Uruguay rejects oil privatization bill

Uruguayans Sunday voted to overturn a law that opened up country's oil market to foreign investments. The center-left opposition pushed forward the referendum as population negative is a major set back on center-right Government, which future is uncertain.

Over 60% of the Uruguayan electorate Sunday voted to overturn a controversial law that authorised the public oil company (ANCAP) to sign joint venture deals with foreign investors.  The vote is a major setback for country's center-right president Jorge Batlle and is seen as a victory for the center-left opposition, which now stands the best chances on 2004 presidential race.

The referendum became not only a vote on ANCAP's privaization, but also a vote on the unpopular president Jorge Batlle, whose popularity dropped to 18% at his third year in power. As such, following the mood in Brazil and Argentina, the president of the South American country  loses power as far as the shift to the left continues. The referendum strenghtened the leftist Frente Amplio (Broader Front) and its leader Tabare Vazquez who will run for president on 2004 race.

The oil trading law was considered by the Government as crutial instrument to inject foreign capital into the country's energy sector. Uruguay's economy, apart from the strong private financial system, is mainly controlled by the State. The law was originally passed in 2001, but its implementation was frozen amid calls for a referendum.

Despite several attempts to privatise public services and State-owned energy companies, Uruguayans have repeatedly opposed to such measures. However, the ruling coalition passed a law that allows the National Oil Company ANCAP, to seal association agreements with foreign enterprises. The opposition believed the government was trying to sell the company" "We are fighting for a referendum to overturn ANCAP's covered privatization, as its refinery pumps enough oil to feed the internal market and even export the surplus", said Nat. Sen.

Marina Arismendi from the Communist Party to PRAVDA.Ru before the vote. "As the company has been built up thanks to local taxpayers, we are sure the citizens will vote against privatization", he had forecasted at that time and was right.

As the country prepares for 2004 presidential elections, authorities are afraid the referendum could lead to a broader discussion that may include the Government itself. Analysts believe that the deep social crisis would lead to a victory of the opposition at that time, but the adverse result in the referendum could speed up the renewing process.

Although it is a plausible chance, FA's leaders are cautious, as they do not want to damage democratic institutions. "The election campaign starts next year. Now, we have to vote for ANCAP and to push active policies to resolve pending social issues", said Arismendi.

Now that a referendum has taken place it looks set to be scrapped. Political commentators say Uruguay's four year recession is behind the government's unpopularity.

Uruguay's economy shrank by nearly 11% in 2002 as neighbouring Argentina's economic troubles caused cross-border trade to collapse. The fragility of Argentina's own economy triggered a massive debt default and currency devaluation in December 2001.

Uruguay does not pump oil, as imports 100% from bordering countrties as Argentina and Brazil. ANCAP is a refinery plant that has expanded its activities to other indusrial sectors. Spanish energy group Repsol YPF was among the foreign firms interested in taking part in Uruguay's oil trade.

Hernan Etchaleco