MercoPress. South Atlantic News Agency

Bolivia makes effective controversial oil bill

Bolivia's Congress president Hormando Vaca Diez signed Tuesday a controversial hydrocarbons bill substantially increasing royalties and taxes on foreign oil and gas companies operating in the country, and which President Carlos Mesa originally threatened to veto.

The promulgation of the bill coincided with the end of the 10-day statutory period that President Mesa had to either sign the bill or return it to Congress with objections - the equivalent of a veto - or allow it to become law without his signature.

Passed by Congress on May 5, the hydrocarbons bill mandates a non deductible increase from 18 to 50% in oil and gas royalties. Energy companies operating in Bolivia have described the new bill as confiscatory and anticipated they will challenge it in international courts for breach of contracts.

However radical groups, Indian organizations and trade unions have taken to the streets and blocked the country's main routes demanding an outright nationalization of the oil and gas industry which was opened to foreign investment in the mid nineties.

Among the companies involved are Spain's Repsol-YPF, British Petroleum, British Gas, Brazil's state-owned Petrobras and French giant Total, that between 1996 and 2002 have invested an estimated 3,7 billion US dollars particularly in developing natural gas deposits, the second most important of South America behind Venezuela.

Mr. Mesa an intrinsically weak and caretaker president with virtually no Congressional support has been leading Bolivia since the ousting in October 2003 of Gonzalo Sanchez de Lozada a strong advocate of private enterprise and one of the main sponsors inviting foreign companies to explore and develop the country's rich resources.

However mineral resources in dirt poor landlocked Bolivia are a highly sensitive issue from the time of the Spanish colonization. Strong Indian leadership with growing representation in Congress has turned the open market economy spirit of the nineties sour with recurrent popular protests paralyzing the country demanding an outright nationalization of oil and gas resources.