VZCZCXYZ0015
PP RUEHWEB

DE RUEHLP #2831/01 2921657
ZNR UUUUU ZZH
P 191657Z OCT 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 0967
INFO RUEHAC/AMEMBASSY ASUNCION 6199
RUEHBO/AMEMBASSY BOGOTA 3515
RUEHBR/AMEMBASSY BRASILIA 7378
RUEHBU/AMEMBASSY BUENOS AIRES 4635
RUEHCV/AMEMBASSY CARACAS 1890
RUEHPE/AMEMBASSY LIMA 1933
RUEHME/AMEMBASSY MEXICO 1827
RUEHMN/AMEMBASSY MONTEVIDEO 4097
RUEHQT/AMEMBASSY QUITO 4526
RUEHSG/AMEMBASSY SANTIAGO 9102
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 002831 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
TREASURY FOR SGOOCH 
ENERGY FOR CDAY AND SLADISLAW 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN EINV BL
SUBJECT: CONFLICT AND GOB'S LACK OF CAPACITY HINDERS 
DEVELOPMENT 
 
REF: A. LA PAZ 2599 
 
     ¶B. LA PAZ 2197 
     ¶C. LA PAZ 2457 
 
¶1. (SBU) Summary: On October 17, the resident coordinator of 
the United Nations (UN) told the Ambassador that the UN 
supported the Constituent Assembly as a way to unify 
Bolivia's population, but was worried that it would end up 
dividing it instead.  The International Monetary Fund (IMF) 
resident representative said that Bolivia's macroeconomic 
situation is continuing its positive trend, but that several 
risk factors threaten mid-term growth.  The resident 
representative of the Inter-American Development Bank (IDB) 
explained that IDB disbursement would only reach around USD 
50 million this year due to the GOB's lack of capacity to 
execute projects.  He added that donor coordination is 
failing due to GOB ineffectiveness and the lack of 
participation of Cuba and Venezuela in the process.  The GOB 
has not yet released its revised national development plan 
and has postponed the next donor consultative group meeting 
until April.  End summary. 
 
¶2. (SBU) UN Resident Coordinator Antonio Molpeceres told the 
Ambassador on October 17 that Bolivia was like a pressure 
cooker that would not explode, because it frequently let off 
steam through political protests.  However, the constant 
political upheaval impedes development.  He said that the UN 
has been a long-time supporter of Bolivia holding a 
Constituent Assembly in order to resolve political problems 
and unify the country, but is worried that the process may 
end up dividing it instead.  He viewed a Constituent Assembly 
multi-party commission's recent request for international aid 
as a positive sign that the Assembly members want to move in 
the right direction.  He said that the UN has a good 
relationship with the government, partially because of the UN 
assistance provided during last year's flooding. 
 
¶3. (SBU) IMF Resident Representative Esteban Vesperoni said 
that Bolivia's macroeconomic situation continues to be 
positive due to a favorable external environment and the 
GOB's continuation of its predecessors' prudent management 
during its first ten months in office.  Fiscal figures are 
positive, in large part because of the GOB's lack of capacity 
to execute spending plans, but also because of proactive 
government measures to broaden the tax base.  However, 
mid-term prospects depend on the government's management of 
several risk factors, including unemployment, respect for 
property rights, improving the poor investment climate, land 
reform, and loss of U.S. trade benefits in December.  He 
added that although the Central Bank has not moved in the 
wrong direction yet, some congressmen are interested in 
exerting greater political pressure on the Bank (ref A). 
 
¶4. (SBU) IDB Resident Representative Joel Branski said that 
IDB has a USD 400 million portfolio waiting to be disbursed 
in Bolivia, but that because of the GOB's lack of capacity it 
expects to disburse only USD 50 million this year, focusing 
on productive infrastructure, competitiveness, and 
governmental administrative capacity.  Because Bolivia's 
annual debt payment to the Bank is USD 120 million, Bolivia 
will have a negative cash flow to the Bank this year.  This 
negative flow is causing the government to increase its 
pressure on the local IDB office for debt relief, which 
Branski explained would be discussed at the November 17 IDB 
Debt Committee meeting in Washington.  The Bank is scheduled 
to release its new country strategy for Bolivia during the 
first quarter of 2007. 
 
¶5. (SBU) Branski added that the donor coordination process, 
tested at a donor coordination meeting in Santa Cruz the week 
of October 9, is not functioning due to lack of capacity in 
the government and lack of participation in the process by 
 
Cuba and Venezuela. The GOB had originally planned to convene 
a donor consultative group meeting in February in Paris (ref 
B), but has postponed the meeting until April in Brussels. 
According to Branski, the government has not yet released a 
revised, more detailed version of its national development 
plan, which the government had promised to release the third 
week of September (ref C). 
 
¶6. (SBU) Comment: Without a detailed, practical national 
development plan, the GOB will have trouble drumming up donor 
support.  As the plan relies on donor support for around 50 
percent of its financing, the GOB will not be able to 
implement its economic agenda without this support.  End 
comment. 
GOLDBERG