MUTUN TO PROCEED; PROBLEMS WITH NEARBY PROJECT

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