INDEPENDENT NEWS

Cablegate: The Gob's Mining Plan: No "True" Nationalization?

Published: Wed 8 Nov 2006 09:27 PM
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TAGS: EMIN EINV ECON PREL PGOV BL
SUBJECT: THE GOB'S MINING PLAN: NO "TRUE" NATIONALIZATION?
REF: LA PAZ 2780
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SUMMARY
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1. (SBU) GOB officials declared November 7 and 8 that the
Morales administration will not "nationalize" the mining
sector, providing assurances that the GOB has no intention of
expropriating company assets. Instead, the government will
reportedly concentrate on implementing a three-part vision of
a "reactivated" industry centered on a more powerful
state-owned firm and increased exports of value-added goods.
Whether domestic and foreign investors can take the
government at its word remains to be seen.
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NO "TRUE" NATIONALIZATION?
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2. (SBU) GOB officials told Econoff November 7 and 8 that the
Morales administration will not "nationalize" the mining
sector in the traditional or textbook sense, providing
assurances that the GOB has no intention of expropriating
company assets. Mining Vice Minister Alberto Echazu claimed
November 8 that investors misunderstood Morales' recent
announcement of "surprises" for the mining industry (reftel),
explaining that changes will in no way resemble the GOB's
1952 expropriation of mineral deposits and mining operations.
According to Echazu, the GOB recognizes the importance of
foreign investment and has no wish to threaten multinational
firms' operations. Companies that respect existing rules and
regulations and pay appropriate taxes, he said, have no need
to worry; officials are far more concerned about correcting
the actions of firms that have violated laws and demonstrated
a "lack of respect" for the Bolivian government and its
constituents.
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A THREE-PART VISION
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3. (SBU) Echazu explained that the Morales administration
will concentrate on implementing a three-part vision of a
"reactivated" industry centered on a more powerful
state-owned firm and increased exports of value-added goods.
According to the vice minister, the GOB expects Comibol,
Bolivia's state-owned mining company, to play a more
prominent role in all stages of production, with its role as
a mere administrative body a thing of the past. Echazu told
Econoff that Comibol's new capacity would facilitate the
establishment of new processing facilities, which in turn
would boost exports of value-added goods and reduce
dependence on raw materials exports. To complete its
three-part vision, the Morales administration will seek
higher tax and royalty receipts and a more equal distribution
of revenues; Echazu argued that a disappointed and demanding
public could be satisfied only if companies provided tangible
benefits in the form of higher tax payments, more jobs for
local residents, and increased individual incomes.
4. (SBU) Comibol Technical Manager Alejandro Vargas echoed
Echazu's comments, adding that GOB officials knew the
development of a comprehensive mining plan would be
difficult. Vargas noted that Comibol lacks the technical and
financial capacity to operate big projects and said the firm
would start small, working up to more ambitious projects
later. According to Vargas, change will be gradual, not
"violent," and will occur piecemeal, as officials work
through existing legislative procedures to alter the mining
code and modify company practices. Much depends, he said, on
how quickly the GOB completes a broad evaluation of the
mining sector and its needs, as officials still lack in-depth
understanding of how best to rejuvenate the industry.
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COMMENT
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5. (SBU) GOB officials may have made reassuring noises, but
whether domestic and foreign investors can take the
government at its word remains to be seen. Officials may yet
renege on promises to respect foreign investment,
particularly if the Morales administration decides to try to
soothe social unrest and boost approval ratings by announcing
another "nationalization." Recent GOB comments may have as
their aim the partial alleviation of investors' fears, but
the memory of past double-speak, public contradictions, and
policy incoherence will likely lead investors to continue to
question the GOB's true intentions.
GOLDBERG
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