Bolivia’s decision to nationalize its natural gas industry drew challenges from Brazil Wednesday as top officials pledged to defend current gas contracts and suspend investment in the Bolivian industry.
President Luiz Inacio Lula da Silva said Wednesday that while his government respects Bolivian President Evo Morales’ right to nationalize production, he will defend contracts giving Brazil rights to Bolivian gas.
Silva’s comments were his first public remarks on the matter since Morales decreed the nationalization on Monday. Sergio Gabrielli, the president of Petrobras, Brazil’s government-owned oil company, said later that Petrobras has suspended all investments in Bolivia.
In a news conference in Rio de Janeiro Gabrielli also said Petrobras would reject any price increase resulting from the nationalization.
Petrobras is one of Bolivia’s biggest gas producers and one of the largest foreign investors in that country.
Morales’ nationalization decree gives foreign energy companies such as Petrobras, 180 days to re-negotiate and sign new contracts giving control of the industry to the Bolivian state.
Under a contract signed in the 1990s, Brazil buys up to 30 million cubic meters per day of natural gas from that Andean nation and Petrobras has invested some $1.6 billion in Bolivia in both gas and oil development.
”Bolivia’s nationalization of its gas reserves was a necessary adjustment for a suffering people seeking a greater measure of control over their own resources,” Silva said. ”However ”the fact that Bolivia has rights does not deny the fact that Brazil has rights in the matter as well.”
”There is no crisis and there will not be a crisis,” Silva said. Any crisis that may emerge can be avoided if both countries ”accept the need to negotiate” on issues such as gas prices, he added.
”I’m sure that we will come to an agreement,” he said.
Silva and Morales will meet with Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez in Argentina Thursday for discussions on the gas issue.
Spain, worried about the fate of Spanish-Argentine company Repsol SA, announced Wednesday that it is sending a delegation to Bolivia to discuss concerns about the nationalization. Spanish Foreign Minister Miguel Angel Moratinos said the process ”does not augur well” for Repsol, another big player in Bolivia’s gas industry.
Argentina and Brazil are Bolivia’s only export markets for gas, and both countries’ have been resisting Bolivian demands that they should pay more for the fuel, used for power generation, cooking gas and the fuel cars.
Morales, a populist who won a landslide victory in December, has long vowed to take back control of Bolivia’s natural resources. While Bolivia has vast mineral and forestry wealth, the country’s most valuable asset is its natural gas reserves — the continent’s second-largest after Venezuela.
Under Monday’s decree, foreign companies must sell 51 percent of their participation to YPFB. Where the state is going to get the several billion dollars it is estimated is needed for this isn’t known.