Cablegate: Notes From Santa Cruz - October 2007

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TAGS: PREL ECON KPAO CONS AMGT BL
SUBJECT: NOTES FROM SANTA CRUZ - OCTOBER 2007

REF: A) La Paz 2632 B) La Paz 2204

1. (SBU) Summary: Santa Cruz Department, with 26 percent of
Bolivia's population, is its fastest-growing region responsible for
32 percent of Bolivian GDP. Political and business leaders lament
the lack of central government funds dedicated to Santa Cruz but on
the other hand resent central government attempts to control
regional policy-making and rally around the cry of "autonomy." The
strength of Santa Cruz's private enterprise and economic diversity
was evident at the annual "Expocruz" trade fair. Business is going
strong, despite concerns about the nation's political uncertainty
and economic policies that discourage new investment. Santa Cruz
represents the diversity of Bolivia, with new migrants arriving
daily from throughout the country in search of a better life. Local
interlocutors welcomed increased Embassy attention through the work
of the new American Presence Officer. End summary.

2. (U) September 24 is the "Day of Santa Cruz" and the date around
which the Chamber of Industry, Trade, Services, and Tourism of Santa
Cruz (CAINCO) holds its renowned annual trade fair, Expocruz. In
conjunction with the Ambassador's participation in Expocruz, the
visit of WHA DAS McMullen and WHA/AND Director Chacon, and the Santa
Cruz Day festivities, American Presence Officer (APO) made a series
of initial calls on political and business leaders. Following is
the first of what will be regular reporting cables from the American
Presence Post in Santa Cruz (currently based at Embassy La Paz).

Give Us More Money and then Leave Us Alone
------------------------------------------

3. (SBU) There are two common themes among Santa Cruz political
leaders: a desire for more money from the central government and a
desire to be left alone to spend that money and govern their affairs
as they see fit. Current decentralization laws allocate central
government monies to municipalities according to population, but the
2001 census data is no longer accurate. Municipal Council President
Oscar Vargas estimates there are eight new residents in his city per
hour due to births and immigration, and has installed an electronic
"Cruceno-counter" on the corner of his building to highlight the
difference between the census results (1,135,526) and the current
population (1,521,423 as of October 12).

4. (SBU) During a September 21 awards ceremony to honor local
heroes, Vargas made that point directly to President Evo Morales.
He characterized his admittedly-provocative speech as a history of
Santa Cruz autonomy. In his own speech, Morales pointed out that
increased revenue from the Direct Tax on Hydrocarbons (IDH--part of
the renegotiation of oil and gas concessions) had brought much more
money to Santa Cruz for primary and secondary education, health
clinics, roads, and universities. (Note: The government has since
announced a plan to divert 30 percent of IDH revenues from local
governments and universities to pension benefits. Santa Cruz
leaders are at the forefront of the protest against this plan.)
Morales further insisted that "autonomy" would be guaranteed and
that the question before the constitutional assembly was how to
resolve regional autonomy with indigenous autonomy. Finally, he
asked the front-row seats full of former government officials why
they had not guaranteed regional autonomy when they had the chance,
but instead were "bothering Evo now?" A poem read by one of the
honorees, highlighting the diversity of Santa Cruz due to migration
from all parts of the country, served to break the tension. The
speech by Mayor Percy Fernandez was also conciliatory, as Fernandez
with humor asked Morales to stop demonizing Crucenos as responsible
for all of Bolivia's problems because "we're not bad people!"

Expocruz and the Business Climate
----------------------------------

5. (U) The 32nd annual trade fair "Expocruz" took place September
21-30, generating $172,593,617 of potential business deals and
approximately 50,000 new jobs (12,000 direct and 38,000 indirect).
There were 2,100 participants exhibiting goods and services from 18
countries to nearly 507,000 visitors. One of the primary sectors
for business at EXPOCRUZ has traditionally been cattle. This year
the fair exhibited 800 animals, hosted 14 auctions, and did business
in excess of a million dollars. The second main draw is the "Circle
of Business" and its match-making among companies. This year 740
companies from 18 countries participated in nearly 8,000 encounters,
resulting in $119.3 million of business contracts. In a country
with a GDP of $10.3 billion (2006), this is no small amount. The
organizers of Expocruz celebrated their success as proof that the
private sector, supporting production in Bolivia, is the best
vehicle for economic growth.

6. (SBU) This point, which might seem obvious to international
observers, was highlighted again and again as a sharp contrast to
President Morales' "revolutionary" vision for the country. At a
roundtable with journalists, the Ambassador heard a variety of
opinions ranging from cautious optimism ("Evo won't destroy us, he

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knows he needs us") to deep dissatisfaction with the direction the
economy is taking, to panic that the President has a dark,
unstoppable plot to confiscate and destroy all private industry in
the country. Business leaders were generally concerned that
political uncertainty is constraining new investment, though noted
that currently business was profitable, and Bolivians feel better
off now than during the past five years (reftel).

Economic Diversity, Environmental Degradation
---------------------------------------------

7. (SBU) CAINCO briefed APO and Poloff on programs it is running to
foment small business development in Santa Cruz in the poorest
neighborhoods, including the inspiring success story of a disabled
woman who now produces marmalades and sauces for a national grocery
store chain. CAINCO directors bristle at accusations by the MAS
government that they are all "oligarchs," when they mostly see
themselves as self-made men and women who are giving back to their
community. The truth is probably somewhere in the middle.

8. (U) Santa Cruz has been the Department (of Bolivia's nine) with
the most economic growth during the last 23 years. It has 26
percent of the country's population and is responsible for 32
percent of GDP, according to the Bolivian Institute for Foreign
Trade, though it still lacks infrastructure such as improved roads
and other transportation systems. Santa Cruz has very favorable
conditions for agriculture, strong forestry and hydrocarbons sectors
and a growing manufacturing sector, and is close to huge export
markets in Brazil and Argentina. The economic diversity and
strength of private enterprise continue to attract migration from
throughout Bolivia.

9. (U) One unfortunate side-effect of the rapid development is the
economic degradation caused by slash-and-burn land-clearing
techniques and the annual tradition of burning off the old grass on
extensive cattle ranches. During Expocruz, the air was full of
smoke, and poor visibility resulted in the cancellation of many
flights throughout the country. At one point during the height of
the burning, NASA qualified the air quality in Santa Cruz city as
the worst in the entire Western Hemisphere. In addition, population
pressure is encroaching on protected areas. During a visit to
Amboro National Park, APO and USAID environment officer observed
recently-cleared land in the protected "yellow zone" around the park
planted with teak allegedly destined for a future paper factory.
Pre-existing communities around the park are allowed to use the land
for traditional agriculture, and a USAID-funded biodiversity
protection project engaged them in conservation efforts. Therefore,
local environmental NGOs contribute the teak plantations to bigger
business interests.

American Presence Post Update
-----------------------------
10. (SBU) Though our intent to open an APP has not been publicly
announced yet (nor even discussed privately with the government),
interlocutors welcomed the idea of increased Embassy focus on Santa
Cruz, with a specific embassy officer (the APO) serving as a liaison
between the Department of Santa Cruz and the U.S. Mission, and as a
source of information on U.S. policies and activities in Bolivia.
One local contact suggested that the USG has a problem of
"branding," since Bolivian citizens do not always associate familiar
USAID and NAS assistance programs with the United States Government.
In spite of the country team's many successful efforts to
communicate the USG's friendship and support to Bolivia (ref B),
there is still room to do more. Thus, an important goal for the APP
will be to publicize USG assistance programs in direct outreach to
neighborhoods in the city of Santa Cruz and towns throughout Santa
Cruz Department.

11. (SBU) Office space on the DEA compound, where the U.S. consular
agent is also housed, is under renovation to provide work space for
two LES and the APO (during her TDY visits to Santa Cruz) and a
conference room for public diplomacy activities and warden meetings.
The hiring process for a PAS-funded LES is in progress, after which
the hiring process for a PROG-funded LES will begin.

12. (SBU) Post plans to roll out the "Virtual Presence Post" website
for Cochabamba in early November, the website for VPP Chuquisaca
(Sucre) about a month later, and the VPP website for Santa Cruz
early next year.

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