--Peru considering buying refinery, service stations
--Opposition says government shouldn't purchase the oil sector
assets
By Robert Kozak and Ryan Dube
LIMA, Peru--The possibility that Peru's government may buy a
refinery and a chain of service stations is causing a fire storm of
protests, with critics saying that President Ollanta Humala is
pushing for greater state control of the economy.
Government officials like Finance Minister Luis Miguel Castilla
have acknowledged that the government is looking at having
state-owned Petroleos del Peru SA (PETROBC1.VL), or Petroperu, take
a minority stake in the assets that Spain's Repsol SA (REP.MC,
REPYY) could sell.
"The decisions that the government takes, when they have to be
taken, will be based strictly and scrupulously on commercial and
economic aspects, not ideological ones," President Humala said late
Sunday in a television interview.
"If we aren't clear that technically, economically, and
commercially it is a good opportunity, and that the risks are going
to be limited, then we won't do it," said Mr. Humala, who held a
closed-door meeting in Lima last week with Repsol chairman Antonio
Brufau.
The ownership of oil resources in Peru is a heated political
issue.
Petroperu was created in the late 1960s during the left-wing
military dictatorship led by Gen. Juan Velasco from expropriated
properties. Mr. Humala, a former military officer, is an admirer of
Gen. Velasco, although he has ruled out running socialist
policies.
The mere suggestion, however, that Petroperu could become the
sole owner of all the oil refineries in Peru has caused a vivid
backlash from the private sector.
Alfonso Garcia Miro, head of Peru's largest business group,
Confiep, was quoted as saying Monday that if the government buys
Repsol's assets, then this would be the start of a process of
giving Peru an economic model like that followed in Cuba and
Venezuela.
"A dividing line has been drawn between the confidence that we
had in the government and what its true intentions are," said Mr.
Garcia Miro.
"I'm warning the millions of business owners that we represent,
that they're going to be threatened in their business," he
added.
The board of directors of Petroperu is divided on the issue and
hasn't approved any purchase of Repsol assets, while sources say
the decision to study the purchase came from the office of the
president.
The controversy has led to speculation that Finance Minister
Castilla, an orthodox economist with close ties to the business
community, could resign if the government goes ahead. Mr. Castilla
has denied that he has any plans to step down.
Critics say that if the government controls all the refining
capacity in the nation, plus having a chain of service stations,
then it could try to gain political approval by offering subsidized
petroleum products.
On Monday, Energy and Mines Minister Jorge Merino said that
Repsol hasn't made a firm decision to sell its assets in Peru, and
he ruled out that the government might want to control fuel
prices.
"The government is concerned that fuel prices aren't abused, but
we don't want to control prices, only to have regulatory mechanisms
that don't alter the rules of the free market," Mr. Merino
said.
Over the weekend, the government published regulations that will
strengthen Petroperu, allowing it to participate in all hydrocarbon
activities, including exploration and production as well as
industrial processes and retail. The regulations allow Petroperu to
make investments without receiving authorization from the finance
ministry.
Former President Alan Garcia called the new regulations
"unconstitutional," comparing the government's plans to policies of
leftist administrations that have boosted the state's presence in
the economy.
"It is unconstitutional, it changes the laws, avoids tenders and
excludes Congress," a message on Mr. Garcia's twitter account
said.
Write to Robert Kozak and Ryan Dube at peru@dowjones.com
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