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Morales Takes Step Against Operation Part-Held by Shell

The Wall Street Journal Home Page

Bolivia Nationalizes Pipeline

Morales Takes Step 
Against Operation 
Part-Held by Shell
June 3, 2008; Page A15

SÃO PAULO, Brazil — In a bid to regain political footing amid a growing autonomy movement by Bolivia’s richest states, Bolivian President Evo Morales ordered the nationalization Monday of a natural-gas pipeline operator half-owned by Royal Dutch Shell PLC and a U.S. investment fund.

The move came a day after voters in the gas-rich states of Beni and Pando overwhelmingly passed referendums calling for autonomy from the Morales government, joining a similar move last month by the country’s richest state, Santa Cruz. Mr. Morales is betting the nationalization will energize his mainly poor Indian backers ahead of a crucial national referendum on Mr. Morales’s presidency set for Aug. 10.

“We’re a small country, sometimes they call us underdeveloped, but we have lots of dignity,” Mr. Morales told supporters at a signing ceremony for the nationalization of the pipeline in Santa Cruz, according to the Associated Press.

Mr. Morales is engaged in a tug-of-war with the gas- and agriculture-rich lowland states over who will keep the windfall revenue from soaring prices of the commodities. Mr. Morales wants to rewrite the constitution to centralize control in the Andean capital of La Paz and has talked about breaking up large landholdings. The lowland states, which represent most of Bolivia’s economy, have retaliated by mounting autonomy movements.


The gas-rich state of Tarija will hold its own autonomy vote in a few weeks’ time.

Bolivia is a chronically unstable country. Mr. Morales, an Aymara Indian who led protest movements that helped bring down two previous presidents, won the presidency in 2005 promising to transform the lives of the indigenous majority. His rhetoric has aggravated existing cultural rivalries between the mainly poor Indian highlands and the more mixed-race lowlands.

While observers say there is ample room for compromise on both sides, increasingly hard-line stances are raising the likelihood of violence as the nation heads for the August recall vote. Political analysts say Mr. Morales is likely to prevail in the referendum — though with his presidency on the line, the stakes are high.

“President Morales is trying to strengthen his position as much as he can before August,” says Michael Shifter, vice president of the Washington-based Inter-American Dialogue think tank. “He is resorting to one of the tools that has worked for him before to strengthen his hand.”

The leader of a coca-leaf growers’ union, Mr. Morales earlier declared his intentions to take control of the pipeline company, Transredes SA, which delivers Bolivian natural gas for export to Argentina and Brazil. But the speed of the move came as a surprise. Transredes shareholders Shell and investment fund AEI were already in talks with the government about a sale. But Mr. Morales said the talks were going nowhere and decreed the nationalization. He didn’t detail the terms. AEI declined to comment on the move. Shell couldn’t be reached.

Mr. Morales’s aides called Transredes to notify officials that the president would arrive at the company in “about an hour” and needed to borrow a table, a person familiar with the situation said. When Mr. Morales arrived, he had a crowd of chanting supporters in tow. He used the table to sign the decree.

The nationalization may have political benefits for Mr. Morales, but the economics of the move aren’t clear. Gas production has declined in Bolivia since Mr. Morales began intervening in industries, and the country has missed delivery on contracts with neighbors Brazil and Argentina. The moves have also scared away foreign investment in Bolivia’s massive gas reserves, discovered in the 1990s.

Mr. Morales first rose to national prominence helping to lead street protests against plans to develop the gas discoveries by selling it to the U.S. via a pipeline to Chile. The plans, which would have added hundreds of millions of dollars to Bolivia’s budget, were scrapped amid the violence.

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