Bolivia energy deals to take effect Wednesday

By Eduardo Garcia

LA PAZ (Reuters) - Bolivia's government said on Tuesday it would implement new energy contracts and take control of the country's oil and natural gas production on Wednesday, but President Evo Morales did not unveil expected major decrees on energy or mining.

In a speech on International Workers' Day marking the first anniversary of Bolivia's energy nationalization, Morales announced a 5 percent increase in the minimum wage and the creation of a bank to give low-interest loans to small businesses.

In addition, state energy company Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, said it will take control of production and marketing of oil and natural gas under new contracts signed by foreign companies operating in the South American country.

Under the deals, foreign energy companies become service providers to YPFB, which is now in control of the second-largest natural gas reserves in South America after Venezuela's.

"The Bolivian state through YPFB will be in charge of all the production of natural gas and oil in Bolivia, as well as the commercialization. Tomorrow will be a historic day," Guillermo Aruquipa, head of YPFB, told local radio Erbol.

Top government officials had said Morales would make major economic announcements on May Day, an important date for socialists worldwide, and local media had speculated about new decrees to deepen state control of mining.

"Surely some decrees will be announced tomorrow, but today is a day to celebrate," Morales said in a speech to thousands of supporters in front of the presidential palace.

The leftist leader also pressed Congress to ratify a deal between YPFB and its Venezuelan counterpart PDVSA, saying it will bring "more investments" to develop Bolivia's natural gas-rich energy sector.

YPFB's Aruquipa said exports to Bolivia's natural gas clients Argentina and Brazil would not be affected by the implementation of the contracts with foreign companies.

The implementation of the energy contracts coincides with a move by Morales' main regional ally, Venezuela's Hugo Chavez, who on Tuesday forced big energy companies to hand over control of their operations in the oil-rich Orinoco oil belt to the state.

The contracts, which were ratified by Congress in late April after months of bickering among lawmakers, raise the taxes foreign energy companies pay to the impoverished Bolivian state to an average of 82 percent of revenue for the next 20 to 30 years.

Bolivia's government has said the contracts call for investments worth $3.51 billion between 2007 and 2010. That's a crucial period as Bolivia has agreed to quadruple natural gas exports to Argentina from the current maximum of 7.7 million cubic meters a day over a 20-year period starting in 2010.

The government is also negotiating a return to state hands of three energy companies controlled by Spain's Repsol YPF, BP Plc, Royal Dutch Shell Plc and Ashmore Energy International Ltd. of Britain, and of two refineries operated by Petrobras.

Morales has also vowed to overhaul the mining industry to reap more benefits from Bolivia's vast deposits of silver, zinc, tin, wolfram and gold.

Morales became Bolivia's first president of indigenous descent after winning a December 2005 election on vows to tighten the state's grip over natural resources and use the extra revenue to bring prosperity to his country.

Analysts have said that so far the more than $600 million in extra funds Bolivia pocketed last year through the energy shake-up have not had a positive effect in living standards in the poorest country in South America.