President Evo Morales-led Bolivian government yesterday announced its intention to nationalise the local assets of Spanish power producer Red Electrica Corp.
The nationalisation would bring control of the Andean nation's power grid directly under the Bolivian government. According to Morales, the company's local investment was inadequate and that energy should be controlled by the government.
According to analysts Morales is in the same page as Argentine president Cristina Fernandez de Kirchner who justified the takeover, last month of oil producer YPF SA from Spanish parent Repsol YPF SA (See: Argentine senate okays YPF nationalisation).
The action by the two countries is reinforcing the divide between Latin American leaders backing private investment and those seeking greater state control of their economies.
"These decisions, and the way they have been carried out, are bound to increase risks for foreign investors in Argentina, Bolivia and perhaps a few other countries," Michael Shifter, president of the Washington-based Inter-American Dialogue Policy Centre, said in an interview. "For most governments in the region, sound economic performance is prized more than short- term symbolic gains."
The past five years have seen Bolivia, Venezuela, Argentina and Ecuador take over energy, cement, airline, pension and mining companies while governments in Chile, Colombia, Brazil and Mexico have sought to draw investment to bolster growth.