MINING MINISTER SAYS GOB WILL NOT NATIONALIZE

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