THE U.S.- BOLIVIA TRADE RELATIONSHIP

UNCLAS LA PAZ 000934 SIPDIS USTR: BENNETT HARMAN; DOC: JULIE ANGLIN E.O. 12958: N/A TAGS: ECON ETRD PREL KTEX BL EAID KTIA KTDB PE SUBJECT: THE U.S.- BOLIVIA TRADE RELATIONSHIP REF: A. LA PAZ 867 ¶B. LA PAZ 126 ¶1. SUMMARY. This is the first of a three part series on Bolivia's economic and trade situation. In 2008, Bolivia was the United States 105th highest trading partner, while the U.S. was Bolivia's third. Despite concern over the potential permanent removal of Bolivia from the Andean Trade Preferences and Drug Eradication Act (ATPDEA) for non-compliance with counternarcotics cooperation, expansion in non-ATPDEA goods continues to grow. Exported products to the U.S. such as quinoa, brazil nuts, cooking oil, and minerals have exploded. As Bolivia continues to industrialize, its need for U.S. products, including machines and tools, have allowed for increased U.S. exports to Bolivia as well. END SUMMARY. - - - - - - - - - - A DECADE OF GROWTH - - - - - - - - - - ¶2. The overall U.S.- Bolivia trade relationship has steadily increased over the past decade. The table below shows the trade relationship over a ten-year span, including estimates for 2009 based on first quarter data. THE TRADE RELATIONSHIP OVER THE PAST DECADE (from U.S. Census Data, in millions of U.S. dollars) YEAR IMPORTS FROM BOLIVIA EXPORTS TO BOLIVIA TRADE BALANCE 1999 283.3 223.9 74.4 2000 253 184.9 68.1 2001 215.9 166.4 49.5 2002 192.1 160.6 31.5 2003 182.7 184.7 -2 2004 193.9 260.4 -66.6 2005 219.5 293.2 -73.7 2006 215.2 362.4 -147.1 2007 277 362.6 -84.9 2008 393 511 -121.7 2009 (est) 481.6 530 -48.4 ¶3. Mining and agriculture remain crucial exports to the U.S., with many U.S. programs supporting alternative development of food goods such as pineapple, hearts of palm, and coffee to divert producers from growing coca illegally. While global commodity prices have hurt Bolivia's mining sector, exports to the U.S. remain high. Exports of silver to the U.S. saw a major increase in the first quarter of 2009. Extrapolating from that estimate, values of silver exported to the United States will nearly double from 2008. Bolivian export growth rates to the U.S. have remained positive over the past 3 years, with a nearly 40% increase between 2006 and 2007. ¶4. U.S. exports to Bolivia have remained generally constant in machinery (excavating, telecommunications, drilling and oilfield, industrial engines, agricultural),passenger vehicles, jewelry, and computer accessories. Emerging markets in the past five years have been in quinoa and brazil nut products, passenger vehicles, civilian aircraft materials and measuring/testing equipment. The growth rate for U.S. exports to Bolivia has remained positive for the past seven years, with a significant increase of 40% between 2006 and 2007. - - - - ATPDEA - - - - ¶5. The ATPDEA program was initially started as the Andean Trade Preferences Act (ATPA) in 1991 as a program to "help four Andean countries (Bolivia, Colombia, Ecuador, Peru) in their fight against drug production and trafficking by expanding their economic alternatives." The program was amended in 2002 to include more goods and to further specify the program's eligibility criteria. In September 2008, Bolivia's counternarcotics efforts were decertified for having "failed demonstrably." As the program's intention was to support countries fighting narcoticsand Bolivia's benefits were suspended. Shortly thereafter, the U.S. Congress legislated that indicated that Bolivia needed to show CN cooperation progress, as decided by the President, prior to June 30, 2009, or it be permanently removed from the legislation. ¶6. The Bolivian government and media have contradicting stories about the U.S. trade relationship and how a permanent loss of the ATPDEA program would affect Bolivia. As all other goods besides textiles and leather can enter the U.S. duty-free under the General System of Preferences, these industries were most affected by the December 15, 2008 suspension. The Bolivian textile industry has flourished due to ATPDEA, although it has been declining over the past several years, usually contributed to the short-term extensions granted and the Peruvian Free Trade Agreement. The industry has manifested itself in the city of El Alto, a stronghold of President Evo Morales. Using 2009 first quarter trade statistics as a prediction of total 2009 exports, textile exports to the United States will be approximately $7.9 million, down from $13.3 million in 2008 and $19 million in 2007. In late 2008, a labor organization did a study of unemployment throughout Bolivia, which stated an average unemployment rate of 11 percent countrywide, and the city of El Alto at 13 percent. Employment statistics are hard to gauge but most studies estimate between 5,000-20,000 direct and 30,000-50,000 indirect jobs, mainly in El Alto, are at risk in the industry if the textile manufacturers are forced to close due to permanent removal from ATPDEA. - - - - - COMMENT - - - - - ¶7. ATPDEA is a small part of the overall Bolivia-U.S. trade relationship. Continued export growth in several goods mean that the United States will always be a crucial market for Bolivia, regardless of its expansion of exports to other countries. Although Bolivia's current ranking indicates it is not a vital market for the United States at this point, its economic ambitions, despite its non-capitalist methods, will continue to rely on U.S. goods for growth. Even assuming a 10% average growth rate for U.S. exports, well under the 14% average from the past decade, the sum could reach over $1 billion by 2015. END COMMENT. URS