Bolivia nationalises Spanish-owned power grid

Bolivian troops occupy installations owned by Red Eléctrica, following Argentina's move to nationalise oil company

guardian.co.uk, Phillip Inman and agencies, Wednesday 2 May 2012

Bolivian president Evo Morales (second right) and members of his
government celebrate May Day. Photograph: EPA

The trend for South American nations to reclaim privatised energy businesses has strengthened after Bolivia's president Evo Morales said he planned to seize control of the main power grid from a Spanish-owned company.

The move is a blow to Red Eléctrica Corporacion, which has operated most of Bolivia's electricity distribution since the grid was privatised 15 years ago.

It follows Argentina's controversial move last month to take control of the country's oil company, YPF, from the Spanish energy company Repsol, which had a majority interest.

Spain's ambassador to La Paz expressed alarm that another overseas Spanish asset was effectively being seized. He said the electric grid takeover "is sending a negative message that generates distrust."

Morales chose to press ahead with the move on May Day, the international labour day, by ordering troops to occupy the company's installations.

Red Eléctrica is the sole operator of the transmission grid in Spain, and the Spanish government holds a 20% stake in the company.

Morales did not say how much the company would be compensated, but the nationalisation decree says the state would negotiate a compensation fee.

Morales said only $81m (£49.9m) had been invested in Bolivia's power grid since it was privatised in 1997.

The government, meanwhile, "invested $220m in generation and others profited. For that reason, brothers and sisters, we have decided to nationalise electricity transmission," he said.

Argentina president Cristina Fernández de Kirchner also blamed a lack of investment by Repsol for her decision to nationalise the oil companies assets.

Bolivian soldiers peacefully took over the company's offices in the central city of Cochabamba, hanging Bolivia's flag across its entry.

Red Eléctrica had no immediate comment.

The company owned 74% of Bolivia's electrical transmission network, or 1,720 miles of high voltage lines.

Two years ago, on May Day, Morales' government took control of most of Bolivia's electrical generation, nationalising its main hydroelectric plants.

Morales, Bolivia's first indigenous president, has moved to put energy, water and telecommunications under state control.

But analyst Joao de Castro Neves of the Eurasia Group said the president has been far more pragmatic and less radical than the leftist leaders of Venezuela or Argentina.

"He knows his limits," Castro Neves said. "The Bolivian state doesn't have the capacity to take over all these sectors, including mining, and maintain the high levels of investment they need."

He noted that Morales still hasn't come to terms for taking over several small mines whose nationalisation he announced last May Day.

Bolivia's government also has not been able to negotiate compensation for the power plants taken from GDF Suez of France and Britain's Rurelec.

In his first year in office in 2006, Morales announced he was "nationalising" the oil and gas sector. He began extracting concessions from multinational energy companies, renegotiating contracts to give Bolivians greater control of and a bigger share of profits from the natural gas industry, the country's biggest ahead of mining.

In 2008, he used May Day to announce the completion of the nationalisation of Bolivia's leading telecommunications company, Entel, from Telecom Italia.

The nationalisations have not saved Morales from widespread criticism by Bolivians upset over rising consumer prices, lower domestic oil production and discontent over government plans to build a highway through a lowlands nature preserve inhabited by Indians.

Morales' approval rating is down to about 40% from 69% when he began his second term in January 2010.

Related Article:

Argentinian president moves to nationalise Spanish-owned oil assets