MILLENNIUM CHALLENGE ACCOUNT UPDATE

UNCLAS SECTION 01 OF 02 LA PAZ 001845

SIPDIS

SENSITIVE
SIPDIS

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

E.O. 12958: N/A
TAGS: EAID ECON ETRD PGOV BL
SUBJECT: MILLENNIUM CHALLENGE ACCOUNT UPDATE

REF: STATE 101248


1. (SBU) Summary: Econoff delivered reftel information to
Bolivia's Millennium Challenge Account (MCA) representative,
Javier Hurtado, on July 5. Hurtado was optimistic that
Bolivia would not follow in the Gambia's footsteps. He plans
to contract seven technical team members within the next
week. He emphasized the importance of the U.S. market for
Bolivian producers and repeated the GOB's plea for extension
of ATPDEA benefits. He claimed that the GOB wants to reduce
coca cultivation for both counternarcotics and environmental
reasons and that providing farmers with fair trade
opportunities would reduce coca growing. He said that the
construction of the proposed MCA-funded northern road should
be done in conjunction with a program to ensure sustainable
forestry management. End summary.

GOB Optimistic that Bolivia Will Not Follow Gambia
-------------- --------------

2. (SBU) Econoff discussed the Millennium Challenge
Corporation's (MCC's) suspension of Gambia's eligibility with
Bolivia's Millennium Challenge Account (MCA) Representative,
Javier Hurtado, on July 5 per reftel. Econoff reminded
Hurtado of the importance of maintaining passing scores on
the MCC's 16 indicators to obtain MCA funds, particularly in
the areas of democracy, rule of law, and promoting economic
freedom, as discussed by Hurtado with MCC officials during
his June trip to Washington. Hurtado expressed optimism that
the GOB would continue to qualify for MCA funds and would
improve its relationship with the USG. He asserted that the
outcome of the July 2 Constituent Assembly (CA) elections was
positive as the representation of multiple parties and
interest groups ensured that the MAS could not consolidate
power. He said that although Bolivia sympathized with Cuba,
the GOB did not intend to implement a communist economic
agenda, but rather would focus on finding markets and fair
trade opportunities for the nation's indigenous
entrepreneurs.

MCA Process Moving Forward
--------------

3. (SBU) Hurtado told Econoff that the World Bank has
approved funding for Bolivia's MCA technical team; however,
World Bank official Oscar Antezana told us that the World
Bank has not committed any such funds. Hurtado has
identified eight team participants -- himself, an
environmental specialist, a development expert, a civil
engineer, a monitor, an administrator, a treasurer, and a
social consultant. He said that contracts would be signed
within the next few days and that the team would begin
working by early September. Hurtado, the owner of a
successful organic food company, plans to commit himself
full-time to moving the MCA process forward once the team is
up and running. He said that the GOB is ready to focus more
attention on the MCA process now that CA elections are over.
He asked us to notify him if "the door of opportunity for MCA
funds is closing" on Bolivia so that he may plan accordingly.

ATPDEA Concerns and Trade Agenda
--------------

4. (SBU) Hurtado expressed concern that non-renewal of ATPDEA
trade benefits for Bolivia would harm its chances of
receiving MCA funds, would damage its economy, particularly
in El Alto, and would damage the bilateral relationship.
Econoff responded that ATPDEA benefits were not linked to MCC
benefits, but that Bolivia's commercial policies and trade
openness were factors considered by the MCC, along with rule
of law, including counternarcotics cooperation. Hurtado
replied that Bolivia would like to negotiate a trade
agreement with the U.S., but qualified that such trade
agreement must be designed to decrease the inequalities
between the two economies. He argued that a Free Trade

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Agreement was appropriate for a country like Canada that had
a similar level of development as the U.S., but not for
Bolivia, which was on vastly unequal footing. He
acknowledged that U.S. market access is vital for Bolivian
producers.

Coca Production
--------------

5. (SBU) On coca, Hurtado replied that the GOB was committed
to decreasing coca cultivation, not only to reduce cocaine
production but also to limit environmental damage done by
coca growers. He argued that providing farmers with markets
and fair trade opportunities would do more to decrease coca
cultivation than eradication. He explained that he was
requesting Inter-American Bank (IDB) funding to bring fifty
organic trade association representatives from the U.S. to
Bolivia to discuss exports of Bolivian products. He said
that this type of initiative, in conjunction with the
proposed MCC-funded northern road project, could enable
farmers to escape poverty by transporting and selling their
products. He said that prior alternative development efforts
had not achieved their goals because of the intermediation of
corrupt government officials. He noted that the Morales
administration sought to distance itself from former corrupt
leaders, but not from donors. Hurtado advised that the U.S.
and other donors take a proactive approach to the Morales
administration in order to counter Venezuelan influence in
Bolivia. (Comment: Contrary to Hurtado's suggestion,
several ministries, including Development Planning and
Government, have sent us signals that our involvement in some
matters is unwanted. Increased U.S. largesse seems unlikely
to deter Venezuela's actions or the GOB's acceptance of such
actions. End comment.)

Environmental Concerns About Proposed Road
--------------

6. (SBU) Hurtado said that the proposed northern road should
be constructed in conjunction with a program to ensure that
local communities and migrants from other regions managed the
forests sustainably. He feared that road construction might
lead to irresponsible logging companies or migrant farmers
moving into the area and cutting trees, although the land was
not suitable for cultivation.


7. (SBU) Comment: Although the GOB's actions to date indicate
potential problems in the areas of rule of law (contract
violation/intimidation of judiciary),civil liberties (press
intimidation),fiscal policy (large spending plans),trade
policy (no FTA negotiations),and regulatory quality
(increased GOB role in the economy and elimination of
independent regulatory system),the GOB could possibly
improve its scores on the investing in people, political
rights, and control of corruption categories if it is true to
its stated goals of improving health and education,
increasing indigenous political inclusion, and combating
corruption. Hurtado seems a capable manager of the MCA
process, but the GOB's economic and political policies could
prove to be his largest stumbling blocks. End comment.
GREENLEE