Identifier
Created
Classification
Origin
08LAPAZ1264
2008-06-05 15:44:00
CONFIDENTIAL
Embassy La Paz
Cable title:  

BOLIVIA & ATP-DEA: EXPORTING FRUSTRATION

Tags:  ECON KTEX BL PINV PGOV PREL 
pdf how-to read a cable
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C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 001264 

SIPDIS

PLEASE PASS TO USTR; TREASURY

E.O. 12958: DECL: 03/31/2018
TAGS: ECON KTEX BL PINV PGOV PREL
SUBJECT: BOLIVIA & ATP-DEA: EXPORTING FRUSTRATION

REF: A. LA PAZ 158

B. LA PAZ 522

C. LA PAZ 1180

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

C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 001264

SIPDIS

PLEASE PASS TO USTR; TREASURY

E.O. 12958: DECL: 03/31/2018
TAGS: ECON KTEX BL PINV PGOV PREL
SUBJECT: BOLIVIA & ATP-DEA: EXPORTING FRUSTRATION

REF: A. LA PAZ 158

B. LA PAZ 522

C. LA PAZ 1180

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


1. (C) SUMMARY. The Andean Trade Preferences and Drug
Eradication Act (ATP-DEA) was extended in February of 2008
for another ten months for Bolivia, Peru, Ecuador and
Colombia. Although the preferences are crucial to the
textiles industry, the private sector is growing tired of the
exhausting lobbying efforts for even short extensions. As
business leaders press for the Bolivian government to
negotiate a long-term commercial agreement (preferably a Free
Trade Agreement (FTA)) the government promises to expand
other export markets in an effort to pull away from the
United States. The statistics, however, prove that Evo's
recipe for trade policy is adding to further economic
turmoil. END SUMMARY.


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ATP-DEA: Short Term Solution to a Long Term Problem
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2. (SBU) After the Senate approved the extension of ATP-DEA
until December 2008, the reaction in Bolivia was mixed. The
immediate relief of receiving the trade preferences was
evident, as was the immediate realization that they would
only last another ten months.


3. (C) ATP-DEA predominately affects the textiles industry,
and Post's sources have long complained that the continued
short-term extensions help their industry very little.
Bolivian textiles heavy-weight Ametex told EmbOff that
although ATP-DEA is crucial for their production, they
believe a long-term agreement is most practical. Marco de la
Rocha, General Manager at Ametex, says that not only do
short-term extensions cut into profits, they hurt the
development of the textiles industry as a whole. He says that
developing "alternative markets" is extremely difficult and
even more so with a ten-month ATP-DEA expiration date.


4. (C) Ametex is not the only company feeling the pressure.
Alpaca business owner Gerald Fisher told EmbOff that most of
his U.S. clients place their orders six to eight months out.

This means that Fisher is selling goods that may or may not
include a 19% tariff when delivery arrives. The uncertainty
has caused many of his U.S.-based clients to place orders
with Peruvian companies. "They have told me directly that
Peru is a less volatile place--both politically and
commercially speaking," says Fisher.


5. (C) "We could have been Peru" is a dominant theme in the
speeches of economists, politicians and business leaders
alike. With the prospect of a Free Trade Agreement (FTA)
being implemented in Peru, many industries are criticizing
the Government of Bolivia for losing the opportunity for a
long-term agreement with the United States. In a speech given
to local business leaders, former government economist Juan
Antonio Morales emphasized that an FTA with the U.S. would be
a good start to stabilizing the Bolivian economy, currently
plagued by low foreign direct investment and high inflation
rates.

- - - - - - - - - - - - - -
New Minister, Same Morales
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LA PAZ 00001264 002 OF 003



6. (C) Despite the private sector pleas for an FTA, the
Bolivian government expresses little (or no) enthusiasm for a
viable trade agreement with the U.S. (ref A,B.) In the
beginning of February, only one week after DCM met with her,
Minister of Production and Micro-Enterprise Celia Sosa was
replaced by Javier Hurtado. Hurtado, already a contact of the
Embassy through the Millennium Challenge Account, at first
seemed more open to talks with the U.S. However, after
further discussion, it became clear that the current
difficult state of U.S.-Bolivian bilateral relations allows
little space for commercial dialogue. Post has continuously
been promised a concrete "long term trade agreement" proposal
as a follow-up to Vice President Garcia Linera's 2006 broadly
worded "eliminate poverty" paper. In a June 3 meeting, Vice
Minister of Trade and Exports Huascar Ajata told EconOff that
they have revised the original long term trade proposal and
hope to present it to Post in the coming weeks. He also
mentioned an upcoming public push for ATP-DEA extension.

- - - - - - - - - - - - - - - - - - - - -
Textiles: Hanging By a Thread Without U.S.
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7. (C) One focus of Bolivian trade talk has been the
expansion of export markets. Evo and his government continue
to claim that while ATP-DEA is important, Bolivia will keep
its textiles numbers up through other South American nations,
the European Union (EU) and Japan, all key trading partners.
However, Post's analysis of the export data indicates that
all of the markets combined does not equal the U.S. buying
power.


8. (U) THE UNITED STATES. In 2007, the U.S. imported 12.6
million kilograms of textile goods for a total price of $19.1
million dollars. The total for all other Bolivian textile
markets was $22 million in 2007. It should be noted that both
volume and value of U.S. textile imports from Bolivia have
decreased over the past four years, with a nearly 40% drop in
value between 2006 and 2007 alone. The numbers suggest that
while there is a significant market for textiles in the
United States, buyers are unlikely to continue to import from
Bolivia if they must pay a 19% tariff.


9. (U) KEY SOUTH AMERICAN PLAYERS. Brazil is a key importer
of Bolivian textiles, though the numbers are significantly
lower than the U.S. market. Growth rates for Brazil have
averaged around 50% but its volume in 2007 was still only
660,000 kilograms for a value of $4 million dollars. Another
major import market for Bolivia is Chile. Its total imported
good volume was only 880,000 kilograms with a value of $3.4
million dollars. The average 10% growth rate for Chile over
the past four years suggest only a slight increase in demand
for textiles. South America as a whole only offered up $16
million in imports, but it is a ten million dollar jump in
only two years. (NOTE: Much of this can be contributed to
inflated figures from Venezuela, see next para. END NOTE.)


10. (C) THE PEOPLE'S TRADE AGREEMENT (ALBA.) Not
surprisingly, the textiles industry will not be saved by the
trade alliance between Venezuela, Cuba and Bolivia.
Venezuela's "miraculous" growth of over 6000% for 2007 was
significantly inflated by a foreign exchange scheme and is
being investigated (ref C.) Cuba imports little to no textile
goods. The ALBA countries may help Bolivia in terms of
political alliances but it is not helping with trade.


11. (U) THE EUROPEAN UNION (EU.) The EU announced that they
intend to finalize a trade agreement with the Andean nations
by 2009. Major markets for Bolivian goods are the UK, Italy
and Germany, each importing over $1 million dollars of goods

LA PAZ 00001264 003 OF 003


in 2007. The combined total of Bolivian textile exports to
the EU, however was only $3.6 million, one-fifth of the value
of U.S. imports.


12. (C) ASIA. Japan has long been a trade partner for
Bolivia, importing a variety of textile goods. Its growth
patterns, however, show a slow down in imports. Contacts at
the Japanese embassy say that despite a March 2007 Evo visit
to Japan, the Japanese are shifting towards imports from
other Asian nations, particularly in textiles. South Korea
has increased its imports of Bolivian textiles, but only
reaching 15,000 kilograms for a value of $290,000 in 2007.
One player that has made a prominent jump is Hong Kong,
surpassing Japanese demand for Bolivian goods, but still only
barely breaking $1 million dollars in value over the past
three years combined.

- - - -
COMMENT
- - - -


13. (C) Although the government claims it wants a long-term
commercial agreement with the U.S., it will likely not expand
beyond ATP-DEA. Evo will continue to claim that his other
trade plans would offset a drop in trade with the U.S., but
the data clearly shows this is not the case, particularly in
textiles. Although no companies have moved to date, both the
Peruvian and Chilean governments have actively recruited
Bolivian textile company owners to set up shop in their
countries. Evo's policies, not taking into account business
interests, are taking a toll on both U.S. and other foreign
companies, leading to more frustration and less trade. END
COMMENT.
GOLDBERG