BOLIVIA JOINS ALBA, SIGNS PEOPLES' TRADE AGREEMENT

UNCLAS LA PAZ 001172 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI STATE PASS TO USTR FOR BHARMAN COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: ETRD EINV ECON PREL PGOV EPET USTR BL SUBJECT: BOLIVIA JOINS ALBA, SIGNS PEOPLES' TRADE AGREEMENT ¶1. (SBU) Summary: On April 29, Bolivia formally joined the Bolivarian Alternative to the Americas (ALBA) and signed a Peoples' Trade Agreement with Venezuela and Cuba, becoming party to agreements meant to advance regional economic, political, and cultural integration. The three countries promised to work together to create employment, boost economic growth, and broaden cooperation on a range of issues, but the pact offered few specifics. With this and the May 1 announcement of the nationalization of the hydrocarbons industry (septels),Bolivia appears to have abandoned traditional approaches to trade in favor of an ideologically colored leftward shift more likely to undermine than to advance the interests of Bolivia's millions of poor. End summary. ¶2. (U) In April 28 and 29 meetings in Havana, Cuba, President Evo Morales formally joined the Venezuela-Cuba bilateral pact known as the Bolivarian Alternative to the Americas (ALBA) and signed a Peoples' Trade Agreement with his Venezuelan and Cuban counterparts, making Bolivia party to agreements meant to advance regional economic, political, and cultural integration. While Venezuelan President Hugo Chavez has attempted to portray ALBA as an alternative to the Free Trade Area of the Americas, the proposal met with little regional support until Bolivia's accession; it is now reportedly the foundation on which a series of Peoples' Trade Agreements will be built. ¶3. (U) In the first of these peoples' agreements, Bolivia, Venezuela, and Cuba promised to work together to create employment, boost economic growth, and broaden cooperation on a range of issues. The three countries agreed to develop a "strategic plan" to generate jobs; execute mutually beneficial public investments (ensuring the host country possesses at least 51 percent of any new enterprise whenever possible); arrange for reciprocal credits among banking institutions; consider unspecified state "compensation" mechanisms to facilitate trade; exchange science and technology information; and cooperate on health, education, and communication matters. ¶4. (U) The pact offered few specifics for creating employment or generating growth, but both Venezuela and Cuba recognized Bolivia's "special needs" and offered to help the country overcome the harmful effects of "centuries of colonial and neocolonial dominance." Venezuela promised to help strengthen Bolivia's Ministries of Hydrocarbons and Mining and to assist in the restructuring of state-owned oil and mining companies; to provide 5,000 scholarships to Bolivian students seeking to study at Venezuelan universities; to create a special $100 million fund to finance infrastructure and other projects; to donate $30 million to the GOB for use in addressing the "social and productive" needs of the Bolivian people; to increase its imports of Bolivian products (especially soy); to offer financial incentives to Bolivian businesses operating in Venezuela; and to make available Venezuela's air and maritime transportation facilities for Bolivia's economic development. ¶5. (U) Cuba, meanwhile, promised to provide free eye treatments to all Bolivians lacking necessary financial resources; to assist Bolivian and other doctors in providing such treatments; to provide 5,000 scholarships to train Bolivian medical personnel; to continue to support the 600 Cuban doctors working in Bolivia since the widespread January flooding; and to continue working (with Venezuela) to raise Bolivian literacy rates. Together with Venezuela, Cuba also promised to eliminate tariff and non-tariff barriers to Bolivian exports and to guarantee the purchase of all soy and some agricultural goods, which may lose Andean markets as a result of recently signed Colombian and Peruvian free trade agreements with the United States. ¶6. (U) In return, Bolivia need only export its mineral, agricultural, and industrial goods; implement reciprocal tax exemptions for Venezuelan and Cuban firms and for any joint enterprises formed under the Peoples' Trade Agreement; and contribute to the countries' energy security by continuing its gas exports (although it is unclear how Bolivian natural gas will help Venezuela and Cuba). Together, the pact declares, the three countries will "fight for the unity and integration of the peoples of Latin America and the Caribbean." ¶7. (SBU) Comment: With this and the May 1 announcement of the nationalization of the hydrocarbons industry (septels), Bolivia appears to have abandoned traditional approaches to trade and investment in favor of an ideologically colored leftward shift more likely to undermine than to advance the interests of Bolivia's millions of poor. The Peoples' Trade Agreement is a pact absent of significant economic value, particularly when considering that the grand total of Bolivian exports to Cuba was only $5,291 last year; the agreement seems instead an empty political gesture designed to demonstrate the GOB's commitment to improving the lives of the masses. In his opposition to accepted models of international trade and recent moves toward nationalization, Morales has complicated any chance of negotiating a free trade agreement with the United States - and undermined opportunities to generate the economic growth Bolivia so desperately needs. End comment. GREENLEE