Bolivia's Morales deepens control of economy

By Carlos Quiroga Thu May 1, 4:48 PM ET

LA PAZ (Reuters) - Bolivia's leftist President Evo Morales deepened state control of key areas of the economy on Thursday on the second anniversary of the sweeping energy nationalization that set the tone for his reform agenda.

Morales decreed a takeover of leading Bolivian telephone company Entel, a unit of Telecom Italia, after more than a year of accusing the company of failing to meet commitments to expand phone network coverage.

He also announced a $6.3 million deal with Spanish oil company Repsol, which will cede control of its Andina subsidiary to the government, but retain a minority stake and a say in management.

The government will pay more than $37 million to acquire controlling stakes in three other energy companies which it took over by decree, the energy minister said.

The companies are natural gas producer Chaco, owned by British oil giant BP; pipeline company Transredes, controlled by Cayman Islands-based Ashmore Energy International; and storage company CLHB, or Bolivia's Hydrocarbon Logistics Company.

"Today, May 1, 2008, we are consolidating the energy nationalization. The Bolivian state has 50 percent plus one share of the capitalist, or so-called capitalist, companies," Morales said to cheers at a public act.

On May 1 a year ago, Morales announced the implementation of new contracts that turned foreign energy firms into service providers to Bolivian state energy company YPFB.

May 1 is a holiday for International Workers' Day, marked by union marches in much of Latin America and a significant day for socialists since it celebrates labor movements.

REGIONAL NATIONALIZATIONS

Leftist leaders in Venezuela, Argentina, Bolivia, Ecuador and other countries in the region have in recent years rolled back capitalist reforms of the 1990s, when hundreds of companies in Latin America were privatized with mixed results.

Morales is a close ally of outspoken leftist Venezuelan President Hugo Chavez, who has also increased state control of the economy along socialist lines and has pledged investment in Bolivia's energy sector.

Bolivia, the poorest country in South America, is a key supplier of natural gas to its large neighbors Argentina and Brazil.

Morales was able to negotiate with Argentina to pay higher prices for natural gas from Bolivia, but Brazil has proved a tougher client. Brazil's state owned Petrobras is the biggest investor in Bolivia's natural gas fields.

Morales' energy nationalization, which forced foreign natural gas producers to pay much higher taxes, is highly popular in Bolivia, where people felt for years that they were not seeing the benefits of their rich energy resources.

But his wider leftist reforms have met strong opposition, especially his proposed rewrite of the constitution to increase state control of the economy and possibly to institute land reform, breaking up large ranches to redistribute land to the poor.

On Sunday voters in populous and wealthy Santa Cruz department will vote in a referendum demanding autonomy from the central government.

The autonomy movement, led by the conservative opposition, is seen as a repudiation of Morales' initiatives.

(Writing by Fiona Ortiz; Editing by Cynthia Osterman)