NATIONALIZATION AS GRAND POLITICAL GESTURE

UNCLAS SECTION 01 OF 02 LA PAZ 001159

SIPDIS

SENSITIVE
SIPDIS

STATE FOR DRL/IL LAUREN HOLT
LABOR FOR ILAB TINA MCCARTER

E.O. 12958: N/A
TAGS: ELAB EINV ENRG ECON PGOV SOCI PREL BL
SUBJECT: NATIONALIZATION AS GRAND POLITICAL GESTURE


LA PAZ 00001159 001.7 OF 002



1. (SBU) Summary: By announcing the nationalization of
Bolivia's hydrocarbons sector, President Evo Morales has
again proven himself a master of the grand political gesture.
Timed to coincide with the kick off the campaign for the
Constituent Assembly and accompanied by the symbolic taking
of gas fields by Bolivian armed forces, the announcement has
been enthusiastically received by a vast majority of the
population and is likely to boost the government's sagging,
though still high, popular support. Morales did not announce
the expected labor day-focused increase to the minimum wage
or derogation of the infamous privatization decree 21060,
instead calling nationalization the "best gift of all" to
Bolivian workers. The nationalization announcement was a
quintessentially populist gesture that has played extremely
well in Bolivia's political theater, but its longer-term
economic consequences, particularly on the investment
climate, appear grave. End Comment.


2. (SBU) Whatever else it brings (see septel),President Evo
Morales May 1 announcement of an executive decree
nationalizing the country's hydrocarbons resources was a
grand political gesture performed by a populist political
master. The mood in Plaza Murillo in downtown La Paz
adjacent to the national palace, as more than ten thousand
mostly mixed race and indigenous Bolivians waited expectantly
for their president to speak, was festive. The band played
revolutionary songs, firecrackers exploded overhead, and many
people waved two-sided flags - one side Bolivian, the other
Cuban. In his initial announcement, made just after noon,
President Morales' voice was piped in from the department of
Tarija -- where he spoke, appropriately, from one of
Bolivia's largest gas fields -- while Vice President Garcia
Linera, members of the cabinet and other party luminaries
waved grandly from the palace balconies to the crowd below.
In the late evening, Morales appeared in person in plaza
Murillo to give a second speech to the still-waiting masses,
this time highlighting an anti-imperialist (and indirectly
anti-American) theme and pledging that the nationalization of
the mining and forestry sector would follow.


3. (SBU) The atmosphere throughout the day was manifestly
one of a political campaign getting underway -- May 1 also
marked the initiation of the 60-day campaign period for the
scheduled July 2 election of representatives to the
Constituent Assembly -- and the government party got off to a
great start. Popular reaction to the announcement has been
overwhelmingly positive. Some observers have described a
feeling of widespread "euphoria" that the government has
followed through with a key campaign promise in a manner that
resonates deeply with most Bolivians. One opposition Senator
described it as "explosive," particularly the media coup
associated with the symbolic taking of gas fields by
Bolivia's armed forces (septel). Others have commented on
the brilliance of its organization and execution, coming as a
kind of May surprise and followed up by a barrage of
carefully timed and packaged publicity on national radio and
television. Almost everyone believes the announcement will
help shore up the Government's popular support, which had
sagged from 80 to 62% in a poll released in late April,
particularly among its social sector bases.


4. (SBU) Contrary to widespread expectations, Morales did
not announce any labor-specific measures on the International
Day of the Worker. Many media and other observers believed
he would take the opportunity to raise the minimum wage or to
nullify the infamous privatization decree 21060 --
particularly Article 55, which allows employers to hire and
fire workers freely. Instead, Morales let nationalization do
the political trick, calling his announced decree the "best
gift of all" to Bolivian workers. All told, the
government's move successfully outflanked a planned march by
the splintering Bolivian Worker's Central (COB),and appeared
to take the wind out of the sails of any potential radical

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social sector challenge. Sounding like a scratchy broken
record, COB executive secretary Jaime Solares criticized
Morales for failing to announce "nationalization without
indemnification" and for refusing to raise the minimum wage.
Some news reports suggest that Morales will announce the
minimum wage hike today (May 2),but many observers believe
he may save that ruse until the political need arises again
down the line.

Comment: Short-term Gain for Long-term Loss
--------------

5. (SBU) Morales' nationalization decree was a
quintessentially populist gesture made for Bolivia's
surrealistic political theater, where it has played extremely
well. It was the perfect accompaniment for the bells,
whistles and balloons of yet another campaign season, and has
surely put the government's disintegrating opposition back on
its heels. By contrast, the longer-term economic
consequences of the action, particularly for the investment
climate, could be grave. In that sense, Morales and his
advisors have again demonstrated a willingness to trade off
sound economic policy for short-term political gain.
GREENLEE