ANALYSIS-Bolivia's Morales turns blind eye to mine seizures
* Pro-government peasants seizing small mines
By Diego Ore
LA PAZ, Oct 15 (Reuters) - Dozens of mine seizures by peasant farmers are adding to the woes of Bolivia's dilapidated mining industry, but the leftist government is unlikely to crack down on squatters ahead of a presidential election.
Large, foreign-owned mines remain unaffected for now, but squatters have grabbed a string of smaller sites since President Evo Morales took office in 2006 vowing to strengthen state control over natural resources.
Industry groups and mining leaders say the takeovers could aggravate falling investment. But Morales is unlikely to act in coming months for fear of alienating voters he is counting on to win reelection in a December presidential vote.
Many of the peasant farmers and freelance miners behind the mine seizures are supporters of Morales, an Aymara Indian who is Bolivia's first president of indigenous descent.
"There's no doubt ... mining investors are wary at the moment because of the mine seizures," said Albino Garcia, vice president of FENCOMIN, an association representing tens of thousands of freelance miners, many of whom work for foreign companies.
Morales, a close ally of Venezuelan President Hugo Chavez, has nationalized several energy and mining companies, boosting his popularity among the Andean country's poor, indigenous majority but alarming foreign investors.
Government officials appear reluctant to step in to stop the sometimes-violent mine takeovers, saying foreign mining investors have done little to help the local economy.
"While natural resources have been taken abroad for centuries, the communities remain poor, without water or electricity," mining director Freddy Beltran told Reuters.
Centuries after the Spanish conquered the famous silver mines of Potosi, he said, foreign companies are still making healthy profits from Bolivia's vast deposits of zinc, silver and lead.
Beltran, a top Mining Ministry official, said it was "totally justified" that local communities want to benefit directly from Bolivia's mineral riches, but added that the government opposed violent occupations.
Two people were killed early last year when rival groups fought for control of the Santa Maria tin mine in the central Oruro region. One person died in March in clashes between peasants and police over the Lipichi gold mine in La Paz.
This year, some 200 people ambushed a group of police trying to evict them from the Himalaya tungsten mine, beating some and taking their guns.
Peasants have taken over mines because they say mineral resources belong to them, to press companies to employ more people from local communities or to demand compensation for environmental problems.
In some cases, groups of freelance miners have seized control of small mines because they were unemployed and needed a place to work.
The government has deployed police and soldiers to evict squatters from mines in the past, but is unlikely to do so again in the run-up to the December election, which polls suggest Morales will win.
TARGETING SMALL MINES
Some 30 mines are being exploited by illegal squatters, industry sources say, and most have been occupied in the three years since Morales took office.
Whether unemployed local men or freelance miners in search of a rich mineral deposit, squatters have targeted mainly small mines as opposed to larger operations controlled by foreign companies.
Fernando Kyllmann, president of Barrosquira, the mining company that runs Himalaya, told daily newspaper La Razon his company had lost more than $500,000 in mining revenues since his mine was seized in October 2007.
According to official statistics, private companies invested $296.7 million in the mining sector in 2008, nearly 23 percent less than a year a earlier despite soaring global metals prices.
The biggest mining investors in the country are Japan's Sumitomo, which controls the silver-lead-zinc San Cristobal (5713.T) and U.S. Coeur d'Alene Mines (CDE.N), which runs the San Bartolome silver mine in the central Potosi region.
Cesar Lugo, the head of the Bolivian National Federation of Mining Workers, the country's largest mining trade union, said squatters tend to target mines "where there aren't many people" and which have infrastructure they can use.
"To do mining one needs economic resources ... but peasants don't understand that and say 'this mine is in our community and we have rights over it'. They do not want to recognize how much has been invested in the mine," he said.
(Writing by Eduardo Garcia; Editing by Helen Popper and David Gregorio)