VZCZCXYZ0000
RR RUEHWEB

DE RUEHLP #3090/01 3201734
ZNR UUUUU ZZH
R 161734Z NOV 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 1316
INFO RUEHAC/AMEMBASSY ASUNCION 6298
RUEHBO/AMEMBASSY BOGOTA 3619
RUEHBR/AMEMBASSY BRASILIA 7480
RUEHBU/AMEMBASSY BUENOS AIRES 4742
RUEHCV/AMEMBASSY CARACAS 1991
RUEHPE/AMEMBASSY LIMA 2053
RUEHME/AMEMBASSY MEXICO 1899
RUEHMN/AMEMBASSY MONTEVIDEO 4188
RUEHQT/AMEMBASSY QUITO 4630
RUEHSG/AMEMBASSY SANTIAGO 9213
RUEHKO/AMEMBASSY TOKYO 0263
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 003090 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND LPETRONI 
COMMERCE FOR JANGLIN 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: EMIN EINV ECON PREL PGOV BL
SUBJECT: GOB SHRINKS FROM THREATS AGAINST SWISS MINING FIRM 
 
REF: LA PAZ 2976 
 
------- 
SUMMARY 
------- 
 
¶1. (SBU) President Morales announced October 23 that the GOB 
would unveil plans for the mines and mills of Swiss mining 
powerhouse Glencore International, whose Bolivian subsidiary 
controls properties once held by former President Gonzalo 
"Goni" Sanchez de Lozada.  The GOB later backed away from its 
threats, thanks in part to promises of violent protests from 
company employees and intervention by the Swiss ambassador, 
and the firm's president recently said tension had 
diminished.  The attack and subsequent retreat represents yet 
another GOB false start and may highlight the GOB's 
frustration with its inability to secure Goni's extradition. 
 
------------------ 
ATTACK AND RETREAT 
------------------ 
 
¶2. (U) President Morales announced October 23 that the GOB 
would unveil plans for the mines and mills of Swiss mining 
powerhouse Glencore International, whose wholly owned Sinchi 
Wayra subsidiary controls properties once held by Comsur, a 
firm owned until 2005 by former President Gonzalo "Goni" 
Sanchez de Lozada.  Tensions escalated when Minister of 
Mining Jose Dalence said October 31 that the GOB would 
investigate the sale of Comsur and rose still higher when 
Morales threatened November 1 to "recover for the state" the 
company's tin smelter.  The threats played on the fears of 
many in Bolivia's mining industry and led company executives 
to wonder if the GOB would target other firms' operations 
after making an example of Glencore. 
 
¶3. (SBU) The GOB later backed away from its threats, thanks 
in part to promises of violent protests from Glencore 
employees and intervention by the Swiss ambassador.  Sinchi 
Wayra President Eduardo Capriles told Econoff November 15 
that the firm's 4,000 workers responded to rumors of planned 
military takeovers of company operations by threatening armed 
resistance and "bloody" conflict; while reportedly surprised 
by the miners' decision to side with their employer, 
President Morales took the threat seriously.  Subsequent 
intervention by the Swiss ambassador, who reminded GOB 
officials that the expropriation of mines or mills would 
violate the two countries' reciprocal investment treaty, 
reportedly led Morales to back down.  Capriles noted that 
tension had diminished in the last few weeks, commenting that 
GOB officials seemed unsure how to proceed; while royalty and 
tax hikes might be inevitable, he said, government 
expropriations probably are not. 
 
------- 
COMMENT 
------- 
 
¶4. (SBU) The attack and subsequent retreat represents yet 
another GOB false start - it coincided with a clumsy decision 
to delay officials' much-hyped mining plan (reftel) - and may 
highlight the GOB's frustration with its inability to secure 
Goni's extradition.  (Note: Goni has been living in exile in 
the United States since October 2003, when he resigned the 
presidency and fled the country after deadly clashes between 
civilian protesters and the military.  End Note.)  Having 
failed to "get" Goni through extradition, Morales may have 
lashed out at the former president, in hopes of boosting the 
administration's political standing with an attack on Goni's 
former assets.  Because such a move risked causing more 
trouble with an already turbulent mining sector, however, 
Morales appears to have backed off, at least for now. 
GOLDBERG