BOLIVIA FORECAST: LEADING UP TO MAY 4

C O N F I D E N T I A L LA PAZ 000693

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/28/2018
TAGS: ASEC PREL PGOV ECON EAID AGR BL
SUBJECT: BOLIVIA FORECAST: LEADING UP TO MAY 4

REF: LA PAZ 677

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

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


1. (C) Short of an outbreak of widespread chaos and
violence, the opposition-led department (state) of Santa Cruz
is on track to hold a referendum on its autonomy statute
despite President Evo Morales' attempts to stop or at least
postpone it. The Catholic Church and the international
community will likely fail to bring the opposition and
Morales' Movement Toward Socialism (MAS) to the negotiating
table prior to the May 4 referendum. Morales may offer some
last ditch enticements to delay the referendum, or at a
minimum to cast himself as a reasonable "peacemaker," but the
opposition can be expected to proceed undeterred. Faced with
the prospect that he cannot stop the referendum, Morales may
issue a series of new "nationalization" announcements on or
around May 1 to steal the political limelight. He might use
food security as a pretext for such a move, which would also
show action to reverse rising food costs, while
simultaneously reinforcing blame on opposition businessmen
for the inflation. It is also likely that Morales will step
up attacks against USG/USAID, with the possible closure of
one of USAID's programs, using an on-going bilateral
portfolio review to support its action. The USAID democracy
program is the most likely target.


2. (C) Recognizing he cannot block the referendum, Morales
will likely avoid direct government intervention, instead
continuing to play down the referendum's significance by
denouncing it as illegal and illegitimate. Nevertheless
there is a chance the he may resort to more drastic actions.
Rumors are circulating that Morales is contemplating
arresting Santa Cruz political leaders and that his
government may take over some Santa Cruz agro-businesses.
Both the national police and military are reluctant to
interfere. However, Bolivia is slipping further into
potential chaos with more strikes, blockades, and protest
marches. In such an environment the central government may
be able to convince security forces that they must establish
order as constitutionally required. Alternatively, it is
quite possible that, as in the past, Morales will send his
"social groups" as shock troops to disrupt the referendum.
This is the first of a two-part cable series looking at
Bolivia's future pre- and post- May 4. This cable examines
scenarios up to the May 4 referendum. End Summary.

--------------
May 4: Santa Cruz Says Full Speed Ahead
--------------


3. (C) The Santa Cruz political leadership has made it
clear that there is no turning back on their May 4 referendum
to approve their department's (state) autonomy statutes.
Opposition Senate President Oscar Ortiz (Santa Cruz, PODEMOS)
tells us the referenda are inevitable and Congress no longer
has any power to hold back prefecture governments from moving
forward. While the other lowland departments will also hold
referenda on their own autonomy statutes (Beni and Pando on
June 1, Tarija on June 22),Santa Cruz' vote is the most
important because it is first and Santa Cruz holds the
undisputed leadership role amongst the opposition
departments.

--------------
Church Mediated Talks: A Road To Nowhere
--------------


4. (C) Church mediated talks will likely not proceed, and
if they do move forward will almost certainly fail before May

4. Neither the MAS nor opposition are interested in real
negotiations. As of March 25, Catholic Church officials
stated that neither side had taken any steps to set an
agenda, date, or place for talks )- indicating there is no
will to negotiate. Although, Vice President Alvaro Garcia
Linera in a March 26 meeting with the Ambassador indicated
that the MAS had sent the Church a proposed agenda.

--------------
International Community: Interest Waning
--------------


5. (C) With the Catholic Church tapped as the "facilitator
du jour" both the European Union (EU) and the Organization of
American States (OAS) have put on hold their earlier offers
to serve as mediators. Regional neighbors such as Brazil,
Argentina and Peru )- who were once seen as potential
facilitators -- are also waiting for a call to action. Most
in the international community now see themselves being
pulled into talks only after both sides accept the need for
it, perhaps after a more direct confrontation. In his March
26 meeting with the Ambassador, the Vice President did bring
up the possibility of having a "Friends Group" including
Brazil, Argentina, Peru, and the United States act as
facilitators. However the Vice President said thinking on
such an effort was still evolving and that the timing was not
yet right. As May 4 approaches, it is likely that the
government will want international involvement if for nothing
else than to portray itself as the "reasonable" party.

--------------
Desperate Times Call for Desperate Measures
--------------


6. (C) The Bolivian government is likely to make
increasingly desperate offers to tempt Santa Cruz to postpone
its May 4 referendum. Vice President Alvaro Garcia Linera
and other MAS leaders have occasionally stated that
everything is "on-the-table" for discussion with regards to
revising the MAS constitution. Such an offer should, in
theory, be welcomed by an opposition that views the MAS draft
constitution as a threat to their livelihood. However, since
the MAS in practice has not acted on its previous offers to
"revise" its constitution the opposition sees little reason
to believe the MAS will do so in the run-up to the May 4
referendum. President Morales may offer a last minute
compromise on the (IDH) funding cuts to the departments in
exchange for postponing the May 4 referendum. Unfortunately,
the opposition will likely disregard any offers (concessions)
as disingenuous, as too little too late, or simply another
clever government negotiating trick. Morales will paint the
opposition's failure to accept the government's offers as
proof that the Santa Cruz leadership is unreasonable and has
"separatist" intentions.

--------------
Rational Actors Wanted
--------------


7. (C) Periodically, rumors surface that the government may
resort to more drastic actions such as the arrest of key
Santa Cruz leaders, or the "nationalization" of certain Santa
Cruz businesses. While such actions may appear irrational to
us, increasingly Morales and his closest advisors seem to be
making policy decisions based less on logic and more on
impulse. For example, on March 19, the Ministry of Rural
Development issued a decree prohibiting the export of cooking
oil as a means to hold back inflation and ensure adequate
cooking oil supplies for the domestic market, despite the
fact that the domestic market represents less than 20 percent
of the gross sales of cooking oil. Santa Cruz political and
business leaders have denounced the measure as a political
weapon meant to dampen their autonomy efforts. To justify
its actions the government has been disseminating (largely
false) information that cooking-oil in Bolivia is "the most
expensive in the world" and that Santa Cruz agro-businesses
sell their product overseas for less than it does in Bolivia.


8. (C) Initial reactions to the cooking-oil decree have
likely surprised the Morales administration. Truckers
blocked roads around the country, arguing the export
prohibition is destroying their livelihood. While the
truckers' strike seems to be waning, it could escalate and
prompt a confrontation well before the May 4 referendum.
Furthermore, Santa Cruz food producers are threatening to cut
off food shipments to La Paz )- such an action could provoke
the government to take more drastic measures (see paragraphs
12 and 13). Ironically, the government's distribution of
subsidized cooking-oil has provoked anger within its own
stronghold of La Paz, as people have had to wait up to four
hours to get their &cheap8 oil. Meanwhile, the Santa Cruz
Prefecture is contemplating authorizing exports of
cooking-oil despite the government ban to help its local
businesses, and as means to exercise its autonomy. Despite
Santa Cruz, threats there are no signs the government will
rescind its decree anytime soon. On March 27, the Minister
of Development Planning stated it would remain in effect for
six months. There are fears that the national government
will use the cooking-oil protests to create chaos and disrupt
the autonomy vote. Percy Anez Rivero, Vice President of
Banco Mercantil Santa Cruz, told Emboffs that "we are
painfully aware that the government may provoke violence as a
means to suppress Santa Cruz. The (Santa Cruz) business and
political leadership are making every effort to ensure this
does not happen." Nevertheless, with neither side
apparently ready to give in, serious confrontations could
occur in the very near term.

--------------
Gearing Up the Shock Troops
--------------


9. (C) Both sides, the government and the opposition,
appear to be gearing up their shock troops in the run up to
the referendum. Already, MAS-aligned indigenous groups and
community leaders of "immigrant" communities (generally
populated by altiplano or Cochabamba economic migrants) have
stated that they will block roads starting May 3 in Santa
Cruz to disrupt the election. The migrant communities of San
Julian and Yapacani already saw violent clashes between pro-
and anti-MAS groups in 2006 and 2007. President of the
Eastern Indigenous Peoples' Confederation (CIDOB) Adolfo
Chavez stated publicly that his organization would resist the
autonomy referendum and is preparing for conflict with the
Santa Cruz Youth Union.


10. (C) Members of the Youth Union have frequently attacked
pro-MAS/government people and installations (including the
government TV channel). Their actions frequently appear more
racist than politically motivated. Several months ago, a
group of mainly white Youth Union members attacked an
altiplano migrant who they alleged was pro-MAS
(anti-autonomy). The attack was televised. (Note: The
government is certainly looking to capture on video an attack
by a light-skinned pro-autonomy supporter on an indigenous
person or persons on or around referendum day, as a means to
discredit the entire referendum process. End Note). Such
events provide fodder for the government's arguments that the
Santa Cruz leadership is anti-indigenous and seeks to
separate the country. The Youth Union and other pro-autonomy
groups state they are forming a "guardia civil" (civil
protection brigade) to guard polling places and prefecture
installations. The Youth Union has boasted to the press that
it has signed up 7000 members to participate in the guardia
civil )- the number is likely inflated but many of those who
have signed-on are militant.

--------------
Bold Actions on May 1?
--------------

11. (C) In the past the government has used May 1
(International Labor Day) as a day to unveil its boldest
initiatives )- in May 2006 it was the "nationalization" of
the oil and gas sector. As May 1 falls just three days
before the Santa Cruz referendum we can expect a number of
"bold" announcements around that day to distract attention
from May 4. Rumors are circulating that Morales will
announce the "official" nationalization of other sectors of
the economy such as mining, communications, or energy. While
such a move would be largely symbolic as the government has
already attempted to grab a larger stake in all three, it
would be popular with more than just the MAS base.


12. (C) There are now rumors that the government is
contemplating "nationalizing" the cooking-oil manufacturers,
if companies do not abide by the government's March 19
decree. The government on March 26 announced that it would
buy soybeans directly from producers, to essentially control
the cooking-oil supply-chain. But, soy producers citing the
government's previous delays in payments, have responded that
they would rather let their crop rot than sell it to the
government. Embassy contacts tell us the national government
does not have the technical knowledge, must less the physical
capability, to make good on their threat.


13. (C) An armed seizure of an agro-business company (or
companies) in Santa Cruz would be viewed by the opposition as
yet another government provocation and would likely result in
confrontations between security forces and Crucenos (people
from Santa Cruz). A seizure of one or more agro-businesses
is a much more risky endeavor than the government's
nationalization of the gas sector in May 2006. Unlike the
demand to "nationalize" the hydrocarbons sector which was
deeply rooted in the Bolivian political psyche (since at
least 2003),there has not been the same historical demand
for nationalizing agro-business interests. Demetrio Perez,
Vice President of the Association of Seed Oil and Wheat
Producers (ANAPO),told Emboff that his organization believes
the export ban is less a move to provoke violence and more a
move to try and pressure Santa Cruz into not holding the
referendum. He is concerned that the government has hardened
its position and places the blame directly on Vice President
Garcia Linera, "the real force behind the export ban."

--------------
GOB Target Acquired: Embassy and USAID
--------------


14. (C) May 1 (or before) may also mark the beginning of a
new barrage of attacks on the USG and USAID. Morales will
likely make new claims of USG/USAID support to the opposition
as a means to undermine the autonomy referendum. The
government is currently conducting a 30-day in-depth review
of USAID projects. It is quite likely that Morales will use
the "results" of this review as a pretext to demand the
closing of one or more USAID programs. Vice President Alvaro
Garcia told the Ambassador that government was seriously
considering ending USAID's democracy program (reftel),
although he claimed not to be aware of the on-going portfolio
review.

--------------
Where Do The Military and Police Stand?
--------------


15. (C) The conventional wisdom is that security forces
(police and military) would be reticent to intervene in Santa
Cruz. While the Morales administration continually argues
the referendum is illegal, no one disputes that Santa Cruz
referendum advocates collected enough signatures to call a
referendum. (Note: The MAS' legal argument often cites a
law they passed in Congress while their supporters forcibly
prevented the opposition's participation that stipulates that
only Congress can authorize a departmental referendum. End
Note). Most in the military state they will hew closely to
their role of defending the constitution, which does not
necessarily mean they will defend Evo Morales' "political
project." While the Armed Forces Commander General Luis
Trigo has recently stated that the military will "defend
Bolivia's unity" -- seen by some as a veiled threat against
Santa Cruz -- the legal ambiguity surrounding the referendum
gives lower ranking security forces enough cover to stay in
their barracks.


16. (C) The arrest of Santa Cruz political leaders such as
Prefect (governor) Ruben Costas or Civic Committee leader
Branko Marinkovic remains a slim but not discountable
possibility prior to the May 4 referendum. The Morales
administration could justify their actions based on the
notion that Santa Cruz leaders are promoting an illegal
referendum, and that they have committed seditious acts.
Arrests before May 4 would be hard for the government to
coordinate without Santa Cruz's political elite learning of
the plans. Arrests would enrage many pro-autonomy Crucenos
and would likely lead to violence against security forces.
The police would likely be reticent to act. Many in the
police are angry with the government for failing to raise
their salaries. Also, fresh in the memory of the national
police is the attacks they suffered in Sucre (November 2007)
defending the MAS' hastily convoked Constituent Assembly
session. Sucre residents attacked officers and destroyed all
of the police's installations in Sucre, and finally forced
the police to flee the city for three days. Nonetheless, if
Morales' government is looking to foment chaos to create a
pretext for greater government intervention in Santa Cruz,
arrests might serve this function.

--------------
The Embassy's Plans: Keep a Low Profile
--------------


17. (C) The Embassy plans to keep a low profile in the
coming weeks in order to lessen the government's ability to
use us as a distraction. The Ambassador will minimize his
travel to opposition-led areas before and immediately
following the May 4 referendum to avoid providing Morales
fodder for his accusations that the USG is "conspiring" with
the opposition. Nonetheless, if history is a good predictor,
Morales will soon launch accusations against us regardless of
how low a profile we maintain.
GOLDBERG