Spain slams Bolivia power grid nationalization

AP News
Posted: May 02, 2012 6:35 AM
Spain slams Bolivia power grid nationalization

Spain warned Bolivia on Wednesday that its nationalization of a Spanish company that owned most of its electricity grid will hurt the Latin American country's image among international investors.

But Economy Minister Luis de Guindos said there was no link between this case involving Red Electrica Corporacion S.A. and Argentina's process of nationalizing YPF, until now an affiliate of Spanish energy giant Repsol SA.

De Guindos said Madrid will be watching out to make sure Bolivia pays a fair price for the forced takeover of the Spanish company.

The nationalization could not come at a worse time for the Spanish government, the owner of 20 percent of Red Electrica, as it faces a recession, mass unemployment and investor concerns it will be the next eurozone country to need a bailout.

"The Spanish government does not like this kind of decision because we believe it is essential to maintain legal security in the investment process in countries like Bolivia," de Guindos said in Brussels, where he is to meet with his EU counterparts.

Of the decisions by Bolivia and Argentina to expropriate companies, he said "They are mainly negative for the countries that make them, for the governments that make them."

Over the mid-term they will have "implications" for their economic development and investor confidence, the minister added.

Red Electrica spokesman Antonio Prada denied Bolivia's accusations the local unit did not invest enough in the grid. He said the company had invested "the amount necessary to maintain and raise the quality standards" of the Bolivian electrical distribution network.

The seizure was announced Tuesday by President Evo Morales at a ceremony marking May Day.

Prada added that Bolivia only accounted for 1.5 percent of the company's revenues, which totaled (EURO)1.8 billion in 2011.

Red Electrica shares were down 1 percent at (EURO)31.90 in midday trading.

The vice president of Spain's main business federation, Arturo Fernandez, said that in the wake of these moves announced by Argentine President Cristina Kirchner and now Morales, Spain's government has to be tough. These nationalizations "could be contagious" and be emulated by countries such as Ecuador or Venezuela, he said.

"It is just not right that Mrs. Kirchner did what she did and now in Bolivia they toy with the Spanish people like this," Fernandez told Spanish state television.

"I do not see this happening with the French or the Germans. It seems we have been singled out. We have invested a lot of work and money, and we have resolved too many economic problems in those countries to be treated like this now."

Prada said Red Electrica expects to reach agreement with Bolivia on compensation for the nationalization of its Bolivia unit.