Identifier
Created
Classification
Origin
09LAPAZ472
2009-03-27 12:50:00
CONFIDENTIAL
Embassy La Paz
Cable title:  

GAS SCANDAL TOUCHES TARIJA AND SQUEEZES OPPOSITION

Tags:  ECON PGOV PREL ENRG EPET EINV BL EFIN PINR 
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FM AMEMBASSY LA PAZ
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RUEHBO/AMEMBASSY BOGOTA 6281
RUEHBR/AMEMBASSY BRASILIA 0255
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RUEHRI/AMCONSUL RIO DE JANEIRO 1055
RUEHSO/AMCONSUL SAO PAULO 2370
RUEKJCS/SECDEF WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHUB/USINT HAVANA 1727
RUEHLMC/MILLENNIUM CHALLENGE CORP
C O N F I D E N T I A L SECTION 01 OF 04 LA PAZ 000472 

SIPDIS

E.O. 12958: DECL: 03/25/2019
TAGS: ECON PGOV PREL ENRG EPET EINV BL EFIN PINR
ASEC, SNAR, KDEM
SUBJECT: GAS SCANDAL TOUCHES TARIJA AND SQUEEZES OPPOSITION
(C-AL9-00459)

REF: A. SECSTATE 21121

B. LA PAZ 2009

C. LA PAZ 373

D. LA PAZ 345

E. LA PAZ 305

F. LA PAZ 303

G. 08 LA PAZ 1633

Classified By: A/EcoPol Chief Brian Quigley for reasons 1.4 (b,d).


- - - -
Summary
- - - -

C O N F I D E N T I A L SECTION 01 OF 04 LA PAZ 000472

SIPDIS

E.O. 12958: DECL: 03/25/2019
TAGS: ECON PGOV PREL ENRG EPET EINV BL EFIN PINR
ASEC, SNAR, KDEM
SUBJECT: GAS SCANDAL TOUCHES TARIJA AND SQUEEZES OPPOSITION
(C-AL9-00459)

REF: A. SECSTATE 21121

B. LA PAZ 2009

C. LA PAZ 373

D. LA PAZ 345

E. LA PAZ 305

F. LA PAZ 303

G. 08 LA PAZ 1633

Classified By: A/EcoPol Chief Brian Quigley for reasons 1.4 (b,d).


- - - -
Summary
- - - -


1. (C) As corruption scandals swirl around President
Morales and his administration, corruption may also provide a
mechanism for a power-grab in the southern, gas-producing
state of Tarija. Ironically, the same company,
Catler-Uniservice, that was presumably making the payoff to
Santos Ramirez, then president of Bolivia's national
hydrocarbon company (YPFB),for the contract to build the
Santa Cruz gas separation facility, is also linked to shady
dealings with Mario Cossio, opposition leader and governor
(prefect) of Tarija. President Morales has promised to have
Cossio arrested before mid-April. Cossio has responded by
accusing Morales of trying to divert the spotlight, but the
charges against Cossio and his diminishing popularity in his
home state makes a MAS takeover of the prefecture a
possibility. Some believe that space still exists for dialog
and the public pronouncement are merely bravado to play to
hard-line elements on both sides, but a tarnished Cossio
leaves regional opposition leaders adrift, caught between a
discredited national opposition party (Podemos) and a
relentlessly aggressive MAS push for regional power. End
Summary.

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The National Gas Scandal Background
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2. (C) The current national gas scandal revolves around the
contract to build a gas separation facility in Rio Grande,

Santa Cruz (Note: There was a great deal of pressure on the
Morales government to advance this project because the
separation facility would help ease the shortages of Liquid
Petroleum Gas (GLP). Currently, the gas exported to Brazil
has a high BTU level because the propane and butane, used for
GLP, are not processed out. End note.). On April 9, 2008,
President Morales signed a decree authorizing YPFB to
directly contract (without a bidding process supervised by
the Senate) to construct the plant. In July, Santos Ramirez,
then president of YPFB, announced the $86 million dollar
"turn key" contract for Catler-Uniservice to build the
facility. At the time, no one in the hydrocarbon industry
had heard of Catler-Uniservice. The company came under the
spotlight following the murder of its Santa Cruz/La Paz
business representative Jorge O'Connor during a botched
robbery attempt (Ref. B-F). Jorge O'Connor was carrying
US$450,000 allegedly destined as a kickback for Santos
Ramirez. Miguel O'Connor is Jorge's brother and is the
company's legal representative in Tarija. The O'Connors are
a well know family in Tarija. Miguel has claimed that he has
no knowledge of his brother's activities in La Paz or Santa
Cruz because he strictly limits his administrative oversight
to Tarija.

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An Additional Smell In Tarija
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3. (C) It now appears evident that Catler-Uniservice never
was a justifiable choice to carry out the gas separation

LA PAZ 00000472 002 OF 004


facility contract. Uniservice is a construction company from
Tarija with no experience in the hydrocarbon area. It also
appears that Catler, based in Argentina, is merely a shell
company created to pair with Uniservice in order to win the
contract. Several Tarija middle men worked to convince
(bribe?) Ramirez that Catler-Uniservice could build the
facility using subcontractors in the U.S. and Argentina.
(Note: The U.S. firm involved is Gulsby Engineering Inc.
based in Texas. Having already been paid $13 million
dollars, the credibility of Gulsby is now being questioned in
the Bolivian press. Gulsby is reportedly a family firm with
less than US$57,000 in assets that only did around US$1
million in business last year. Gulsby did not return calls
to Econoff. End note.) Additionally, Uniservice has also won
contracts offered by the Tarija prefecture. The rub is that
Mario Cossio's brother, Pablo Cossio Cortz, is also linked to
the company.


4. (C) About three months ago, Tarija's Secretary of
Hydrocarbons for the prefecture Gabriel Paz resigned his
position. His wife, Podemos Senator Maria Rosa Paz, told
Econoff that Gabriel was tired of insisting on technical
merits for the awarding of contracts. Evidently Cossio and
his closest advisors had been pressuring to eliminate
technical prerequisites for construction contracts and
hydrocarbons contracts in particular. Rather than bow to the
pressure, Gabriel Paz resigned and, according to Maria Rosa
Paz, the bidding qualifications were changed and Uniservice
was allowed to bid. These allegations join others circling
around Mario Cossio (Ref. G). Allegations that United
Nations Development Program (UNDP) funding in Tarija was used
inappropriately recently led the UN office in Bolivia to
issue a letter assuring diplomatic missions in the country
that its program funds were all being managed appropriately.
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Management Style and Boom Times Make Corruption Likely
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5. (C) Cossio has overseen a skyrocketing state budget in
Tarija. Cossio entered office in 2005, at the same time that
laws redistributing hydrocarbon revenues to the state
governments went into affect (not to mention when the price
of Bolivian gas began its impressive rise). In 2004,
Tarija's state income was around US$68 million; in 2007, that
figure had risen to US$212 million. Converting this bonanza
in tangible benefits for the population has been difficult,
largely because the capacity of the local government could
not match the windfall. However, part of the blame must be
placed at the feet of Cossio.


6. (C) Freddy Castrillo, the likely new president of the
civic committee (elections will be held on April 3),told us
that a lack of transparency in the budget process has created
an atmosphere of distrust in the state and has helped feed
the rumors of corruption. He said, "the people of Tarija
simply don't know what the prefect is up to; they truly do
need to open up the process." Senator Paz described Cossio's
management style as authoritarian. All decisions are made by
Cossio and his inner circle of Mauricio Lea Plaza and Ruben
Ardaya, the two other authorities frequently accused of
corruption by the MAS central government. According to Paz,
this has led to a climate in the prefecture where lower level
officials are afraid to take any initiatives or even advance
their projects. As a result, many high profile initiatives
have stalled and/or contracts are signed without adequate
transparency, even within the prefecture itself.

- - - - - - - - - -
Cossio vs. Morales
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7. (C) The Secretary of Economic Development in Tarija,
Ernesto Farfan, told Econoff that Cossio was taking the

LA PAZ 00000472 003 OF 004


threat of arrest very seriously. The Morales administration
does not limit its charges against Cossio to corruption, but
also accuses him of terrorism for ordering the attack on the
gas pipelines during the civil uprisings in September 2008.
Returning from a European trip on March 23, Cossio did not
arrive in La Paz with the rest of the delegation for fear of
being arrested, but rather flew through Argentina and crossed
into Tarija from Salta. The threat of arrest however, has
not silenced the prefect. Along with representatives from 11
Tarija institutions, Cossio has filed an accusation against
Morales for initiating the corruption surrounding the gas
separation facility by signing the Supreme Decree that
allowed YPFB to conduct a no-bid contract. (Note: This is
in line with the opposition strategy to connect corruption
scandals to the Morales administration for the manner by
which it conducts economic policy, i.e. through state
corporations and presidential decrees (Ref. B). End Note.)


8. (SBU) Following the Europe trip, the Morales
administration again attacked the prefect. The Vice Minister
of the Interior, Marcos Farfan, accused Cossio of plotting an
"auto assassination attempt" which he would then try to blame
on Morales. Additionally, Farfan said that Cossio had been
"knocking on the doors of the fascist organizations in
Europe" to look for financing to continue the "civic coup"
that he had tried to perpetrate in September 2008. Moreover,
the Vice Minister for the Prevention of Corruption, Tamer
Medina, insinuated that Cossio had asked for asylum in
Germany to avoid prosecution. Cossio denied all of the
accusations and said he would not be leaving Tarija. He then
added that if anything should happen to him or his family,
the public should know to lay the blame firmly at the feet of
Evo Morales.


9. (C) Podemos Senator Roberto Ruiz from Tarija also
accompanied Cossio on the trip to Germany and told us that
there was absolutely no time for any clandestine meetings.
Moreover, he said that in addition to Santa Cruz Prefect
Ruben Costas, three members of the MAS were also a part of
the delegation: Deputies Eduardo Novillo, Ceasar Navarro and
Alejandro Colanzi. This was neither publicized in the press
nor by the Morales administration. Ruiz contends that it
illustrates that many different factions exist within the MAS
itself. For Ruiz, the announcements by Farfan and Medina only
represent one hard-line faction within the party (and may not
have come from Morales himself). He believes that there also
exist MAS factions that want to find a middle ground with
moderate members of the opposition. Ruiz represents part of
the "opposition middle-ground" and he is seeking to build and
maintain bridges with the MAS.

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The Shape of Autonomies and Roadblocks to Dialog
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10. (C) Ruiz laments that the Tarija prefecture has
maintained a strict posture of advancing its model of
autonomy as passed by the state's population, rather than
work with the central government to modify the model to
correspond with the new constitution. This rigid position
has, in his opinion, played into the hands of the
conflictive, hard-line of the MAS. Moreover, it has forced
the Chaco region of eastern Tarija (and parts of the states
of Santa Cruz and Chuquisaca) to seek its own form of
autonomy directly from the central government. In Ruiz's
opinion, Cossio will never be able to defeat the MAS
hard-liners head on with public expressions of conflict and
hostility -- it plays into the MAS hard-liner's hands. For
Ruiz, Cossio must negotiate behind the scenes with factions
of both the MAS and the opposition that are open to dialog
and able to advance a legal framework for the new
constitution that takes both views into consideration. In
this way, he thinks it will be harder for Morales to attack

LA PAZ 00000472 004 OF 004


and/or imprison Cossio because he would be seen as
undermining people diligently working to advance a national
consensus. (Note: This arbitrator role was played by Cossio
and Ruiz during the uprisings in September and helped bring
Cossio into the national spotlight. End note.)


11. (C) Ruiz also said that the Santa Cruz Prefect, Ruben
Costas, was more open to dialog and reconciliation than other
opposition leaders; however, he is constrained by the many
hard-line opposition figures in Santa Cruz. He also said
that Senate President Oscar Ortiz from Santa Cruz was a key
instrument for these hard-line factions and continually takes
an unnecessarily uncompromising line within the senate. Ruiz
pushed his vision throughout the trip to Europe and still
hopes that Cossio will follow his lead as he works with MAS
moderates like Novillo and Navarro. He hopes that they will
be able to reach compromises on the new electoral law over
the next two weeks, but he is afraid that the series of legal
charges made by both the Tarija institutions and the Morales
administration may limit any space for compromise.

- - - - - - - - - - - - - - - - - - - - -
Tarija Opposition: No Clear Way Forward
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12. (C) Outside of a push within the senate by Ruiz for
compromise and dialog, opposition figures within Tarija are
caught between a prefect seen as corrupt and the relentless
MAS push for regional power. The opposition political party
of Podemos is moribund in Tarija and their civic committee, a
traditional avenue to advance state goals, has suffered a
severe drop in respect following the September violence and
the resulting arrest of then Civic Committee President
Reynaldo Bayard. Bayard felt abandoned by Tarija leaders
while in jail and has accused Cossio of ordering the attacks
on the gas pipelines. He was removed from the civic
committee and is now living in the Chaco region. The end
result is that now the civic committee is no longer seen as a
credible voice for the people of Tarija, nor for its
institutions.

- - - -
Comment
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13. (C) While the tensions between the opposition states
and the central government have taken a back seat since the
new year, they will be coming more apparent again as the
nation struggles to pass the implementing legislation for the
new constitution. One of the big fights will be over the
shape of autonomies. While elements within the congress work
for compromise, they will likely be overshadowed by
hard-liners on both sides of the fence. Tarija will again be
a critical test. Should Cossio (and Ruiz) work behind the
scenes to secure compromise wording on national autonomy
laws, and emerge as a force for peace and national
reconciliation, Bolivia may avoid more violence and advance
towards a national consensus. More likely however, the MAS
will continue to steamroll any moderate voices and seek to
eliminate regional opposition figures, including Cossio.
Despite the MAS's own complicity in corruption scandals,
charges of corruption are one more tool in the MAS arsenal
and an obvious target remains Mario Cossio and the Tarija
prefect leadership.



URS