ECONOMIC PLANNING MINISTER VAGUE ON PLANS

UNCLAS SECTION 01 OF 02 LA PAZ 000406

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: ECON PGOV ENGR EPET EAIR BL
SUBJECT: ECONOMIC PLANNING MINISTER VAGUE ON PLANS

REF: A. A) LA PAZ 351


B. B) LA PAZ 386


1. (SBU) Summary: In a courtesy call with the Ambassador on
February 10, Minister of Development Planning Carlos
Villegas, President Morales' paramount advisor on economic
issues, spoke of the GOB's plan to achieve "productive
development and social inclusion," but gave few concrete
details about how these goals were to be achieved. He
discussed his plan to create competent teams of permanent
staff within each ministry to reduce the GOB's reliance on
consultants and acknowledged that the Ministry of Finance
would be under the tutelage of Planning, but stated that all
other ministries would have relative autonomy. He explained
that his ministry would coordinate with the other ministries
to create a development plan within the next three months.
Once formulated, the GOB would seek international support for
this plan, including at a Paris Club meeting the GOB hoped to
convene in La Paz in June or July. Villegas was optimistic
about negotiations with the hydrocarbons companies, which he
said seemed disposed to come to agreement with the GOB. He
stated that the GOB would not bail out Lloyd Aero Boliviano
(LAB),but would seek to find a solution together with the
LAB President during the 90-day period of government
intervention (ref A). During this first meeting with the
Ambassador, Villegas appeared almost blithely unaware of
practical realities, raising neither the topic of a free
trade agreement nor the possibility of access to Millennium
Challenge funds. End Summary.

Villegas' Theoretical Plan Lacks Concrete Details
-------------- --------------

2. (SBU) In a February 10 courtesy call, Minister of
Development Planning Carlos Villegas told the Ambassador that
his ministry would lead the government's efforts during the
next three months to design a national development plan that
would promote production and social inclusion. "We seek to
redesign the relationship between the worker and the state,"
said Villegas. After this plan was devised, he said, the GOB
would seek international and donor support. He alluded to
the possibility of Consultative Group and Paris Club meetings
in La Paz during June or July.


3. (SBU) Villegas lamented that the MAS administration came
into power and found a weak state lacking vision and
dependent on consultants. For example, he said the former
Ministry of Indigenous Affairs was 100% dependent on support
from Denmark. He explained that the MAS administration
wanted to strengthen the system by creating competent teams
of permanent staff within each ministry during the next six
months. He stated that he did not believe the executive
branch salary cuts would hinder this goal, as Bolivia was
plagued with professional unemployment and the state remained
the principal option. He acknowledged that it would be
necessary to continue contracting consultants with needed
expertise (lawyers and engineers) in the Hydrocarbons
Ministry.

LOPE: The Plan for the Ministry Structure
--------------

4. (SBU) Villegas predicted that the law restructuring the
executive power (LOPE) would be approved by Congress the week
of February 13. Once the law was approved, Villegas'
Ministry of Sustainable Development would morph into the
Ministry of Development Planning, a super-ministry that would
oversee the works of the Finance Ministry (ref B). Villegas
explained that, although the state would participate in the
hydrocarbons, mining, and water sectors, those ministries
would have relative autonomy. Villegas envisioned the role
of his ministry as a coordinator between, rather than
director of, all of the ministries (with the exception of
Finance). He stated that the GOB would respect the
independence of the Central Bank, but that he would seek
increased coordination between the Planning Ministry, the

LA PAZ 00000406 002 OF 002


Finance Ministry, and the Central Bank.

Optimistic on Hydrocarbons
--------------

5. (SBU) Villegas said that the GOB would complete the design
of its hydrocarbons policy within a few days. GOB
representatives have held initial meetings with hydrocarbons
companies during the past two months, and according to
Villegas, the companies have shown a "good disposition" to
work with the government. Villegas claimed that the
companies were eager to come to agreement with the GOB,
because the MAS government could offer them legal and social
security. (Note: The companies, indeed, seem disposed to
come to agreement, but rather out of resignation than because
of confidence in "legal security". End note.)

LAB Question Unsolved
--------------

6. (SBU) Villegas stated that the partially-privatized LLoyd
Aero Boliviano airline has experienced a financial crisis
since the end of the 1990s, accumulating over USD 150 million
in debt and defaulting on pension, tax, salary, and insurance
payments. Due to LAB's trend towards bankruptcy and the
recent pilots' strike, the GOB requested financial
information about the company and found that the company's
Board had only approved its financial reports through 2003.
In order to get a reliable picture of the financial situation
in 2004 and 2005, the GOB ordered a fact-finding, 90-day
intervention in which a GOB-appointed intervenor would manage
the company. After the 90-day period, Villegas said that the
GOB would work together with LAB management to find a
solution, but would not take on LAB's debt (ref A).


7. (SBU) Comment: Villegas' notions of social engineering and
faith in state planning seem ungrounded in present
economic/global reality. Perhaps reflecting his exclusively
academic background, Villegas appears to be absorbed in
theory and to lack focus on practical issues, as demonstrated
by his raising neither the prospects for a free trade
agreement nor access to Millennium Challenge funds during the
meeting. In fact, Villegas curiously failed to ask one
question during this first meeting, seeming oblivious to the
U.S. role in Bolivia's economy, whether through investment,
trade, or direct financial assistance. End comment.
GREENLEE