Lefty South American Nations Threatened With Energy Bust-up

By Howard Williams | July 7, 2008 | 8:17 PM EDT

(CNSNews.com) - A tumultuous week in which the expansion of a coalition of left-wing South American governments was threatened, has ended with a fragile truce. Bolivian President Evo Morales, who earlier this week announced that he was nationalizing his country's natural gas industry, agreed to continue providing Brazil with cheap gas.

A hastily arranged summit between the leaders of Bolivia, Brazil, Argentina and Venezuela was held Thursday in the Argentinian town of Puerto Iguazu, following the May Day announcement by Bolivia that it was taking control of foreign-owned energy companies, including Brazil's state-owned Petrobras.

The move shocked Brazil which had considered itself a close ally of Bolivia since Morales took over the country. Brazil is also considered a likely future member of the so-called Bolivarian Alternative for the Americas (ALBA) which currently comprises Fidel Castro's Cuba, Hugo Chavez's Venezuela and Morales' Bolivia.

But the shock announcement by Morales on Monday clearly angered Brazilian President Luis Inacio Lula da Silva. According to well-informed sources, the Thursday summit was hastily arranged by Chavez.

In a communique issued late Thursday, the leaders of the four countries pledged to continue negotiating for steady and cheap supplies of energy from the energy producing countries to the import-dependent nations.

According to the communique, "The presidents of Argentina, Bolivia, Brazil and Venezuela, meeting in Puerto Iguazu, emphasized that energy integration is an essential element for the region and its people.

"In this context, the presidents concur on the need to preserve and guarantee the supply of gas to permit equitable development in both producing and consuming countries.

The leaders also "expressed their willingness" to "consolidate South American integration. In this sense, they ratified their decision to advance the Southern Gas Pipeline Project."

This is a major regional project in which Brazil and Bolivia are key partners. But following the announcement of the Bolivian take-over of foreign-owned natural gas operations, Petrobras said it would scrap plans to expand a gas pipeline between the two nations.

Although Thursday's communique did not refer to this threat, observers said Chavez was instrumental in persuading Brazil to cool down the tone. Venezuela also offered to increase its own oil and alternative energy supplies to the region in return for Brazil not taking retaliatory action against Bolivia.

Both Argentina and Brazil are big investors in the Bolivian energy sector and are among the major purchasers of Bolivia's liquefied natural gas.

Following Thursday's summit, Brazilian President Lula da Silva said: "The important thing is that gas supplies for the countries needing them have been guaranteed and that prices will be discussed in the most democratic form possible between all parties involved."

While Chavez brokered the compromise between his two friends -- Morales and Lula da Silva - he may have over-played his hand in Peru where there is a presidential election run-off between another of his close friends, Ollanta Humala, and former socialist President Alan Garcia.

Garcia has confounded pundits by taking the lead in opinion polls for the May 28 vote. Like Humala, Garcia opposes the current free trade pact between Peru and the United States, ratified by Peru last month. But Garcia resents Chavez's interference in a matter dealing with Peruvian sovereignty.

First, Chavez lambasted Peru for ratifying the trade deal. Then, Garcia accused Venezuela of "shameless" interference in trying to stop another country from dealing with the United States even as Venezuela continues to be a main supplier of oil to the U.S.

In a reference to Garcia's presidency in the 1980s, when his administration was widely recognized as corrupt, Chavez called Garcia "a thief."

All of this makes it doubtful that Garcia, should he win the May 28 presidential run-off in Peru, will want to participate in the Bolivarian Alternative that has been orchestrated by Chavez.

Subscribe to the free CNSNews.com daily E-Brief.

Send a Letter to the Editor about this article.