Bolivia lands $2bn iron deal with Jindal Steel

Bolivia lands $2bn iron deal with Jindal Steel
By Hal Weitzman in Lima
Published: July 19 2007 19:01 | Last updated: July 19 2007 19:01
Bolivia has secured the largest pledge of foreign investment in its history, after the country signed a $2.1bn deal with Jindal Steel and Power, an Indian steel company, to exploit a huge iron ore deposit.
The agreement marks the first big investment by an Indian company in South America, a region whose mineral, oil and gas deposits have attracted interest from Chinese and Russian companies in recent years. It is hoped that the deal, signed on Wednesday night, could lead to other Indian investment in the region.
It is a boon for Evo Morales, Bolivia's radical leftist president and close ally of Hugo Chávez, the Venezuelan leader. Like Mr Chávez, the Bolivian leader has made increasing state involvement in the economy one of his main priorities.
In May 2006 he caught the world's attention when he announced his government would nationalise Bolivia's gas sector, the second largest in the region.
"Just imagine: from this Mother Earth more natural resources continue to appear after 500 years of looting," said Mr Morales after announcing the deal. "Together we are obligated to take advantage of these natural resources for the good of the region and the nation."
The reaction of foreign investors such as Petrobras of Brazil, Repsol of Spain, Total of France and British Gas has been cautious. The companies migrated to new contracts giving the state a much larger share of tax revenues, but they have refrained from ploughing fresh large-scale investments into the country.
The government's scepticism about the interests of foreign investors complicated talks with Jindal, which has been negotiating for more than 18 months to complete the deal. Every few months, Mr Morales's administration announced a new deadline to complete the talks, but those were routinely missed.
The agreement gives Jindal access to 50 per cent of El Mutún, located in Puerto Suarez in south-eastern Bolivia near the border with Brazil.
With an estimated 40bn tons of iron ore, El Mutún is thought to be the biggest untapped iron ore deposit in the world.
Under the terms of the deal, the Indian company will undertake to invest $2.1bn (€1.5bn, £1bn) in the project during the first eight years of the 40-year deal.
The government is hoping at least 4,000 jobs will be created and expects to receive annual revenues of $200m, although Jindal claims up to 21,000 jobs could be created including workers not employed directly at the facility.
The agreement may soothe tensions between the government and business leaders in the south-east, a region generally hostile to Mr Morales.
It should also help to modernise Bolivia's woefully antiquated mining sector.
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