Identifier
Created
Classification
Origin
07LAPAZ3259
2007-12-14 18:41:00
CONFIDENTIAL
Embassy La Paz
Cable title:  

DIESEL SHORTAGES: EXCUSES, BLAME, AND INFLATION

Tags:  ECON PGOV PREL FAS IICA AGR FAO IFAD BL 
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C O N F I D E N T I A L SECTION 01 OF 02 LA PAZ 003259 

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/12/2017
TAGS: ECON PGOV PREL FAS IICA AGR FAO IFAD BL
SUBJECT: DIESEL SHORTAGES: EXCUSES, BLAME, AND INFLATION
WORRIES

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

-------
Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 LA PAZ 003259

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/12/2017
TAGS: ECON PGOV PREL FAS IICA AGR FAO IFAD BL
SUBJECT: DIESEL SHORTAGES: EXCUSES, BLAME, AND INFLATION
WORRIES

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

--------------
Summary
--------------


1. (SBU) Over the past four months, Bolivia has suffered
repeated shortages of diesel, especially in the eastern,
agricultural powerhouse of Santa Cruz where the concurrent
winter harvest and summer planting seasons are hampered by
fuel shortages. Logistical problems appear to be principally
to blame, but accusations of mismanagement, incompetence,
speculation, and contraband abound. The consequences are
beginning to be felt as less grains are harvested, reduced
plantings threaten food security, and increasing food prices
pressure an already rising inflation rate. End Summary.

--------------
Where's My Diesel
--------------


2. (C) Bolivia produces 12,000 barrels of diesel a day, but
imports around 6,000 barrels a day or 180,000 barrels a
month. These imports come principally from Venezuela and 70%
are brought in via the Paraguay-Parana river (the remainder
is trucked up from the Peruvian port of Ilo). Many of the
sporadic shortages over the past four months have resulted
from low river levels that do not allow for the passage of
fuel barges. Adding to this problem, is a shortage of trucks
to bring the stranded diesel overland via Paraguay or
Argentina. The President of the Association of Hydrocarbon
Suppliers (Asosur) in La Paz, Pierre Chain, said in early
November that the shortages were mostly the results of these
logistical problems and would therefore eventually sort
themselves out, yet the problems persist.


3. (C) Others claim that nationalization is to blame and
the Bolivian state hydrocarbon company (YPFB) has neither the
manpower nor the brainpower to effectively manage all aspects

of the hydrocarbon sector. For example, Chain said that
during one of the shortages YPFB wanted one million barrels
of diesel delivered and thus called for one million barrels
to be put into the pipeline, not realizing that 200,000 would
stay in the line. In addition to technical failures, others
criticize YPFB lack of foresight. Martha Parada, the general
manager of Asosur in Santa Cruz says that the biggest problem
isn't just logistical, but rather a lack of planning by YPFB.
She claims that "strategic planning of importation simply
doesn't exist."


4. (SBU) For its part, the government, while acknowledging
logistical issues, places most of the blame on contraband.
At the end of October, the Minister of Hydrocarbons, Carlos
Villegas, claimed that contraband of diesel had
"significantly increased." He ordered military police to be
posted at all gas stations and increased vigilance by border
control agents. The problem has yet to be solved. Indeed,
as long as the price of diesel remains half of what it is in
the neighboring countries of Brazil and Chile, contraband
will continue to leak across the borders. Ironically, one of
groups most critical of the central government also stands
the most to gain from diesel subsidies; it is estimated that
diesel subsidies provide an annual savings of some $70
million for Santa Cruz farmers. (Note: The GOB estimates
that subsidies on diesel and liquefied petroleum gas (LPG)
will total around $180 million by the end of the year, $20
million more than was projected at the beginning of the year.
End note.)

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The Impact: Food Security and Inflation
--------------


LA PAZ 00003259 002 OF 002



5. (SBU) The Agricultural Board for Eastern Bolivia (CAO)
warns that diesel shortages are hampering the current winter
harvest and summer planting seasons. CAO's President
Mauricio Roca estimates that 500,000 hectares (out of a total
1.2 million hectares that were projected to be planted) are
at risk. It is not only a matter of hectarage planted;
timing in agriculture is also important. Roca points out
that the optimal time for planting beans and corn has already
passed, yet farmers have been forced to postpone planting
until now. As a result, he predicts diminished yields come
harvest and a possible food crisis next year. Echoing these
fears, The National Federation of Rice Cooperatives (Fenca)
claims that the government delivered diesel too late in the
year and some 35,000 hectares of rice are in danger of being
lost.


6. (SBU) It is not only disruptions in planting that has
farmers and bureaucrats worried, floods and diesel shortages
have also led to the loss of an estimated 100,000 hectares
($60 million) of grains. Between squeezed domestic supplies
and high international prices, the GOB is clearly worried
about the inflationary pressures on the Bolivian food basket.
A recent study by the survey company Mori, estimated that
between July and November, the cost of lunch in the four
largest cities in Bolivia had risen by 47% (the overall
inflation rate reached 11.02% through November).


7. (SBU) The government has responded to rising food prices
with Band-Aids and blame. Currently, the GOB is importing
1,000 tons of rice from Argentina which it plans to sell at
below market prices. Past actions have included taking over
transportation and distribution of meat from the isolated
northeastern state of Beni and having army units bake bread.
More ominous in the current political context are the
consistent claims that large producers are to blame for high
prices. Recently, the Minister of Rural Development Susana
Rivero assured that there are no production shortages, but
rather just speculation. And Evo consistently blames the
agricultural "oligarchy" for trying to undercut his
government by withholding abundant supply to increase
inflation and topple his government.


8. (SBU) Recently, a government produced television spot
supporting the campaign "Bolivia is Changing, Evo Delivers"
portrays a campesino women talking to a cab driver about high
food prices. The taxi driver patiently explains that it is
the fault of the greedy, large farmers by name who withhold
supplies. The woman at first questions why she has never
heard about such practices, but the cabby explains that those
same oligarchs also control the media. "They are without
shame," the exasperated lady gasps as the theme slogan cuts
short the scene.

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


9. (C) The manner in which the Morales Administration has
addressed the persistent diesel shortages again demonstrates
both its lack of technical know-how and determination to
blame others for its own failings. Meanwhile, inflation
looms as the specter that could undercut Evo's popularity
with his base supporters, push the administration toward more
radical actions/expropriations, or both. Political tensions
are running high throughout the country, what remains to be
seen is to what extend a worsening economic situation for the
poorest Bolivians will affect Evo's ability to push through
his radical, undemocratic, and anti-free market agenda.

GOLDBERG