Will Bolivia's Move Make Chavez Leader of the Pack?

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Venezuelan President Hugo Chavez with Bolivian President Evo Morales, in Argentina yesterday

Venezuelan President Hugo Chavez is better known for a blustering, antagonistic style of politics that has made him the star of Latin America's resurgent left. But as he flew into in Puerto Iguazu, Argentina, on Thursday to try and head off a rift between his left-wing allies Bolivia, Brazil and Argentina over Bolivia's abrupt nationalizaton of its natural gas and oil industries this week, Chavez suddenly found himself in the unfamiliar role of quiet diplomat. And his success or failure may well determine whether or not he becomes the sort of regional leader he's always aspired to be — and which his avowed enemy, the Bush Administration, wants to make sure he never becomes.

On its face, the stunning move by Bolivian President Evo Morales to bring his nation's recently discovered natural gas reserves, South America's second largest, under state control would seem to be a triumph for Chavez and his quest to integrate Latin America under his leftist "Bolivarian Revolution" (named for South America's independence hero, Simon Bolivar). But while Venezuela has the hemisphere's largest oil reserves, Bolivia is still a bit player on the world energy stage. And while Morales' nationalization decree was certainly a strong rebuke to the U.S.-backed capitalist reforms that have swept the region over the past 15 years, it was also a major irritant for Brazil and Argentina.

The continent's two economic powers are not only Bolivia's sole natural gas markets but among its biggest energy investors as well. "Foreign energy companies got very sweet deals when Bolivias energy sector was privatized in the 1990s, and many Bolivians feel they were screwed," says David Mares, a political science professor at the University of California-San Diego and an expert on Latin American energy issues. "But in the end, Morales needs a lot of capital to make this work — which means he needs Brazil and Argentina more than they need him. He's going to have to make deals right away."

Those are deals that Morales apparently feels Chavez, his political mentor, can broker for him. Chavez was characteristically boisterous Wednesday night when he flew into La Paz, Bolivia, to meet with Morales before the pair left for Puerto Iguazu. "Bolivia and Venezuela," he announced, "are always working on a big common strategy."

But behind closed doors, say analysts, Chavez has to help devise a way for Bolivia to realize the steeply increased share of gas and oil revenues it wants, while making sure foreign companies like Brazil's Petrobras and Spain's Repsol don't face expropriation of the hundreds of millions of dollars worth of investments and infrastructure they have staked in the Andean nation. That balance will probably require Venezuela to help subsidize the nationalization by pouring some of its own prodigious petro-wealth into Bolivia's threadbare state energy company, YPFP.

What's more, not all the parties to the negotiations feel such a high degree of left-wing solidarity. Brazilian President Luiz Inacio Lula da Silva may be a leftist himself, but he views Chavez's more radical "21st-century socialism" with a dose of skepticism and concern. It is quite possible that the nationalization may have enhanced the bargaining position of Morales — who told TIME before his January inauguration that "the foreign companies have to be subordinate to the Bolivian people." But Mares and other experts warn that the fact that Morales sent armed troops into the country's gas and oil fields this week — and that he brought in auditors from Venezuela's state-run oil monopoly, Petroleos de Venezuela, to seize and examine the books of the foreign energy firms operating in Bolivia — may not have been the most tactful thing to do before sitting down with Brazil and Argentina.

The Bush Administration has long argued that Chavez is a would-be dictator in the mold of Fidel Castro and a threat to hemispheric stability. But if Chavez can use his combination of financial clout and pan-Latin charisma to keep the Puerto Iguazu parties united, it would undoubtedly help raise his standing from an anti-U.S. firebrand to the sort of regional coalition-builder Latin America has never had. Alex Main, a former international relations advisor to Chavez, concurs: "This is the first time we've seen a real challenge to the unity of the new Latin American left, and to keep it together through all this would be a great achievement for him. He's already gotten away with things" — like thwarting President Bush's plans for a hemispheric free trade agreement — "that no one thought possible from a Latin American leftist just a few years ago."

Bolivia's actions in many ways simply mirrored Chavez's very similar moves. Venezuela's oil industry was nationalized 30 years ago, but last month Chavez himself put the screws on foreign oil and gas firms operating in Venezuela by raising their taxes and royalties and forcing them to concede majority stakes in their projects to the government. Few plan to pull out of Venezuela, however, given the record profits they're earning there. And with crude prices at astronomical levels, Chavez has used his petro-largesse — including programs to provide cash-strapped neighbors with cheaper access to Venezuelan oil and to build continent-wide pipelines for oil and natural gas — to create what he hopes could someday be an E.U.-style economic partnership in Latin America (though analysts like Mares nevertheless call it a pipe dream at this point).

At the same time, leftists riding an angry anti-globalization wave in Latin America, where the gap between rich and poor has only widened in recent years, are winning elected office around the region at a remarkable pace. Another, Ollanta Humala, may win Peru's presidential election this month, and he too has pledged to drastically renegotiate his nation's contracts with foreign energy and mining companies. Meanwhile, though the front-runner in this year's Mexican presidential race, former Mexico City mayor Andres Manuel Lopez Obrador, is more friendly to foreign investment than the likes of Chavez, he has also pledged to review certain aspects of the 12-year-old North American Free Trade Agreement (NAFTA).

As he walked into a Puerto Iguazu meeting on Thursday, Chavez remarked that Latin America has "been trying to integrate for 200 years and [the U.S.] has been trying to break us up for 200 years." It was typical Chavez bluster. But if he can prove his mediator mettle this week, he could make it much harder for anyone to thwart his hemispheric ambitions in the coming years.