VZCZCXYZ0018
RR RUEHWEB

DE RUEHLP #1341/01 1381516
ZNR UUUUU ZZH
R 181516Z MAY 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 9242
INFO RUEHAC/AMEMBASSY ASUNCION 5857
RUEHBO/AMEMBASSY BOGOTA 3160
RUEHBR/AMEMBASSY BRASILIA 7018
RUEHBU/AMEMBASSY BUENOS AIRES 4265
RUEHCV/AMEMBASSY CARACAS 1558
RUEHPE/AMEMBASSY LIMA 1537
RUEHME/AMEMBASSY MEXICO 1702
RUEHMN/AMEMBASSY MONTEVIDEO 3793
RUEHQT/AMEMBASSY QUITO 4198
RUEHSG/AMEMBASSY SANTIAGO 8740
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS LA PAZ 001341 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND LPETRONI 
STATE PASS TO USTR FOR BHARMAN 
COMMERCE FOR JANGLIN 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ECON PREL PGOV BL
SUBJECT: GOB CONTINUES TO FOCUS ON ATPDEA EXTENSION 
 
REF: A. LA PAZ 1271 
 
     ¶B. LA PAZ 1100 
 
¶1. (SBU) Summary: Bolivia's vice minister of trade and 
exports told Econoffs May 17 that GOB officials remained 
interested in an extension of the Andean Trade Promotion and 
Drug Eradication Act (ATPDEA), believing additional time 
would provide "space" for the government to define its trade 
policies (ref A).  GOB officials have largely ignored a 
recent study suggesting that 300,000 jobs are directly or 
indirectly related to exports and have placed little stock in 
reports that some Bolivian businessmen are considering moving 
their operations to Chile, thanks in part to a Chilean 
government-backed plan to bring investors to Arica and other 
cities.  Econoffs advised that an ATPDEA extension appeared 
unlikely and suggested the GOB begin to consider 
alternatives.  End summary. 
 
¶2. (SBU) In a May 17 meeting, Vice Minister of Trade and 
Exports Gustavo Barbery told Econoffs that GOB officials 
remained interested in an extension of the Andean Trade 
Promotion and Drug Eradication Act (ATPDEA), largely because 
they believed additional time would provide "space" for the 
Morales administration to define its trade policies (ref A). 
Barbery admitted that the GOB's economic objectives were 
unclear and said it was difficult to explain the goals of 
Morales' proposed Peoples' Trade Agreement, as even this was 
poorly defined (ref B).  Barbery could only repeat the GOB's 
standard declaration that the pact is meant to be a model of 
"mutually beneficial" trade arrangements. 
 
¶3. (SBU) GOB officials have largely ignored a recent study, 
prepared by the National Statistics Institute, the Bolivian 
Institute of Foreign Trade, the National Chamber of 
Exporters, and the Unit for Social and Economic Policy 
Analysis, suggesting that an estimated 42,000 direct and 
328,000 indirect jobs are tied to exports.  Responses from 
surveyed businesses indicate that 55 percent of firms export 
to the United States, Europe, the Andean Community, Mexico, 
and Chile under some type of trade agreement (with nearly a 
third of these relying on ATPDEA) and show that 45 percent of 
jobs directly attributable to exports are in the department 
of La Paz, many of them in the restive satellite city of El 
Alto, whose residents have loudly demanded that the GOB boost 
employment.  Despite the study's findings, GOB officials have 
thus far shown little inclination to seriously consider the 
effects of exporters' potential loss of ATPDEA trade 
preferences. 
 
¶4. (SBU) Officials have placed equally little stock in 
reports that some Bolivian businessmen, including leading 
gold jewelry exporters, are considering moving their 
operations to Chile, thanks in part to "Plan Arica," a 
Chilean government-backed plan to bring foreign investors to 
Arica and other cities.  The incentive package allows new 
investors to collect up to half of the costs of 
pre-investment studies from the Chilean government; to count 
up to 40 percent of investment costs against future corporate 
taxes; to benefit from certain tax exemptions; to take 
advantage of Chilean government-sponsored worker training 
subsidies of up to $2,000 per employee; and to transfer part 
of their existing workforces to Chile.  For many Bolivian 
exporters, these are attractive options, particularly since 
Chile's free trade agreement with the United States would 
allow them continued preferential access to U.S. markets. 
The Chilean government has also offered Bolivian exporters 
the services of a rules-of-origin expert to help determine 
which parts of the production process might be able to remain 
in Bolivia and still allow the final product to qualify as a 
Chilean export. 
 
¶5. (SBU) Econoffs advised Vice Minister Barbery that an 
ATPDEA extension appeared unlikely and suggested the GOB 
begin to consider alternatives.  Econoffs noted that 
Bolivia's window of opportunity was probably narrow, 
particularly given the June 2007 expiration of President 
Bush's trade promotion authority.  Barbery promised to take 
this into account but said Ministry of Foreign Affairs 
officials were in the process of drafting a letter formally 
requesting an ATPDEA extension, with hopes of sending it to 
the Ambassador within the next few weeks. 
 
¶6. (SBU) Comment: Despite repeated warnings that an ATPDEA 
extension appears unlikely, GOB officials continue to state 
publicly and privately that this is their aim.  At times, 
they seem oblivious to the negative impact of the recent 
hydrocarbons nationalization and the harsh tone of President 
Morales and other GOB officials' anti-free trade, anti-U.S. 
comments on their hopes of achieving some form of commercial 
agreement with the United States.  Even now, GOB officials 
appear convinced they need only ask to have their request 
granted.  Receiving a formal request for an ATPDEA extension 
would provide an opportunity for us to say officially that 
the USG does not consider this a realistic possibility. 
While the timing of our response would have to be carefully 
considered, a negative reply may help GOB officials (and the 
Bolivian private sector) realize they must move on and 
consider other options - even a free trade agreement under 
another name - to preserve Bolivian jobs, which are already 
in short supply.  End comment. 
ROBINSON