EVO'S VAGUE CONDITIONS FOR "CONDITIONLESS" AID

C O N F I D E N T I A L LA PAZ 002960

SIPDIS

SIPDIS

DEA FOR OEL/TOTH, BLANCO
STATE/USAID PASS TO PAUL BONICELLI

E.O. 12958: DECL: 11/07/2017
TAGS: PGOV PREL ECON BL
SUBJECT: EVO'S VAGUE CONDITIONS FOR "CONDITIONLESS" AID

REF: LA PAZ 2956

Classified By: EcoPol Chief Mike Hammer for reasons 1.4 (b) and (d)


1. (C) Summary: Bolivian President Evo Morales issued a
decree October 11 presenting foreign assistance donors with a
variety of new requirements to register projects with the
Bolivian government and strengthen its oversight. The most
potentially troublesome articles require that aid not/not
imply "political or ideological conditions" or run counter to
Bolivian sovereignty. The jury is still out on this
extremely vague decree. It prompts more questions about its
scope and categorization of donor assistance than it answers.
The Embassy and the greater donor community are seeking
clarifications with Bolivian Government counterparts.
Development Minister Gabriel Loza promised forthcoming
regulations and procedures and assured the donor community
October 23 the decree would be implemented reasonably,
focusing on registration of foreign funds and implementing
partners. But, already the Justice Ministry has cited the
decree to reject display of the USAID logo at a USAID project
event. The donor community met October 30 and established a
sub-committee to approach the government with decree
questions, but was divided between decree skeptics and
supporters. The decree appears to be unconstitutional and
steps on congressional authorities. Congress is considering
related legislation, but it is unclear if it will attempt to
challenge the decree or embrace it. Government officials
have based the decree's international legitimacy on the 2005
Paris Declaration, which both Bolivia and the U.S. signed.
It is questionable, however, whether that broad agreement
supports many of the decrees' specific articles. End Summary.


2. (U) Following two months of intermittent government
criticisms of USAID programs, particularly democracy programs
accused of undermining the government, Bolivian President Evo
Morales decreed that all international development assistance
conform to new requirements, including registration with the
Bolivian Government. Supporting processes and regulations
remain to worked out. Donors are uncertain what level of
concern is warranted about the decree given its vague
wording. Decree 29308, Norms for the Management and
Implementation of External Donor Funds, was published in the
national gazette October 11.

The Devil is in the Interpretation
--------------


3. (C) The decree's stated intent is for the Bolivian
Government to ensure that donor funds are harmonized with the
National, State, and/or Municipal development plans and
priorities, respect Bolivian legislation, and are implemented
with Bolivian public sector institutions. Taken at face value
this is not particularly onerous or out of step with our
existing programs. However, the devil is in the details and
in the many potential interpretations of vague language. The
decree lacks clear definitions, does not identify whom or
what entity is subject to its various provisions, does not
state who will interpret the decree or provide guidelines on
doing so, and seeks to impose provisions unilaterally and
sometimes retroactively.



4. (U) The decree states that all government agencies that
receive donor funds must register these funds with the
Bolivian Government, making them subject to other articles of
the decree and potentially to as yet unspecficified
government review. Sub-contracting by government entities
with third parties to administer donor-supported programs is
prohibited, although it is unclear if this will impact donor
implementers. Requirements also include inscription of funds
into Bolivian Government budgets, establishments of reporting
requirements on information protected by U.S. law, the
potentially ambiguous ability of Bolivian Government to
"object" to donors' local hiring decisions, and the
precedence of Bolivian contracting rules over those of the
donor country.


No "Political or Ideological" Aid Allowed
--------------


5. (C) Article 9 of the decree requires assistance to be
without "political or ideological" conditions. Article 17
further prohibits aid that "undermines Bolivian sovereignty."
The decree does not further define either condition, nor
does it assign a procedure or body to interpret or enforce
them, opening them to arbitrary and politicized applications.
These articles may be linked to recent and unfounded
government criticism that USAID democracy programs were
supporting the opposition. Presidential Minister Juan
Quintana, the most outspoken government critic of USAID, has
said donors who cannot extract ideological conditions (at
least the wrong kind of ideology) from their aid programs
will be shown the door.


6. (C) U.S. assistance is by nature "conditioned" (e.g.
earmarked) by Congress for needs it defines, restrictions for
use (including assuring sound management and appropriate
institutional capacity),and requirements for support from
the host government. An extreme interpretation of the
requirement could find all assistance in violation of the
decree. Bolivian officials often cite Venezuelan aid as a
model, as it comes "without conditions," and often in the
form of a check from President Morales for local governments.
Critics argue the Venezuelan aid is very much conditioned on
"political" factors, focused on bolstering pro-government
politicians, and that not attaching any conditions to aid is
the same as not having a plan, and ultimately unsustainable.

Domestic Legal Concerns
--------------


7. (C) The decree gives the impression that the Bolivian
Government may ignore the long standing Bolivian legal
practice granting international agreements supremacy over
presidential decrees. The decree empowers the Ministry of
Planning and Development and Ministry of Foreign Relations to
renegotiate bilateral agreements, such as the 1951 Point Four
Agreement with the U.S. and subsidiary agreements signed as
recently as this year. The decree also prompts concerns
about executive overreach and the role of the Bolivian
Congress in international relations. Article 228 of the
Bolivian Constitution determines the Constitution has
supremacy over legislation and decrees, and that only the
Bolivian Congress (Article 59-12) can change and modify a Law
of the Republic. The Bolivian Congress is attempting to
exercise legislative oversight of the executive on this
decree, as demonstrated by an October 24 hearing requiring
Development Minister Gabriel Loza to present the decree to
the Internal Affairs Commission of the Lower House. A
congressional staffer told EmbOffs the commission is
considering drafting a statue on donor regulation.

Vague Squared: Broad Declaration Used to Back Vague Decree
-------------- --------------


8. (C) During an October 23 open meeting with donors,
Development Minister Gabriel Loza cited the 2005 Paris
Declaration as legal authority for the decree. The
declaration signed by many leading aid NGOs and 91 countries,
including the U.S. and Bolivia, attempted to hone development
strategies between aid donor and recipient nations. It
resulted in broad recognition that donor countries should
respect host government sovereignty, operate transparently,
and align assistance programs with national development plans
and systems "to the greatest extent possible." Although a
thorough study of the Declaration is needed to ascertain its
relevance to the decree, Post's initial assessment is we are
already operating within the broad parameters of the
Declaration.

Minister Loza: Don't Worry, Donate Happy
--------------


9. (C) Development Minister Gabriel Loza attempted to assure
donors October 23 the decree was aimed at improving
transparency by ensuring aid projects were registered with
the government, not to punish or obstruct development
partners. He added the decree would improve government
understanding and coordination of development efforts
underway in Bolivia. He said some sub-ministers had approved
projects and agreements without informing their own
ministers, let alone other agencies. Loza explained donors
could continue to use contractors (although this is far from
clear from the decree's text) so long as both the contractor
and funds were registered with the government. He claimed
about half of Bolivia's 1,200 aid contractors were
unregistered. Loza appeared more interested in projecting to
the press and donors how reasonable the decree was than
offering answers to donors' questions. He proposed that
details about the decree's scope, interpretation, and other
issues would be worked out in the future with donor input.

USAID Branding Burns MOJ
--------------


10. (C) Embassy contacts and staff generally regard Loza as
reasonable and suspect he will attempt to keep to a
"reasonable" implementation of the decree. But, it is
unclear how influential Loza can or will be executing a
decree that contacts speculate is backed and intellectually
authored by such hardliners as Presidential Minister Juan
Quintana and Government Minister Alfredo Octavio Rada. Also,
even if high-ranking government officials agree to a less
restrictive interpretation of the decree focusing on
implementer and fund registration and increased project
reporting, there are currently no regulations or procedures
in place to ensure their subordinates do the same. The
Ministry of Justice has already used the decree to object to
the use of the USAID logo and slogan "from the American
people" at an upcoming event as a "political" condition.
Using the logo at public events is a USAID requirement and is
backed by agreements with the Bolivian Government allowing
USAID "branding." USAID is still discussing the issue with
the MOJ. If local officials apply this degree of sensitivity
in interpreting Article 9, donors are in for challenging
years ahead.

Potential to Counter Counter-Narcotics Aid
--------------


11. (C) Embassy La Paz's Narcotics Affairs Section (NAS) is
concerned that the Bolivian Government will use the decree to
insert itself in both the funding and execution of
counter-narcotics programs that begin after December 31,

2007. Under the decree, the GOB could assign itself to
determine what interdiction or eradication efforts will
continue, and the USG may then have to begin the process of
renegotiating a new Letter of Agreement. Particularly
troubling to NAS, Article 20 allows the GOB to object to the
hiring of Bolivain or foreign staff of cooperative agencies
that provide support to donor programs.

Much Ado About Nothing?
--------------


12. (C) Vice Minister of Social Defense, Felipe Caceres, told
NAS staffer October 22 that Minister Loza held a meeting with
ministers and vice ministers to discuss in greater detail the
background and rationale behind the decree. Loza used the
example of USAID, citing a case in which 90 percent of
assistance funding went to salaries and overhead and only 10
percent went to field implementation to benefit needy
Bolivians. NAS staffer corrected Caceres, stating the
approximate and average figures for USAID projects are about
30 percent for contractor and grantee administration costs
and 70 percent for field implementation. NAS staffer added
it was disconcerting that the Minister of Planning and
Development continued to get basic facts wrong regarding U.S.
development assistance. NAS staffer indicated that the
decree requirement to cut off aid with "conditions" could
change how NAS programs are carried out because USG NAS funds
are entirely conditioned on counter-narcotics programs.
Although Caceres had not read the decree, he said he would
study it and consult with higher officials in the Bolivian
Government to seek further clarification to determine if
certain clauses might be removed or modified.

Other Vulnerable Programs Flying Under Radar, For Now
-------------- --------------


13. (C) The government appears to be aiming the decree at
USAID and NAS (often complementary) programs, reflecting
Bolivian Government criticism over the past few months. For
the moment, other agencies have not been singled out or
approached by their GOB counterparts for inclusion in the
decree's requirements. Doubts remain about how interested or
capable the Bolivian Government would be in tracking the many
assistance programs not associated with USAID or NAS.
However, the vague degree hangs threateningly over all
sections providing assistance should it be interpreted
broadly:

--MILGRP: These programs are already generally directed
through and in cooperation with Bolivian Government
institutions (largely the military and Ministry of Defense),
so provisions about third-party contractors and registration
of funds do not apply. However, the clauses about rejecting
"political or ideological" aid or assistance that runs
counter to Bolivian sovereignty could be interpreted to mean
just about anything. Provisions about the right to object to
local hires of partnering cooperation agencies are also
potentially troubling.
--DEA: DEA funds assigned to the Bolivian counter-narcotics
police (FELCN) also are not impacted by third-party
constraints of the decree. But the FELCN, as part of the
Bolivian National Police, would fall under the decree's
provisions and is vulnerable to the same potentially
arbitrary objections to local cooperation agency staff and
controls over assistance.
--PAS: The decree could impact Public Affairs Section
donations to private institutions (i.e. Symphony Orchestra,
Binational Centers, etc.) and the public grant to the
Ambassador's Fund for Cultural Preservation. Both public and
private assistance needs to be registered by government
ministries under complicated and vaguely defined decree
requirements. Because of its relatively small budget and
non-controversial nature of its assistance, PAS funds are the
most likely to be overlooked for decree compliance.

Waiting for the Phone to Ring
--------------


14. (C) All 2008 project agreements are required to be
consistent with the decree. The Ministry of Planning and
Development, in coordination with the Ministry of Foreign
Affairs, has 180 days from the end of decree's transition
period of December 31, 2007, to renegotiate assistance
agreements to reflect the new requirements. The government
has provided no clear guidance on how or when the
renegotiation would move forward or given formal notice of an
intent to renegotiate our assistance agreements with the GOB.
Minister Loza's October 23 comments indicated working with
donors in Bolivia on new agreements, perhaps not
understanding this would require State Department permission
and a formal request in DC. The government's apparent
eagerness to renegotiate agreements on this scale suggests a
misunderstanding of the time, resources, and potential
downside involved. Donor countries and NGOs can be expected
to press for their own outstanding concerns once agreements
are reopened, such as government requirements and taxing of
foreign assistance.

Mixed Reaction from Donors
--------------


15. (SBU) Donors agreed the decree needed clarification
during an October 30 meeting of the GRUS (Grupo de
Seguimiento) donor coordination group and assigned a
sub-group to identify and submit questions to the Bolivian
Government. Although USAID has volunteered to join the
sub-group, post will continue to work bilaterally with the
Bolivian Government on issues specific to our programs and
our method of development assistance delivery. The GRUS
appears unlikely to speak as a strong or unified voice on
possible decree encroachment on donor independence. Although
many members of GRUS donor coordination group, which meets
monthly in La Paz, were diplomatically critical or guarded
concerning the decree (Germany, OAS, EU, and USAID),other
donors appeared unconcerned or even positive (France and
Belgium). Although donors regretted the Bolivian Government
had not consulted with them prior to the decree's release,
they generally seemed inclined to accept the main principles
of the decree, the decree's asserted consistency with the
Paris Declaration, and hoped to help the GOB develop the
implementing regulations.

Decree Down With MCC
--------------


16. (SBU) Millennium Challenge Corporation (MCC) General
Coordinator Graciela Toro downplayed the decree's impact to
Bolivian's $657 million MCC proposal. She said stipulations
barring "political" aid (Article 9) were too vague to apply
to Bolivia's MCC proposal, at least until they are more
clearly defined. She also was not worried about prohibitions
on third party contracts (Article 7) because the decree only
mandates that appropriate government agencies do the work
they are capable of doing. According to her interpretation,
if the administrating agency does not have the capacity (as
would be the case with large-scale road building projects
contemplated by the MCC proposal) then the work can be
contracted out. The Bolivian Government's MCC Legal Advisor,
Carlos Hugo Pinilla, provided a similarly unrestrictive
interpretation of the decree to EmbOffs November 5 (reftel).
Although he was disappointed he was not consulted on the
decree's drafting, Pinilla added he did not see an MCC
conflict with Article 9's objection to "political or
ideological" aid and believed Article 7 would allow for MCC
outsourcing. He plans to participate in the Ministry of
Planning's "Coordination Tables" with donors to help shape
implementing regulations.

Comment
--------------


17. (C) The jury is still out on this decree. It is so vague
it will be all things to all people. Post is not clear on
the scope of the decree and the modalities of donor
assistance it applies to. Minister Loza seemed to suggest
that the great majority of the decree is focused on those
donors who pass cash to government ministries through a
formal government-to-government agreement. The use of that
donor cash by the Bolivian ministry appears to be tightly
regulated by the decree. Neither USAID nor NAS however, work
under this modality, hence we are asking ourselves whether
the decree will have much of an affect on U.S. government
funding, or, alternatively whether the Bolivian Government
will insist that the USG begin providing aid in this fashion.
Although implementing regulations should provide greatly
clarity about the decree's intent and impact, they may be
similarly vague, and how strictly these regulations are
applied may also be an open question.


18. (C) Comment continued: Although some officials may apply
the decree in good faith and with good intentions, the
decree, without further definition from implementing
regulations, could go beyond the intent or letter of the
Paris Declaration, which may be used as cover for some
potentially onerous and excessive government oversights.
Publicly we remain optimistic, give the Bolivian Government
the benefit of the doubt on interpretation, and avoid
provoking the drafting of onerous implementing regulations.
The Ambassador said October 29, "Let us hope that it (the
decree) does nothing to damage our aid, I don't think this is
the government's intention." However, while we hope for the
best, we plan for the worst. We continue to work with our
Bolivian counterparts to clarify new requirements and
maintain our development impact. As the Embassy sections
share information and work on a common approach forward, we
are considering several proactive next steps, including a
letter of interpretation to the GOB explaining our
understanding of the decree. This may provoke a reactionary
response from a government that clearly wants to emphasize it
is in the driver's seat, but the alternative is waiting for
the government to fill in the blanks. That could be a very
long wait, considering the decrees vagaries may be
intentional and designed to allow for double standards: EU
aid OK, U.S. aid "political." Post will consult with the
Department before proceeding.


19. (C) Comment continued. It is one thing to publish
decrees and hold a press conference, quite another to
organize and execute these new, vaguely defined
responsibilities to monitor and evaluate development
projects. The government assures guidance and regulations
are coming to fill in vast expanses of unanswered questions.
We have heard this before with new visa requirements for
American Citizens. The government does not seem to have the
manpower, technical resources, or a coherent plan to achieve
either initiative within the time allotted. An NGO that
works with PAS recently finished the process to register with
the Bolivian Government; it took almost a year. Unlike the
visa case, however, the decree will impact a wide variety of
donor countries, NGOs, aid contractors, and the government
itself. In both cases, we see confusion and postponements
in the short term, as capacity clashes with intent. End
Comment.

Selected Articles of Decree 29308
--------------


20. (U) ARTICLE 2.- (SCOPE OF APPLICATION)
--------------

I. All public entities included in Articles 3 and 4 of Law
No.1178 of July 20, 1990, on Governmental Management and
Control are included in the scope of application of this
Supreme Decree and are obligated to comply with its
provisions.

II. The activities of the multilateral financial
organizations, cooperation agencies, governments, and
national or international non-governmental organizations
(NGOs) that provide grants to the private sector of the
Republic of Bolivia are included in the scope of application
of this Supreme Decree.


ARTICLE 4.- (MODES OF DONATION)
--------------
The donations can be made by means of the following modes:

a) Official donation. Is provided by multilateral financial
organizations, cooperation agencies, governments or
countries, national or international non-governmental
organizations by means of an Agreement or Convenio signed
with the Bolivian State;

b) Direct donation. Is provided in direct manner to the
Bolivian State or to one of its public entities, without a
signed Agreement or Convenio signed with the Bolivian State;
and

c) Non-official or unilateral donation. Is the contribution
not acknowledged as cooperation to the Republic of Bolivia,
which is directly transferred by the donor to private
entities or organizations.


ARTICLE 7.- (SERVICE OUTSOURCING)
--------------

I. The public entities that manage donation resources for the
implementation of programs and projects are banned from
hiring third parties for their administration; in case they
do not have their own institutional capability they will be
able to sign inter-institutional agreements with national
public entities for that purpose.

II. The management of donated relief resources received by
the country for emergencies and/or disasters is exempted from
this requirement. In such cases, the National Council for
Risk Reduction and Disaster Management (CONARADE) will be
able to authorize the modality to be used for the management
of these resources.


ARTICLE 9.- (PROHIBITION OF CONDITIONS.)
--------------
No cash or in-kind donations that imply political or
ideological conditions will be accepted.


ARTICLE 17.- (ADMINISTRATION OF MONETIZED DONATIONS.)
-------------- --------------

I. In agreements that establish in-kind donations, to be
monetized or not, the Bolivian authorities will not accept
conditions that undermine the national sovereignty.

II. The financial resources derived from the monetization of
in-kind donations will be exclusively managed by the
implementing or beneficiary public entities or by the ones
established by legal norms, without interference from the
donors.


ARTICLE 20.- (INCOMPATIBILITIES)
--------------

I. The Ministers and Vice Ministers are prohibited from
serving in cooperation agencies, multilateral organizations,
foreign governments, and non-governmental organizations for
up to two (2) years after ceasing their public service,
whether as direct employees or consultants.

II. Also, the public officers in entities in charge of
managing and implementing programs and projects financed with
foreign donations are prohibited from serving in those
cooperation agencies, multilateral organizations, foreign
governments, and non-governmental organizations with which
they had relationship during the administration and/or
implementation of the aforementioned projects for up to two
(2) years after ceasing their public service, whether as
direct employees or consultants.

III. The Ministry of Development Planning shall include a
clause expressing this incompatibility in all Financing
Agreements to be signed.

IV. The authorities that are appointed by a Supreme
Resolution as representatives to multilateral organizations
shall be exempted from this provision.


V. The National government will be able to object to the
hiring of Bolivian or foreign officers by the cooperation
agencies or multilateral organizations to serve in executive
or management positions in the resident offices of the
international cooperation within the Bolivian territory.

VI. The former public servants who, while exercising their
public functions, participated in the management or
implementation of donation resources cannot participate
directly or indirectly in the processes of procurement of
goods, services, or personnel in those programs and projects
for up to two years upon the cessation of their functions.
GOLDBERG