EXPORT BAN STRETCHES TO SIX DAYS

C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 000670 SIPDIS SIPDIS E.O. 12958: DECL: 03/27/2018 TAGS: ECON PGOV PREL FAS AGR FAO IFAD BL SUBJECT: EXPORT BAN STRETCHES TO SIX DAYS REF: A. LA PAZ 589 ¶B. LA PAZ 638 ¶C. LA PAZ 111 Classified By: EcoPol Chief Mike Hammer for reasons 1.4 (b) and (d). -------------- Summary -------------- ¶1. (C) The devastating ban on Bolivian cooking oil exports has now been in effect for six days. The Morales Administration, according to the Vice President in a meeting with the Ambassador March 26 (Septel),is determined to guarantee the supply of cooking oil at affordable prices. They are prepared to take whatever actions may be required, including military confiscation of trucks that violate the export ban, subsidized imports, and even "buying-out" private companies. Social movements linked to the Movement Toward Socialism (MAS) government are calling for the nationalization of the major agricultural firms involved in soy processing, which include Archer Daniels Midland (ADM) company. Ironically, so far the ban has worked to unify the different social elements involved in the soy production chain and give further impetus to the Santa Cruz autonomous movement. The ban is contributing to a growing feeling of economic and social upheaval, and related transportation strikes are likely to paralyze the country unless the ban is lifted in the coming days. -------------- -------------- Export Bans Raise Tensions, Potential for Economic Chaos -------------- -------------- ¶2. (SBU) On March 25, all of the actors involved in the chain of production for cooking oils met in Santa Cruz to decide what actions they could take to have the export bans on agricultural products lifted (Note: The ban on cooking oil exports went into affect on March 20, but a ban on cattle, beef, chicken, wheat, corn, rice, and wheat flour has been in effect since February Ref A and B). The most immediate result of the meeting is the call for a blockade of the border custom houses by the transportation sector. These actions will be followed up by a more general blockages of major highways on March 27. However, truckers in La Paz decided to postpone any actions. This decision will allow the major border crossings leading to the Pacific ports in Chile and Peru to remain open. ¶3. (C) Despite no direct impacts of the cooking oil ban in La Paz yet, there is a sense that the economic situation is getting out of control. Rising inflation is bringing out all manner of protest. Contributing to problems on the roads, a public transport strike is scheduled for April first unless the government agrees to raise taxi and bus rates. Meanwhile, as headlines such as, "currently approximately 250 butchers are marching with dynamite toward the downtown area" cross our desks, more chaotic times appear to be quickly approaching. -------------- Strengthening Regional Autonomy Resolve -------------- ¶4. (C) Ironically, the cooking oil ban has further unified many disparate economic actors in Santa Cruz to the necessity of greater autonomy. Moreover, the ban has put additional pressure on the departmental government to take autonomous actions even before the May 4 vote. Following Tuesday's meeting, regional leaders called upon Prefect Ruben Costas to somehow legalize through regional actions the export of all agricultural products. While the prefect is reluctant to do anything that the Morales Administration can pounce upon as provocatively illegal, pressure to act independently is LA PAZ 00000670 002 OF 003 growing. ¶5. (C) One example of the propensity to handle economic affairs locally came after Minister of Agriculture Susana Rivero refuted the Department's ability to export agricultural goods independent of the national government. Rivero said that without authorization from the Plant and Animal Food Safety Agency (SENASAG),no agricultural products would be accepted in foreign markets. Right on cue, the Prefect of Santa Cruz announced that a parallel prefectual food safety service, whose creation was announced two months ago as a response to the growing politicization (and inaction) of SENASAG (Ref C),would begin to operate in Santa Cruz. -------------- -------------- Government Justifications and Calls for Nationalization -------------- -------------- ¶6. (SBU) The Morales Administration is trying to frame the export ban as a move to defend poor Bolivians against the exploitative practices of Santa Cruz oligarchs. At first, Minister Rivero claimed that these oligarchs had already exported as much oil out of the country this year as was produced in all of 2007 (Ref A). These claims were quickly shown to be false. Now she is claiming that cooking oil sold in Bolivia is the most expensive in the region and the oligarchs are willing to export at cheaper prices than they sell in the domestic market. According to data from the Association of Seed Oil and Wheat Producers (ANAPO) this claim is also clearly false (Note: Only Venezuela has lower consumer prices for refined soy cooking oil in all of South America. Venezuela is also the largest importer of Bolivian cooking oils, importing almost $200 million last year. End Note.) ¶7. (C) The facts are clearly unimportant to the Morales Administration, what is important is that the export bans be seen as a defense of lower prices and the Bolivian people. Propoganda to this effect is frequent on both the radio and television. It is unclear who the majority of Bolivians blame for rising food prices, but judging from television interviews people in La Paz and El Alto do not trust Santa Cruz farmers and seem willing to place some of the blame at their doorstep. ¶8. (C) Several social movements closely related to the MAS party are calling for the nationalization of cooking oil companies as a punishment for having "provoked hunger among the Bolivian people." This message was likely dictated to them from within Evo's inner circle and represents another threat against the department and it's leading economic actors. -------------- American Company ADM Suffers with the Ban -------------- ¶9. (C) Archer Daniel Midland (ADM) represents the largest American investment in Bolivia outside of the hydrocarbons and mining sectors. Their total investment in Bolivia stands at over $100 million. Carlos Pinto, Chief Financial Officer at ADM, estimates that the company will be forced to shut down operations in about 20 days if the cooking oil ban stays in place. This is the amount of time it will take to fill their warehouses to capacity. At that time, ADM may be forced to default on international contracts. Moreover, Pinto explained that the decree has other far reaching negative impacts. For example, Bolivia's risk rating has already been raised as a result of the ban. This affects the cost of new capital for both the government and all private companies (not just those in agriculture). Meanwhile, barges and trucks sit waiting for cargo (Ref A). LA PAZ 00000670 003 OF 003 GOLDBERG