bolivian subsidiary Entel was nationalized by the government earlier this year, officials said on Monday.

Bolivian President Evo Morales announced the government takeover of Entel on May 1, claiming Telecom Italia failed to meet investment commitments and owed the state $645 million in fines and back taxes.

The Bolivian government is facing legal challenges from the company over compensation.

Nationalization Minister Hector Arce told reporters in La Paz the money had been recovered by Bolivian authorities.

Bolivia is also seeking to seize another $31 million that Telecom Italia transferred from Entel to a U.S. bank, Adalid Cabrera, a spokesman for Arce, said.

The money will be turned over to Entel and invested in the company's expansion, Cabrera told Reuters.

Entel is the largest telecommunications company in Bolivia, commanding 80 percent of the long distance market and 70 percent of the mobile telephone services.

Arce said Bolivia will not allow the World Bank to arbitrate in a dispute with Telecom Italia over compensation for the nationalization.

Bolivia's withdrawal from the World Bank's International Center for Settlement of Investment Disputes (ICSID) last year makes the country immune to a claim filed in May by the Italian firm, Arce said.

"Bolivia has pulled out of the ICSID ... it does not allow this institution to rule over disputes related to investments," said Arce, who was appointed in June to defend Bolivia in legal battles over the nationalization of foreign firms.

The state takeover of Entel is part of a drive by leftist President Morales to return to state control key economic sectors.

Morales has signaled Bolivia will not compensate Telecom Italia.

No one could be reached for comment at the company's offices in La Paz.

"We hope that (Telecom Italia) will stop the process at the ICSID and sit down... to find a solution," said Arce. (Reporting by Eduardo Garcia)