SANTA CRUZ BUSINESSMEN MAKE PROMISES, REITERATE

UNCLAS LA PAZ 000438 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI ENERGY FOR CDAY AND SLADISLAW COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: EPET ENRG EAGR ETRD EINV ECON PGOV PREL BL SUBJECT: SANTA CRUZ BUSINESSMEN MAKE PROMISES, REITERATE CONCERNS REF: A. LA PAZ 216 ¶B. LA PAZ 251 ¶C. 05 LA PAZ 3590 ¶1. (U) Summary: In February 15 meetings, Santa Cruz businessmen made two promises: first, that they will support President Evo Morales as long as he protects private enterprise and avoids substantive policy changes; and second, that they will act if the administration shifts radically leftward. Business leaders expressed particular concern about the upcoming Constituent Assembly and the proposed referendum on autonomy; reiterated hydrocarbons companies' willingness to negotiate with the GOB (refs A and B); called attention to the detrimental effects of U.S. demands for immediate access to Andean markets for U.S. soy exports (ref C); and repeated their support for Bolivia's inclusion in the proposed Andean Free Trade Agreement. End summary. ¶2. (U) In February 15 meetings, Santa Cruz businessmen told Econoffs they would support President Evo Morales as long as he protects private enterprise and avoids substantive policy changes. Federation of Private Businessmen Vice President Pedro Yovhio said business leaders recognize that Morales was legitimately elected and are willing to work with him as long as he respects the private sector and guarantees judicial security. Yovhio indicated that Santa Cruz business leaders would offer constructive criticism of policies they considered detrimental to their interests, adding that they would "act" in a still undetermined manner if they saw the administration shifting radically leftward. CONSTITUENT ASSEMBLY, AUTONOMY REFERENDUM RAISE CONCERNS -------------- -------------- ¶3. (U) Business leaders expressed particular concern about the upcoming Constituent Assembly and the proposed referendum on autonomy, describing the former as their major political challenge. Yovhio and Chamber of Exporters representatives said they were disturbed by President Morales' call for assembly delegates to "refound" Bolivia, pointing out that such a broad mandate could have unexpected and potentially alarming consequences. Business leaders disagreed with Morales' proposals for electing delegates to the assembly and said they planned to offer alternatives that would more accurately reflect the department's population and influence. Many said they worried Morales would use the assembly to replicate Venezuelan President Hugo Chavez' efforts and gradually consolidate power. ¶4. (U) Carlos Dabdoub, former vice-presidential candidate for the National Unity (UN) party, told us he assumed the role of director of the Autonomy and Constituent Assembly Committee for Santa Cruz Prefect Ruben Costas. He expressed concern about the pace with which the executive branch sought to push through legislation to authorize elections for Constituent Assembly representatives. Dabdoub believed it important for the departments, especially Santa Cruz, to develop independent proposals for the assembly and said slowing the Constituent Assembly process was an essential element of their strategy. HYDROCARBONS COMPANIES DISPOSED TO NEGOTIATE -------------- ¶5. (U) Hydrocarbons Chamber President Raul Kieffer reiterated companies' willingness to negotiate with the GOB (refs A and B),saying firms are disposed to reach an agreement as long as they can assure their profits. Company executives are presumably still operating according to the terms of a white paper drafted before the May 2005 Hydrocarbons Law, but many are apparently willing to be flexible on the details as long as they can protect their bottom lines. Executives are now concerned about the lack of expertise at the Hydrocarbons Ministry and the possibility of a conflict between new Minister of Hydrocarbons Andres Soliz Rada and new YPFB (the state oil company) President Jorge Alvarado. A personality conflict, Kieffer said, could significantly complicate already complex negotiations. SOY STILL AN ISSUE -------------- ¶6. (U) Chamber of Exporters representatives again called attention to the detrimental effects of U.S. free trade agreement negotiators' demands for immediate access to Andean markets for U.S. soy exports (ref C),saying Bolivian producers stand to incur annual losses of $200 to $300 million if sales in neighboring countries are undercut by cheaper U.S. exports of soy and its derivatives. Business leaders noted that approximately 90 percent of all Bolivian soy exports are shipped to Andean countries and warned that the markets' disappearance and related job losses could significantly undermine the region's social, political, and economic stability. ¶7. (SBU) Comment: While Bolivian soy producers seem genuinely concerned about potential competition from U.S. soy exports, they have also told us that large mechanized producers, which account for the vast majority of Bolivian soy production, will likely be able to compete, albeit not without painful adjustments. More than these firms, it is Bolivian small producers, many of whom have just a few hectares under cultivation, who stand to lose. End comments. SUPPORT FOR ANDEAN FTA REMAINS WIDESPREAD -------------- ¶8. (U) Concerns about soy notwithstanding, businessmen repeated their support for Bolivia's inclusion in the proposed Andean Free Trade Agreement, saying they continue to urge the GOB to pursue negotiations. Chamber of Exporters' representatives said an agreement was particularly important for Bolivian textile and apparel producers, who rely on trade preferences to compensate for high transportation costs and would find it difficult to compete without them. Business leaders said they were worried by President Morales' reluctance to make official policy statements but told Econoffs they would continue to push for an agreement, particularly given the December 31 expiration of Andean Trade Promotion and Drug Eradication Act (ATPDEA) trade preferences. ¶9. (SBU) Comment: While Santa Cruz businessmen placed the Constituent Assembly and the referendum on autonomy among their top concerns, economic issues continue to command attention. For the next several months, businessmen will be watching the new administration's actions closely; any they deem too radical could prompt a showdown between the Morales administration and Santa Cruz' powerful business interests. End comment. GREENLEE