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Morales In May Day Gift To People Nationalizes Spanish Utility

Two weeks after Argentina nationalized a Spanish owned oil company, Bolivia nationalizes Spanish owned utility.
By Amiel Ungar
First Publish: 5/3/2012, 5:38 AM

Under New Ownership
Under New Ownership
Reuters

Two weeks after Argentina nationalized a Spanish owned oil company Bolivian President Evo Morales played copycat by nationalizing Bolivia's main electricity company. Morales is an ally of Venezuelan President Hugo Chavez who spearheaded the nationalization policy and has imparted it to Argentina, Ecuador and Bolivia. In Bolivia the nationalization probably had less Iberian sentiments to overcome as Morales represents the country's Indian majority rather than the descendants of the Spanish conquistadors. Under international law a country has the right to nationalize but must provide prompt, adequate and effective compensation. The Bolivian government conceded that it owes the Spanish Red Electrica Company, the owner of the nationalized subsidiary, compensation the problem is what precisely is adequate. A British electric utility company that was nationalized in 2010 by Bolivia is still engaged in arbitration at the Hague to receive the compensation.

Morales has used 1 May as a red letter date for nationalization to demonstrate that national property is being returned to the people. "In honour of all Bolivian people who have struggled to recuperate our natural resources and basic services, we are nationalising Transportadora de Electricidad (TDE)." The penalty that countries pay for nationalization is to create adverse investor confidence both in projects as well as in bond sales and the Chavez led bloc pays significantly higher interest rates.

Brazil and Chile are governed by leaders who identify themselves as part of a political left but are business friendly and as a result have an easier job in capital recruitment.

The European Union expressed its concern about the nationalization as it had done in the Argentinian case. It is an irony that the nationalization of Spanish property in Latin America is proceeding while a Popular Party government is in power in Madrid. The Popular Party under Jose Maria Aznar had attempted to strengthen ties between the European Union and Latin America while emphasizing the common Hispanic heritage. In This Way, Spain imitated France that sought to reinforce ties between her former colonies in Africa and the European Union.

Given Spain and the European Union's economic troubles it may be that some Latin American leaders feel that they no longer have to display respect neither for Spain nor for Brussels.