Bolivia's Morales deepens control of economy

Bolivia's President Evo Morales gives a speech as he takes part in the May Day celebration outside the presidential palace in La Paz May 1, 2008.

LA PAZ (Reuters) - Bolivia's President Evo Morales deepened state control of the economy on Thursday, the second anniversary of his energy nationalization and days before an opposition-led autonomy vote that challenges his leftist reforms.

Morales announced the government takeover of Italian-owned Entel, the country's biggest telephone company, and of four energy companies.

Police occupied Entel's headquarters in an echo of the May 1, 2006 energy nationalization when Morales sent security forces to Bolivia's oil fields.

The new announcements came as residents of the populous and wealthy farming region of Santa Cruz prepare to vote on Sunday in an autonomy referendum that is expected to pass and that is seen as a repudiation of Morales' initiatives.

"We confirm that there's no turning back on our changes, and national unity is more important than any regional or sectorial agenda," Morales said to applause at a rally of union workers.

For more than a year the government had said it was seeking to take over Entel, a unit of Telecom Italia. The government accuses the company of failing to meet commitments to expand phone network coverage.

Morales also announced a $6.3 million deal with Spanish oil company Repsol, which will cede control of its Andina subsidiary to the government but retain a minority stake and a say in management.

The government will pay more than $37 million to acquire controlling stakes in three other energy companies which it took over by decree, the energy minister said.

The companies are natural gas producer Chaco, owned by British oil giant BP; pipeline company Transredes, controlled by Cayman Islands-based Ashmore Energy International; and storage company CLHB, or Bolivia's Hydrocarbon Logistics Company.

INTERNATIONAL WORKERS' DAY

"Today, May 1, 2008, we are consolidating the energy nationalization. The Bolivian state has 50 percent plus one share of the capitalist, or so-called capitalist, companies," Morales said to cheers.

May 1 is a holiday for International Workers' Day, marked by union marches in much of Latin America and a significant day for socialists since it celebrates labor movements.

On May 1 last year, Morales announced the implementation of new contracts that turned foreign energy firms into service providers to Bolivian state energy company YPFB.

Leftist leaders in Venezuela, Argentina, Bolivia, Ecuador and other countries in the region have in recent years rolled back capitalist reforms of the 1990s, when hundreds of companies in Latin America were privatized with mixed results.

Morales is a close ally of outspoken leftist Venezuelan President Hugo Chavez, who has also increased state control of the economy along socialist lines and has pledged investment in Bolivia's energy sector.

Bolivia, the poorest country in South America, is a key supplier of natural gas to its large neighbors Argentina and Brazil.

Morales was able to negotiate with Argentina to pay higher prices for natural gas from Bolivia, but Brazil has proved a tougher client. Brazil's state owned Petrobras is the biggest investor in Bolivia's natural gas fields.

Morales' energy nationalization, which forced foreign natural gas producers to pay much higher taxes, is highly popular in Bolivia, where people felt for years that they were not seeing the benefits of their rich energy resources.

But his wider leftist reforms have met strong opposition in Santa Cruz and elsewhere in the country's eastern lowlands, especially his proposed rewrite of the constitution to include land distribution reforms that large landholders see as a threat.

(Writing by Fiona Ortiz; Editing by Cynthia Osterman)