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.

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A DECADE OF GROWTH
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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.

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ATPDEA
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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.

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COMMENT
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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