Chile tiptoes around Bolivia's proposed rail nationalisation
The Santiago Times: June 22, 2006
Chilean Businesses Threatened By Bolivian President, Evo Morales? Nationalisation Plan.
PHOTO SOURCE: Presidencia de Bolivia
Chile?s government said Tuesday it will ?closely monitor? the business nationalizations recently ordered by Bolivian President Evo Morales, but that it would not publicly comment.
?In principle, Chile?s government should not involve itself in the dealings of every business,? said Foreign Minister Alejandro Foxley. ?Unless there is a violation of international law, in principle, we should not be influencing any of these decisions.?
Bolivia recently announced it would soon take control of the energy, railroad, and telecommunication companies which are currently not under state control.
The proposed nationalizations would impact several important Chilean businesses which have invested in Bolivia, including railroad lines owned by the Luksic family, one of Chile?s most important economic groups.
?The state will buy the necessary amount of company shares so that it owns more than 50 percent of the companies,? said Bolivian Planning Minister Carlos Villegas. ?Therefore, the state will administer them.?
Jos?inelo, Bolivia?s consul in Chile, explained the measures as a relatively benign way to give his country more control over the natural resources within its borders. ?This represents the strengthening of the national government. What I can say is that it will not be hostile.?
The ?National Development Plan for 2006-2010? published last week by Bolivia?s government said the first businesses to be nationalized would be the electricity companies Corani, Guaracachi y Valle Hermoso, which have large investments from the United States; the telephone company Entel, an offshoot of the Italian giant Telecom Italia; and the Oriental y Andino railroad companies, which are primarily owned by Chilean investors.
Chilean investments in Bolivia?s automobile, publicity, and soft drink industries are estimated at more than US$360 million.
?We have been in Bolivia for years, and we would definitely like to stay there,? said a source within the Del Rio group, which currently owns some 30 percent of the Bolivian automobile sales industry.
Still, the most high profile investment in Bolivia belongs to the influential Luksic family, which owns 100 percent of the Antofogasta-Bolivia train line FCAB and 50 percent of Ferrocarril Andino, the most important railroad company in Bolivia which was state owned until 1995. Some 4.34 million tons of mostly mineral shipments were transported by both train lines in 2005 (ST, May 5).
The Luksic group announced its ambition recently to operate the train line between the northern Chilean city of Arica and La Paz. This railroad is currently administrated by the Chilean government, but with Bolivian oversight (ST, May 5).
The Ferrocarril Andino line is of particular importance to the business conglomerate. The family paid US$13 million for a 50 percent interest in the mid 1990?s and, since then, has invested an additional US$27 million. Cargo is mostly raw minerals, soy beans, and wheat destined for international export.
The announcement about the imminent round of nationalizations comes after Morales? landmark decision to nationalize Bolivia?s natural gas reserves early last month. Morales ordered the military to occupy his nation?s energy fields on May 1 as he placed Bolivia?s oil and gas reserves under state control. Morales ordered foreign producers to relinquish control of all fields and to channel future sales through a state-owned energy company. He also gave foreign companies 180 days to renegotiate existing contracts with the government, or leave the country (ST, May 3).
Bolivia sits on the second-biggest gas reserves in Latin America after Venezuela.
Chile?s low-key response to Bolivia?s nationalizations may in part be attributed to Chile?s desire to import Bolivian natural gas, a need that is hampered by Bolivia?s insistence on a return of its Pacific Coast territory lost in the 1879-1884 War of the Pacific. Another factor may well be Chile?s own history with the state-owned Codelco copper company. Chile?s copper was nationalized in the early 1970s under the administration of Socialist Party President Salvador Allende. The Pinochet regime dared not fully rescind the nationalization, but rather opened the door wide for new private investment in the mining sector with special laws guaranteeing the security of foreign investments. Codelco will earn Chile an estimated US$11 billion in 2006 as a result of sky-high copper prices.
Energy-dependent Chile currently imports more than 97 percent of the 22 million cubic meters of the natural gas it consumes daily, at a cost of US$822 million in 2005. During the past two years the natural gas shortfall in central Chile has been replaced by more expensive petroleum fuels, of which Chile also imports 98 percent (ST, April 19).
SOURCE: LA NACION, EL MERCURIO, AND LA TERCERA
By Matt Malinowski (firstname.lastname@example.org)