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C O N F I D E N T I A L SECTION 01 OF 02 LA PAZ 003259 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 12/12/2017 
TAGS: ECON PGOV PREL FAS IICA AGR FAO IFAD BL
SUBJECT: DIESEL SHORTAGES: EXCUSES, BLAME, AND INFLATION 
WORRIES 
 
Classified By: EcoPol Chief Mike Hammer for reasons 1.4 (b) and (d). 
 
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Summary 
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¶1.  (SBU)  Over the past four months, Bolivia has suffered 
repeated shortages of diesel, especially in the eastern, 
agricultural powerhouse of Santa Cruz where the concurrent 
winter harvest and summer planting seasons are hampered by 
fuel shortages.  Logistical problems appear to be principally 
to blame, but accusations of mismanagement, incompetence, 
speculation, and contraband abound.  The consequences are 
beginning to be felt as less grains are harvested, reduced 
plantings threaten food security, and increasing food prices 
pressure an already rising inflation rate. End Summary. 
 
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Where's My Diesel 
----------------- 
 
¶2.  (C)  Bolivia produces 12,000 barrels of diesel a day, but 
imports around 6,000 barrels a day or 180,000 barrels a 
month.  These imports come principally from Venezuela and 70% 
are brought in via the Paraguay-Parana river (the remainder 
is trucked up from the Peruvian port of Ilo).  Many of the 
sporadic shortages over the past four months have resulted 
from low river levels that do not allow for the passage of 
fuel barges.  Adding to this problem, is a shortage of trucks 
to bring the stranded diesel overland via Paraguay or 
Argentina.  The President of the Association of Hydrocarbon 
Suppliers (Asosur) in La Paz, Pierre Chain, said in early 
November that the shortages were mostly the results of these 
logistical problems and would therefore eventually sort 
themselves out, yet the problems persist. 
 
¶3.  (C)  Others claim that nationalization is to blame and 
the Bolivian state hydrocarbon company (YPFB) has neither the 
manpower nor the brainpower to effectively manage all aspects 
of the hydrocarbon sector. For example, Chain said that 
during one of the shortages YPFB wanted one million barrels 
of diesel delivered and thus called for one million barrels 
to be put into the pipeline, not realizing that 200,000 would 
stay in the line.  In addition to technical failures, others 
criticize YPFB lack of foresight.  Martha Parada, the general 
manager of Asosur in Santa Cruz says that the biggest problem 
isn't just logistical, but rather a lack of planning by YPFB. 
 She claims that "strategic planning of importation simply 
doesn't exist." 
 
¶4.  (SBU)  For its part, the government, while acknowledging 
logistical issues, places most of the blame on contraband. 
At the end of October, the Minister of Hydrocarbons, Carlos 
Villegas, claimed that contraband of diesel had 
"significantly increased."  He ordered military police to be 
posted at all gas stations and increased vigilance by border 
control agents.  The problem has yet to be solved.  Indeed, 
as long as the price of diesel remains half of what it is in 
the neighboring countries of Brazil and Chile, contraband 
will continue to leak across the borders.  Ironically, one of 
groups most critical of the central government also stands 
the most to gain from diesel subsidies;  it is estimated that 
diesel subsidies provide an annual savings of some $70 
million for Santa Cruz farmers. (Note:  The GOB estimates 
that subsidies on diesel and liquefied petroleum gas (LPG) 
will total around $180 million by the end of the year, $20 
million more than was projected at the beginning of the year. 
End note.) 
 
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The Impact:  Food Security and Inflation 
---------------------------------------- 
 
 
LA PAZ 00003259  002 OF 002 
 
 
¶5.  (SBU)  The Agricultural Board for Eastern Bolivia (CAO) 
warns that diesel shortages are hampering the current winter 
harvest and summer planting seasons.  CAO's President 
Mauricio Roca estimates that 500,000 hectares (out of a total 
1.2 million hectares that were projected to be planted) are 
at risk.  It is not only a matter of hectarage planted; 
timing in agriculture is also important.  Roca points out 
that the optimal time for planting beans and corn has already 
passed, yet farmers have been forced to postpone planting 
until now.  As a result, he predicts diminished yields come 
harvest and a possible food crisis next year.  Echoing these 
fears, The National Federation of Rice Cooperatives (Fenca) 
claims that the government delivered diesel too late in the 
year and some 35,000 hectares of rice are in danger of being 
lost. 
 
¶6.  (SBU)  It is not only disruptions in planting that has 
farmers and bureaucrats worried, floods and diesel shortages 
have also led to the loss of an estimated 100,000 hectares 
($60 million) of grains.  Between squeezed domestic supplies 
and high international prices, the GOB is clearly worried 
about the inflationary pressures on the Bolivian food basket. 
 A recent study by the survey company Mori, estimated that 
between July and November, the cost of lunch in the four 
largest cities in Bolivia had risen by 47% (the overall 
inflation rate reached 11.02% through November). 
 
¶7.  (SBU)  The government has responded to rising food prices 
with Band-Aids and blame.  Currently, the GOB is importing 
1,000 tons of rice from Argentina which it plans to sell at 
below market prices.  Past actions have included taking over 
transportation and distribution of meat from the isolated 
northeastern state of Beni and having army units bake bread. 
More ominous in the current political context are the 
consistent claims that large producers are to blame for high 
prices.  Recently, the Minister of Rural Development Susana 
Rivero assured that there are no production shortages, but 
rather just speculation.  And Evo consistently blames the 
agricultural "oligarchy" for trying to undercut his 
government by withholding abundant supply to increase 
inflation and topple his government. 
 
¶8.  (SBU)  Recently, a government produced television spot 
supporting the campaign "Bolivia is Changing, Evo Delivers" 
portrays a campesino women talking to a cab driver about high 
food prices.  The taxi driver patiently explains that it is 
the fault of the greedy, large farmers by name who withhold 
supplies.  The woman at first questions why she has never 
heard about such practices, but the cabby explains that those 
same oligarchs also control the media.  "They are without 
shame," the exasperated lady gasps as the theme slogan cuts 
short the scene. 
 
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Comment 
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¶9.  (C)   The manner in which the Morales Administration has 
addressed the persistent diesel shortages again demonstrates 
both its lack of technical know-how and determination to 
blame others for its own failings.  Meanwhile, inflation 
looms as the specter that could undercut Evo's popularity 
with his base supporters, push the administration toward more 
radical actions/expropriations, or both.  Political tensions 
are running high throughout the country, what remains to be 
seen is to what extend a worsening economic situation for the 
poorest Bolivians will affect Evo's ability to push through 
his radical, undemocratic, and anti-free market agenda. 
 
GOLDBERG