EVO'S MAY DAY DECREES AND REMARKS

C O N F I D E N T I A L LA PAZ 001018 SIPDIS E.O. 12958: DECL: 05/03/2018 TAGS: PGOV PREL PTER ECON EINV EPET IT BL SUBJECT: EVO'S MAY DAY DECREES AND REMARKS Classified By: EcoPol Chief Mike Hammer for reasons 1.4 (b) and (d) ¶1. (U) Summary: Speaking to a relatively small crowd of a few thousand on May 1, Bolivian President Evo Morales announced the state would "take immediate control" of Italian-owned telecommunications company Entel and three foreign-owned hydrocarbon companies (septel). Morales tried to soften the blow to private businesses by assuring them he is open to working with them, so long as they act "as partners, not owners." Business and political leaders have been slow to react to the "nationalizations." Although he commented that the State Department Country Reports on Terrorism "didn't matter" to him, he criticized the U.S. authority to opine on terrorism given U.S. troops in Iraq (misidentified as Iran) and then equated capitalism with economic terrorism. Morales also focused on themes of anti-corruption, the difficulty of undoing "the last 500 years," and labor rights. End Summary. Entel Nationalized as a "Basic Service" -------------- ¶2. (U) Morales decreed (DS 29544) the nationalization of leading Bolivian telecommunications company Entel, which is owned by Telecom Italia. Morales characterized telecommunication as a "basic service" that required government control. He likened Entel to a natural resources such as water or energy that "should not have owners," but instead should belong "to the people." Morales has promised to keep existing staff, but warned Entel employees not to fight the move. The government posted police at Entel offices (mimicking the May 1, 2006 troop deployment to gas fields that accompanied the hydrocarbons nationalization announcement),had Bolivian flags raised near entrances or draped over Entel signs, and, in some cases, mobilized supporters to hold placards supporting the "return of Entel to the hands of the people." Entel was privatized in 1995-1996. ¶3. (U) The government has been vague about exactly how the "nationalization" will move forward, which it plans to finalize in the next 180 days. Minister of the Presidency (Chief of Staff) Juan Ramon Quintana announced May 2 the government has arrived at a "reasonable price" for Entel, which it will announce in 60 days. Quintana said the reorganization will result in 98 percent stock for the government, with two percent reserved for employees. The Superintendent of Telecommunications has assured Entel's 1.8 million subscribers uninterrupted service. MASsive Potential for Intelligence/Media Abuse -------------- --- ¶4. (C) With the takeover of Entel, there is concern about the government's acquired ability to control both television and cellular phone transmissions. Beyond the ability to cut off broadcasts at will, the threat of doing so could also push media to self-censor critical coverage of the government. Investors: Please Don't Go -------------- ¶5. (SBU) Morales also declared he was "taking control" of three hydrocarbon companies (Chaco, Transredes, and CLHB; septel),ending two years of negotiations with the companies to gain a majority share of company stocks (dubbed re-nationalization by the government). Morales tempered his nationalization mania with a "guarantee" to continue exploring and exploiting hydrocarbon fuels with investors that "respect Bolivian norms and invest as partners." Morales said Bolivia needs "true investment" and "partners, not owners." Opposition/Biz Reaction Still Developing -------------- ¶6. (C) The decrees appear to have been taken the opposition and Entel by surprise. Opposition leaders are criticizing the "so-called nationalizations" and opposition congressmen stress that the deals require their approval. Entel contacts tell us they were surprised by the decree and shocked by the use of police to surround their facilities in an over-the-top show of force. Business contacts speculate that ultimately the decrees may be more political pageantry and an upping of the ante than the actual end state of negotiations. Terrorism Report "Does Not Matter to Me" -------------- ¶7. (SBU) Morales briefly mentioned the April 30 State Department Country Reports on Terrorism, saying it was not the first time the United States "has called us terrorists." Morales said in 2002, he was characterized as "Bin Laden" and his supporters in the coca unions as "Andean Taliban" (remarks apparently made by then U.S. Ambassador Manuel Rocha). It was not clear who or what was the source of the alleged accusation. "With all due respect," Morales said the United States had no credibility to opine on terrorism in foreign countries due to its "troops in Iran" (an apparent mix-up with Iraq which was repeated by the official government news agency ABI) and the "economic terrorism" inflicted by U.S.-sponsored "savage capitalism." The report "does not matter to me. Let them continue accusing." (Note: Government Minister Alfredo Rada also criticized the report as not serious, inconsistent, and a demonstration that the U.S. is partial to opposition prefects. Rada also repeated the accusation that Ambassador Goldberg is behind a conspiracy against the government. End Note.) Other Themes: Overcoming 500 years -------------- ¶8. (U) Morales stressed combating government corruption throughout his speech. "That money does not belong to government officials, it belongs to the people." He often tried to manage expectations, highlighting government achievements and explaining it was impossible to solve in the two years of his administration problems that have developed over 500 years. Morales also decreed changes to labor dispute resolution and labor union election laws. Comment -------------- ¶9. (C) May 1 is becoming synonymous with unilateral government takeovers of privatized businesses. It could have been worse (for us). The decrees do not impact U.S. mining interests and U.S. firms have little stake in the take-over of the three nationalized hydrocarbon concerns. A feared announcement restricting or banning USAID's Democracy Program did not materialize. The Europeans bear the brunt of the "nationalizations." The takeovers provide Morales some ostensibly concrete take-aways for his base to distract from the May 4 Santa Cruz autonomy referendum and high inflation. On corruption, it appeared Morales was more concerned with spreading blame for unfulfilled promises than advancing any tangible measures to combat graft. His message: others are wasting the increased bounty I have brought Bolivians. Although Morales did comment on Bolivia's entry in the terrorism report, he was more dismissive than inflammatory. End Comment. GOLDBERG