Saturday, August 02, 2008

Keeping Score: Bolivia - 2, Telecom Italia - 0

Aug 2 - The Bolivian government scored two major wins against multinational company Telecom Italia in recent days as courts in the United States and United Kingdom handed down rulings in favor of Bolivia's nationalization plans.

Last week the U.S. District Court for the Southern District of New York determined that $36 million in assets that are being held in four separate U.S. bank accounts, no longer belong to Telecom Italia.

This ruling was on the heels of a recent decision by three appeal court judges in the British Court of Appeals. Those judges unanimously voted against an injunction filed by Entel that would freeze $49 million of Telecom Italia assets being held in a British bank.

Telecom Italia’s attempts to freeze these assets were the latest move by the company to wrestle compensation from the Bolivian government by filing injunctions that would lock up company bank accounts. Entel transferred the funds from Bolivia into U.S. and British bank accounts in 2007.

On May 1, President Evo Morales announced that Entel (Empresa Nacional de Telecomunicaciones) – a subsidiary of Telecom Italia – would finally be brought under government control.

Morales claimed Entel failed to meet its investment commitments and owed the Bolivian government $645 million in fines and taxes.

Telecom Italia owned a 50 percent share of Entel which is the biggest telephone and internet provider in Bolivia. The company controls 80 percent of the long distance market and 70 percent of mobile telephone services.

Entel failed to expand services into rural communities and its monopoly power enabled the company to charge users exorbitant long distance and internet rates. The company’s practices were called “technological colonialism” by some critics.

Negotiations for Bolivia to buy Telecom Italia’s majority stake in Entel commenced last year, and Morales formed a commission to study the full nationalization of Entel to create a new company – Entelbo.

The two sides disagreed upon the value of Telecom Italia’s shares and the company requested that negotiations for its majority stake be moved to a neutral country, citing pressure from local media and a ‘lack of guarantees” in Bolivia.

The government rejected the request saying it would not negotiate behind the backs of the Bolivian people. Unfruitful talks continued to drag on, with President Morales finally announcing the full nationalization of the company in May of this year.

Initially Telecom ltalia tried to fight the Bolivian government’s plans by filing a plea for arbitration with the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) in April 2007.

Bolivia withdrew from ICSID in the previous year and said it was immune from the jurisdiction of the World Bank dispute court.

Morales has been a long-time critic of ICSID, claiming the court is biased against developing nations and unfairly ruled in favor of multinational companies.

On May 1, 2006 the Bolivian government sent a formal notice to the World Bank President Paul Wolfowitz announcing its withdrawal from the ICSID convention, making it the first country to attempt such a move.

The U.S. and British court rulings signify that the nationalization plan of Entel is valid and within the boundaries of international law.

Morales repeatedly pronounced his plans to recover state control of all public companies privatized between 1993 and 1997, during the presidency of Gonzalo Sanchez de Lozada.

Nationalization of the country's oil and gas resources catapulted Bolivia's annual hydrocarbon revenue from $300 million in 2005 to $2 billion in 2007.



Blogger Unknown said...

Hat tip to you!
A factual presentation of the facts without partisan embellishment--something rarely seen in the media, no matter whether it originates within Bolivia or in the USA.
It's too bad most Bolivians won't get the chance to read it before casting their votes on the 10th.

August 02, 2008 11:06 PM  

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