2007 DEVELOPMENT PLAN TO BE RELEASED DECEMBER 31

UNCLAS LA PAZ 003402 SIPDIS SIPDIS STATE FOR WHA/AND TREASURY FOR SGOOCH ENERGY FOR CDAY AND SLADISLAW E.O. 12958: N/A TAGS: ECON EAID EFIN EINV EAGR BL SUBJECT: 2007 DEVELOPMENT PLAN TO BE RELEASED DECEMBER 31 REF: LA PAZ 1660 -------------- Summary -------------- ¶1. (U) President Morales will announce the government's economic development plan for 2007 on December 31. The government will encourage production through the founding of a national development bank, perhaps with Venezuelan funding, and by government purchase of products and the creation of "productive complexes." The government will promote human capital development by increasing free public health coverage, targeting resources for poor municipalities, and opening boarding schools for rural children. End summary. -------------- --- 2007 Development Plan to be Released December 31 -------------- --- ¶2. (U) President Morales will announce the government's economic development plan for 2007 -- based on its five-year national development plan (reftel) -- on December 31, according to press reports. The government will encourage production through the founding of a national development bank and by government purchase of products and will promote human capital development through education and health initiatives. -------------- Production Stimulation -------------- ¶3. (U) The national development bank will provide low-rate credits based on collective guaranties to micro, small, and medium enterprises affiliated with social organizations and syndicates. Press reports indicate that the bank currently has USD 30 million that were transferred to it by the existing state-owned Bolivian National Financier. The press speculates that the Bolivian state-owned Union Bank could become the development bank by channeling USD 100 million in concessional loans granted by Venezuela. The bank would finance the production of such products as soy, quinua, honey, coca toothpaste, milk, furniture, leather, and textiles. In addition to creating the bank, the government plans to encourage production by purchasing Bolivian products for government use or for reselling abroad. The government will promote job creation and improved production through creating "productive complexes," which will provide farmers and others with access to technology, markets, and roads. -------------- Investing in Human Capital -------------- ¶4. (U) The government also plans to promote health and education in 2007 by increasing free public health coverage from age 5 to age 21, providing resources for health and education to 148 of the country's poorest municipalities, opening boarding schools for rural children who live far away from education centers, and providing public transportation for school children. -------------- Comment -------------- ¶5. (U) The government's design for the national development bank remains unclear. Depending on how the bank is set up, it could negatively impact the rest of the banking sector. The government's proposal to purchase goods lacking markets to stimulate production sounds like a costly, unsustainable method of job creation, and the "productive complex" idea seems poorly defined. However, the GOB's planned health and education initiatives could produce long-term gains by strengthening Bolivia's human capital. End comment. GOLDBERG