MercoPress. South Atlantic News Agency

Spain warns Bolivia about “bilateral relations”

The Spanish government said Tuesday it was “deeply concerned” with the nationalization of Bolivia's energy industry and warned that the move would have “consequences for bilateral relations”.

The message was transmitted to the Chargé d' Affairs at Bolivia's embassy in Madrid, Alvaro del Pozo, who was summoned to the Spanish Foreign Affairs Ministry.

The Spanish press reports that Foreign Secretary Miguel Angel Moratinos contacted Tuesday his Brazilian counterpart, Celso Amorim suggesting they jointly act with "firmness and dialogue ... within the framework of a common focus" to the Bolivian decision. Brazil and Spain have invested heavily since the nineties in Bolivia's energy business.

Brazilian government owned Petrobras is the largest investor in Bolivia's energy industry and Spanish-Argentine Repsol YPF is also a major player in the industry.

The Spanish government announced that in coming days it will meet with the leadership of the Spanish firms operating in Bolivia to analyze the energy nationalization.

Industry Minister Jose Montilla said Tuesday that the nationalization of the Bolivian energy sector "is not good news" adding that "the Spanish government is concerned by the impact it could have on Spanish corporations" in Bolivia.

However Mr. Montilla admitted that "the president of Bolivia had repeatedly anticipated a measure of this kind" and so it did not come as a surprise but "it's a bad signal for the markets, which could discourage foreign investment" in the country.

On the Madrid Stock Exchange on Tuesday, Repsol YPF shares lost moderate ground. Fears about Bolivia's energy supplier "reliability" Brazil's all powerful industrial lobby doubts that Bolivia will remain a reliable supplier of natural gas in the wake of the country's decision to nationalize hydrocarbons' resources. Sao Paulo's federation of industries, FIESP, said the Bolivian nationalization process could have drastic consequences for the Brazilian market.

"In the medium and long term there will be a serious problem in the supply of gas, since many industries depend on Bolivia and we don't know how negotiations will end," Fiesp energy analyst Luiz Gonzaga Bertelli told reporters.

Sao Paulo state the powerhouse of Brazil, which generates a third of Brazil's GDP, depends on Bolivia for 75% of its natural gas.

Any supply interruptions will have a greater impact on industrial users than on consumers who use natural gas to cook or power their vehicles, Fiesp said.

Two other Brazilian states, Mato Grosso and Mato Grosso do Sul, receive 100% of their gas from Bolivia, and Rio Grande do Sul 75%.

Sao Paulo business leaders fear Bolivia will impose a drastic price increase on the gas it sells to Brazil, currently at 3.25 US dollars per million British Thermal Units. Officials from Bolivian President Evo Morales administration often point out that natural gas fetches 7 US dollars per 1 million BTU on world markets.

But Petrobras, the Brazilian state-owned giant that holds (held?) the biggest gas concessions in Bolivia, says that the 7 US dollars applies to liquefied natural gas shipped over long distances by sea, a line of business unavailable to landlocked Bolivia.

Petrobras CEO Sergio Gabrielli said recently that the company will depend on natural gas from Bolivia until at least 2010.

However the chairman of Brazil's National Confederation of Industry, Armando Monteiro Neto, downplayed concerns about a possible gas cut-off recalling that Bolivia's "income depends to a great extent" on providing fuel to Brazil.

But amid the complaints and gloomy predictions from Brazil's business community, the leader of the oil workers union in Sao Paulo offered support for Morales' decision to nationalize hydrocarbons' resources.

"If Brazil can have control of its petroleum (via Petrobras), why not Bolivia?" asked union chief Antonio Carlos Spis.