Bolivian response to Electricity Prices

Bolivian President Evo Morales nationalised two Spanish-owned electricity companies on Saturday in a bid to improve rural energy services.

He took over the subsidiaries of Spanish energy giant Iberdrola in a public ceremony at the governmental palace.

Soldiers and police guarded buildings belonging to the newly nationalised Electropaz and Elfeo, many of which were draped with colourful banners reading "nationalised."

President Morales said he had been "forced to take the step" to ensure "equitable" energy prices in rural areas of La Paz and Oruro.

He said the end to "unfair" disparities was in line with the constitution, which rules that public interests override private profit in energy provision.

Customers currently pay 0.63 bolivianos (10 cents) per kilowatt in the cities of La Paz and Oruro but 1.59 (22 cents) bolivianos per kilowatt in rural areas.

The country's first indigenous president said Iberdrola will get the full market value of its seized shares as determined by an independent arbiter in the next 180 days.

Iberdrola said it hoped it would receive a "fair" price for the shares, valued at around $90 million by the Spanish media.

The Spanish Foreign Ministry criticised the decision, saying the assets had "never belonged to the Bolivian state."

Bolivian Vice-President Alvaro Garcia Linera reassured workers that "there will be job security with a guaranteed wage curve."

But the decree excludes senior managers from employment continuity.

Mr Morales told a rally in Cochabamba later that day that he had spent four months negotiating with the firm to equalise energy rates without success and so had been forced to nationalise the distribution.

Since his 2005 election victory Mr Morales has moved to take control of his country's resources from a rampant private sector.

His government nationalised around a dozen foreign oil firms in May 2006. and in May this year he sent troops to take over an electrical company owned by Spain's Red Electrica, which controlled 75 per cent of energy transmission in the Latin American country.