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