VZCZCXYZ0000
RR RUEHWEB

DE RUEHLP #0870/01 0881423
ZNR UUUUU ZZH
R 291423Z MAR 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 8650
INFO RUEHAC/AMEMBASSY ASUNCION 5734
RUEHBO/AMEMBASSY BOGOTA 3012
RUEHBR/AMEMBASSY BRASILIA 6884
RUEHBU/AMEMBASSY BUENOS AIRES 4121
RUEHCV/AMEMBASSY CARACAS 1434
RUEHPE/AMEMBASSY LIMA 1374
RUEHME/AMEMBASSY MEXICO 1680
RUEHMN/AMEMBASSY MONTEVIDEO 3689
RUEHQT/AMEMBASSY QUITO 4076
RUEHSG/AMEMBASSY SANTIAGO 8608
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEANHA/FAA NATIONAL HQ WASHINGTON DC
RUEAYVF/FAA MIAMI ARTCC MIAMI FL
RHEHNSC/NSC WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS LA PAZ 000870 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/TRA JHORWITZ AND EB/TRA/OTP BMATTINGLEY 
STATE ALSO FOR WHA/AND LPETRONI 
STATE PASS TO FAA MIAMI FOR LHART 
STATE PASS TO DOT FOR CCOLDREN 
COMMERCE FOR JANGLIN 
 
E.O. 12958: N/A 
TAGS: EAIR ECON PGOV BL
SUBJECT: GOB ENDS LLOYD INTERVENTION 
 
REF: A. LA PAZ 816 
 
     ¶B. LA PAZ 567 
     ¶C. LA PAZ 351 
 
¶1. (U) Summary: The GOB ended its intervention in Lloyd Aero 
Boliviano (reftels) on March 24, one day after Bolivia's 
Constitutional Tribunal granted a petition requesting the 
suspension of the GOB-appointed controller's authority.  The 
GOB relinquished control to Ernesto Asbun, Lloyd's chief 
executive, and cancelled a proposed multi-million loan for 
the airline.  Lloyd employees across the country responded 
with hunger strikes and renewed calls for Asbun's 
resignation.  Observers note that the Constitutional Tribunal 
action may have given the GOB a timely exit opportunity, 
allowing government officials to wash their hands of an 
increasingly messy affair.  This line of reasoning 
notwithstanding, the Lloyd case is making the GOB appear weak 
and incompetent, wholly incapable of resolving a challenging 
economic problem.  End summary. 
 
¶2. (U) Minister of the Presidency Juan Ramon Quintana 
announced the end of the GOB's six-week intervention in 
Bolivian national carrier Lloyd Aero Boliviano (reftels) on 
March 24, one day after Bolivia's Constitutional Tribunal 
granted a petition requesting the suspension of the 
GOB-appointed controller's authority.  Tribunal officials 
suspended the powers not only of Angel Zaballa, the 
individual overseeing Lloyd's operations since February 9, 
but also of Vice Minister of Transport Wilson Villarroel, 
asking both to surrender all responsibility for Lloyd while 
the court evaluated the legality of the GOB's intervention. 
 
¶3. (U) The GOB relinquished control to Ernesto Asbun, Lloyd's 
chief executive, and cancelled a proposed multi-million loan 
for the airline.  Asbun publicly accused the GOB of having 
brought Lloyd to the brink of collapse, blaming the company's 
crisis on its poorly managed capitalization (or 
privatization) and the GOB's ineffective intervention.  The 
February pilots' strike, Asbun added, caused flight 
cancellations and revenue losses from which the carrier has 
yet to recover and which could force executives to introduce 
austerity measures, including suspending Lloyd's Madrid route 
(announced March 29), limiting the frequency of international 
flights, cutting administrative and maintenance costs, and 
eliminating personnel (although it is unclear how many of the 
airline's 2,200 employees would lose their jobs). 
 
¶4. (U) Lloyd employees across the country responded with 
hunger strikes and renewed calls for Asbun's resignation. 
Thirty to forty workers at the airline's Cochabamba 
headquarters initiated hunger strikes over the weekend and 
threatened to disrupt flights unless Asbun quit and the GOB 
assumed permanent control of the carrier's operations. 
Employees in Santa Cruz and La Paz picketed company offices 
and joined coworkers in calling on the GOB to intervene to 
save their jobs, refusing to work for Asbun and his team of 
executives. 
 
¶5. (SBU) Comment: Observers note that the Constitutional 
Tribunal action may have given the GOB a timely exit 
opportunity, allowing government officials to wash their 
hands of an increasingly messy affair.  By laying the blame 
for Lloyd's difficulties squarely on Asbun, GOB officials are 
attempting to sidestep any responsibility for the airline's 
problems and distance themselves from potential job losses. 
They may also hope to use the episode as evidence of the 
private sector's weakness and as ammunition for their 
argument that the state should play a greater role in 
Bolivia's economy.  This possibility notwithstanding, the 
Lloyd case is making the GOB appear weak and incompetent, 
wholly incapable of resolving a challenging economic problem. 
End comment. 
GREENLEE