IS MINING NEXT IN LINE FOR NATIONALIZATION?

UNCLAS LA PAZ 001180 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: EMIN ETRD EINV ECON PREL PGOV BL SUBJECT: IS MINING NEXT IN LINE FOR NATIONALIZATION? REF: LA PAZ 141 ¶1. (SBU) Summary: In the aftermath of the GOB's May 1 nationalization of Bolivia's hydrocarbons sector, many are wondering if mining might be next in line. President Morales and other GOB officials have repeatedly stated their intent to nationalize all natural resources, including mineral deposits, but have yet to announce detailed plans. Given the GOB's emphasis on increasing the state's role in the economy, greater intervention in the mining industry seems a real possibility, but it is difficult to say when or how this might happen. End summary. ¶2. (SBU) The GOB's May 1 nationalization of Bolivia's hydrocarbons sector has caused many to wonder if mining might be the next target. Representatives of Apex Silver, Newmont, and Coeur d'Alene, the three U.S. companies involved in the industry (with investments totaling an estimated $610 million),have expressed concern about the GOB's actions, noting that the threat of nationalization has added to economic and political uncertainty and prompted U.S.-based executives to reconsider Bolivian investments. James Duff, President of Empresa Minera Manquiri, a subsidiary of Coeur d'Alene Mines Corporation, told EconOff May 3 that the firm would continue to delay significant investment in its $135 million San Bartolome silver mine, a project on hold since early 2004. The uncertainty, Duff said, makes large investments unwise - and adds to holding costs, which may lead the company to abandon the project if it cannot begin construction by the end of the year. ¶3. (SBU) President Morales and other GOB officials have repeatedly stated their intent to nationalize all natural resources, including mineral deposits, but have yet to announce detailed plans. In his May 1 speech, Morales said nationalization of other natural resources would "soon follow" but offered no timeline. Minister of Mining Walter Villarroel has said the administration plans to increase its role in the industry - probably through a change in the way Comibol, the state-owned mining company, operates - and will consider royalty and tax hikes, in addition to changes to the mining code. He has not, however, announced a timeline or provided details, saying that proposed modifications are still under discussion with representatives of mining cooperatives and miners' unions. ¶4. (SBU) Comment: Given the GOB's emphasis on increasing the state's role in the economy, greater intervention in the mining industry seems a real possibility, but it is difficult to say when or how this might happen. Morales could act suddenly, opt for a more deliberate route, make drastic moves, or choose incremental change. Much will depend on whether he and other GOB officials consider the hydrocarbons nationalization enough of a political gesture to satisfy supporters and generate goodwill in the run-up to Constituent Assembly elections. End comment. GREENLEE