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