ECONOMIC CABINET CHANGE: STATE ECONOMY COMING

C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 001935 SIPDIS E.O. 12958: DECL: 09/09/2018 TAGS: ECON PGOV PREL ENRG EPET EINV BL PINR ASEC PTER SUBJECT: ECONOMIC CABINET CHANGE: STATE ECONOMY COMING Classified By: EcoPol Chief Mike Hammer for reasons 1.4 (b) and (d). - - - - Summary - - - - ¶1. (C) On September 8, Evo Morales again shuffled his cabinet. Gone are the more pragmatic ministers Graciela Toro and Javier Hurtado, as Movement Toward Socialism (MAS) politicians assume the reins at the Ministries of Hydrocarbons and Rural Development. Carlos Villegas and Susana Rivero, the two former ministers in those spots, shift over to take on new positions as Ministers of Development Planning and Production respectively. The changes are seen as prioritizing politics over technical expertise, strengthening the government's push towards a statist economy, and signaling the administration's priority to push through its proposed constitution. Moreover, by placing two Santa Cruz natives in the cabinet, Morales both avoids infighting within his highland base and gains another tool to try to divide and conquer the eastern opposition. End summary. - - - - - - The Changes - - - - - - ¶2. (SBU) President Morales made five changes to his cabinet on September 8. Minister of Hydrocarbons Carlos Villegas is leaving that post and replacing Graciela Toro as Minister of Development Planning, a position he held when Morales initially assumed the presidency. As Minister of Hydrocarbons, Villegas spearheaded the drive to deepen the nationalizations and had a very confrontational relationship with the private sector. ¶3. (C) The Minister of Rural Development, Susana Rivero has now been moved to Production and Microenterprise, where she will replace Javier Hurtado. Hurtado suffered a stroke in July and was unable to continue as minister. Rivero is perhaps the most controversial of all of the Morales cabinet. She has survived repeated calls for her resignation by MAS-aligned social groups and public criticism by Morales himself. She has close relations with the Minister of the Presidency Quintana and has proven one of the most obstructionist ministers regarding U.S. cooperation. She is a lawyer by training from the department (state) of Beni. She has worked as a journalist and as an advisor to the Center of Juridical Studies and Social Investigations (CEJIS),a MAS-aligned NGO based in Santa Cruz. Three ministers and one vice-minister have now formally worked at �A;CEJIS and the NGO is seen has having a strong influence on indigenous and land reform issues. ¶4. (SBU) Carlos Romero will now be the Minister of Rural Development. He is the former national director of CEJIS and played a prominent role in shaping the current land law. He is also the former director of the Local University Federation and was a MAS assembly man from 2006 to 2007. ¶5. (C) Saul Avalos takes over as the Minister of Hydrocarbons. Like Romero, Avalos is from Santa Cruz and owns a private security firm there. He is an economist by training, but beyond being named as the interim director of the Bolivian Hydrocarbons Logistical Company (CLHB) after it was confiscated by the state in May, Avalos has no experience in the sector. He was formally a politician with the Revolutionary Nationalist Movement (MNR),but switched to the MAS as Morales gained influence and become head of the party in Santa Cruz. He was also elected to the Constitutional Assembly, and was part of the committee on autonomies. A colleague on that committee and former prefect of Santa Cruz, Ruben Dario told us that while Avaro has little technical experience he is a canny politician who is a hard-core, confrontational MAS ideologue in private, but respectful and LA PAZ 00001935 002 OF 003 humble in front of the cameras. ¶6. (SBU) The final new member of the cabinet is Ramiro Tapia, who takes over from Walter Selum as Minister of Health and Sports. He is a pediatrician and is the vice-deacon at the medical school at the University of San Andres (UMSA). - - - - - - - - - - - - - - - - - - - To Consolidate A New Economic Model - - - - - - - - - - - - - - - - - - - ¶7. (SBU) According to Evo, this newest reshuffle is in order to consolidate a new economic model for the nation. He reiterated that the neoliberal model had failed and capital would no longer be concentrated in the hands of transnational corporations and the elite. He stated that the earnings now flowing to the state would not only be destined for "annual operating plans" but would be invested in budgets that would allow for development, improvements in the industrial sector, and food security. He pointed out that when he took power the state only controlled 14 percent of the economy, now it controls 23 percent. ¶8. (SBU) The way the new ministers will help realize this vision is through politics and getting the new constitution passed. The new Minister of Rural Development acknowledged that the change of ministers provided "more political support for the cabinet, because even though we will have technical work, we are coming into a highly charged political environment." He commented that his primary challenge will be to implement the constitutional process and keep it going. The Vice President of the MAS, Gerardo Garcia agreed, saying that the new ministers were people who had fought for the new constitution and now it is "yes or yes that it will be approved." - - - - - - - - - - - - - - - - - A Special Poison for Santa Cruz - - - - - - - - - - - - - - - - - ¶9. (C) The two new members of the cabinet in economic positions are both from Santa Cruz. As such, Morales avoided fights among his core supports in the altiplano as to who should be awarded the powerful positions. Additionally, it increased the administration's ability to put pressure on the leading opposition state. According to Dario, the former prefect of Santa Cruz, the appointment of Romero is particularly troubling. With his experience and political contacts, he can bring much more pressure to bare on the agricultural sector than Rivero was ever capable of doing. Indeed, in Morales' speech he paid special attention to food security and the need to break up the "monopoly of food production" in the hands of businessman who "raise prices and engage in speculation in order to meet their objectives." Large agricultural businesses now are faced with a radical proponent of land reform in charge of Rural Development and, as the general manager of the Chamber of Santa Cruz Exporters pointed out, a leading proponent of export prohibitions as the head of Production and Microenterprises. - - - - - - - - - - - - - - - - - - - - Hydrocarbons: Not Necessarily All Bad - - - - - - - - - - - - - - - - - - - - ¶10. (C) While the new minister of hydrocarbons lacks any real technical expertise in the sector, his appointment may signal an opportunity for companies to work with both the state hydrocarbon company (YPFB) and the ministry to move the sector forward. By all accounts, Minister Villegas and the president of YPFB could not work together and, as a result, YPFB and the ministry did not coordinate their actions. Minister Avalos may change that. According to the general manager of the Bolivian Chamber of Hydrocarbons (CBH) Raul Kieffer, Avalos is "Ramirez's man." While no one in the sector is willing to celebrate the appointment of a MAS hard-liner, they are hopeful that at least a coherent policy LA PAZ 00001935 003 OF 003 and game plan may be followed by the two most important government players in the sector. - - - - Comment - - - - ¶11. (C) There is speculation that the sacking of Graciela Toro as the Minister of Development Planning came as a result of her announcement last week that the dollar would continue to depreciate against the local currency. She was quickly denounced as having overstepped her mandate and the Central Bank President said that no such "plan" could be foreseen. That said, the reshuffling clearly emphasizes the political over the pragmatic, and the loss of Toro (and Hurtado) is a blow to elements of the private sector who are trying to work with this government. Moreover, leading up to the announcements there was widespread speculation that the hard line Minister of Government Rada was headed out. These rumors proved false and Morales again resisted the frequent calls from MAS-aligned social groups to oust ministers Quintana and Rivero. The hard line political core of the cabinet remains intact. It is noteworthy that despite Morales' self-stamped indigenous label, none of the new appointments were indigenous, leaving still only two such appointment in his 17 minister cabinet. GOLDBERG