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TRADE WARS
Bolivia take-over spurs compensation calls
by Staff Writers
La Paz, Bolivia (UPI) Feb 21, 2013


Ecuador president vows to push large-scale mining
Quito (AFP) Feb 23, 2013 - Ecuador's re-elected President Rafael Correa said Saturday he will push large-scale mining projects during his next four years in office, despite opposition from some indigenous groups.

"The Ecuadoran people have voted to responsibly take advantage of non-renewable resources," said in a weekly address on his administration's activities.

Correa, a socialist, said his goal was to use the country's mining and oil wealth to eliminate poverty and said he was committed to "the Amazonian people and all the areas where there is mining or oil."

A year ago, Correa's government signed a contract with the Chinese company Ecuacorriente to mine copper in the Amazon basin province of Zamora-Chinchipe, in a major move to open the country to large-scale mining.

The country's largest indigenous organization opposed the deal, however, and with the backing of opposition groups led a two-week-long protest march from the Amazon to Quito.

But Correa, who has been in power since 2007, won re-election last week in a landslide, with 56.77 percent of the vote, and he used his speech Saturday to criticize opponents of big mining.

"To hurt the government, they are hurting the country, the poor, that Amazonian region," Correa said, adding that "we are not with the multinationals, we are with the poor."

"We cannot be beggars sitting in front of a bag of gold," he said.

Bolivia's ties with Spain are beginning to nosedive after President Evo Morales ordered a third nationalization of Spanish commercial interests in the Latin American country in less than a year.

For Latin America watchers, it's a familiar story. Last year Argentina nationalized Spanish majority share in the country's largest energy company YPF.

Both Argentina and Bolivia say the nationalizations became inevitable after the companies failed to invest enough of their profits back into the companies' expansion and modernization.

Last year Bolivia unleashed two major nationalizations affecting Spanish energy companies. Details of compensation negotiations remain unclear, as do data about the companies' performance since the state takeovers.

Argentina's YPF struggled briefly to find foreign partners willing to invest into its expansion plans, given the country's financial standing since its sovereign default in 2002. But the energy industry's cut-throat competition trends soon got YPF back on track with ambitious new expansion plans. Former owner Repsol wants more than $1 billion in compensation.

In Bolivia, on a smaller scale, the government's takeovers were condemned as "aggression" by Spain and infrastructure company Albertis joins a lengthening queue of aggrieved firms that want to be compensated.

Albertis says it wants at least $90 million from Bolivia as compensation for the loss of subsidiary Servicios de Aeropuertos Bolivianos. Sabsa manages Bolivia's major airports.

Before the takeover Sabsa was owned 90 percent by Abertis and 10 percent by the Spanish airport management company Aena.

Bolivia won higher ratings from major credit rating agencies last year before it embarked on nationalizations.

Latin American governments increasingly are leaning toward tougher rules in a bid to manage foreign investors and extract better terms. The stakes are high and their politically charged, often populist, measures are met with investor responses that are tempered by shareholder expectations.

Did the companies really invest too little of their earned income? Are the governments acting too harshly too soon? Analysts say the truth lies somewhere in between.

Nationalizations usually indicate a breakdown of communications between officials and investors and both sides must do more to avoid them, say analysts.

The diplomatic and political damage caused by nationalizations often lasts for years. When state-run enterprises fail to deliver better results than their former owners, governments get deeper into trouble, as witnessed in Venezuela, analysts say.

Cuba's much trumpeted economic liberalization program, begun by President Raul Castro last year, is seen to be faltering because entrenched state-linked vested interests simply won't let go of their influence and power.

Bolivia's main charge against Albertis is that it earned up to $2 million a year but failed to deliver on promised investments. Spanish share-holders now face the prospect of lengthy processes of compensation that may take years to complete, if at all.

Analysts said the loss was ill-timed for Spain, already struggling in eurozone's recession.

"The relevant compensation will be paid in 120 days," Morales told a gathering this week. Amounts being considered for the compensation remain unclear.

Spanish investors say Bolivia raised salaries by 140 percent in less than a decade but barred the airport operators from raising tariffs.

Spanish Foreign Minister Jose Manuel Garcia-Margallo said Madrid intended to mobilize all national and European resources against Bolivia. Spain's Repsol also made similar declarations, but talks on Argentine compensation haven't moved forward.

Last year Morales nationalized five energy utilities owned by Red Electrica and Iberdrola S.A.

Garcia-Margallo said the nationalizations were linked to domestic troubles faced by Morales.

Bolivia last month renewed accusations the U.S. Embassy in La Paz was continuing to spy on his government. Morales expelled U.S. Ambassador Philip Goldberg and drug enforcement agents in 2008. Charge d'affaires Larry L. Memmott heads the diplomatic mission at present.

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