VZCZCXRO3528
PP RUEHLMC
DE RUEHLP #0093/01 0171545
ZNY CCCCC ZZH
P 171545Z JAN 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 7712
INFO RUEHAC/AMEMBASSY ASUNCION 5512
RUEHBO/AMEMBASSY BOGOTA 2776
RUEHBR/AMEMBASSY BRASILIA 6642
RUEHBU/AMEMBASSY BUENOS AIRES 3859
RUEHCV/AMEMBASSY CARACAS 1222
RUEHPE/AMEMBASSY LIMA 1116
RUEHMN/AMEMBASSY MONTEVIDEO 3484
RUEHQT/AMEMBASSY QUITO 3862
RUEHSG/AMEMBASSY SANTIAGO 8377
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 LA PAZ 000093 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 01/17/2016 
TAGS: PGOV PREL ECON SOCI BL
SUBJECT: DEALING WITH THE MAS-LED BOLIVIAN GOVERNMENT 
 
 
Classified By: Ambassador David Greenlee for 
reasons 1.4 (B) and (D). 
 
---------------------------- 
Selective Passive Engagement 
---------------------------- 
 
¶1.  (C) As the Washington policy community meets on January 
17 for a Deputies Committee meeting on Bolivia, Embassy La 
Paz submits the following reflections on how to best engage, 
or limit our engagement, with the new GOB and President Evo 
Morales, as well as other suggestions concerning potential 
U.S. action.  In the weeks since Morales, resounding 
electoral victory on December 18, there has been much 
speculation in Bolivian press and political circles about the 
future nature of the U.S.-Bolivia official relationship. 
 
¶2.  (C) The Bolivian Government, perhaps more than it 
realizes, depends on the USG for financial assistance and 
technical expertise across a wide range of issues.   Official 
U.S. assistance, the largest of any bilateral donor by a 
factor of three, is often hidden by our use of third parties 
to dispense aid with U.S. funds.  As the MAS assumes the 
responsibilities of power in both the executive and 
legislative branches, Morales, his ministers and his key 
congressional leaders will become increasingly aware of the 
role and influence of the USG in international financial 
institutions, trade programs that generate Bolivian jobs, in 
addition to the direct assistance provided to specific 
ministries. 
 
¶3.  (C) In our view, exploring a possible relationship with 
the MAS-led GOB will require a nuanced approach beyond the 
black and white choice of engaging or shunning the new 
leadership.  The USG,s first meeting with Morales at the 
Ambassador,s residence on January 2, while sometimes tense 
and cool in tone, was constructive and allowed clear messages 
to be delivered both ways.  During Morales, subsequent world 
tour, he has at times appeared more the moderate, even 
conceding to "pardon the United States Government" for its 
previously "disrespectful" treatment of him--a perhaps 
amateurish and untactful way to extend an olive branch to the 
USG but an olive branch just the same.  Positive press 
reaction to A/S Tom Shannon,s public statements from Brazil 
encouraging dialogue has also engendered local hopes that a 
constructive relationship between Morales and the USG is 
possible.  The sharp contrast of these statements with 
meddling comments by Hugo Chavez about a U.S.-planned 
coup--which was greeted with widespread skepticism here--only 
heightens hopes that the U.S. will remain Bolivia,s ally and 
friend. 
 
¶4.  (C) Dealing with the MAS-led government will require a 
careful application of carrots and sticks to encourage good, 
and to discourage bad, behavior and policy.  While Morales 
and his advisors are seasoned labor and opposition leaders, 
few have any direct experience in government, and most of the 
future government's key players are likely to be in such 
positions for the first time.  Current government Ministers 
have told us they have been underwhelmed by the quality of 
MAS personnel staffing the various transition teams, and 
believe for this reason that the new GOB will make more than 
its fair share of rookie mistakes.  Therefore, the decision 
to engage or not with the GOB--and at what pace--will not be 
a one-time affair, but rather a series of small decisions 
taken based on the GOB,s most recent actions. 
 
¶5.  (C) We recommend a determined passivity in our relations 
with Morales and his cabinet, at least at the outset.  With 
previous Bolivian governments, most action and dialogue 
transpired at our initiative, not the other way around.  The 
lack of institutional capacity in the government ministries 
meant that we usually had to instigate programs or policy 
discussions, and help them gain their bearings.  Given the 
anticipated disorder in the first few months of the Morales 
Administration, absent a U.S.-approach on specific issues 
(USAID programs, trade, finance, and security), we anticipate 
little dialogue.  Assuming a posture of passivity, and 
avoiding an excessive eagerness to engage, would send the 
message that they need to come to us, and not vice-versa. 
This would also accurately reflect the reality that the U.S. 
 
LA PAZ 00000093  002 OF 003 
 
 
can survive in the absence of an active relationship with the 
new GOB.  In practical terms, the Embassy would not schedule 
a round of courtesy calls on the new ministers, but rather 
wait for an invitation.  At the same time, we would carefully 
avoid the impression of hostility, which could quickly 
redound against us, and continue a policy of rhetorical 
support for engagement based on our shared interests. 
 
¶6.  (C) In administering a policy of carrots and sticks, the 
carrots would be our existing programs in support of the GOB. 
 To maintain these existing programs, we would require 
positive policy actions from the GOB, without any discussion 
of future additional benefits. Our initial consideration of 
GOB actions should be linked to coca policy.  Within a short 
time in office, the Morales Administration's intentions in 
this area will probably be clear.   A second area of interest 
will be the GOB's plans for nationalization of the 
hydrocarbons industry (perhaps followed by negative movement 
within the mining sector), which would have a negative impact 
on U.S. investors.  A third will be its attitude and actions 
with respect to democratic norms and practices, including 
press freedoms and the independence of state powers.  The 
organization and dynamics of a Constituent Assembly, which 
could undermine institutional democracy, will play a key role 
in this connection. 
 
-------------------- 
Possible USG Actions 
-------------------- 
 
¶7.  (C) As to possible sticks, we might consider numerous 
small measures connected with the administration of existing 
USG assistance programs, including the freezing of certain 
programs pending an initial meeting with the relevant 
ministers (again at their initiative) to review USG interests 
within that ministry.  In this connection, it may be 
important to send clear signals early on, shots over the bow, 
that it will not be business as usual.  A menu of options 
that could be used depending on circumstances and that would 
resonate clearly include: 
 
--Use USG's veto authority within the IDB's Fund for Special 
Operations (from which Bolivia currently receives all its IDB 
funding) to withhold IDB funding for Bolivia, estimated by 
the IDB Resrep in Bolivia to total $200 million in 2006. 
 
--Postpone decision on the forgiveness of IDB debt 
(approximately $800 million under the Fund for Special 
Operations and $800 million under the IDB's regular program) 
pending clarification of the new GOB's economic policies. 
 
--Pursue a postponement of the World Bank's vote on debt 
relief for Bolivia.  Request a 6-month delay, pending a 
review of the GOB's economic policies. 
 
--Disinvite GOB participation as observers at future Andean 
FTA events, pending clarification of the new GOB's interest 
in participating in the FTA. 
 
--Discourage GOB interest in pursuing dialogue on a possible 
MCC compact. 
 
--Deny GOB requests for logistical support by NAS aircraft 
and equipment, except in cases of humanitarian disasters. 
 
--Stop material support (tear gas, anti-riot gear, and other 
assistance) for Bolivia's security services. 
 
--Announce USG intention to not extend the ATPDEA trade 
benefits beyond the December 31, 2006 expiry date.  Should 
the GOB's initial actions on coca policy be negative, then 
announce an intention to review Bolivia's continued 
eligibility for ATPDEA benefits. 
 
 
---------------- 
Slowly Back Away 
---------------- 
 
¶8.  (C) Because the GOB depends on us more than they realize, 
the posture of the Embassy would be to take one step 
 
LA PAZ 00000093  003 OF 003 
 
 
backwards, let them stumble so they understand our 
importance, and then give them an opportunity to request our 
assistance.  Examples: If they want to participate in the FTA 
discussions, then we would ask for a letter signed by Morales 
requesting such.  If Alternative Development assistance in 
the Chapare is desired, then the Minister of Government 
should ask for it publicly, with us then responding that we 
would consider the request.  We would not ask the GOB to come 
pleading "on its knees," but public requests for assistance 
by the MAS-led government would become the norm.  In some 
ways, this would entail a reversal of our previous policy to 
remain low-key and soft-spoken about our assistance, and we 
would seek greater public and government acknowledgment of 
our aid.  We would want to make Chavez, $30 million pledge 
look like peanuts. 
 
------------------------ 
Right Time to Right Size 
------------------------ 
 
¶9.  (C) There is a widespread belief that the U.S. Embassy in 
the past has interfered with and even "controlled" the GOB, 
leading to considerable resentment among Bolivians, including 
but not only the population that elected Morales president. 
This impression is reinforced by the sheer size of the U.S. 
official community--about 215 Americans and 800 FSN,s--which 
dwarfs the size and scope of any other diplomatic 
representation in Bolivia.  A case can be made that, over 
time, with the establishment of numerous programs, sometimes 
in ad hoc fashion, the U.S. Mission has ballooned out of 
proportion with USG interests in Bolivia.  The size of the 
official U.S. community in La Paz also poses considerable 
evacuation concerns, as recent experiences with authorized 
departure and other near evacuations have highlighted.  Some 
efforts to reduce the size of the mission have taken place, 
but we believe a more aggressive reduction is warranted. 
 
¶10.  (C) Certain assistance programs related to the military, 
economic policy, and counternarcotics no longer appear 
warranted given the anticipated change in our bilateral 
relationship.  There is no chance for an Article 98 agreement 
with the new government, thus cutting off numerous 
military-to-military programs, which will no longer require 
personnel in country to administer.  Many USAID-administered 
economic programs run counter to the direction the GOB wishes 
to move the country.  Our resource- and personnel-intensive 
narcotics programs, dedicated to reducing the production of 
cocaine destined for Brazilian and European markets, no 
longer address specific U.S. bilateral interests.  Reducing 
our role in counternarcotics to an advisory role (if they 
want it) rather than an operational one would significantly 
reduce the exceedingly large USG footprint in Bolivia. 
 
¶11.  (C) Such a reduction would not only be in keeping with 
the scope of our real interests in Bolivia, it would also 
compel our regional partners, especially Brazil and 
Argentina, to step up to their greater and more 
geographically immediate responsibilities in this regard. 
 
¶12.  (C) Comment:  These are initial thoughts, submitted in 
the vacuum of the departing Rodriguez and incoming Morales 
governments.  We have arrows in our quiver, but this is a 
time for discretion and balance, not yet for hard decisions. 
 
 
 
 
 
GREENLEE