VZCZCXYZ0015
PP RUEHWEB

DE RUEHLP #1666/01 1661626
ZNR UUUUU ZZH
P 151626Z JUN 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 3982
INFO RUEHAC/AMEMBASSY ASUNCION 6864
RUEHBO/AMEMBASSY BOGOTA 4209
RUEHBR/AMEMBASSY BRASILIA 8093
RUEHBU/AMEMBASSY BUENOS AIRES 5343
RUEHCV/AMEMBASSY CARACAS 2578
RUEHPE/AMEMBASSY LIMA 2730
RUEHMD/AMEMBASSY MADRID 3511
RUEHMN/AMEMBASSY MONTEVIDEO 4674
RUEHQT/AMEMBASSY QUITO 5209
RUEHSG/AMEMBASSY SANTIAGO 9806
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUMIAAA/USCINCSO MIAMI FL
RUEHUB/USINT HAVANA 0368
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 001666 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
STATE FOR EEB/ESC/IEC MAUEL AND HAENDLER 
STATE FOR EEB/ESC/IEC/ENR HAYMOND 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: ECON EINV EMIN ENRG EPET BL
SUBJECT: BOLIVIA: EITI RESPONSE PENDING 
 
REF: A. STATE 75118 
 
     ¶B. LA PAZ 870 
     ¶C. LA PAZ 1618 
 
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Summary 
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¶1. (SBU) The DFID letter referred to in ref A was delivered 
June 12; the GOB has not yet responded.  The British DCM told 
Emboffs on June 13 that he does not expect the GOB to 
prioritize the Extractive Industries Transparency Initiative 
(EITI), but hopes to encourage steps toward membership 
through Norwegian technical assistance and potential World 
Bank funding.  He noted that U.S. involvement in promoting 
EITI would most likely hinder the effort.  Bolivia's 
hydrocarbons sector is in flux as the GOB seeks to implement 
its "nationalization" policies and revamp the state oil 
company YPFB.  Once the sector stabilizes, Bolivia may be in 
a better position to implement EITI.  President Morales 
vetoed a bill in May that would have required YPFB to publish 
its revenues, but reportedly plans to present a substitute 
bill with similar requirements to congress later this month. 
The vice minister of mining told Emboff on June 1 that it was 
unlikely that an employee from the mining ministry would be 
appointed to manage EITI due to resource constraints.  End 
summary. 
 
---------------------------- 
EITI Letter Response Pending 
---------------------------- 
 
¶2. (SBU) The DFID letter referred to in ref A was delivered 
to President Morales and the hydrocarbons and mining 
ministers on June 12.  The GOB has not yet responded. 
British DCM Steve Townsend told Emboffs on June 13 that he 
does not expect the GOB to prioritize the Extractive 
Industries Transparency Initiative (EITI), but hopes to 
encourage steps toward membership through Norwegian technical 
assistance and potential World Bank funding.  He noted that 
U.S. involvement in promoting EITI would most likely hinder 
the effort. 
 
--------------------------- 
Hydrocarbons Sector in Flux 
--------------------------- 
 
¶3. (SBU) In May 2005, a new hydrocarbons law was passed.  In 
May 2006, the GOB issued a decree "nationalizing" the 
hydrocarbons sector.  Both of these norms implied serious 
changes to the industry, which have been difficult to 
implement.  The cornerstone of the GOB plan, state company 
YPFB, lacks the capacity to assume its new role.  Amidst all 
of these changes, and with frequent changes in the GOB 
cabinet, the government has not focused on EITI.  Although 
the purported purpose of the "nationalization" is to return 
Bolivia's gas to its people for their benefit, which seems to 
be in line with the EITI goals, the GOB appears more 
internally focused on its processes of change than interested 
in participating in international initiatives.  Some gas 
companies, including British Gas, are interested in EITI, as 
are the Norwegians who are providing technical assistance to 
YPFB.  Once the sector stabilizes, Bolivia may be in a better 
position to move forward with EITI. 
 
----------------------- 
Transparency Law Vetoed 
----------------------- 
¶4. (SBU) When new hydrocarbons contracts were approved by the 
Bolivian congress in April (ref B), the congress also passed 
the Hydrocarbons Sustainable Development Law, which would 
have eliminated the hydrocarbons surtax, replacing it with 
Annex F of the new contracts.  Annex F determines how the 
earnings from company operations are split between Bolivia's 
state oil company YPFB and the companies through a complex 
table of variables and equations which vary by gas field. 
The law would have required that YPFB publish its revenues 
from Annex F on a periodic basis to ensure transparency. 
However, President Morales vetoed the law in May.  The 
hydrocarbons minister announced in early June that a 
substitute bill will be presented to congress later that 
month.  Presently, the payment mechanisms between YPFB, 
private companies, the Bolivian tax service, and buyers are 
in flux, uncertain, and not transparent. 
 
---------------------------------- 
Mining Ministry Says EITI Unlikely 
---------------------------------- 
 
¶5. (SBU) Emboff attended a separate meeting with the vice 
minister of mining on June 1 (ref C) in which the vice 
minister admitted that he was unfamiliar with EITI and that 
no one had been appointed to head EITI issues.  He added that 
it was unlikely that someone from his ministry would be 
appointed due to the ministry's lack of human and financial 
resources. (Note:  The day of the meeting, local media 
reported the mining minister's recent announcement that half 
of the minerals exported from Bolivia leave the country 
illegally, resulting in lost taxes of USD 70 million. Much of 
this unregistered exodus of minerals was attributed to 
independent miners and thieves who target independent 
miners.) 
URS