GOB CONTINUES TO FOCUS ON ATPDEA EXTENSION

UNCLAS LA PAZ 001341

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 BL
SUBJECT: GOB CONTINUES TO FOCUS ON ATPDEA EXTENSION

REF: A. LA PAZ 1271


B. LA PAZ 1100


1. (SBU) Summary: Bolivia's vice minister of trade and
exports told Econoffs May 17 that GOB officials remained
interested in an extension of the Andean Trade Promotion and
Drug Eradication Act (ATPDEA),believing additional time
would provide "space" for the government to define its trade
policies (ref A). GOB officials have largely ignored a
recent study suggesting that 300,000 jobs are directly or
indirectly related to exports and have placed little stock in
reports that some Bolivian businessmen are considering moving
their operations to Chile, thanks in part to a Chilean
government-backed plan to bring investors to Arica and other
cities. Econoffs advised that an ATPDEA extension appeared
unlikely and suggested the GOB begin to consider
alternatives. End summary.


2. (SBU) In a May 17 meeting, Vice Minister of Trade and
Exports Gustavo Barbery told Econoffs that GOB officials
remained interested in an extension of the Andean Trade
Promotion and Drug Eradication Act (ATPDEA),largely because
they believed additional time would provide "space" for the
Morales administration to define its trade policies (ref A).
Barbery admitted that the GOB's economic objectives were
unclear and said it was difficult to explain the goals of
Morales' proposed Peoples' Trade Agreement, as even this was
poorly defined (ref B). Barbery could only repeat the GOB's
standard declaration that the pact is meant to be a model of
"mutually beneficial" trade arrangements.


3. (SBU) GOB officials have largely ignored a recent study,
prepared by the National Statistics Institute, the Bolivian
Institute of Foreign Trade, the National Chamber of
Exporters, and the Unit for Social and Economic Policy
Analysis, suggesting that an estimated 42,000 direct and
328,000 indirect jobs are tied to exports. Responses from
surveyed businesses indicate that 55 percent of firms export
to the United States, Europe, the Andean Community, Mexico,
and Chile under some type of trade agreement (with nearly a
third of these relying on ATPDEA) and show that 45 percent of
jobs directly attributable to exports are in the department
of La Paz, many of them in the restive satellite city of El
Alto, whose residents have loudly demanded that the GOB boost
employment. Despite the study's findings, GOB officials have
thus far shown little inclination to seriously consider the
effects of exporters' potential loss of ATPDEA trade
preferences.


4. (SBU) Officials have placed equally little stock in
reports that some Bolivian businessmen, including leading
gold jewelry exporters, are considering moving their
operations to Chile, thanks in part to "Plan Arica," a
Chilean government-backed plan to bring foreign investors to
Arica and other cities. The incentive package allows new
investors to collect up to half of the costs of
pre-investment studies from the Chilean government; to count
up to 40 percent of investment costs against future corporate
taxes; to benefit from certain tax exemptions; to take
advantage of Chilean government-sponsored worker training
subsidies of up to $2,000 per employee; and to transfer part
of their existing workforces to Chile. For many Bolivian
exporters, these are attractive options, particularly since
Chile's free trade agreement with the United States would
allow them continued preferential access to U.S. markets.
The Chilean government has also offered Bolivian exporters
the services of a rules-of-origin expert to help determine
which parts of the production process might be able to remain
in Bolivia and still allow the final product to qualify as a
Chilean export.


5. (SBU) Econoffs advised Vice Minister Barbery that an
ATPDEA extension appeared unlikely and suggested the GOB
begin to consider alternatives. Econoffs noted that
Bolivia's window of opportunity was probably narrow,
particularly given the June 2007 expiration of President
Bush's trade promotion authority. Barbery promised to take
this into account but said Ministry of Foreign Affairs
officials were in the process of drafting a letter formally
requesting an ATPDEA extension, with hopes of sending it to
the Ambassador within the next few weeks.


6. (SBU) Comment: Despite repeated warnings that an ATPDEA
extension appears unlikely, GOB officials continue to state
publicly and privately that this is their aim. At times,
they seem oblivious to the negative impact of the recent
hydrocarbons nationalization and the harsh tone of President
Morales and other GOB officials' anti-free trade, anti-U.S.
comments on their hopes of achieving some form of commercial
agreement with the United States. Even now, GOB officials
appear convinced they need only ask to have their request
granted. Receiving a formal request for an ATPDEA extension
would provide an opportunity for us to say officially that
the USG does not consider this a realistic possibility.
While the timing of our response would have to be carefully
considered, a negative reply may help GOB officials (and the
Bolivian private sector) realize they must move on and
consider other options - even a free trade agreement under
another name - to preserve Bolivian jobs, which are already
in short supply. End comment.
ROBINSON