VZCZCXYZ0002
RR RUEHWEB

DE RUEHLP #1596/01 1641523
ZNR UUUUU ZZH
R 131523Z JUN 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 9559
INFO RUEHAC/AMEMBASSY ASUNCION 5910
RUEHBO/AMEMBASSY BOGOTA 3223
RUEHBR/AMEMBASSY BRASILIA 7074
RUEHBU/AMEMBASSY BUENOS AIRES 4327
RUEHCV/AMEMBASSY CARACAS 1618
RUEHPE/AMEMBASSY LIMA 1610
RUEHME/AMEMBASSY MEXICO 1721
RUEHMN/AMEMBASSY MONTEVIDEO 3836
RUEHQT/AMEMBASSY QUITO 4252
RUEHSG/AMEMBASSY SANTIAGO 8799
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS LA PAZ 001596 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND LPETRONI 
COMMERCE FOR JANGLIN 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: EMIN EINV ECON BL
SUBJECT: TRIBUNAL DECLARES MINING CODE ARTICLES 
UNCONSTITUTIONAL 
 
 
¶1. (SBU) Summary: Bolivia's Constitutional Tribunal recently 
declared six articles of the mining code unconstitutional, 
eliminating investors' rights to transfer and mortgage mining 
concessions.  The ruling will take effect after a two-year 
delay, ostensibly to allow the GOB to pass legislation 
incorporating the change.  At the same time, the tribunal 
upheld the practice of entering into joint-venture agreements 
without congressional approval.  Apex Silver, Newmont, and 
Coeur d'Alene executives said the ruling would not 
immediately affect their operations but expressed concern 
that delegates to the upcoming Constituent Assembly would 
radically alter the mining code.  The tribunal's ruling could 
have long-term implications for Bolivia's mining sector, as 
it not only raises questions about the nature of mining 
concessions, but may restrict traditional mine financing and 
future investment.  End summary. 
 
¶2. (U) In a May 10 ruling, Bolivia's Constitutional Tribunal 
declared six articles (in whole or in part) of the mining 
code unconstitutional.  The finding eliminated investors' 
rights to transfer mining concessions - e.g., to buy or sell 
concessions or to leave them as an inheritance - and said 
concessions could not be mortgaged.  According to the ruling, 
mining code articles granting these rights violated Bolivia's 
Constitution, which declares mineral and other resources the 
property of the state and specifically says they cannot be 
transferred to private entities.  The ruling is not 
retroactive and will take effect after a two-year delay, 
ostensibly to allow the GOB to pass legislation incorporating 
the change. 
 
¶3. (U) At the same time, the Constitutional Tribunal upheld 
the ability of public and private entities, both domestic and 
foreign, to enter into joint-venture agreements for the 
development and execution of mining projects.  In so doing, 
the tribunal rejected the popular argument that the 
Constitution requires congressional approval of all contracts 
governing the exploitation of natural resources. 
 
¶4. (SBU) Apex Silver, Newmont, and Coeur d'Alene executives 
said the ruling would not immediately affect their 
operations.  Apex Silver representatives admitted June 12 
that many of the firm's San Cristobal concessions were 
mortgaged but said the two-year implementation delay would 
prevent any immediate material affect on the company's 
finances.  Executives said it was possible, however, that 
banks could recall the firm's mortgages at the expiration of 
the two-year deferral.  Newmont executives told Econoff that 
the company had no outstanding mortgages and expected to 
close its remaining gold mine before the deadline, thus 
avoiding problems related to the tribunal's finding.  Coeur 
d'Alene executives, meanwhile, said that since the company's 
San Bartolome mineral reserves and resources were not held 
under concession, the ruling would have no significant impact 
on operations. 
 
¶5. (SBU) Executives welcomed the two-year deferral of the 
Constitutional Tribunal's findings but expressed concern that 
delegates to the upcoming Constituent Assembly would 
radically alter the mining code.  Everything, they noted, 
would be fair game, and the Assembly could easily modify or 
re-write existing regulations, possibly going beyond the 
Constitutional Tribunal's ruling to further change the rights 
and attributes associated with mining concessions. 
 
¶6. (SBU) Comment: The Constitutional Tribunal's finding could 
have long-term implications for Bolivia's mining sector, as 
it not only adds to political and economic uncertainty, but 
also raises questions about the nature of mining concessions 
and may restrict traditional mine financing and future 
investment.  Company executives noted that losing the ability 
to mortgage concessions would limit money-raising options and 
 
 
stifle project development.  If implemented as written, one 
executive commented, the ruling could be the "death" of 
mining in Bolivia - strangling a sector crucial to the 
country's long-term economic growth.  End comment. 
GREENLEE