NOTES FROM SANTA CRUZ - OCTOBER 2007

UNCLAS SECTION 01 OF 02 LA PAZ 002813 SIPDIS PASS USAID WASHDC SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL ECON KPAO CONS AMGT BL SUBJECT: NOTES FROM SANTA CRUZ - OCTOBER 2007 REF: A) La Paz 2632 B) La Paz 2204 ¶1. (SBU) Summary: Santa Cruz Department, with 26 percent of Bolivia's population, is its fastest-growing region responsible for 32 percent of Bolivian GDP. Political and business leaders lament the lack of central government funds dedicated to Santa Cruz but on the other hand resent central government attempts to control regional policy-making and rally around the cry of "autonomy." The strength of Santa Cruz's private enterprise and economic diversity was evident at the annual "Expocruz" trade fair. Business is going strong, despite concerns about the nation's political uncertainty and economic policies that discourage new investment. Santa Cruz represents the diversity of Bolivia, with new migrants arriving daily from throughout the country in search of a better life. Local interlocutors welcomed increased Embassy attention through the work of the new American Presence Officer. End summary. ¶2. (U) September 24 is the "Day of Santa Cruz" and the date around which the Chamber of Industry, Trade, Services, and Tourism of Santa Cruz (CAINCO) holds its renowned annual trade fair, Expocruz. In conjunction with the Ambassador's participation in Expocruz, the visit of WHA DAS McMullen and WHA/AND Director Chacon, and the Santa Cruz Day festivities, American Presence Officer (APO) made a series of initial calls on political and business leaders. Following is the first of what will be regular reporting cables from the American Presence Post in Santa Cruz (currently based at Embassy La Paz). Give Us More Money and then Leave Us Alone -------------- ¶3. (SBU) There are two common themes among Santa Cruz political leaders: a desire for more money from the central government and a desire to be left alone to spend that money and govern their affairs as they see fit. Current decentralization laws allocate central government monies to municipalities according to population, but the 2001 census data is no longer accurate. Municipal Council President Oscar Vargas estimates there are eight new residents in his city per hour due to births and immigration, and has installed an electronic "Cruceno-counter" on the corner of his building to highlight the difference between the census results (1,135,526) and the current population (1,521,423 as of October 12). ¶4. (SBU) During a September 21 awards ceremony to honor local heroes, Vargas made that point directly to President Evo Morales. He characterized his admittedly-provocative speech as a history of Santa Cruz autonomy. In his own speech, Morales pointed out that increased revenue from the Direct Tax on Hydrocarbons (IDH--part of the renegotiation of oil and gas concessions) had brought much more money to Santa Cruz for primary and secondary education, health clinics, roads, and universities. (Note: The government has since announced a plan to divert 30 percent of IDH revenues from local governments and universities to pension benefits. Santa Cruz leaders are at the forefront of the protest against this plan.) Morales further insisted that "autonomy" would be guaranteed and that the question before the constitutional assembly was how to resolve regional autonomy with indigenous autonomy. Finally, he asked the front-row seats full of former government officials why they had not guaranteed regional autonomy when they had the chance, but instead were "bothering Evo now?" A poem read by one of the honorees, highlighting the diversity of Santa Cruz due to migration from all parts of the country, served to break the tension. The speech by Mayor Percy Fernandez was also conciliatory, as Fernandez with humor asked Morales to stop demonizing Crucenos as responsible for all of Bolivia's problems because "we're not bad people!" Expocruz and the Business Climate -------------- ¶5. (U) The 32nd annual trade fair "Expocruz" took place September 21-30, generating $172,593,617 of potential business deals and approximately 50,000 new jobs (12,000 direct and 38,000 indirect). There were 2,100 participants exhibiting goods and services from 18 countries to nearly 507,000 visitors. One of the primary sectors for business at EXPOCRUZ has traditionally been cattle. This year the fair exhibited 800 animals, hosted 14 auctions, and did business in excess of a million dollars. The second main draw is the "Circle of Business" and its match-making among companies. This year 740 companies from 18 countries participated in nearly 8,000 encounters, resulting in $119.3 million of business contracts. In a country with a GDP of $10.3 billion (2006),this is no small amount. The organizers of Expocruz celebrated their success as proof that the private sector, supporting production in Bolivia, is the best vehicle for economic growth. ¶6. (SBU) This point, which might seem obvious to international observers, was highlighted again and again as a sharp contrast to President Morales' "revolutionary" vision for the country. At a roundtable with journalists, the Ambassador heard a variety of opinions ranging from cautious optimism ("Evo won't destroy us, he LA PAZ 00002813 002 OF 002 knows he needs us") to deep dissatisfaction with the direction the economy is taking, to panic that the President has a dark, unstoppable plot to confiscate and destroy all private industry in the country. Business leaders were generally concerned that political uncertainty is constraining new investment, though noted that currently business was profitable, and Bolivians feel better off now than during the past five years (reftel). Economic Diversity, Environmental Degradation -------------- ¶7. (SBU) CAINCO briefed APO and Poloff on programs it is running to foment small business development in Santa Cruz in the poorest neighborhoods, including the inspiring success story of a disabled woman who now produces marmalades and sauces for a national grocery store chain. CAINCO directors bristle at accusations by the MAS government that they are all "oligarchs," when they mostly see themselves as self-made men and women who are giving back to their community. The truth is probably somewhere in the middle. ¶8. (U) Santa Cruz has been the Department (of Bolivia's nine) with the most economic growth during the last 23 years. It has 26 percent of the country's population and is responsible for 32 percent of GDP, according to the Bolivian Institute for Foreign Trade, though it still lacks infrastructure such as improved roads and other transportation systems. Santa Cruz has very favorable conditions for agriculture, strong forestry and hydrocarbons sectors and a growing manufacturing sector, and is close to huge export markets in Brazil and Argentina. The economic diversity and strength of private enterprise continue to attract migration from throughout Bolivia. ¶9. (U) One unfortunate side-effect of the rapid development is the economic degradation caused by slash-and-burn land-clearing techniques and the annual tradition of burning off the old grass on extensive cattle ranches. During Expocruz, the air was full of smoke, and poor visibility resulted in the cancellation of many flights throughout the country. At one point during the height of the burning, NASA qualified the air quality in Santa Cruz city as the worst in the entire Western Hemisphere. In addition, population pressure is encroaching on protected areas. During a visit to Amboro National Park, APO and USAID environment officer observed recently-cleared land in the protected "yellow zone" around the park planted with teak allegedly destined for a future paper factory. Pre-existing communities around the park are allowed to use the land for traditional agriculture, and a USAID-funded biodiversity protection project engaged them in conservation efforts. Therefore, local environmental NGOs contribute the teak plantations to bigger business interests. American Presence Post Update -------------- ¶10. (SBU) Though our intent to open an APP has not been publicly announced yet (nor even discussed privately with the government), interlocutors welcomed the idea of increased Embassy focus on Santa Cruz, with a specific embassy officer (the APO) serving as a liaison between the Department of Santa Cruz and the U.S. Mission, and as a source of information on U.S. policies and activities in Bolivia. One local contact suggested that the USG has a problem of "branding," since Bolivian citizens do not always associate familiar USAID and NAS assistance programs with the United States Government. In spite of the country team's many successful efforts to communicate the USG's friendship and support to Bolivia (ref B), there is still room to do more. Thus, an important goal for the APP will be to publicize USG assistance programs in direct outreach to neighborhoods in the city of Santa Cruz and towns throughout Santa Cruz Department. ¶11. (SBU) Office space on the DEA compound, where the U.S. consular agent is also housed, is under renovation to provide work space for two LES and the APO (during her TDY visits to Santa Cruz) and a conference room for public diplomacy activities and warden meetings. The hiring process for a PAS-funded LES is in progress, after which the hiring process for a PROG-funded LES will begin. ¶12. (SBU) Post plans to roll out the "Virtual Presence Post" website for Cochabamba in early November, the website for VPP Chuquisaca (Sucre) about a month later, and the VPP website for Santa Cruz early next year.