Evo Morales set for energy accord with Chávez

Bolivia's president-elect Evo Morales was yesterday set to seal a series of accords with Hugo Chávez, Venezuela's president, that are expected to underpin forthcoming radical reforms to Bolivia's economy and energy sector.

Mr Morales, who later this month will enter office as the first indigenous president of South America's poorest country, stopped in Caracas before heading to Europe, South Africa and China.

Venezuela's warm reception for Mr Morales, including full state honours, underscores a desire to influence Bolivia's development.

Mr Chávez formally welcomed Mr Morales into the fold of left-leaning governments in the region that are at odds with the US administration. "The axis of evil is Washington and its allies around the world, which go about threatening, invading and murdering,'' said Mr Chávez. "We are forming the axis of good."

Bolivia's incoming president and his economic advisers are likely to listen soberly to advice from Mr Chávez on how to implement state-centred reforms akin to those of the "Bolivarian Republic of Venezuela". This week the Chávez government took control of 32 privately operated oilfields ahead of their conversion into state-dominated joint ventures.

Foreign investors in Bolivia, such as Brazil's Petrobras, Spain's Repsol and British Gas, are watching closely for elaboration of Mr Morales's declared plans to "nationalise" the country's oil and gas industry.

"Those investors will be looking out for anything said by Morales or Chávez that sounds like the formation of a Bolivarian Republic of Bolivia," said one Latin American ambassador in Caracas.

With an estimated 53,000bn cubic feet, Bolivia has the second largest gas reserves in South America. Venezuela has the largest, but its gas industry is poorly developed compared with its oil industry.

Analysts said energy was the main strategic issue uniting the two countries. "Morales knows that he is not going to be able to gain any significant national income from the energy sector unless he sells some oil and gas overseas," said Stephen Johnson, Latin American analyst at the Heritage Foundation, a think-tank in Washington.

"The question is which countries. Since Venezuela has significant experience working with China, there would be some talk about how China can also be part of developing the energy sector in Bolivia."

Mr Chávez and Mr Morales were expected to sign deals for Venezuelan assistance in land reform and education. Mr Morales last week signed co-operation agreements with Fidel Castro, Cuban president, in Havana.

He was scheduled to depart for Spain to meet Prime Minister José Luis Rodríguez Zapatero today.