Critics say Brazil caved in to Bolivian energy nationalization

Brazil's president came under fire Friday from critics who say he caved into pressure from neighboring Bolivia and failed to defend Brazil's energy interests after Bolivia nationalized its natural gas sector.

Photo: Critics say Brazil caved in to Bolivian energy nationalization

Many Brazilians expected President Luiz Inacio Lula da Silva to win concessions from Bolivia's Evo Morales when the two leaders met Thursday at a regional summit with Presidents Nestor Kirchner of Argentina and Hugo Chavez of Venezuela in the Argentine city of Puerto Iguazu.

Silva was expected to demand guarantees that Bolivia won't interrupt gas supplies to Brazil. The government's oil company Petroleo Brasileiro SA, or Petrobras, has invested roughly US$1.6 billion (Ђ1.3 billion) in Bolivia and is the country's biggest taxpayer.

Critics said Silva, known popularly as Lula, instead undercut Petrobras and failed to assert Brazil's importance as the continent's largest country and the primary consumer of Bolivian gas. While Petrobras has repeatedly said it won't invest new money in Brazil because of the new business climate there, Silva suggested that Bolivia could get more investment from the company.

"Lula was confused, contradictory, neither in favor nor in defense of Petrobras," said Paulo Kramer, of consultants Kramer and Associates.

Morales announced his nationalization decree Monday, sending soldiers to guard Petrobras installations and others operated by foreign companies in Bolivia. The nation hasn't produced gas on its own since the 1990s, when a wave of privatization drew foreign companies to the Andean nation.

Bolivia gave Petrobras and other foreign energy companies 180 days to renegotiate and sign new contracts. Petrobras executives were furious and said the company had suspended all investments in Bolivia.

But Silva on Thursday said Petrobras would continue investing in Bolivia and agreed to negotiate gas prices, starting next week in Bolivia.

"I don't know how secure supplies are ... if they already have broken contracts," Kramer said. "We don't have any guarantees not even what will happen to Petrobras' investments."

Silva, who is widely expected to announce that he will run for a second term in October elections, said he was acting in the best interests of Brazil and Bolivia, the poorest country in South America, reports AP.

O.Ch.