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Bank willing to hand shares to Bolivia

A Spanish bank said it is willing to meet government demands to surrender shares it administers for a public pension fund.

india Updated: May 17, 2006 13:20 IST

A Spanish bank said it is willing to meet government demands to surrender shares it administers for a public pension fund, but was demanding compensation that the government doesn't want to give.

The Bolivian government on Monday gave two companies -- Spain's Banco Bilbao Vizcaya Argentaria SA, or BBVA, and Futuro SA of Swiss Zurich Financial Services -- three days to hand over the assets they administer for a fund used to pay pensions.

The move would immediately give the government control over a large, but minority block of shares in three energy companies. The shares are worth an estimated $1.5 billion (euro1.16 billion), according to Andres Soliz, Bolivia's hydrocarbons minister. The president of the local BBVA subsidiary, AFP Prevision, told reporters Tuesday that "there's no problem" in giving up the shares.

But Ildelfonso Nunez added that the bank believes the government cannot take the shares without compensation, as it has demanded. "I'm not going to say it's illegal, but a point of understanding must be reached even though they interpret this as legal," Nunez said. "Our position is not to give up the shares for free." Spain's Deputy Prime Minister Pedro Solbes also said Tuesday that BBVA should be compensated for handing over the shares it administers.

President Evo Morales said Tuesday his government would not pay for the shares because they are not being expropriated, but already belong to the Bolivian people.

"Bolivia gave us the administration of these shares through a law and now they are taking them away with a decree," Nunez said. "We want to negotiate this within the proper laws." Vice President Alvaro Garcia Linera said the government issued its decree after attempts to negotiate with the financial institutions had failed.

The three local energy companies involved are Andina SA, a subsidiary of the Spanish-Argentine Repsol YPF; Chaco SA, a unit of Panamerican Energy controlled by Britain's BP PLC and Argentine Grupo Bridas, and Transredes SA, of British-Dutch owned Shell Corp. and American Prisma Energy.

All three were once Bolivian state-run companies that were privatized in the 1990s. Foreign shareholders took majority control, while a little less than half the shares of each were put in a trust used to pay a pension to all Bolivians over 65 years old. The administrators distribute the pension _ just over US$200 (euro155) a year _ as well as representing shareholders. The government insists it will continue to pay the pension, but said it will also use the funds to boost its cash-strapped state energy company.

The trust holds roughly 48 percent of Andina and Chaco and 34 percent of Transredes. To take majority control over the three companies, the government must still obtain shares from foreign shareholders.

On May 1, Morales ordered the takeover of his country's 53 foreign-owned natural gas installations, sending white-helmeted military police with semiautomatic rifles to guard the continent's second-largest gas reserves.

He gave the companies six months to negotiate new contracts or leave.

Since then, the government has begun initial contract negotiations with foreign companies operating in Bolivia, the largest being Brazil's partially state-owned Petrobras and Repsol YPF.

Morales wrapped up a trip to Europe Tuesday, meeting with Belgian Foreign Minister Karel De Gucht, who said that Bolivia's decision to nationalize would discourage foreign investment. Morales defended his decision, saying that his country remained open to European investors.