- The Washington Times - Tuesday, May 2, 2006

Evo Morales, the coca-farmer-turned-populist-president of Bolivia, chose to mark May Day by using military force to seize foreign-owned natural gas assets and demanding that the companies agree to accept larger state ownership of the projects. Mr. Morales was fresh from a meeting with Venezuelan President Hugo Chavez and Cuban leader Fidel Castro in Havana, and the influence of the two authoritarians could hardly be more evident in this move.

During his campaign, Mr. Morales bolstered his populist image with promises of nationalization and greater state control of the timber and mining industries, as well as the energy sector, with patrimonial comments about taking back the countries resources from foreign interests. The egregious nature of Mr. Morales’ action warrants a strong rebuke from the international business community, the United States and Europe, and Bolivians themselves as well.

For Bolivia, already the poorest country in South America, the confiscation should prove disastrous. The details of the takeover — that companies will retain a mere 18 percent of production, if any at all — will determine how destructive the decision will be for the Bolivian economy in the long run. With that low of a return, the likelihood that other foreign companies would risk the capital investment to access Bolivia’s natural gas reserves, the second largest on the continent, is extremely low. Total foreign investment in the country, which amounts to $3.5 billion since the mid-1990s, has not yet created the infrastructure necessary to fully process those reserves. Bolivia lacks Venezuela’s tremendous oil resources, and companies are far more likely to leave Bolivia altogether after this stunt.

While Mr. Morales continues to align Bolivia more closely with Venezuela and Cuba, his move drew criticism from fellow leftist leader Luiz Inacio Lula da Silva, the Brazilian president, who reproached the Bolivian president and convened his cabinet to discuss how the Morales seizure will effect the large Brazilian oil company Petrobas.

As the United States is not a primary importer of Bolivian oil and gas, the move will have much less impact on America than Mr. Chavez’s recent demand for a majority stake in Venezuelan oil operations. At the same time, Mr. Morales’ takeover may present an opportunity for European countries and the United States to present a strong front of opposition to the nationalization of foreign assets. Other populist leaders — and aspirant leaders like Peruvian presidential front-runner Ollanta Humala and Mexican presidential candidate Andres Manuel Lopez Obrador, who have similarly close relations with Mr. Chavez — need to be convinced that Venezuela’s statist model is not the way to prosperity.

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