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DE RUEHSG #0908/01 1231844
ZNY CCCCC ZZH
P 031844Z MAY 06
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 9022
INFO RUEHBR/AMEMBASSY BRASILIA PRIORITY 3160
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 3016
RUEHCV/AMEMBASSY CARACAS PRIORITY 0936
RUEHLP/AMEMBASSY LA PAZ MAY 4596
RUEHPE/AMEMBASSY LIMA PRIORITY 4547
RUEHSO/AMCONSUL SAO PAULO PRIORITY 0571
RUEHUB/USINT HAVANA CU PRIORITY 0001

C O N F I D E N T I A L SANTIAGO 000908 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 05/03/2016 
TAGS: ECON ENRG EPET EINV PREL CI BL BR CU VE
SUBJECT: CHILE: BOLIVIA GAS NATIONALIZATON PROMPTS 
POLITICAL CONCERNS 
 
 
Classified By: Ambassador Craig A. Kelly for Reasons 1.4 (b and d). 
 
¶1. (C) Summary.  Chile's government has reacted cautiously in 
public to Evo Morales' move to nationalize Bolivia's natural 
gas.  Chile's media has reported unemotionally on the events 
in Bolivia, but editorials have expressed concern about 
regional effects.  In private, Chilean officials are worried. 
 They mention Brazil and Argentina's reaction to what some 
Chilean officials see as Cuban and Venezuelan influence on 
Bolivia.  Chilean officials are also worried about how 
foreign investors will asses regional risk factors, but see 
no immediate direct impact for Chile.  End summary. 
 
¶2. (U) Chile's major dailies ran largely unemotional 
reporting May 2-3 on the decision of Bolivian President Evo 
Morales to nationalize natural gas.  Editorialists, however, 
expressed concern about how the move would affect the region. 
 Conservative, independent daily "La Tercera" called the 
details of the nationalization much harsher than foreign 
companies had expected.  The also conservative flagship daily 
"El Mercurio" emphasized Morales' conspicuous use of the 
military to occupy the gas fields, and noted Morales' 
purported plans to nationalize mining and forestry as well. 
 
¶3. (SBU) Publicly, the Government of Chile has reacted 
cautiously to Morales' decision.  Foreign Minister Foxley did 
not openly criticize the Bolivian move, but commented that 
Chile's own model was "based on a global and open market 
economy."  Foxley also expressed concern that the region's 
integration efforts were now being questioned and "some 
efforts were even in crisis."  Foxley mentioned the regional 
energy integration ring, and said Chile would continue to 
seek its creation.  Other government sources have been quoted 
in the press as saying Morales' nationalization 
"crystallizes" two regional axes, with Chile, Brazil and 
Uruguay facing a more radical bloc formed by Venezuela, Cuba 
and now Bolivia. 
 
¶4. (C) In private, Chilean officials are more worried.  In a 
May 2 meeting with the number three official at the Foreign 
Ministry, Carlos Portales, the Ambassador asked about Chile's 
reaction to Morales' decision.  Portales related that during 
meetings in Buenos Aires at the end of April, he had 
discussed Bolivia at length with his Argentine counterparts. 
Portales said Argentina shared Chile's concerns about the 
direction Bolivia was taking, and that many countries in the 
region did as well.  He said the Argentines did not have much 
investment in Bolivia but were still worried about the 
deteriorating relationship between the Bolivian government 
and the private sector. 
 
¶5. (C) Econoff spoke with two diplomats working in the 
economic directorate at the Foreign Ministry (MFA) and both 
expressed more concern for the political fallout in the 
region rather than the economic implications for Chile. 
Claudio Rojas (protect), chief advisor to MFA Economic 
Director General Carlos Furche, said Chile's diplomatic 
representatives in La Paz had sent the full text of the 
presidential decree to Santiago for analysis.  That analysis 
was underway and so far the GOC had found the decree to be 
"consistent" with international law.  Rojas called the 
Bolivian move "not traditional nationalization."  He hoped 
the decree's dictates were not final, and that there was 
still room for negotiation for the foreign firms involved. 
 
¶6. (C) Rojas said the GOC was worried about regional 
political implications.  By this he said he meant Brazil's 
reaction.  He said Brazil will "rightly see Venezuela and 
Cuba behind the Bolivian decision."  Rojas expected further 
Brazilian anger with the Castro/Chavez/Morales bloc.  Rojas 
cited press reports in Chile that had the Government of 
Brazil calling Bolivia's step "an unfriendly act." 
 
¶7. (C) Rojas said some in the GOC were concerned that by 
virtue of having a left-center government, Chile was in 
danger of being lumped together in people's minds with 
Morales' Bolivia.  He said this was a perception Chile keenly 
wished to avoid.  As for an immediate effect on Chile, Rojas 
did not see one.  He acknowledged Chile was in a "delicate 
energy situation" and thus anything that affected the 
regional energy base could also affect Chile.  However, he 
remained more concerned about the short-term regional 
political fallout then the long-term potential economic 
effect on Chile. 
 
¶8. (C) Chilean diplomat Andres Lamoliatte (protect), 
currently assigned to implementing the U.S.-Chile Free Trade 
Agreement, had a similar reaction on the effect on Chile.  He 
noted Chile had no direct connection to Bolivian gas, with no 
Chilean investments in the fields and no gas shipments from 
Bolivia.  That being said, Lamoliatte said the Bolivian 
nationalization was a long-term issue for Chile itself but 
one that would hurt Brazil immediately.  He called the 
nationalization "not a good step for Bolivia" and "a little 
crazy."  He felt strongly that Morales' decision would affect 
the Cuba-Brazil and Venezuela-Brazil relationships first and 
foremost.  He did not think Bolivia had thought through the 
ramifications of its actions. 
KELLY