GOB ENDS LLOYD INTERVENTION

UNCLAS LA PAZ 000870 SIPDIS SENSITIVE SIPDIS STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY STATE ALSO FOR WHA/AND LPETRONI STATE PASS TO FAA MIAMI FOR LHART STATE PASS TO DOT FOR CCOLDREN COMMERCE FOR JANGLIN E.O. 12958: N/A TAGS: EAIR ECON PGOV BL SUBJECT: GOB ENDS LLOYD INTERVENTION REF: A. LA PAZ 816 ¶B. LA PAZ 567 ¶C. LA PAZ 351 ¶1. (U) Summary: The GOB ended its intervention in Lloyd Aero Boliviano (reftels) on March 24, one day after Bolivia's Constitutional Tribunal granted a petition requesting the suspension of the GOB-appointed controller's authority. The GOB relinquished control to Ernesto Asbun, Lloyd's chief executive, and cancelled a proposed multi-million loan for the airline. Lloyd employees across the country responded with hunger strikes and renewed calls for Asbun's resignation. Observers note that the Constitutional Tribunal action may have given the GOB a timely exit opportunity, allowing government officials to wash their hands of an increasingly messy affair. This line of reasoning notwithstanding, the Lloyd case is making the GOB appear weak and incompetent, wholly incapable of resolving a challenging economic problem. End summary. ¶2. (U) Minister of the Presidency Juan Ramon Quintana announced the end of the GOB's six-week intervention in Bolivian national carrier Lloyd Aero Boliviano (reftels) on March 24, one day after Bolivia's Constitutional Tribunal granted a petition requesting the suspension of the GOB-appointed controller's authority. Tribunal officials suspended the powers not only of Angel Zaballa, the individual overseeing Lloyd's operations since February 9, but also of Vice Minister of Transport Wilson Villarroel, asking both to surrender all responsibility for Lloyd while the court evaluated the legality of the GOB's intervention. ¶3. (U) The GOB relinquished control to Ernesto Asbun, Lloyd's chief executive, and cancelled a proposed multi-million loan for the airline. Asbun publicly accused the GOB of having brought Lloyd to the brink of collapse, blaming the company's crisis on its poorly managed capitalization (or privatization) and the GOB's ineffective intervention. The February pilots' strike, Asbun added, caused flight cancellations and revenue losses from which the carrier has yet to recover and which could force executives to introduce austerity measures, including suspending Lloyd's Madrid route (announced March 29),limiting the frequency of international flights, cutting administrative and maintenance costs, and eliminating personnel (although it is unclear how many of the airline's 2,200 employees would lose their jobs). ¶4. (U) Lloyd employees across the country responded with hunger strikes and renewed calls for Asbun's resignation. Thirty to forty workers at the airline's Cochabamba headquarters initiated hunger strikes over the weekend and threatened to disrupt flights unless Asbun quit and the GOB assumed permanent control of the carrier's operations. Employees in Santa Cruz and La Paz picketed company offices and joined coworkers in calling on the GOB to intervene to save their jobs, refusing to work for Asbun and his team of executives. ¶5. (SBU) Comment: Observers note that the Constitutional Tribunal action may have given the GOB a timely exit opportunity, allowing government officials to wash their hands of an increasingly messy affair. By laying the blame for Lloyd's difficulties squarely on Asbun, GOB officials are attempting to sidestep any responsibility for the airline's problems and distance themselves from potential job losses. They may also hope to use the episode as evidence of the private sector's weakness and as ammunition for their argument that the state should play a greater role in Bolivia's economy. This possibility notwithstanding, the Lloyd case is making the GOB appear weak and incompetent, wholly incapable of resolving a challenging economic problem. End comment. GREENLEE