Identifier
Created
Classification
Origin
09LAPAZ1166
2009-08-11 21:10:00
CONFIDENTIAL
Embassy La Paz
Cable title:  

BOLIVIAN INFRASTRUCTURE: ELECTRIC INERTIA

Tags:  EMIN ECON EFIN EINV ETRD PREL BL 
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C O N F I D E N T I A L LA PAZ 001166 

SIPDIS

E.O. 12958: DECL: 08/10/2019
TAGS: EMIN ECON EFIN EINV ETRD PREL BL
SUBJECT: BOLIVIAN INFRASTRUCTURE: ELECTRIC INERTIA

REF: A. 09LAPAZ968

B. 08LAPAZ2614

Classified By: Acting EcoPol Chief Holly Monster for reasons 1.4 b,d

-------
Summary
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C O N F I D E N T I A L LA PAZ 001166

SIPDIS

E.O. 12958: DECL: 08/10/2019
TAGS: EMIN ECON EFIN EINV ETRD PREL BL
SUBJECT: BOLIVIAN INFRASTRUCTURE: ELECTRIC INERTIA

REF: A. 09LAPAZ968

B. 08LAPAZ2614

Classified By: Acting EcoPol Chief Holly Monster for reasons 1.4 b,d

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

1. (C) The Government of Bolivia (GOB) began negotiations
in late July with the country's electric generation and
distribution companies to reportedly nationalize the sector
by the end of the year. As negotiations move forward, the GOB
will find it is acquiring a sector that received no
investment or upgrades since Morales' election. It will need
a strong jumpstart to serve the future needs of the country.

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Still in the Dark
--------------

2. (C) In October 2006, the Ministry of Public Works
released the "Electricity to Live with Dignity" plan. The
strategy outlined five year plans through 2025 to increase
the nation's electric coverage. The Ministry cited a survey
which showed that in 2004 only 65% of all Bolivians had
access to electricity. This compared to 75% in Peru, 85% in
Paraguay and over 90% in Ecuador, Colombia and Chile. The
coverage for rural Bolivians was only 30%, compared to 35% in
Peru, 64% in Colombia, just below 80% in Paraguay and Ecuador
and 90% in Chile.


3. (C) The proposal called for coverage in urban areas (at
least 2000 homes) to increase from 87% in 2005 to 98% in 2010
and to universal coverage by 2020. Rural coverage was to
expand from 33% in 2005 to 53% in 2010 with universal
coverage by 2025. The plan calls for an investment of $190
million and criticizes the previous administration for only
allocating $20.3 million for energy needs. The GOB has not
released data on the progress of the plan, but according to
Juan Carlos ((Queregazu)),General Manager of Valle Hermoso,
an electricity generating firm, the lack of investment in the
energy sector assures that any progress has been minimal.

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Untapped Potential
--------------

4. (C) There are no projects in the development of
Bolivia's gas sector, according to Gustavo ((Assad)),

Director of Norberto Odebrecht, an energy and transportation
construction company based in Brazil. The current level of
investment is sufficient to maintain the status quo, not to
generate growth (Ref A). By law, Bolivian gas must first
satisfy domestic demand. Contractual obligations and any
remaining gas can then be sold to foreign customers (Ref B).
In recent years, rising domestic consumption without
additional investment has limited Bolivia's ability to supply
foreign customers other than Brazil. Through the first seven
months of the year the Bolivian Hydrocarbons Company (YPFB)
utilized only one percent of its 2009 investment budget.
Assad claims that in 2008 only four wells were drilled in
Bolivia and despite plans in 2001 for 97 wells in the
Prefecture of Tarija, today there are only seven.


5. (C) The Madeira River Hydroelectric Complex is a plan
developed with Brazil to construct four hydroelectric plants;
one in Northern Bolivia (just north of Riberalta),one along
the Bolivia/Brazil border (between the Bolivian Prefecture of
Pando and the Brazilian State of Rondonia) and two in Brazil
(southwest of the city of Porto Velho). The Brazilians are
moving forward with the construction of the dams in their
territory, but protests from environmental NGO's have put the
Bolivian dams on hold.


6. (C) In late July, a survey of the wind-power potential
throughout Bolivia was released by Transportadora de
Electricidad (TDE). After studying 10 years worth of records
from 210 meteorological stations, TDE determined that a large
region in southwestern Santa Cruz and a few other small
pockets around the country are strong candidates for
wind-powered electricity. The report is being hailed by some
as a significant step towards reaching the goal of providing
electricity for 210,000 rural homes by the end of next year.
Queregazu cautions against the euphoria however, noting that
there are a number of steps, and investments, between
studying wind patterns and harnessing that energy.

--------------
Shining Light on the Economy
--------------

7. (C) Also in July, the Ministry of Industry reported
that Bolivia's average electricity consumption had stagnated
at 890 MW after growing at 6% per year in recent years. This
allayed the fears of previous years that rising energy demand
would overtake the country's 1000 MW capacity. The GOB claims
consumption leveled off as a result of energy-saving light
bulbs being distributed around the country. Experts skeptical
of the impact of the light bulbs point out that energy
consumption is one of the most sensitive indicators of
economic performance, and more likely reflects the slowing
Bolivian economy.

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Evaluating Priorities
--------------

8. (C) Assad believes that Bolivia's first priority should
be to reinvigorate its hydrocarbon sector. The price of gas,
coupled with Bolivia's extensive reserves, would give the GOB
the resources to finance many projects. The second priority
should be the hydroelectric sector, according to Assad. The
generation of power in Beni, Pando and La Paz, coupled with
the increased irrigation created by a well designed dam,
could help to even the economic playing field between the
traditionally poorer West and more economically vibrant East,
potentially defusing some regional tensions. Finally, Assad
calls for upgrading Bolivia's roadways to attract foreign
investment, increase commerce and boost tourism.

--------------
Comment
--------------

9. (C) The lack of investment in recent years in Bolivia's
energy sector is taking its toll on the entire country. Lack
of production in the hydrocarbons sector has the industry
simply running in place while potential revenues go
unrealized. The GOB's inability or unwillingness to negotiate
a compromise with environmental NGO's while Brazil moves
forward on hydroelectric projects will probably result in
Bolivia becoming increasingly dependent on natural gas, while
their biggest foreign customer diversifies. The economic
slowdown seems to have given YPFB a reprieve, causing energy
consumption in Bolivia to level off. However, as the global
economy rebounds, the pressure on Bolivia's electic capacity
is likely to return. A return to 6% growth in consumption
would give the GOB two years before demand would exceed
capacity. Without investments in hydrocarbons, alternative
energies, electric capacity and electricity coverage,
Bolivians may find brownouts and blackouts a regular
occurance.
CREAMER