Bolivian nationalisation leaves Lula in disarray

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http://news.ft.com/cms/s/1d2fe614-e380-11da-a015-0000779e2340.html

The summit of more than 50 Latin American, Caribbean and European leaders last week was hardly Brazil’s finest hour. Where once the South American giant – with the region’s biggest population and economy – would dominate such events, this time it found itself reacting to an agenda set by Bolivia, the continent’s poorest state.

Bolivia’s nationalisation of its hydrocarbons sector on May 1 has embarrassed Luiz Inácio Lula da Silva, Brazil’s president, more than perhaps any other world leader. It has also raised questions over the direction of policy in Brazil, both domestically and abroad.

Petrobras, controlled by Brazil’s government, has assets worth about $1.5bn (€1.1bn, £790m) in Bolivia and has spent another $2bn on a pipeline to bring Bolivian gas to Brazil. “Our whole foreign policy is under threat,” one of those involved told the FT after crisis meetings following the nationalisation decree.

At the summit in Vienna, things got worse before they got better. Evo Morales, Bolivia’s president, began by announcing he would not compensate companies for assets seized in the nationalisation. The price Brazil paid for its gas would increase by as much as 60 per cent, he added, accusing foreign oil companies of operating illegally in his country and branding them smugglers.

Following Brazil’s threat to recall its ambassador, Mr Morales started to backtrack and by the end of the summit he promised negotiations over the nationalisation and the gas price rise. Petrobras and other oil companies were now Bolivia’s “partners” and Mr Lula da Silva his “compadre”.