- The Washington Times - Monday, January 23, 2006

SANTA CRUZ, Bolivia

State enterprises from Venezuela and China are signing agreements with Bolivia’s new leftist government to develop Bolivia’s hydrocarbon and mineral resources, according to diplomats and spokesmen for Bolivia’s ruling Movement for Socialism (MAS).

A $1.5 billion investment by Chinese energy giant Sinopac for gas fields in eastern Bolivia is going ahead, according to Chinese Embassy officials who say the bid, first made over a year ago, was blocked until now by “political and administrative complications.”

Sinopac made a deposit for the project after a visit to Bolivia last year by Chinese energy executives. New investments were among the main topics discussed during a visit to Beijing last week by Bolivian President Evo Morales, who was sworn into office on Sunday after campaigning on a promise to nationalize his country’s energy resources.

Mining ventures in Bolivia also are being considered by China, which already controls much of the iron production in Peru and is planning to build steel plants in Brazil.

A consortium of companies from India and China is among five groups bidding on a $5 billion project to develop Bolivia’s iron-ore deposits at El Mutun, according to confidential documents shown to The Washington Times.

El Mutun, in eastern Bolivia, is believed to contain the largest iron-ore deposits in Latin America, and the third-largest in the world.

Officials of Bolivia’s mining ministry said development of El Mutun has been held up by the need for major investments on infrastructure. A railroad must be built to connect the mine with Port Busch on the Paraguay River, where new facilities need to be installed for barges to carry the iron to the Atlantic Ocean.

Rival firms eye mining

“There are Chinese companies currently investigating projects in mining. But it’s very complicated. It’s a very big investment,” said a Chinese diplomat in Santa Cruz.

There are also political complications. Local business interests favor other foreign companies bidding for the project, including Britain’s Rio Tinto Zinc and private Brazilian and Argentine firms.

Arturo Medivil, a Santa Cruz lawyer and radio talk-show host, warns that competition for El Mutun could set off an explosion of separatism in eastern Bolivia, which supported the right-wing Podemos party in the December elections and elected independent governors favoring regional autonomy.

But Mr. Morales’ MAS — which won the election with 54 percent of the vote based on strong support in La Paz and the western high Andes — seems to have offered assurances to local governments that are more closely aligned with its preference for a state-directed economic model.

Petroleos de Venezuela SA announced last week it was entering into a joint venture with Yacimientos Petroliferos Fiscales Bolivianos (YPFB), the Bolivian Oil and Gas Co., to explore and develop Bolivia’s hydrocarbon reserves — Latin America’s largest after Venezuela’s.

“On the basis of our agreement with YPFB, we will participate first in exploration and later in production,” said Rafael Ramirez, Venezuela’s mines and energy minister.

Mr. Morales told The Washington Times in a pre-election interview that he wants Bolivia to join a “network of state-directed energy companies” to be called Petroamerica — a project of Venezuelan President Hugo Chavez.

Mr. Chavez, whom Mr. Morales visited in Caracas immediately after winning the Dec. 22 election, has offered a $30 million aid package to Bolivia plus 150,000 barrels of diesel fuel in a barter for Bolivian farm products.

Trade plus politics

“Our main interest in Bolivia is not to make money, it is to promote unity among nations of South America through interconnections in the exploration, processing and distribution of oil and gas. With the coming to power of Evo Morales, we strengthen Petroamerica,” Mr. Chavez said.

The Venezuelan leader also said that during his talks with Mr. Morales in Caracas, the two men took a call from the president of Iran, who “promised to send a commission to Bolivia to cooperate in development in all areas.”

Aside from oil, gas and minerals, Bolivia has important reserves of uranium and lithium. Its main uranium deposit is in a mountain near Santa Cruz called Cerro Manomo — currently a military preserve.

An official of MAS told The Washington Times that Bolivia’s agreements with China and Venezuela would offset any losses in investment from U.S. and European interests that may oppose the nationalization policies the new government plans to undertake.

So far, Spain’s Repsol, the French company Total Elf and Brazil’s Petrobras have said that they will respect measures to extend Bolivian state control over hydrocarbon resources.

“If this had been just six months ago, we might have decided to leave Bolivia and resort to international arbitration,” said a European oil executive, “but demand for natural gas has increased to such levels that we need to hang on to all we have.”

Recent exploration indicates that Bolivia’s gas reserves — until now estimated at 73 trillion cubic meters — could be far larger. British Petroleum just announced the discovery of 20 new wells along Bolivia’s border with Paraguay.

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