VZCZCXYZ0005
RR RUEHWEB

DE RUEHLP #0438/01 0521735
ZNR UUUUU ZZH
R 211735Z FEB 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 8137
INFO RUEHAC/AMEMBASSY ASUNCION 5611
RUEHBO/AMEMBASSY BOGOTA 2877
RUEHBR/AMEMBASSY BRASILIA 6750
RUEHBU/AMEMBASSY BUENOS AIRES 3972
RUEHCV/AMEMBASSY CARACAS 1320
RUEHPE/AMEMBASSY LIMA 1219
RUEHME/AMEMBASSY MEXICO 1651
RUEHMN/AMEMBASSY MONTEVIDEO 3572
RUEHQT/AMEMBASSY QUITO 3957
RUEHSG/AMEMBASSY SANTIAGO 8474
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS LA PAZ 000438 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND LPETRONI 
ENERGY FOR CDAY AND SLADISLAW 
COMMERCE FOR JANGLIN 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EAGR ETRD EINV ECON PGOV PREL BL
SUBJECT: SANTA CRUZ BUSINESSMEN MAKE PROMISES, REITERATE 
CONCERNS 
 
REF: A. LA PAZ 216 
 
     ¶B. LA PAZ 251 
     ¶C. 05 LA PAZ 3590 
 
¶1. (U) Summary: In February 15 meetings, Santa Cruz 
businessmen made two promises: first, that they will support 
President Evo Morales as long as he protects private 
enterprise and avoids substantive policy changes; and second, 
that they will act if the administration shifts radically 
leftward.  Business leaders expressed particular concern 
about the upcoming Constituent Assembly and the proposed 
referendum on autonomy; reiterated hydrocarbons companies' 
willingness to negotiate with the GOB (refs A and B); called 
attention to the detrimental effects of U.S. demands for 
immediate access to Andean markets for U.S. soy exports (ref 
C); and repeated their support for Bolivia's inclusion in the 
proposed Andean Free Trade Agreement.  End summary. 
 
¶2. (U) In February 15 meetings, Santa Cruz businessmen told 
Econoffs they would support President Evo Morales as long as 
he protects private enterprise and avoids substantive policy 
changes.  Federation of Private Businessmen Vice President 
Pedro Yovhio said business leaders recognize that Morales was 
legitimately elected and are willing to work with him as long 
as he respects the private sector and guarantees judicial 
security.  Yovhio indicated that Santa Cruz business leaders 
would offer constructive criticism of policies they 
considered detrimental to their interests, adding that they 
would "act" in a still undetermined manner if they saw the 
administration shifting radically leftward. 
 
CONSTITUENT ASSEMBLY, AUTONOMY REFERENDUM RAISE CONCERNS 
--------------------------------------------- ----------- 
¶3. (U) Business leaders expressed particular concern about 
the upcoming Constituent Assembly and the proposed referendum 
on autonomy, describing the former as their major political 
challenge.  Yovhio and Chamber of Exporters representatives 
said they were disturbed by President Morales' call for 
assembly delegates to "refound" Bolivia, pointing out that 
such a broad mandate could have unexpected and potentially 
alarming consequences.  Business leaders disagreed with 
Morales' proposals for electing delegates to the assembly and 
said they planned to offer alternatives that would more 
accurately reflect the department's population and influence. 
 Many said they worried Morales would use the assembly to 
replicate Venezuelan President Hugo Chavez' efforts and 
gradually consolidate power. 
 
¶4. (U) Carlos Dabdoub, former vice-presidential candidate for 
the National Unity (UN) party, told us he assumed the role of 
director of the Autonomy and Constituent Assembly Committee 
for Santa Cruz Prefect Ruben Costas.  He expressed concern 
about the pace with which the executive branch sought to push 
through legislation to authorize elections for Constituent 
Assembly representatives.  Dabdoub believed it important for 
the departments, especially Santa Cruz, to develop 
independent proposals for the assembly and said slowing the 
Constituent Assembly process was an essential element of 
their strategy. 
 
HYDROCARBONS COMPANIES DISPOSED TO NEGOTIATE 
-------------------------------------------- 
¶5. (U) Hydrocarbons Chamber President Raul Kieffer reiterated 
companies' willingness to negotiate with the GOB (refs A and 
B), saying firms are disposed to reach an agreement as long 
as they can assure their profits.  Company executives are 
presumably still operating according to the terms of a white 
paper drafted before the May 2005 Hydrocarbons Law, but many 
are apparently willing to be flexible on the details as long 
as they can protect their bottom lines.  Executives are now 
concerned about the lack of expertise at the Hydrocarbons 
 
 
 
Ministry and the possibility of a conflict between new 
Minister of Hydrocarbons Andres Soliz Rada and new YPFB (the 
state oil company) President Jorge Alvarado.  A personality 
conflict, Kieffer said, could significantly complicate 
already complex negotiations. 
 
SOY STILL AN ISSUE 
------------------ 
¶6. (U) Chamber of Exporters representatives again called 
attention to the detrimental effects of U.S. free trade 
agreement negotiators' demands for immediate access to Andean 
markets for U.S. soy exports (ref C), saying Bolivian 
producers stand to incur annual losses of $200 to $300 
million if sales in neighboring countries are undercut by 
cheaper U.S. exports of soy and its derivatives.  Business 
leaders noted that approximately 90 percent of all Bolivian 
soy exports are shipped to Andean countries and warned that 
the markets' disappearance and related job losses could 
significantly undermine the region's social, political, and 
economic stability. 
 
¶7. (SBU) Comment: While Bolivian soy producers seem genuinely 
concerned about potential competition from U.S. soy exports, 
they have also told us that large mechanized producers, which 
account for the vast majority of Bolivian soy production, 
will likely be able to compete, albeit not without painful 
adjustments.  More than these firms, it is Bolivian small 
producers, many of whom have just a few hectares under 
cultivation, who stand to lose.  End comments. 
 
SUPPORT FOR ANDEAN FTA REMAINS WIDESPREAD 
----------------------------------------- 
¶8. (U) Concerns about soy notwithstanding, businessmen 
repeated their support for Bolivia's inclusion in the 
proposed Andean Free Trade Agreement, saying they continue to 
urge the GOB to pursue negotiations.  Chamber of Exporters' 
representatives said an agreement was particularly important 
for Bolivian textile and apparel producers, who rely on trade 
preferences to compensate for high transportation costs and 
would find it difficult to compete without them.  Business 
leaders said they were worried by President Morales' 
reluctance to make official policy statements but told 
Econoffs they would continue to push for an agreement, 
particularly given the December 31 expiration of Andean Trade 
Promotion and Drug Eradication Act (ATPDEA) trade preferences. 
 
¶9. (SBU) Comment: While Santa Cruz businessmen placed the 
Constituent Assembly and the referendum on autonomy among 
their top concerns, economic issues continue to command 
attention.  For the next several months, businessmen will be 
watching the new administration's actions closely; any they 
deem too radical could prompt a showdown between the Morales 
administration and Santa Cruz' powerful business interests. 
End comment. 
GREENLEE