BOLIVIA: EITI RESPONSE PENDING

UNCLAS LA PAZ 001666

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/AND
STATE FOR EEB/ESC/IEC MAUEL AND HAENDLER
STATE FOR EEB/ESC/IEC/ENR HAYMOND
TREASURY FOR SGOOCH

E.O. 12958: N/A
TAGS: ECON EINV EMIN ENRG EPET BL
SUBJECT: BOLIVIA: EITI RESPONSE PENDING

REF: A. STATE 75118


B. LA PAZ 870

C. LA PAZ 1618

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Summary
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1. (SBU) The DFID letter referred to in ref A was delivered
June 12; the GOB has not yet responded. The British DCM told
Emboffs on June 13 that he does not expect the GOB to
prioritize the Extractive Industries Transparency Initiative
(EITI),but hopes to encourage steps toward membership
through Norwegian technical assistance and potential World
Bank funding. He noted that U.S. involvement in promoting
EITI would most likely hinder the effort. Bolivia's
hydrocarbons sector is in flux as the GOB seeks to implement
its "nationalization" policies and revamp the state oil
company YPFB. Once the sector stabilizes, Bolivia may be in
a better position to implement EITI. President Morales
vetoed a bill in May that would have required YPFB to publish
its revenues, but reportedly plans to present a substitute
bill with similar requirements to congress later this month.
The vice minister of mining told Emboff on June 1 that it was
unlikely that an employee from the mining ministry would be
appointed to manage EITI due to resource constraints. End
summary.

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EITI Letter Response Pending
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2. (SBU) The DFID letter referred to in ref A was delivered
to President Morales and the hydrocarbons and mining
ministers on June 12. The GOB has not yet responded.
British DCM Steve Townsend told Emboffs on June 13 that he
does not expect the GOB to prioritize the Extractive
Industries Transparency Initiative (EITI),but hopes to
encourage steps toward membership through Norwegian technical
assistance and potential World Bank funding. He noted that
U.S. involvement in promoting EITI would most likely hinder
the effort.

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Hydrocarbons Sector in Flux
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3. (SBU) In May 2005, a new hydrocarbons law was passed. In
May 2006, the GOB issued a decree "nationalizing" the
hydrocarbons sector. Both of these norms implied serious
changes to the industry, which have been difficult to
implement. The cornerstone of the GOB plan, state company
YPFB, lacks the capacity to assume its new role. Amidst all
of these changes, and with frequent changes in the GOB
cabinet, the government has not focused on EITI. Although
the purported purpose of the "nationalization" is to return
Bolivia's gas to its people for their benefit, which seems to
be in line with the EITI goals, the GOB appears more
internally focused on its processes of change than interested
in participating in international initiatives. Some gas
companies, including British Gas, are interested in EITI, as
are the Norwegians who are providing technical assistance to
YPFB. Once the sector stabilizes, Bolivia may be in a better
position to move forward with EITI.

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Transparency Law Vetoed
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4. (SBU) When new hydrocarbons contracts were approved by the
Bolivian congress in April (ref B),the congress also passed
the Hydrocarbons Sustainable Development Law, which would
have eliminated the hydrocarbons surtax, replacing it with
Annex F of the new contracts. Annex F determines how the
earnings from company operations are split between Bolivia's
state oil company YPFB and the companies through a complex
table of variables and equations which vary by gas field.
The law would have required that YPFB publish its revenues
from Annex F on a periodic basis to ensure transparency.
However, President Morales vetoed the law in May. The
hydrocarbons minister announced in early June that a
substitute bill will be presented to congress later that
month. Presently, the payment mechanisms between YPFB,
private companies, the Bolivian tax service, and buyers are
in flux, uncertain, and not transparent.

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Mining Ministry Says EITI Unlikely
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5. (SBU) Emboff attended a separate meeting with the vice
minister of mining on June 1 (ref C) in which the vice
minister admitted that he was unfamiliar with EITI and that
no one had been appointed to head EITI issues. He added that
it was unlikely that someone from his ministry would be
appointed due to the ministry's lack of human and financial
resources. (Note: The day of the meeting, local media
reported the mining minister's recent announcement that half
of the minerals exported from Bolivia leave the country
illegally, resulting in lost taxes of USD 70 million. Much of
this unregistered exodus of minerals was attributed to
independent miners and thieves who target independent
miners.)
URS