IDB'S FUTURE DIRECTION

C O N F I D E N T I A L LA PAZ 002197

SIPDIS

SIPDIS

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

E.O. 12958: DECL: 08/14/2016
TAGS: EAID ECON BL
SUBJECT: IDB'S FUTURE DIRECTION

REF: A. LA PAZ 1660


B. LA PAZ 937

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


1. (C) Summary: The Inter-American Development Bank (IDB)
Resident Representative told Econoff on August 11 that a
donor coordination meeting to be held in Bolivia in October
would likely fail to meet the GOB's anticipated funding
requirements. The GOB's National Development Plan relies
heavily on anticipated donor funds, and a poor showing in
October would be a set-back for the government, which has
already angered some donors due to its educational policies
and alignment with Cuba. The GOB prefers Cuban and
Venezuelan aid over other assistance because it comes without
accountability requirements. Venezuela and Cuba also
disburse rapidly, according to the IDB representative. The
IDB will likely move away from funding education and health
programs and is considering implementing direct subsidies to
poor families. End summary.

Donor Coordination Meeting
--------------

2. (SBU) Inter-American Development Bank (IDB) Resident
Representative Joel Branski told Econoff on August 11 that
the GOB's National Development Plan (ref A) would be put to
the test at an important donor coordination meeting in Santa
Cruz in October. He explained that the government needed
more than USD 12 billion to fund its five-year plan and that
it was expecting to get about half of the needed investment
from donors. Branski was not sure how receptive donors would
be to making large commitments without the macroeconomic
framework of an International Monetary Fund (IMF) agreement.
(Note: Bolivia's IMF agreement ended in March, and the GOB
does not want a new one (ref B). End note.) Without donor
support, the GOB would not be able to implement its economic
development vision. The October meeting will be followed up
by a donor consultative group meeting in Paris in February

2007.

Cuban and Venezuelan Aid
--------------

3. (C) Branski said that the Scandinavian countries were
angry with Bolivia, and particularly the Ministry of
Education, because of its educational policies. He explained
that the Scandinavians have been donating money for education
in Bolivia for years, but now the GOB has told them that they
must provide support within the rubric of Cuban cooperation.
Branski said the Scandinavians were not keen to "buy TVs and
literacy videos and hand them out in rural areas", in line
with the Cuban method. He argued that Cuban and Venezuelan
aid was so popular with the GOB because it was given
"overnight", because those two governments were not bound by
democratic processes and accountability concerns, like the
IDB and other donors.

IDB's Future Direction
--------------

4. (SBU) Partially in response to the GOB's education
policies, the IDB plans to stop funding education programs,
and possibly health programs as well. The IDB will continue
to fund road projects and is considering implementing direct
subsidy programs. These programs would provide money or food
stamps to poor families who send their children to school or
engage in other positive behavior and would take the IDB
about one year to implement.


5. (C) Comment: We expect that the donor coordination meeting
will serve as a reality check for the GOB. We anticipate
that the government will not receive anywhere near the amount
of aid commitments that it would need to enact its
development agenda. Several donors have complained that the
GOB's plan lacks concrete details about how it would be
implemented. End comment.
GREENLEE