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Bolivia nationalises electrical grid

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President Evo Morales has announced that his government is completing the nationalisation of Bolivia's electricity sector by seizing control of its main power grid from a Spanish-owned company.

Morales on Tuesday took advantage of the symbolism of May Day, the international day of the worker, to order troops to occupy installations of the company, a subsidiary of Red Electrica Corporacion SA.

The president's placing of another of what he deems basic services under state control comes as neighbouring Argentina moves to take control of the country's oil company, YPF, from the Spanish energy company Repsol SA, which had held a majority interest.

Ramon Santos, the Spanish ambassador to Bolivia, told reporters the electric grid takeover "is sending a negative message that generates distrust".

Morales did not say how much Red Electric would be compensated, but the nationalisation decree says the state would negotiate an indemnisation fee.

Morales said only $81m had been invested in the 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.

Military push

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

Red Electrica had no immediate comment. A security guard reached at its headquarters in Spain said a statement was expected later.

The company owned 74 per cent of Bolivia's electrical transmission network, or 2,772km 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 had 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 has not 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 Rurelec PLC of Britain.

Morales continues to deal with multinational companies such as Brazil's oil company, Petrobras, and Repsol, whose president, Antonio Brufua, he met on Tuesday after announcing the power grid takeover.

The two men inaugurated a $528m natural gas plant in eastern Bolivia that represents the single biggest foreign investment in the country under Morales.

It is designed to triple the amount of gas sent to Argentina and the local market to 9 million cubic meters a day, said Carlos Villegas, president of Bolivia's state energy company, YPFB.

'Re-nationalisation'

In the case of electricity, the government is following a policy of returning to the public domain a sector privatised during the 1990s.

"Just to make it clear to national and international public opinion, we are nationalising a company that previously was ours," Morales said.

The 20 per cent of the industry the government does not own is in the hands of small companies serving cities in the eastern lowlands that are not connected to the national grid.

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 SpA.

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 per cent from 69 per cent when he began his second term in January 2010.


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