MercoPress. South Atlantic News Agency

Bolivia's energy move: urgent regional summit

An urgent regional presidential summit has been called for next Thursday to be held in northern Argentina following Bolivia's Monday decision to take over the country's energy industry.

According to Argentine diplomatic sources the meeting will include Nestor Kirchner from Argentina, Brazil's Luiz Inacio Lula da Silva from Brazil, Venezuela's Hugo Chavez and Evo Morales, Bolivia.

"The meeting will take place Thursday in Puerto Iguazu, province of Misiones neighbouring with Brazil and the main issue the hydrocarbons resources nationalization decided by President Morales", added the diplomatic source. Another item in the agenda is the mega-pipeline which Argentina, Brazil and Venezuela are planning to build extending from the Caribbean to the South Atlantic.

As he had promised during his electoral campaign President Morales last Monday signed a decree taking over Bolivia's energy industry and giving foreign corporations operating in the country 180 days to adapt to the new production and sales conditions.

The decision to meet in Puerto Iguazu was agreed between presidents Kirchner and Lula da Silva during a phone exchange Tuesday afternoon, given growing concerns in both countries with the consequences for the region in the event of an increase in the prices of natural gas from Bolivia.

Brazil and Argentina are Bolivia's main clients for natural gas and are supplied on long term contracts at prices considered extremely low by the administration of President Morales. Bolivia sells Argentina between 4.5 and 5 million cubic metres per day of natural gas.

Brazil's oil company Petrobras has invested 1.5 billion US dollars in Bolivia, including two refineries, and controls 10% of the country's gas reserves which is equivalent to 15% of GDP.

Bolivia supplies 60% of Brazil natural gas demand which is pumped along a 3.200 kilometres pipeline with a daily transport capacity of 30 million cubic metres. Seventy five percent of that volume is absorbed by energy short Sao Paulo state, where most of Brazil's industry is located.

Bolivia has the second largest natural gas reserves in South America behind Venezuela.

Last April 22 Argentina's Federal Planning minister Julio de Vido signed an agreement with Bolivia by which Buenos Aires accepts an improvement of natural gas prices in the framework of an overall review of the Temporary Gas Sales deal signed two years ago.

Argentine sources said that President Lula da Silva contacted Kirchner and proposed the presidential meeting.

Market analysts believe that although Bolivia's production does not have the potential to distort the world's energy market, taking over the industry does sends the wrong signal at a very volatile international moment plus the impact it could have regionally for Argentina and Brazil.

From Peru ultranationalist presidential candidate Ollanta Humala who won in the first round and at the end of the month faces the run off promised if elected to follow Bolivia's example and nationalize the "hydrocarbons industry" and other strategic resources.

In Santiago Foreign Affairs minister Alejandro Foxley said the Chilean government was concerned with Bolivia's attitude "because integration systems are being questioned, some seem to be in crisis", and warned that "this situation could have a negative economic growth and employment impact for South America".

Regarding the South American energy grid project, Mr. Foxley said Chile will continue working on the "integration project with an open regionalism policy, close links with South American countries and with other regions".