ARGENTINA AND BOLIVIA SIGN IMMIGRATION AND GAS

UNCLAS LA PAZ 001805

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW

E.O. 12958: N/A
TAGS: ECON EINV EPET BL
SUBJECT: ARGENTINA AND BOLIVIA SIGN IMMIGRATION AND GAS
AGREEMENTS

REF: A. BUENOS AIRES 1352


B. LA PAZ 1782


1. (SBU) Summary: Bolivian and Argentine government
officials signed seven agreements in Buenos Aires on June 29
regarding several topics including immigration, natural gas
prices, and the construction of a bridge connecting the two
countries (reftels). Argentina did not agree to legalize
coca exports. Argentina's agreement to pay significantly
more for Bolivian gas exports, as well as its commitment to
facilitate Bolivian immigration, is being used by the MAS to
buoy its popularity prior to the July 2 constituent assembly
elections. End summary.

Seven Agreements Signed
--------------

2. (SBU) Bolivian and Argentine government officials signed
agreements in Buenos Aires on June 29 regarding immigration,
natural gas prices, the construction of a bridge on the
border between the two nations, the creation of a common
missing children database, labor, and public investment. The
presidents of both nations announced the terms of the
agreements at the inauguration of a new stadium filled with
thousands of Bolivian immigrants (approximately 180,000
Bolivians live in Argentina). According to energy firm
contacts who attended the event, President Kirchner announced
that Argentina would improve conditions for Bolivian
immigrants. An Argentine Embassy contact in La Paz told us
that Argentina has been applying the terms of the Mercosur
Immigration Convention since 2004, which gives Bolivians the
right to reside legally in Argentina. However, because the
procedures for acquiring legal residency permits were
expensive and complicated, few Bolivian migrants took
advantage of their rights under the convention. He said that
the GOA had agreed to make the process easier and cheaper,
including offering services in more locations.

Gas Price Agreement
--------------

3. (SBU) Argentina, which currently pays USD 3.2 per million
BTU of Bolivian natural gas, agreed to increase the price to
USD 5 per million BTU beginning July 15 and ending December

31. Before the end of the year, representatives from both
countries will design a price adjustment formula to be
applied beginning January 1, 2007. The agreement, which has
a term of 20 years, establishes that Bolivia, which currently
exports about 4.5 million cubic meters per day to Argentina,
will eventually export up to 27.7 million cubic meters per
day. The existing pipeline has a capacity of around 7.7
million cubic meters; therefore, the additional 20 million
cubic meters will require the construction of an new pipeline
to northwestern Argentina (GNEA). Argentine and Bolivian
state oil companies, Enarsa and YPFB, will analyze the
possibility of conducting joint exploration. Argentina also
agreed to provide Bolivia with credit, reportedly for USD 350
million, for the construction of a gas/liquid separation
plant in the Bolivian Chaco.

Gas Sales to Chile
--------------

4. (SBU) The gas agreement included a clause stating that
Bolivian gas could not be used to authorize additional
exports from Argentina to third countries without both
parties' agreement, which could potentially impact Argentine
sales to Chile, Brazil, and Uruguay. This clause was pushed
by Bolivia to prevent Argentina from selling gas to Chile.
(Note: Bolivia would like Chile to provide access to the sea
in exchange for Bolivian gas. End note.) However, a contact
from the Argentine Embassy in La Paz told us that this clause
was carefully drafted so as to not affect Argentina's future
export possibilities. He explained that Argentina exported
its own gas to Chile, rather than gas imported from Bolivia,

which would be logistically difficult to export to Chile due
to pipeline configurations. Bolivia could not forbid
Argentina from exporting its own gas, he added.

No Coca Exports
--------------

5. (SBU) According to press reports, Bolivia currently
illegally exports around 140 tons of coca (or USD 50 million
dollars worth) annually to Argentina. The Argentine Embassy
told Econoff that Argentineans can legally chew coca, but can
not legally grow or import it -- leading to significant
contraband trade. On June 29, President Morales proposed an
agreement to legalize, monitor, and control the export of
coca leaves to northern Argentina, which was not accepted by
President Kirchner. Morales did not make remarks about coca
at the stadium inauguration, and the issue has received
little press coverage in La Paz, although one Bolivian
television station erroneously reported that coca will be
exported legally to Argentina. The MAS held a large rally in
Cochabamba on the evening of June 29 to publicize the
bilateral agreements and garner support in the run-up to the
constituent assembly elections.


6. (SBU) Comment: Argentina's agreement to pay USD 5 per
million BTU of gas has neighboring Brazil worried about its
chances of negotiating a favorable price with the Bolivian
government, as Bolivia is touting the new Argentine price as
its base reference price and claiming that Brazil should pay
USD 7.5 per million BTU. The announcement of higher gas
export prices and the negotiation of better treatment for
thousands of Bolivian immigrants in Argentina three days
before constituent assembly elections can only help the MAS
on July 2. End comment.
GREENLEE