AMBASSADOR'S MEETINGS WITH U.S. MINING EXECUTIVES

C O N F I D E N T I A L LA PAZ 001847 SIPDIS SIPDIS E.O. 12958: DECL: 07/03/2017 TAGS: ECON EMIN EINV BL SUBJECT: AMBASSADOR'S MEETINGS WITH U.S. MINING EXECUTIVES REF: A. A. LA PAZ 1840 ¶B. B. LA PAZ 1740 Classified By: Ambassador Philip S. Goldberg for reasons 1.4 (b) and (d ). -------------- Summary -------------- ¶1. (C) Although representatives from the three major U.S. mining companies in Bolivia listed specific concerns regarding GOB proposed changes to the mining code and taxes (ref B describes proposals),their basic request to the Ambassador was that the Embassy encourage the GOB to open a dialogue with mining companies. As previously reported, the mining companies have been unable to arrange meetings with the Mining Ministry and past requests for assistance from Vice President Garcia Linera received the unhelpful response that they should address their concerns to the mining ministry. In a phone conversation with Garcia Linera on July 3, the Ambassador urged the Vice President to facilitate a meeting between the mining ministry and mining companies, and Garcia Linera agreed. End Summary. -------------- -------------- Ambassador's contact with Vice President Garcia Linera -------------- -------------- ¶2. (C) In previous discussions between the Ambassador and Vice President Garcia Linera, Garcia Linera claimed not to have been aware of the lack of communication between the mining ministry and mining companies. As it happened, Garcia Linera called the Ambassador during the first of his two meetings with mining executives. After discussing other issues, the Ambassador asked Garcia Linera why mining companies in Bolivia could not get meetings with the ministry responsible for their sector. Vice President Garcia Linera responded that mining companies should indeed be able to meet with the mining ministry and that they would hear from the minister. Post will follow up to see if in fact this takes place. (Note: Mining Association president Humberto Rada characterized Garcia Linera as the only reasonable individual in the GOB with whom they could talk and who would recognize the significance of the Mining Association's tax studies.) -------------- Specific U.S. corporate concerns -------------- ¶3. (C) The U.S. companies and the Bolivian Mining Association have publicly supported the GOB's stated goal of 50/50 sharing of profits. The current GOB proposals, however, result in percentages of up to 80 percent for the GOB (ref B.) Coupled with proposed changes to the import tax regime, this profit-tax increase could potentially put Apex's San Cristobal out of business. Recent proposed legislation (not supported by the GOB) to nullify all contracts with COMIBOL would destroy any remaining semblance of contract security in the Bolivian mining industry. This proposal is unlikely to pass, but is especially worrisome for Coeur D'Alene, which would lose its contracts with COMIBOL. ¶4. (C) The GOB is deeply skeptical of the mining industry and does not believe the Mining Association's calculations showing a greater than 50 percent take for the GOB. The Mining Association has offered to provide actual cost and profit profiles (as opposed to the outdated estimates that the GOB is using),but they have received no response. Mining Association president Humberto Rada asserts that the GOB lacks the technical capacity to understand the ramifications of their proposals. -------------- Seeking dialogue with the GOB -------------- ¶5. (C) All U.S. executives agreed with the Ambassador that the GOB does not want to destroy some of the largest investors in Bolivia. U.S. companies will continue to use what leverage they have (for example, Coeur's good relations with the cooperatives, Newmont's solidarity with their union, and Apex's partnership with Japan's Sumitomo mining company.) The Ambassador has encouraged Vice President Garcia Linera to push for real dialogue between GOB ministries and the mining sector. (Comment: At a time when the MAS needs announcements of positive economic developments to shore up their popular support, new investments from Inti Raymi and strong performance from San Cristobal and San Bartolome should be a GOB goal. However, the MAS's most popular action to date has been the nationalization of the hydrocarbons sector. As frustration with the rate of progress in the Constituent Assembly grows, there may be pressure on President Morales to make another populist declaration. See ref A for a discussion of potential nationalization of the mining industry. End comment.) GOLDBERG