VZCZCXYZ0007
PP RUEHWEB
DE RUEHLP #2385/01 2412109
ZNY CCCCC ZZH
P 292109Z AUG 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 4835
INFO RUEHAC/AMEMBASSY ASUNCION 7034
RUEHBO/AMEMBASSY BOGOTA 4400
RUEHBR/AMEMBASSY BRASILIA 8295
RUEHBU/AMEMBASSY BUENOS AIRES 5524
RUEHCV/AMEMBASSY CARACAS 2751
RUEHPE/AMEMBASSY LIMA 2932
RUEHMN/AMEMBASSY MONTEVIDEO 4815
RUEHQT/AMEMBASSY QUITO 5384
RUEHSG/AMEMBASSY SANTIAGO 9992
RUMIAAA/USCINCSO MIAMI FL
RUEHUB/USINT HAVANA 0501
RHEHNSC/NSC WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
C O N F I D E N T I A L LA PAZ 002385
SIPDIS
SIPDIS
FOR D
E.O. 12958: DECL: 08/27/2017
TAGS: PGOV PREL PHUM ECON EINV EMIN SNAR BL
SUBJECT: DEPSEC'S UPCOMING MEETING WITH BOLIVIAN VP
REF: A. LA PAZ 2357
B. LA PAZ 2312
Classified By: A/DCM Mike Hammer, reasons 1.4 b and d.
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Summary
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1. (C) Although the Morales government states it wants good
relations with the United States, officials often use
anti-U.S. rhetoric to distract from domestic problems, as
when the Bolivian government recently groundlessly accused
the United States of financing opposition groups. The key
areas of concern in Bolivia currently are democracy,
narcotics, and protection for U.S. investments. While Garcia
Linera is generally seen as one of the more reasonable
members of the Bolivian government, and often acts as
moderator for radical elements of the ruling Movement Toward
Socialism (MAS) party, he has been aggressive in questioning
the role and purpose of U.S. aid and U.S. anti-narcotics
policies. The VP will likely push for ATPDEA extension and
seek Millennium Challenge Account funding. End summary.
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Politically-Motivated Anti-American Accusations
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2. (C) It has become the norm for the Morales government to
launch verbal attacks against "American imperialism" in times
of domestic difficulties in order to deflect public
attention. On multiple occasions, President Morales has also
accused the U.S. government of attempted "terrorism",
suggesting that an Amcit who bombed a Bolivian hostel in 2006
was acting on USG orders. President Morales cited this
supposed act of terrorism as an excuse for proposing visa
requirements for U.S. visitors, expected to enter into force
in December. Concerned about a recent increase in vitriolic
rhetoric, Ambassador Goldberg reviewed the U.S.- Bolivia
bilateral relationship with Vice President Garcia Linera
August 20 and noted recent pronouncements and actions on the
part of the Bolivian government that strain bilateral ties.
The Vice President promised to look into the issues of
concern and asked that the Ambassador not allow the forces
that seek to distance Bolivia from the U.S. to prevail,
emphasizing that the Bolivian government is committed to
improving relations (ref b). However, not even a week later,
Garcia Linera came out publicly accusing the U.S. government
of funding opposition groups in Bolivia. We called on Vice
Minister of Foreign Affairs Hugo Fernandez on August 28 to
protest these baseless accusations. Despite our protest, the
Bolivian government a day later (August 29) stepped up their
anti-U.S. aid rhetoric.
3. (C) With no warning, Minister of the Presidency Quintana
gave a lengthy presentation on state-run television accusing
USAID of supporting the opposition and providing what he
described as evidence in support of Morales's and Garcia
Linera's previous accusations. Using USAID's democracy
program as an example, Quintana claimed that only 30 percent
of the funding could be accounted for and said that the other
70 percent is programmed unilaterally. Quintana listed
grants and subcontracts which have been given to Bolivian
organizations, highlighting organization managers who worked
in previous governments as an example of the USG funding
supporters of the "old way" and those against the MAS program
of change. Quintana praised foreign aid from other
countries, stating that other countries follow Bolivian laws.
In a particularly ugly insinuation, Quintana called on
USAID's Bolivian employees to "remain loyal" and "not be
traitors." We would find it useful if the Deputy Secretary
could repeat to Garcia Linera our concerns about the
potential damage to the bilateral relationship if such
baseless anti-U.S. attacks persist.
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Democracy in Danger
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4. (C) Strengthening and supporting democracy in Bolivia is
our mission's primary concern. Although the ruling MAS party
and President Evo Morales were elected with a clear majority
in fair and open elections, their actions since assuming
power have often displayed anti-democratic tendencies.
President Morales is currently attempting to discredit and
weaken the judicial branch of government. Specifically, the
MAS-controlled lower house of Congress has sent an
impeachment case against four of the five judges of the
Constitutional Tribunal (the court which considers questions
of constitutionality, separate from the Supreme Court, which
is the court of final appeal.) The vote on the impeachment
case was a striking example of how the MAS has begun to
manipulate regulations in order to push the MAS agenda: after
fighting broke out in the Congress, the MAS head of the lower
house convened only the MAS congressmen in the offices of the
Vice President, where they voted by "majority of those
present" (that is, only the MAS) to impeach the four judges.
The MAS's aggressive actions in the Constituent Assembly,
which is currently attempting to draft Bolivia's new
constitution, also provide an example of the MAS's growing
disregard for the democratic process.
5. (C) During a recent visit by Venezuelan President Hugo
Chavez, President Evo Morales went so far as to declare his
intention to rule by decree if laws got in his way. In a
number of areas, Evo seems to be following in Chavez's
footsteps (for example, the recently-published draft
constitution, written by the MAS and Evo's Spanish and
Venezuelan advisors, would allow indefinite reelection for
the President and Vice President.) Venezuelan funding is
pouring into the country with no transparency or
accountability, further damaging the democratic process. In
fact, La Razon (Bolivia's paper-of-record), recently called
into question Venezuelan assistance.
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Narcotics: Room for Further Cooperation?
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6. (C) Counter-narcotics programs represent a chance for the
Bolivian and U.S. governments to work together, but again
Bolivian government rhetoric has made the task more
difficult. President Evo Morales, who is the head of
Bolivia's 'cocalero' coca-growing union, is a staunch
supporter of coca leaf cultivation, and he publicly
emphasizes a distinction between coca leaf and cocaine. In
reality, the line between the two is far from clear:
interdiction has increased under Evo's tenure, but so have
coca production and cocaine exports. The Bolivian
government's policies regarding coca are often incoherent,
with one ministry challenging or annulling the actions of
another ministry. Ambassador Goldberg was called to a
meeting with Vice Foreign Minister Hugo Fernandez on August
22 to discuss his public comments voicing U.S. concerns over
the rise of coca cultivation and drug trafficking. The
Ambassador explained that his comments reflected concerns
shared by Bolivian and U.S. drug enforcement authorities,
supported by the latest United Nations figures. Evo's
administration's reaction to the Ambassador's statements
suggests that the comments struck a raw nerve. Evo is having
difficulties making the case that coca cultivation is
separate from cocaine production and does not want to be seen
as tolerating an increase in drug trafficking.
7. (C) The Bolivian government, however, may be starting to
realize that drugs represent a growing problem domestically
and therefore may become more open to greater
counternarcotics cooperation with the United States.
Following a persistent effort by the Ambassador to push for a
net reduction in coca cultivation, the Bolivian government
announced August 28 that it is working on an "Action Plan" to
implement the government's strategy to reduce coca
cultivation to 20,000 hectares, down from the estimated
27,500 hectares currently being cultivated (according to
UNODC's 2006 estimate). The government has plans to go even
further and bring down coca cultivation to 16,000 hectares
(by an unspecified date). While we reject the government's
ongoing effort to bring "legal' cultivation to 20,000
hectares and would clearly want the government to produce a
more substantial net reduction, 20,000 hectares would
represent the average of what has been grown annually in
Bolivia over the past decade, including during the past
administrations. There may be an opportunity here for us to
start a process which will achieve net reduction. The Vice
President has discussed with the Ambassador the possibility
of working out a bilateral agreement to achieve net coca
reduction; it would be useful if the Deputy Secretary could
refer to this idea and urge Garcia Linera to follow-up.
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U.S. Investments Threatened
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8. (C) The MAS's draft constitution made public on August 14
includes an article that specifies that international
investors would only enjoy the benefits of Bolivian law and
could not invoke external agreements or, by implication,
international arbitration. A number of Evo's recent actions
and statements have been seen as anti-investment by the
industries affected: to give only a few examples, the forced
renegotiation of petroleum contracts, the nationalization of
Glencore's Vinto smelter, Evo's stated intention to create a
state energy and electricity company, the Bolivian
government's desire to repatriate a controlling share in
Entel the Italian-owned telephone company, and Morales's
claims that the Bolivian government now controls twenty
percent of Bolivia's economy and should be involved in more.
9. (C) One U.S. investment which is vulnerable is San
Cristobal mine, which is 65 percent owned by Apex Silver.
San Cristobal would be particularly hard-hit by a bill
currently in Congress, which would increase mining taxes.
Although the Bolivian government claims to want a fifty-fifty
split of profits, the proposed tax increases actually result
in, on average, a 60 percent government take of profits.
Because Apex hedged on metal prices in order to obtain
financing, in aggregate proposed tax increases pose a serious
threat to San Cristobal mine. When hedge costs are factored
in to the overall cost structure, Apex estimates that the
proposed tax regime will yield the GOB a 93 percent effective
tax rate. If refunds on import taxes are eliminated for
mines that produce concentrate instead of metal, as has been
proposed by the Ministry of Finance, the government's take
would be more than 100 percent of San Cristobal's profits.
In his August 20 meeting with Vice President Garcia Linera,
the Ambassador noted that given the USD 900 million
investment in San Cristobal mine, he hoped that the Vice
President would grant Apex Silver the opportunity to present
its concerns about the government's planned tax increase
directly to him. Vice President Garcia Linera agreed to look
into the matter and promised to hear out Apex Silver's
concerns once he had a potential way forward.
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Still Interested in ATPDEA and MCA
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10. (C) Vice President Linera will likely push for extension
of ATPDEA during your meeting. ATPDEA is crucial to a
certain segment of the Bolivian economy, particularly
specialty textile goods (note: USAID has provided support to
a number of small companies which, without ATPDEA, would
likely go bankrupt.) President Morales has made numerous
statements that ATPDEA should not be extended by increments
but should be formalized to give Bolivia permanent beneficial
trade access to the United States. Morales has also stated
that ATPDEA is not a U.S. "handout" but instead is Bolivia's
due for its help in counternarcotics efforts.
11. (C) Vice President Garcia Linera is likely to push for
extension of ATPDEA or mention a potential long-term
bilateral "trade agreement" that Bolivian officials have yet
to define. We also understand that Garcia Linera will visit
with the Millennium Challenge Corporation to try to
accelerate efforts to negotiate a compact.
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Being Firm while Keeping the Relationship on Track
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12. (C) Ambassador Goldberg has made clear our desire for
good relations with Bolivia. In return, Vice President
Garcia Linera has stressed that the Bolivian government also
wants better relations with the United States and has pleaded
with us not to "surrender to the forces that want to distance
our countries" and to continue to work to try to find areas
of cooperation but has done little to tone down his
president's or even his own anti-U.S. rhetoric.
13. (C) Garcia Linera needs to hear our concerns about
Bolivian democracy, the eroding investment climate, as well
as our desire to continue and even expand counter-drug
efforts. We also have to continue to urge the Morales
government to temper its rhetoric if it is indeed interested
in improved bilateral ties. That said, we are not optimistic
that the United States will be able to improve its
relationship with Bolivia in the short term, given Morales's
paranoia and Chavez's continuing influence here.
URS