According to reports in São Paulo's press, Brazil's Foreign Affairs minister Celso Amorim reacted "harshly" to his Bolivian counterpart, David Choquehuanca, statements who conditioned the next summit to the evolvement of natural gas negotiations.

Brazil's Foreign Affairs ministry, Itamaraty, described the threat to cancel Bolivian president Evo Morales visit to Brazil as "childish and amateur", reported Folha de S. Paulo.

Over the weekend Choquehuanca said that "the final declaration from the two presidents has been drafted to great extent," but added that Morales visit to Brazil "would depend on how the different bilateral committees' workings evolve, particularly regarding the natural gas issue."

According to Folha, Amorim's reaction was harsh and said that Choquehuanca's statement "was another evidence of the amateurishness of President Morales' administration foreign policy".

"Both President Lula and Amorim feel they have been extremely patient with Bolivia," underlines Folha de S. Paulo, which normally has good contacts in Itamaraty.

A spokesperson for Itamaraty said that Bolivia so far is keeping Morales's visit to Brazil as previously agreed "and we continue to prepare for the event".

"The alleged information regarding the canceling of the visit was published in La Paz press but officially Bolivia has not mentioned a word," added the spokesperson who revealed that Lula and Morales will be signing agreements for the construction of hydroelectric dams in the common border along the Madeira River.

During the visit Lula is also expected to announce that following strong lobbying from "several of Bolivia's friends", the Interamerican Development Bank will condone US$ 1.3 billion of the country's debt with the multilateral organization.

Brazil also rejected any possibility of paying a higher price for Bolivian natural gas. Brazil is Bolivia's main client and built most of the country's gas industry infrastructure including the pipeline to the industrial hub of São Paulo.

"As far as I know there are no chances of price readjustments", said Dilma Rousseff Brazilian cabinet chief.

The natural gas price paid by Brazil is "compatible" with market conditions, she said.

Bolivia is pushing for a price increase similar to that already agreed with Argentina, that is, US$ 5 per million BTU,
Brazil's Petrobras currently is paying an average US$ 4.3 per million BTU, but the regional company Pantanal Energia from Mato Grosso do Sul, neighboring with Bolivia, US$ 1.09.

Bolivia pumps 26 million cubic meters per day of natural gas to Brazil.

Mercopress

Officials from La Paz said Thursday, September 14, the plan was "temporarily" frozen. The move was suspended less than two days after Bolivia announced it would take control of the Villarroel and Elder refineries.

The two plants are owned by Brazil’s oil company, Petrobras, and refine 90 percent of Bolivia’s oil and natural gas.

Relations between La Paz and Brasí­lia have been strained since early May when Bolivian President Evo Morales announced the nationalization of all foreign energy assets in his country.

Brazil has invested US$ 1.5 billion in Bolivia’s natural gas and oil production. But, following the announcement of the nationalization plan, Brazil said it would cut most investments in Bolivia.

A decree Morales issued in May ordered the state energy company YPFB to take exclusive control of domestic oil and natural gas production within six months. Foreign energy companies’ property in Bolivia was seized, and they were told to sign new operating contracts with the state-owned firm by November.

The nationalization program was temporarily suspended in August after the government acknowledged that YPFB lacks sufficient economic resources to assume its new role. President Morales pledged the program will succeed.

Apparently in protest against the Bolivia government’s retreat, the Bolivian Energy Minister, Andrés Solis, presented his resignation this Friday, September 15.

He sent a letter telling about his decision to president Morales.
Solis was the one who signed the resolution giving YPFB control over exports and domestic sales of the products made at two Petrobras refineries.

It was a happy day for old-style nationalists of the left and right. For these reactionaries, Petrobras is a symbol of the good old days when the state ran the economy and provided cushy jobs, blocked imports and let Brazilian companies exploit a captive market with products which were often shoddy and dear.

Ten days later, on May 1, Bolivia spoilt the party atmosphere by announcing that it would take control of its own energy assets. The Bolivians also said they wanted to raise the price of their natural gas on which Brazil is heavily reliant. Even though Bolivia was only doing what Brazil has been doing for 50 years there was a reaction of shock and dismay.

Had the Bolivian announcement only affected American or British companies the nationalists would have been jubilant but the fact that Petrobras was included brought out an unpleasant xenophobic streak which exists among a small minority of Brazilians.

Petrobras is reported to have spent US$ 18 million on marking the self-sufficiency event. Even now, almost three weeks later, it is still the highlight of the Portuguese-language version of the Petrobras home page under the headline "Brazil self-sufficient in petroleum. With the entry into operation of the P-50 platform, Brazil has become one of the few countries in the world self-sufficient in petrol; this year will go down in history."

It certainly will go down in history but not for the reasons Petrobras believes. Not only did Bolivia’s announcement take the gloss off the celebrations but caught the government on the hop.

Lula, whom Bolivian President Evo Morales, had earlier described as his "big brother" first heard about it when the news broke, the foreign minister, Celso Amorim, was in Geneva and the energy minister, Dilma Rousseff, and Petrobras chairman, Sergio Gabrielli, were in the United States. All had to drop what they were doing and rush back to Brasília to find out what was going on.

Armed Takeover Leaves Bad Taste

The Brazilian side was right to object to the crude manner in which Morales made the announcement – in front of a Petrobras plant surrounded by armed soldiers – but the fact is that Brazil was completely unprepared.

The solidarity and fraternity which Lula and Morales were supposed to share was shown to be a sham. The foreign policy which the Lula administration is following – cozying up to Latin America countries, like Bolivia, and trying to be a champion of the world’s poorer nations – was once again shown to be seriously lacking.

At the end of the day, countries act in their own interests regardless of any kind of ideological sympathy, as Lula has found to his cost in his dealing with Argentina, Russia and China. Unfortunately he seems not to have learned this basic fact yet.

Lula reacted calmly (in public anyway) to the news and attended a summit meeting with Morales and Argentina’s president, Nestor Kirchner. Both Lula and Kirchner announced after the meeting that they accepted Bolivia’s right, as a sovereign state, to assume control of its own resources.

It is difficult to know what else Lula could have done in the circumstances. However, his mild response enraged columnists and correspondents in publications like O Estado de S. Paulo and Veja, some of whom showed condescension towards Bolivians which bordered on being colonial and racist.

The cover of Veja referred to the Bolivian move as "stealing Brazil’s assets" while the Estado had so many leading articles and columns complaining about it that readers must have been wondering if anything else was happening in Brazil or the rest of the world.

The affair allowed this section of the media to single out Venezuela’s Hugo Chavez whom it sees as being Morales’s mentor and, in turn, a proxy for Cuba’s Communist dictator Fidel Castro.

Many columnists wondered why Chavez had turned up at the summit involving Lula, Morales and Kirchner. That is a good question but, since the meeting was held in Argentina and not Brazil, it was not a question for Lula to answer.   

One of the few magazines to take a different view was Carta Capital which said: "The indignant, apocalyptical tone of the news about the nationalization of Bolivian gas and petroleum gave many the impression of an imminent catastrophe for the Brazilian economy and Petrobras, which is very far from being the case."

Carta Capital is generally pro-Lula so one would expect it to take this tack. However, financial analysts, with no political axe to grind, were generally relaxed about the takeover. They pointed out that even if the Bolivians did manage to raise gas prices the effects on the Brazilian economy and inflation would be slight.

Flying the Flag for Oil

At the end of the day what we had was a coup by the Bolivians against a big foreign oil company, not an attack on Brazil. However, a certain part of the population has a curious identification with Petrobras which, for some reason, it sees as representing Brazil.

One could never imagine Americans feeling patriotic about Exxon or Texaco and getting upset if their assets were nationalized. There was a similar backlash about 10 years ago when the big state-owned mining company CVRD was auctioned in the privatization program during the Fernando Henrique Cardoso government.

Opponents of this sale included apologists for the military government, trade unionists and even Catholic bishops who managed to have the auction stopped in the middle of bidding through a legal injunction. In the end CVRD was sold and, freed from the shackles of the state, has become one of the world’s most efficient companies. Nowadays, no-one is calling for CVRD to be returned to the state.

The chances of Petrobras being nationalized are nil since it provides good dividends for the government, especially at a time when oil prices are high, and provides plenty of opportunities for patronage by the political parties in the coalitions which are the norm here.

Brazil should write off this affair, learn from it and leave the details of negotiating terms and conditions to Petrobras’s professional management rather than politically-appointed senior executives. Since Bolivia is still highly dependent on Brazil and its state-owned petroleum company has few resources to exploit its natural assets, Brazilian expertise will still be in demand.           

Ironically, while all this was going on, the Abril Group which owns Veja announced that it had sold 30% of its share capital to a South African media concern. This is the maximum amount under Brazilian law which a domestic media company can sell to a foreign partner.

Since this deal means that Abril is no longer a truly Brazilian enterprise one hopes it will stop pretending to be concerned about Brazil’s  "assets" and concentrate on its own assets on the balance sheet.  Readers can look forward to many more articles on Bolivia and, of course, South Africa in the future.

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicações. This article originally appeared on his site www.brazilpoliticalcomment.com.br. He can be contacted at jf@celt.com.br.

© John Fitzpatrick 2006

According to the Brazilian Ministry of Foreign Relations (Itamaraty), the purpose of the visit is to reinforce the ties of cooperation between the two countries.

In a note, the Itamaraty affirms that, during their encounter, the two presidents are expected to talk about Bolivia’s role in consolidating the South American Community of Nations.

Together with Brazil and Peru, Bolivia is a member of the Community’s Troika and is the likely host of the II Summit Meeting of Heads of State of the Community, to be held sometime later this year.

According to the president of the Association of Bolivian Residents in São Paulo, Gil Teodoro Morales, the meeting between the two presidents affords an opportunity for new bilateral alliances.

"I believe that the participation of the Bolivian government is of great importance for us to conduct meaningful negotiations, such as agreements to improve the two countries in all aspects, social and economic as well as political," he remarked.

In his view, both countries can benefit from the exchange of experiences in various areas, such as agrarian reform, for example.

"In this sense, we have one experience, and you have other, so we need to share them and encourage exchanges," he added.

Brazil and Bolivia are major partners in natural gas production. Data from the Brazilian Gas Distributors’ Association (ADEGAS), referring to December, 2005, indicate that 44% of the gas consumed in Brazil comes from Bolivia.

Since 1996 Petrobras has been engaged in the discovery and production of gas reserves to feed the Brazil-Bolivia gas pipeline.

Agência Brasil

Mr. Morales the first indigenous Bolivian to be elected president with a landslide of over 50% votes – still to be confirmed by the Electoral Board – emphasized that "we accept investors as partners, not as owners of our resources".

Bolivia with an indigenous population of 80% and one of the poorest countries in South America has ample gas and oil resources, only second to Venezuela, but has been involved in an ongoing controversy, sometimes extremely violent, as to what extent international investors should participate in the exploitation of those resources.

Current legislation dating back ten years opened the oil and gas fields to transnational companies, which helped develop the industry, but political turmoil and unrest questioning foreign participation ended in rioting, road blockades and the ousting of several elected and caretaker presidents.

However Mr. Morales who has always been identified with the street protests and a radical speech has in the last months leading to the election sounded more conciliatory.

Furthermore his admiration for Venezuelan president Hugo Chavez, – which shocks Washington- , has turned to the more traditional influential neighbors of Bolivia, Brazil and Argentina.

"The gas nationalization policy of my government does not mean expropriation or confiscation of assets from transnational companies. We need their technology, and we will pay for those services. My government will be focused on industrializing those natural resources," insisted Mr. Morales in his first statements.

Actually Brazil’s Petrobras and Spain-Argentine Repsol-YPF are the main investors in the Bolivian gas and oil industry, and are mainly government owned and managed companies. Besides, both countries are Bolivia’s main gas consumers.

Mr. Morales also made it a point to underline that among the first to congratulate him were Argentina’s president Kirchner and Brazil’s Lula da Silva.

"We’re going to have a close coordination with the governments of Mr. Kirchner, Lula and Chavez, but it’s also important to have relations with United States. However, most important is dignifying Latinamerica," underlined the elected President.

"We’re going to review gas prices and we want Argentina and Brazil, two brotherly countries to understand it. Let’s be honest: prices must be improved, they are too low".

But Petrobras officials anticipated no problems with the new Bolivian authorities.

"Brazil and Bolivia have a mutual interdependency. I don’t think we’ll have problems", said Ildo Sauer head of Gas and Energy Department in Petrobras.

A fourth of Bolivian gas production is pumped to Brazil, 30 million cubic metres per day, equivalent to 200.000 barrels of oil.

Bolivian gas in transported along the Santa Cruz-São Paulo pipeline, financed by Brazil, and supplying the main Brazilian industries.

"Bolivia has given a giant leap forward on electing Mr. Morales in a totally democratic environment and this can only anticipate good prospects for both countries," added Mr. Sauer, who nevertheless pointed out that "we’ll have to wait to January when Mr. Morales takes office".

Mercopress – www.mercopress.com

Brazil’s Bovespa Index lost 286.55 points, or 0.86%. Mexico’s benchmark Bolsa Index fell 71.18 points, or 0.40%, while Argentina’s Merval Index tumbled 22.06 points, or 1.45%.

Brazilian stocks fell, as investors took profits following recent strong gains on optimism about local interest rates. Shares were also pressured by Bolivian presidential election results, in which socialist candidate Evo Morales appears to have won by a landslide.

Among individual shares, Petrobras was active following the Bolivian election news. President-elect Morales has said he wants to nationalize Bolivia’s energy sector. Meanwhile, Petrobras has invested US$ 1.5 billion in Bolivia since 1996.

Steel maker Gerdau slumped after the European Commission gave Gerdau, along with Grupo Santander Central Hispano and Bogey Inversiones, the green light to acquire Sidenor Steel Products Manufacturing.

Gerdau and Spanish bank Santander said in mid November that they would each buy 40% of Sidenor. Bogey Inversiones will acquire the remaining shares.

On the up side, electric power holding firm Eletrobrás climbed after the company took three concessions in a government auction Friday for rights to build and operate new hydroelectric projects.

Also, Brasil Telecom gained after the company announced plans to invest a total of 2.5 billion Brazilian reais in its operations in 2006.

Elsewhere, Mexican stocks dropped for a third straight session as investors continued to lock in recent strong gains on optimism about the local economy. Among individual shares, Homex sank. The home builder filed with the Mexican stock exchange for a second share offering.

Argentine issues retreated, as investors continued to react to the government’s surprise announcement last week that it plans to pay off its total US$ 9.8 billion debt to the International Monetary Fund before the end of the year. Some investors are concerned about a significant reduction in the country’s foreign currency reserves.

In corporate news, workers at Telecom Argentina and Telefonica de Argentina went on strike to demand shorter hours and a 40% pay increase. The union indicated that forcible occupations of the companies’ operational centers could be an option.

Thomson Financial Corporate Group – www.thomsonfinancial.com

"Lula’s liking for me is an example of his political understanding and background. It would be surprising if Lula expressed a liking for the candidates of the Bolivian elite," added Morales in an interview published Monday by Brazil’s daily O Estado de S. Paulo.

The Bolivian presidential hopeful who is leading the public opinion polls for next Sunday’s election (32.8%) said the Brazilian leader’s statements of support were merely opinion and not an attempt by Brazil to interfere in Bolivia’s internal affairs.

"That statement won’t add or take votes in an election in Bolivia. I also have my opinion about politics in other countries. That’s natural," underlined Mr. Morales referring to Lula’s comments in late November during a meeting with Argentine President Nestor Kirchner.

"At no moment in history have we had such a chance to have a South America that really takes care of the people," Lula said at the time adding, "I told Kirchner, look what the election of (leftist-populist President Hugo) Chavez meant for Venezuela, imagine what it will mean if Evo Morales wins the election in Bolivia."

The following day Brazil’s diplomacy tried to downplay what were perceived as Lula’s expressions of support for the left-wing Indian legislator and presidential candidate.

An official spokesman said Brazil "has no candidate" in Bolivia’s December 18 presidential election and is "only interested in seeing a country with strong institutions."

Morales admitted in the interview that at one point he referred to Lula as his "big brother" and expected that their relationship would prove productive for the two countries if he was elected president.

"Lula leads an enormous country and a powerful economy, and I would represent a smaller country, much poorer. We both come from similar backgrounds and have the political determination to do our best for the poor in our countries," emphasized Morales.

"And since we consider each other brothers, everything is much easier. Brothers have the trust to address all problems that must be addressed," he added.

Morales, founder of the Movement Toward Socialism, MAS, has pledged to establish greater government control over Bolivia’s oil and massive natural gas reserves much of which is now exploited by private foreign companies including Brazil’s Petrobras.

It was precisely the energy ownership controversy that led to conflict and the protests that toppled presidents Sanchez de Lozada in 2003 and Carlos Mesa earlier this year.

Morales and his MAS party ensured the passage by Congress last May of a bill sharply increasing taxes and royalties paid by foreign companies operating in Bolivia.

Private operators in Bolivia currently hold oil and gas concessions and pay taxes and royalties on output.

Mr. Morales has anticipated he wants to replace concessions with service contracts, a practice adopted by Mexico to attract foreign capital and technology in exploration and production efforts while retaining government ownership of the resources.

This article appeared originally in Mercopress – www.mercopress.com.

Brazil "has no candidate" in Bolivia’s presidential election and only is interested in seeing that country’s institutions strengthened, an official spokesperson said Thursday in Brasí­lia.

President Luiz Inácio Lula da Silva’s international affairs advisor, Marco Aurélio Garcia, said that "Brazil has no intention of meddling in Bolivia’s internal affairs."

Garcia’s comments to foreign reporters came a day after Lula, during a meeting with Argentine President Nestor Kirchner, was interpreted as having expressed specific support for Bolivian candidate Evo Morales.

"At no moment in history have we enjoyed the opportunity of having a South America completely devoted to its people," said the Brazilian president in Puerto Iguazu addressing an audience that included president Kirchner.

The Brazilian President of very humble origin and former union leader went on to say: "Imagine what (president Hugo) Chavez’s election meant for Venezuela. Imagine what it would mean if Evo Morales won Bolivia’s election."

The latest opinion polls show Mr. Morales – the leader of the Movement Toward Socialism – enjoying a slight advantage over his main rival and runner up, former President Jorge Quiroga.

Mr. Garcia insisted in underlining that those remarks "do not mean that the Brazilian government supports or prefers Morales over other candidates".

"Brazil supports the strengthening of democracy… and is convinced that the coming election will be vital to help normalize the country’s institutional situation" stressed Lula’s advisor.

This article appeared originally in Mercopress – www.mercopress.com.

Meeting in the border town of Puerto Iguazu, President Lula da Silva said that "At no moment in history have we enjoyed the opportunity of having a South America completely devoted to its people."

The Brazilian President went on to say: "Imagine what Chavez’s election meant for Venezuela. Imagine what it would mean if Evo Morales won Bolivia’s election."

"These are extraordinary events that not even the most talented political scientists could have ever written about it or even less forecasted," he added.

And turning to President Kirchner, "I’m certain that what you are doing in Argentina is evidence of leadership and progress, having more people committed to help people to advance and overcome poverty."

President Kirchner also expressed preference for Mr. Morales in Bolivia’s coming December 18 presidential election saying that he has given proof of "caring for people, for his country, for the fair exploitation of his country’s resources."

President Lula recently met in Brasí­lia with Morales, currently a member of Congress and leader of the Movement Toward Socialism, MAS, who has promised he will not seize oil and gas companies’ property if he is elected, a most controversial issue in Bolivian politics, which caused the ousting of two presidents in the last two years.

Last May the Bolivian Congress passed a new hydrocarbons bill raising taxes on oil companies and royalties, which had a significant impact for foreign companies such as Brazil’s Petrobras and Spanish-Argentine Repsol-YPF, among others.

Brazil is land locked Bolivia’s main foreign investor and yields great influence in business and politics.

However Mr. Morales also leads the strong coca planting peasants’ movement, which does not please the United States that has invested millions of dollars in trying to convince Bolivian farmers to grow conventional crops.

Washington also believed that Venezuelan president Hugo Chavez was behind the political turmoil in Bolivia financing radical groups, but it now seems that the country is back to its more traditional course with neighbours Brazil and Argentina playing a more active role.

Bolivia with large reserves of oil and particularly natural gas, second only to Venezuela in South America, is expected to have a growing responsibility as a future reliable gas and oil supplier for energy-short Mercosur and associate members.

Public opinion polls show Mr. Morales leading in vote intention, but not enough yet to avoid a run off. Runner up is conservative former President Jorge Quiroga.

This article appeared originally in Mercopress – www.mercopress.com.

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