MINING MINISTER SAYS GOB WILL RAISE TAXES

UNCLAS LA PAZ 000183 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/AND LPETRONI COMMERCE FOR JANGLIN TREASURY FOR SGOOCH E.O. 12958: N/A TAGS: EMIN EINV ECON PREL PGOV BL SUBJECT: MINING MINISTER SAYS GOB WILL RAISE TAXES REF: LA PAZ 137 -------------- SUMMARY -------------- ¶1. (SBU) Bolivia's mining minister told the Charge January 23 that the GOB would raise mining taxes, reiterating proposals presented to U.S. and other foreign firms and asserting the government's right to take a greater share of companies' income. The Charge reminded the minister of firms' need to earn acceptable investment returns and urged him to carefully consider the negative impact of proposed tax hikes on companies' financial positions; the minister responded by saying he believed the GOB had prepared an "objective" proposal and had "mostly" reached agreement with the industry's major players. End summary. -------------- MINISTER SAYS THE GOB WILL RAISE TAXES -------------- ¶2. (SBU) In a January 23 meeting with the Charge, Bolivian Minister of Mining Jose Dalence confirmed GOB plans to raise mining taxes, reiterating proposals presented to U.S. and other foreign firms earlier this month (reftel). Dalence confirmed that the government wants to eliminate companies' ability to credit the complementary mining tax (CMT) against income taxes; abolish the tax rate cap on the existing sliding scale; and raise taxes at each mineral price. He also asserted the government's right to take a greater share of companies' income, arguing that GOB revenues should rise in tandem with mineral prices. ¶3. (SBU) The Charge reminded Dalence of firms' need to earn acceptable investment returns and urged him to carefully consider the negative impact of proposed tax hikes on companies' financial positions, pointing out that U.S.-based Apex Silver and Coeur d'Alene could be forced to cancel or halt significant projects. The minister responded by saying he understood that companies "existed to earn money" and played a crucial role in Bolivia's mining industry. He added that he believed the GOB had prepared an "objective" tax proposal and had "mostly" reached agreement with the industry's major players. -------------- COMMENT -------------- ¶4. (SBU) Dalence tailored many of his comments to his audience, assuring the Charge that the GOB recognizes the importance of foreign investment and has no desire to see companies leave. The minister made it clear, however, that the GOB has no intention of backing away from proposed tax hikes. Company representatives may characterize as "liberal" the minister's statement that the two sides are "mostly" in agreement, but it seems increasingly clear that GOB determination will eventually force a resolution -- although not necessarily one companies will like. End comment. URS