Venezuela Playing Economic Role in Bolivia

LA PAZ, Bolivia – Venezuelan President Hugo Chavez moved to expand his oil-rich country's influence in Bolivia with a set of accords Friday to secure Venezuela's role in the impoverished Andean nation's recently nationalized energy industry.

Chavez and fellow leftist Bolivian President Evo Morales were also set create a joint mining company and a fertilizer company, and Venezuela is pledging more university scholarships, asphalt to pave Bolivian roads, credit for businesses and trees for reforestation.

But Bolivia's huge natural gas reserves are the real prize, and Morales clearly needs outside help.

Negotiations with a half-dozen foreign energy firms have been slow since Morales nationalized the industry earlier this month, sending in troops to guard their energy installations, and Bolivia's cash-strapped state energy company won't be able to extract and profit from this resource without major new investments.

Rich with petro-dollars and eager to expand Venezuela's economic reach throughout Latin America, Chavez has already pledged $140 million in donations and loans to Bolivia. Venezuelans are developing a national identity card program for Bolivia and will pay for 109 rural radio stations.

"Like never before in history, a foreign country is here visiting, orchestrating and deciding on issues that belong to Bolivians," said Fernando Messmer, a former foreign minister and opposition congressman.

Now Chavez is pledging even more support, promising to make Venezuela's state-owned energy firm, PDVSA, a minority partner with Bolivia to explore for gas and certify Bolivia's reserves, as well as build a gas processing plant and three asphalt factories. They will also help run state-owned gas stations in a venture to be called Petroandina.

In exchange for all this largesse, Bolivia will send Venezuela soy beans, as well as pay some cash for diesel shipments and fertilizer.

The deal is so lopsided that critics suspect Chavez is seeking other advantages at the expense of Bolivia and other South American countries, using his largesse to exert influence over Morales and strengthen his role as a regional energy player. Chavez and Morales say that's nonsense, and that both countries will gain plenty.

But Bolivia has long been dependent on foreign aid, and the money always causes political repercussions.

The United States, for example, remains Bolivia's largest donor, giving approximately $150 million annually. But much of the money is tied to the war on drugs, which Morales has said unfairly targets poor coca leaf farmers and gives the U.S too much sway over Bolivia's military.

Chavez is more interested in Bolivia's gas. While Brazil's Petroleos Brasileiro SA, is Bolivia's largest investor, Petrobras has frozen its investments since the nationalization and now says it's seeking natural gas elsewhere. Currently, Brazil gets half its natural gas from Brazil.

Friday's accords could be Venezuela's most assertive move yet to challenge Brazil's energy dominance in Bolivia, although Chavez also denies such intentions and has tried to smooth over tensions.

While some critics fear that Chavez was unduly influencing Morales, others say he's helping to lift the poor Andean nation out of poverty by helping Morales follow through on his pledge to fight corruption and inequality.

"He very much believes in what Evo is doing — Chavez has a vision of an independent Latin America that has growth and development and is based on solidarity," said Mark Weisbrot, an economist at the Washington-based Center for Economic and Policy Research.

The strengthening alliance prompted President Bush to say Monday that he's "concerned about the erosion of democracy" in both Bolivia and Venezuela.

But Washington's words don't weigh as heavily as they once did in the region.

"The reality in Latin America has really changed dramatically," Weisbrot said. "The availability of alternative sources of credit and finance have contributed to a drastic drop in U.S. influence."

And Chavez is not just threatening U.S. power — he's also challenging the region's established leaders, Brazil and Argentina, with his constant advice to Morales, who also nationalized the Bolivian operations of Repsol YPF, the Spanish-Argentine energy company.

"It's not just a personal goal, it has to do with a strategic dispute in the world about the energy resources in the long term," said Horst Grebe, a social scientist and a former Bolivian economic development minister.

And that's because Venezuela could eventually become Bolivia's top competitor in feeding gas-hungry Brazil and Argentina. Venezuela has the continent's largest natural gas reserves, followed by Bolivia, and Chavez would like to send Venezuelan gas to Brazil and Argentina in a proposed multibillion dollar natural gas pipeline.

For now, they insist they're the closest of allies. Morales calls Chavez a "tutor," and refers to his alliance with Chavez and Cuba's Fidel Castro as an "axis of good." He recently signed their "Bolivarian Alternative for the Americas," a trade pact based on socialist principles, and has rejected the U.S. trade deals other Latin American countries are signing.

Morales is bringing Chavez and Cuban Vice President Carlos Lage on Friday to Bolivia's Chapare region, where he rose to power leading the coca farmer's union. It's also where farmers led by Morales have clashed with Washington-backed Bolivian troops sent in to eradicate plants used for cocaine production.