Bolivia seizes natural gas fields

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How is this going to be good for Bolivia's economy?/How will all of the profits from the oil fields make it into the hands of the employees and not Morales and his cronies?

Mexico has had its oil business nationalized for years. The money goes back to the country and its own economy, not the leaders.

Yes, Mexico has had the oil nationalized for years (so, by the way, has had Bolivia on numerous occasions, but that's besides the point). As a result, Mexico has among the highest production expenditures per barrel of oil. The money goes, mainly, to mafia dons (sorry, union leaders) , who, on occasion, share it with workers, conditional on the workers supporting their political aspirations.  Some of the money does get into the treasury - though, probably, not much more than the private companies would have paid in taxes. Because of lack of money for development, Mexico is on track to becoming an oil importer within the next 10-15 years. It is already a gas importer, despite having sizeable potential reserves of its own.  Furthermore, though it still exports crude, it imports gas. To add insult to injury, until recently Mexicans have always paid more for gas than the gringos and the national oil monopoly is notrious for environmental disasters. To sum up, the nationalized oil sector has been bad for workers, for the government and for the environment, but very good for national pride for luxury good consumption by certain union bosses and for the Miami condo sales to the same. By the way, when Mexian oil sector was nationalized it was not such a big deal: the proven reserves were dropping fast, and no new reserves became viable until the much later age of off-shore drilling. Even the radical Mexican governments of the 20s didn't dare to nationalize when the industry actually mattered.

Bolivia has had it energy sector nationalized in 1936, shortly before Mexico. They reopened it to foreign investment, because without it they did not have any way of developing it. The foreigners (mainly, Brasilians) invested 3.5 billion dollars into it - 3.5 billion dollars, which they haven't yet recouped.  Chances are, these was the last major investment in Bolivia for a long, long time to come. 

In addition, Bolivia has desperately screwed one of its only two viable foreign markets : Brasil (the other one is Argentina - since Bolivians refuse to use Chilean ports, they can't really export further afield). What I expect Brasilians to do is to yield on the nationalization, but compensate by forcing Bolivia to sell it fuel well below the international price (given the existing infrastructure and the unlikelyhood of any new investment in the future, Bolivians will not have a choice but to comply or to stop production).  The likely result of this that Bolivian government revenue will actually shrink.

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So why hasn't the PAN government made any effort to priviatize the oil industry?

Because it can't. Nationalization is written into the Constitution, and the idea is opposed by other parties and PAN doesn't have majority in either chamber of Congress.  PAN has repeatedly tried to push through modest ideas on private capital investment in the industry, and has been rebuffed every time. When Fox first became president, he appointed a few businessmen to the Pemex board - and was forced by the Congress to rescind the appointments within a week. It's a point of national pride, you see . The sad thing is, everybody knows something has to be done, but nobody dares touching the taboo. A few months ago Cuahutemoc Cardenas (the son of the late President Lazaro Cardenas who did the nationalization and the founder and the former standard-bearer of the PRD) tried sending a baloon that something must be done about foreign investment, but even with all his credentials it didn't fly: within a day he was forced to come out publically saying he was being "misunderstood".

Forget oil. Take electricity. The national monopoly is so inefficient that a) electrical subsidy is one of the government's major expenditures, dwarfing most other social programs b) despite the subsidy, the consumers still pay MORE for electricity than in the US c) the supply is so erratic, that when the other candidates were debating energy policy, Lopez Obrador, who was staying at his home watching the debate on TV, couldn't watch this very part: his area lost power (in this season it happens a few times a weak in most neighborhoods of the capital, poor or rich alike). Still, when PAN tried to change the Constitution to allow private investment, the bill was declared dead on arrival in the Congress.

Yes, for those who do the spurious comparison between Mexico and Bolivia - Bolivia has always been dramatically poorer than Mexico, whatever the legal status of whatever industry. You might be unaware of it, but Bolivia nationalized oil before Mexico did, and Bolivian energy sector remained in state hands until quite recently. The sum total to show for this is: no development in the sector whatsoever. It is only fairly recently (less than 20 years ago, I believe) that the sector was opened to foreign investment - and, in consequence, began to generate revenue for the nation. Furthermore, unlike Mexico, Bolivia simply does not have enough resources, either material or human, to develop the sector without the foreign participation. Assuming Brasil lets them (which I doubt - this would mean Lula letting his opponents in this year's election exploit his "national betrayal"), they might get to enjoy the benefits of exploiting the existing production capacity, but longer term little new development is likely - with high probability they are simply killing the golden goose.