MORALES GOVERNMENT GENERATES HOPE, CONCERN

C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 000179

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/14/2016
TAGS: ECON PGOV PREL BL
SUBJECT: MORALES GOVERNMENT GENERATES HOPE, CONCERN


Classified By: Amb. David N. Greenlee for reasons 1.4 (b) and (d).


1. (C) Summary: WHA Assistant Secretary Thomas Shannon held a
series of meetings on January 22 with Santa Cruz business
leaders, media and political analysts, opposition leader
Jorge "Tuto" Quiroga, and Spanish Secretary of Foreign
Affairs Bernardino Leon on the margins of the Morales
inauguration. Reaction to the new Morales government varied
widely: analysts were relieved by his clear victory but
concerned about the lack of checks and balances on government
power; Spanish Secretary of Foreign Affairs Bernardino Leon
was cautious about engaging Morales, but hoped to continue
with police cooperation; Santa Cruz business leaders were
pessimistic about the government's plans but hesitant about
confronting it head-on; and would-be opposition leader Jorge
"Tuto" Quiroga expressed hostility toward the new government
and seemed eager to facilitate its failure by abdicating any
role of loyal opposition, even if to the detriment of the
Bolivian people. End summary.

ANALYSTS RELIEVED BUT CONCERNED ABOUT FUTURE
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2. (SBU) Meeting with political and media analysts, A/S
Shannon said that Morales' election responded to an
indisputable democratic process and that the USG recognized
and respected his mandate. Shannon said the United States
was open to dialogue with the new government, and that the
results of that dialogue, and the government's own decisions
and actions, would determine the kind of relationship we
could have. The analysts emphasized the MAS's almost
unlimited political power, the need for consensus and
participation during Bolivia's political transition, and the
importance of the U.S. role in those changes.


3. (SBU) Several analysts commented on a lack of any
countervailing political force to the MAS's power base. They
noted the MAS fully controlled the executive, and had the
majority of congress, including the presidency of both the
Senate and Chamber of Deputies. Additionally, the
opposition, led by defeated Podemos candidate Jorge "Tuto"
Quiroga, was weak and fragmented. Favorable public opinion
(74 percent) gave the Morales administration an even stronger
mandate. Based on these factors, analysts stated that the
MAS would be solely responsible for the government's success
or failure. They evinced relief that Morales had won by such
a large margin, but also concern that the euphoria of power
would lead the government to continue past corrupt practices,
feeding on the belief that it's now "our turn." They also
speculated that Morales would be tempted by his unchecked
power to go too far (e.g. toward an authoritarian system).
Others expressed concern that Morales had promised too much
on the campaign trail, and would face strong pressure from
his party and from social sectors to deliver on a mountain of
nearly impossible expectations in the months ahead.


4. (SBU) Other analysts expressed hope that Morales would
seek consensus and expand political participation in the
coming upheaval of Bolivia's political system. One
indigenous leader lamented that the 2004 popular
participation law did not improve indigenous involvement in
politics, and that the majority remained sidelined
politically. She advocated more direct democratic
representation, particularly for the Constituent Assembly
(now planned for August). Another analyst opined that
Morales was not the answer to Bolivia's crisis, which was
rooted in the structure of the state rather than the
relatively superficial problem of one particular government
or another. He speculated that Morales would be the last
president in this transitional period, as opposed to the
first president of a new era.


5. (SBU) Many analysts believed the United States would play
a critical role during the Morales administration. They
stressed that the MAS would need the United States to govern,
and noted Morales' concern that several ministries were
heavily influenced by U.S. or foreign governments. An
economic analyst urged the USG to move quickly to provide

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economic support to Bolivia, because under a "wait and see"
approach, in the absence of an FTA or an extension of ATPDEA
benefits, Bolivia would be forced to look for other markets.
They pointed out that because Bolivia was so dependent on
regional markets, the Free Trade Agreement of the Americas
(FTAA) was more important than a bilateral agreement or the
Andean FTA. One analyst catergorically stated that the GOB
"can't live with indifference from Washington," and that its
success would depend on its ability to cooperate with the USG.

SPANISH HOPE TO CONTINUE POLICE COOPERATION
--------------

6. (C) Spanish Secretary of Foreign Affairs Bernardino Leon
told A/S Shannon he was concerned about the erratic nature of
Morales' inaugural speech (ref). He noted that Morales'
frequent mention of the evils of the colonial period had
implictly targeted Spain. Nonetheless, the Spanish
government hoped to continue its assistance to the Bolivian
police, but would watch the new government carefully for the
next 5-6 months before making any commitments. Such
cooperation with the police was important to Spain, said
Leon, because of "recent approaches by ETA representatives to
people close to Morales." On counternarcotics, Leon believed
Morales was worried about recertification. Shannon suggested
that the Spanish emphasize to Morales the importance of a
three-pronged approach to narcotrafficking -- eradication,
interdiction and alternative development -- and welcomed
increased European involvement in this area. Leon said he was
somewhat reassured by Morales' promise to fight illegal
cocaine trafficking.


7. (SBU) Leon mentioned his recent meeting with the
Brazilians and Argentines regarding natural gas. He said
both governments remained keenly interested in accessing more
Bolivian gas, but multinational firms such as Petrobras and
Repsol were reluctant to make additional investments in
Bolivia absent international guaranties. Leon continued that
some kind of Mercosur guarantee could be given to provide
necessary assurances to investors while also holding the GOB
accountable to the Mercosur governments for compliance with
the new contracts. In a side comment about Argentina, Leon
said he was "not sure about Kirchner either because he too
has been erratic of late."

SANTA CRUZ BUSINESS LEADERS PESSIMISTIC
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8. (C) Gabriel Dabdoub, President of the Santa Cruz Chamber
of Industry, Commerce, Services, and Tourism, told A/S
Shannon he worried that President Morales would move Bolivia
in the direction of Chavez and Castro, gradually
consolidating power and shifting the country leftward, away
from market-oriented policies toward greater state control of
the economy. Branko Marinkovic, President of the Santa Cruz
Federation of Private Businessmen, echoed Dabdoub's concerns,
saying he expected the next year to be difficult,
particularly if the incoming administration or the proposed
Constituent Assembly introduced radical changes to laws
governing the private sector. For now, they said, they would
adopt a "wait and see" attitude, conducting business as usual
but preparing to offer constructive criticism of unfavorable
government policies. Marinkovic remarked that several issues
-- the nationalization of the hydrocarbons sector, the
redistribution of large land holdings, and the indefinite
postponement of international bidding for the right to
develop Mutun, one of the world's largest iron ore deposits
-- could revive calls for greater regional autonomy, which
could strain relations with the new administration and make
it harder for Morales to govern.

TUTO QUIROGA HOSTILE TOWARD MORALES GOVERNMENT
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9. (C) Jorge "Tuto" Quiroga explained his presidential defeat
as part of the populist wave sweeping South America. He told
A/S Shannon that the MAS had pumped up expectations among the
general population but had low capacity to deliver results --
a recipe for future disaster. Quiroga likened the social
sector movements to bull fights, and that Morales had ridden

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on bulls to power. Now, he continued, President Morales was
the bullfighter who would have to control the bulls. Quiroga
believed that he would have to use the United States, the
IMF, or Quiroga himself as the "red cape" to continue to
irritate and control them. But Quiroga would not allow
himself to be used in this way. Instead, he planned to
facilitate MAS initiatives in Congress, and even to allow the
more ill-advised of those to be passed unchanged by the
legislature in order to ensure that the blame for Bolivia's
impending disorder be placed squarely on Morales' shoulders.
The former president conceded that this was not responsible
economically, but contended that it would be politically
effective.


10. (C) Outside Congress, Quiroga would challenge Morales on
the GOB's establishment of low (concessionary) gas prices for
Brazil and Argentina, and demand explanations for the MAS'
complicity in Bolivia's subsidizing its wealthier neighbors.
Quiroga lamented that the MAS would dismantle many of the
democratic institutions which had taken years to build, and
said that MAS attacks on the superintendencies (government
regulators for telecommunications, hydrocarbons, banks and
other sectors) and the Central Bank would damage Bolivia's
economy. Concerning the relationship between Morales and
Garcia Linera, Quiroga said the strain was already evident.
He believed, "as one who has a PhD in presidential and
vice-presidential intrigue," that Garcia Linera, as a result
of presidential envy and the pressure of Morales' social
sector supporters, would be pushed out of the center of
political power within six months.


11. (U) This message was not/not cleared by A/S Shannon.
GREENLEE