IN COCHABAMBA, BUSINESS AS USUAL

UNCLAS LA PAZ 003051 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: ETRD EINV ECON PREL PGOV BL SUBJECT: IN COCHABAMBA, BUSINESS AS USUAL REF: LA PAZ 2626 -------------- SUMMARY -------------- ¶1. (U) Cochabamba business association representatives told Econoff November 9 that business continues as usual, despite ongoing political and economic uncertainty. They noted that while they share a desire for economic stability and judicial security with their La Paz and Santa Cruz counterparts, they face unique concerns, among them the growing "exodus" of Bolivian workers to Spain (reftel). They also called attention to the harmful impact of the potential expiration of the Andean Trade Promotion and Drug Eradication Act. -------------- BUSINESS AS USUAL ... -------------- ¶2. (U) Representatives of Cochabamba's chambers of commerce, industry, and exporters told Econoff November 9 that business continues as usual, despite ongoing political and economic uncertainty. Chamber of Commerce General Manager Richard Alvarez noted that while not necessarily thriving, businesses appear to have adapted to the uncertainty of the last few months; most expect to withstand rising tensions, and few are seriously considering drastic changes to operations. Businessmen generally feel they will survive current unrest, as they survived past political turmoil, and will continue to urge greater stability and respect for existing rules of the game; what they most want, Alvarez said, is to be left alone, free of GOB interference and drastic change. -------------- ... BUT NOT WITHOUT ITS PROBLEMS -------------- ¶3. (U) Chamber of Industry General Manager Marcelo Vargas noted that while Cochabamba businessmen share a desire for economic stability and judicial security with their La Paz and Santa Cruz counterparts, they face unique concerns, among them the growing "exodus" of Bolivian workers to Spain (reftel). Vargas estimated that more than 2,500 skilled and unskilled laborers leave Bolivia every week; industry representatives say employees frequently stay just long enough to learn a trade before seeking better opportunities and higher wages abroad, where they believe their skills will be in high demand and jobs relatively easy to find. Firms recognize that they might retain employees by raising salaries, but they also worry that higher labor costs will lower competitiveness, especially given stiff competition from low-priced imports from China and East Asia. According to Vargas, firms have few means of coping with the outflow; they can only hope the stream will gradually diminish, possibly as rumors of Spain's consideration of tighter entry requirements for Bolivians prove unfounded. ¶4. (U) Chamber of Exporters representative Boris Maroff reiterated Vargas' concerns, noting that many exporters suffer from a shortage of skilled labor - and foresee significant drops in exports if the Andean Trade Promotion and Drug Eradication Act (ATPDEA) expires later this year. Highlighting a 30 percent increase in Cochabamba exports since 2000, Maroff pointed out that firms rely heavily on ATPDEA trade preferences and have responded to the Act's incentives by exporting a more diversified range of products; exporters now send over 1,000 different goods abroad, mostly to the United States, and have increasingly moved beyond raw materials to processed goods. Maroff argued that many exporters would find it difficult to compete without duty-free access to U.S. markets, cautioning that ATPDEA expiration would put their success at risk and force many businessmen to modify or close operations and potentially fire tens of thousands of employees. -------------- COMMENT -------------- ¶5. (SBU) Cochabamba firms appear to have taken rising tensions in stride, and business continues despite ongoing uncertainty. Many businessmen are understandably worried about the loss of skilled labor and the potential expiration of ATPDEA trade preferences, but most expect to adapt, as they have adapted in the past. Even while they wish for clarity, they recognize that the chances of getting it are slim. GOLDBERG