UNCLAS LA PAZ 001101

SIPDIS

SIPDIS

STATE FOR WHA/AND LPETRONI
ENERGY FOR SDAY AND SLADISLAW
COMMERCE FOR JANGLIN
TREASURY FOR SGOOCH

E.O. 12958: N/A
TAGS: EMIN EINV ECON PGOV BL
SUBJECT: MUTUN TO PROCEED; PROBLEMS WITH NEARBY PROJECT
PROMPT HOSTAGE TAKING

REF: A. LA PAZ 439


B. 05 LA PAZ 3771


1. (SBU) Summary: GOB officials recently announced that
bidding on the rights to develop Mutun, one of the world's
largest iron ore deposits, would proceed as planned; this
satisfied a long-standing demand of local leaders, but
problems with a nearby project have generated conflict.
Civic activists in Puerto Suarez, a small town on the
Brazilian border, took three Bolivian ministers hostage late
April 18 and demanded that the GOB support a Brazilian
company constructing a nearby pig iron facility. The
hostages were released unharmed the following morning, but
the incident embarrassed the GOB and called into question its
ability to respond to the needs of poor Bolivians. End
summary.


2. (U) GOB officials announced April 19 that international
bidding on the rights to develop Mutun, a deposit containing
an estimated 40 billion tons of iron and magnesium, would
proceed as planned, momentarily alleviating fears of yet
another delay. Postponements in December and February
(reftels) delayed firms' submission of bids until May 20, on
the understanding that the GOB would use the extra time to
revise existing bid protocols and modify the joint venture
contract signed with the winning bidder. GOB officials have
yet to announce changes (and may decide not to change
anything) but have now declared their intent to move ahead.


3. (U) The announcement satisfied a long-standing demand of
local leaders, but problems with a nearby project have
generated conflict. Civic activists in Puerto Suarez, a
small town on the Brazilian border 500 miles from the city of
Santa Cruz, took the Bolivian ministers of planning, mining,
and economic development hostage late April 18 and demanded
that the GOB support Brazil's EBX Siderurgica, an iron and
steel company constructing a nearby pig iron facility. GOB
officials have questioned the firm's legitimacy, accused it
of operating without environmental permits, and suggested it
may have violated Bolivian law by attempting to operate too
near Bolivia's border with Brazil (the Bolivian Constitution
prohibits foreign firms from owning land or mineral deposits
within 50 kilometers of any international border). EBX
representatives have said the firm is legally incorporated
and has all necessary permits, denying any wrongdoing.


4. (U) The three ministers were released unharmed early April
19, but Puerto Suarez community leaders immediately initiated
indefinite strikes and road blockades, vowing to "radicalize"
their actions if the GOB fails to meet their demands. Civic
activists accused GOB officials of threatening the 1,500 jobs
associated with the pig iron facility and criticized the
government for failing to recognize the region's development
needs.


5. (SBU) Comment: The hostage taking clearly embarrassed the
GOB and called into question its ability to respond to the
needs of poor Bolivians. Community leaders in a remote small
town not only joined the ranks of teachers, health workers,
transport unions, and others in pressing their demands for
jobs and higher living standards, but also escalated their
tactics by briefly holding cabinet members hostage. The
GOB's weak response added to the picture of a government
struggling to fulfill its promises to the poor. End comment.
GREENLEE