'This wave of nationalism is impeding regional integration and is very negative, because it leaves us stuck in the past,' says David Fleischer, a professor of political science at the University of Brasilia.
The decree by leftwing Bolivian President Evo Morales Monday sparked protests from Brazil, where President Luiz Inacio Lula da Silva convened a crisis meeting of his cabinet to address the issue. Brazil relies on Bolivia for about half of its natural gas needs, while Brazilian oil firm Petrobras was until now the largest company in Bolivia.
Jose Gabrielli, president of Petrobras, called the decree 'anything but a friendly measure.' He fears the nationalization caused a 'dramatic situation' and could lead to 'fierce reactions.' The company said Monday it had suspended new investment plans in Bolivia.
But Petrobras' problems are not only with Bolivia. In Ecuador, where the company has about 100 million dollars of investments, the government is threatening to raise taxes on oil and gas exports from 20 per cent to 50 per cent. Environmental controls in the country have already been tightened.
The wave of nationalism sweeping through Latin America has also sparked a number of other regional disputes. Venezuela's President Hugo Chavez, whose election is widely credited with starting the region's leftward shift, has regularly inserted himself into the elections of neighbouring countries.
Chavez recently insulted Peruvian presidential candidate and former president Alan Garcia, threatening to recall Venezuela's ambassador should Garcia win. Peru promptly recalled its own ambassador to Caracas. Colombia's conservative President Alvaro Uribe has accused Chavez of supporting the leftwing insurgency in his country.
Meanwhile, the governments of Argentina and Uruguay have been sparring over environmental concerns and other differences over the construction of two paper factories on the Uruguayan border with Argentina. The dispute lead Uruguay to announce Monday that it would pull out of the South American trading bloc Mercosur.
Bolivia's Morales is clearly not the only lightning rod in the region. Argentinian President Nestor Kirchner sent his own supporters to join a blockade of petrol stations of Dutch-British oil firm Shell, after the company announced it would be raising petrol prices in Buenos Aires.
Chavez has also refused to play by the rules in the oil industry, mandating a majority decision-making share for the state-owned PDVSA in all joint ventures. When France's Total and Italy's ENI refused to cooperate, they were sent packing.
Experts are divided over the long-term consequences of the recent moves. Fleischer speculates that the costs of recent unrest could harm Brazil's Lula in presidential elections this October.
'The role of regional leader and mediator is now beyond Lula,' Fleischer says.
Investment consultant Adamir Schievelbein predicts a flight of foreign investors from the region.
'The examples and loss of investment set by the most radicalized nations, such as Bolivia and Venezuela, could also contaminate us in Brazil, as well as other countries,' says Schievelbein.
European Union reaction to Bolivia's move focussed on concern over the negative impact it could have on global oil prices and foreign investments in Bolivia's energy sector. The EU does not import oil and gas from Bolivia.
In Washington, the US State Department said it will monitor how the move affects private investment in Bolivia and emphasized the importance of maintaining open markets for economic growth.
'Certainly we will watch very closely any potential impacts on the atmosphere for private sector investment in Bolivia and in terms of the Bolivian government's adherence to its contractual obligations,' spokesman Sean McCormack said.
'We, of course, are of the idea that opening markets, increasing trade, coupled with good governance, is a way to help improve the lives of people in the hemisphere,' he added.
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