UNCLAS LA PAZ 001289

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/AND LPETRONI
COMMERCE FOR JANGLIN
TREASURY FOR SGOOCH

E.O. 12958: N/A
TAGS: EMIN EINV ECON PREL PGOV BL
SUBJECT: MINING MINISTER SAYS GOB WILL NOT NATIONALIZE
MINING INDUSTRY

REF: LA PAZ 1101


1. (SBU) Summary: Minister of Mining Walter Villarroel told
Econoffs May 11 that the GOB would not nationalize Bolivia's
mining industry. He left open the possibility of tax
increases, however, and said the tax structure and mining
code were under review. He also asked for assistance
identifying U.S. companies that might be interested in
investing in the sector; in response, Econoffs said Bolivia's
political and economic uncertainty would likely deter many
firms and suggested the ministry move quickly to make its
plans clear. End summary.


2. (SBU) In a May 11 meeting with Econoffs, Minister of
Mining Walter Villarroel said the GOB would not nationalize
Bolivia's mining industry, providing assurances that the GOB
recognized the importance of foreign investment and would
respect existing concessions. That said, Villarroel noted
that the administration hoped to take advantage of abundant
natural resources and record-high mineral prices to lift
Bolivia from poverty and hinted that the GOB might pursue
contract revisions to raise additional revenues from mining
companies.


3. (SBU) Villarroel left open the possibility of tax
increases, noting that the tax structure and mining code were
under review by several commissions. He mentioned that the
complementary mining tax - a de facto royalty levied on the
gross sales value of metals and minerals - would likely rise
but declined to offer specifics, saying the details would
likely be announced near the end of the month, when the GOB
expects to unveil its economic development plan.


4. (SBU) Villarroel asked for assistance identifying U.S.
companies that might be interested in investing in the
sector. In response, Econoffs said Bolivia's political and
economic uncertainty would likely deter many firms and noted
that executives of one U.S. company, Coeur d'Alene, were
delaying further investment until they knew more about the
GOB's intentions. Econoffs stressed the importance of moving
quickly to make the ministry's plans clear, adding that the
recent expulsion of EBX Siderurgica, a Brazilian iron and
steel company constructing a pig iron facility near the
Bolivia-Brazil border (reftel), had worsened many firms'
perceptions of the risks of pursuing new projects.


5. (SBU) Comment: Villarroel seemed surprised that U.S. firms
were reluctant to invest, having earlier noted that several
Chinese companies expressed interest in Bolivia's mineral
resources during the minister's late February trip to China.
While Villarroel appeared committed to rejuvenating the
mining sector, he seemed to lack concrete plans - which means
mining companies' wait for clarity will likely drag on. End
comment.
ROBINSON