Repsol execs surrender in oil probe

The two top executives of Spanish-Argentine energy company Repsol YPF's Bolivian subsidiary were arrested early Wednesday in an oil smuggling investigation involving the company's alleged avoidance of $9.2 million in taxes.

Julio Gavito, the subsidiary's president, and Pedro Sanchez, its operations manager, were later released by a judge in the eastern city of Santa Cruz on $50,000 bail each and ordered to surrender their passports pending further investigation.

After resisting orders to submit to questioning for three weeks, prompting prosecutors to issue arrest warrants, Gavito, a Spaniard, and Sanchez, an Argentine, had surrendered Tuesday night and submitted to questioning.

The case is widely seen as an attempt by President Evo Morales' new leftist government to exert tighter legal control on multinationals and exact from them more proceeds from the exploitation of Bolivia's natural resources.

Bolivia's customs agency alleges that the Repsol subsidiary Andina SA illegally exported some or 230,000 barrels of oil worth more than $9.2 million to Argentina and Chile between 2004 and 2005.

Although customs officials allege that documents were doctored in the illegal exports, Repsol spokeswoman Karina Vargas insisted Wednesday that no crime was committed. The company says an administrative error occurred and it will pay what is required.

Bolivia badly needs foreign investment to extract natural gas from South American's second largest proven reserves and build pipelines to export it.

"The signal they're sending to the investor community is very bad at the moment," said Pietro Pitts, editor in chief of Venezuela-based LatinPetroleum magazine.

Morales, who took office in January, has insisted on obtaining for Bolivians a larger share of profits from foreign-run oil and natural gas operations and wants to renegotiate contracts with companies including Repsol.

That has put a chill on foreign investment in Bolivia's energy sector. Repsol, one of the biggest foreign investors in this poor landlocked Andean nation, alone froze $480 million that had been earmarked to boost gas production in Bolivia.

However, Repsol's president, Antonio Brufao, said during a March 3 visit to Bolivia that his company would invest $150 million for development of a new gas pipeline within the country.