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### Viewing cable 07LAPAZ2385, DEPSEC'S UPCOMING MEETING WITH BOLIVIAN VP

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07LAPAZ2385 | 2007-08-29 21:09 | 2010-12-03 21:09 | CONFIDENTIAL | Embassy La Paz

`

    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.

    - - - -
    Summary
    - - - -

    ¶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.

    - - - - - - - - - - - - - - - - - - - - - - - -
    Politically-Motivated Anti-American Accusations
    - - - - - - - - - - - - - - - - - - - - - - - -

    ¶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.

    - - - - - - - - - -
    Democracy in Danger
    - - - - - - - - - -

    ¶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.

    - - - - - - - - - - - - - - - - - - - - -
    Narcotics: Room for Further Cooperation?
    - - - - - - - - - - - - - - - - - - - - -

    ¶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.

    - - - - - - - - - - - - - -
    U.S. Investments Threatened
    - - - - - - - - - - - - - -

    ¶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.

    - - - - - - - - - - - - - - - - - -
    Still Interested in ATPDEA and MCA
    - - - - - - - - - - - - - - - - - -

    ¶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.

    - - - - - - - - - - - - - - - - - - - - - - - - - -
    Being Firm while Keeping the Relationship on Track
    - - - - - - - - - - - - - - - - - - - - - - - - - -

    ¶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

`