VZCZCXYZ0000
PP RUEHWEB

DE RUEHLP #2396/01 3122012
ZNR UUUUU ZZH
P 072012Z NOV 08
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 9133
INFO RUEHAC/AMEMBASSY ASUNCION 8536
RUEHBO/AMEMBASSY BOGOTA 5890
RUEHBR/AMEMBASSY BRASILIA 9857
RUEHBU/AMEMBASSY BUENOS AIRES 7077
RUEHCV/AMEMBASSY CARACAS 4125
RUEHPE/AMEMBASSY LIMA 4453
RUEHMN/AMEMBASSY MONTEVIDEO 5947
RUEHQT/AMEMBASSY QUITO 6742
RUEHSG/AMEMBASSY SANTIAGO 1519
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/USDOC WASHDC 1336

UNCLAS LA PAZ 002396 
 
SIPDIS 
 
PLEASE PASS TO USTR/GBLUE; EB/TPP/BTA 
 
E.O. 12958: N/A 
TAGS: ASEC ECON EINV PGOV
SUBJECT: BOLIVIA NATIONAL TRADE ESTIMATE REPORT 2009 
 
REF: SECSTATE 88447 
 
TRADE SUMMARY 
 
The U.S. goods trade deficit with Bolivia was $85 million in 
2007, a decrease of $62 million from $147 million in 2006. As 
of September 2008, U.S. goods exports were $309.2 million and 
imports were $376.9 million, resulting in a trade deficit for 
Bolivia, equivalent to $67.7 million.  Bolivia is currently 
the 106th largest export market for U.S. goods. 
 
According to the Bolivian Central Bank, total Foreign Direct 
Investment (FDI) was $286.1 million as of June 2008. The 
stock of U.S. foreign direct investment (FDI) in Bolivia was 
$172 million in 2006 down from $218 million in 2005. (Note: 
Bolivia has not publicly released statistics relating to the 
country breakdown of FDI since 2006.) 
 
IMPORT POLICIES 
 
Tariffs 
 
Bolivia has a three-tier tariff structure.  Capital goods 
designated for industrial development may enter duty-free; 
non-essential capital goods are subject to a 5 percent 
tariff; and most other goods are subject to a 10 percent 
tariff.  However, the administration of President Evo Morales 
enacted a Supreme Decree that reduces rice and corn tariffs 
to zero. 
 
Non-Tariff Measures 
 
Supreme Decree 27340, dated January 31, 2004, banned the 
importation of: certain types of used clothing (including 
old, destroyed, or useless articles of apparel); used bedding 
and intimate apparel; used shoes; and certain destroyed or 
useless textile articles (rags, cords, string, and rope). 
U.S. industry reports that imports of other types of used 
clothing, while not banned from import into Bolivia, may be 
subject to other non-tariff trade barriers. 
 
According to industry officials, Bolivian customs often does 
not agree with official invoices that are presented.  In 
those instances, importers are typically expected to pay 
whatever valuation the local customs authority deems to be 
 fair value, for the shipment.  U.S. officials are 
continuing to monitor the situation to determine what, if 
any, barriers exist. 
 
STANDARDS, TESTING, LABELING and CERTIFICATION 
 
Bolivia's National Animal and Plant Health and Food Safety 
Service (Servicio Nacional de Sanidad Agropecuaria e 
Inocuidad) or SENASAG appears to apply some standards 
differently to third countries than to fellow Andean 
Community members.  Bolivia continues to ban U.S. beef and 
beef products through BSE-related restrictions.  This is true 
despite the fact that in May 2007, the World Organization for 
Animal Health (OIE) classified the United States as a 
controlled risk country for BSE, thereby clarifying that U.S. 
beef and beef products are safe to trade, provided that the 
appropriate specified risk materials are removed. SENASAG is 
underfunded and is having difficulty carrying out their 
mission.  There has been government pressure to involve 
SENASAG in political affairs and to distance themselves from 
U.S. technical assistance. 
 
GOVERNMENT PROCUREMENT 
 
Government expenditures account for a significant portion of 
Bolivia,s GDP.  The central government, sub-central 
governments (state and municipal levels), and other public 
entities remain important buyers of machinery, equipment, 
materials, and other goods and services.  In an effort to 
encourage local production, the Bolivian government changed 
its procurement and contracting of service rules in July 2007 
(Supreme Decree 29190, dated July 11, 2007).  Government 
procurements under $1 million in value must be awarded to 
Bolivian producers, except for material and services that are 
not produced in Bolivia.  Importers of foreign goods can 
participate in these procurements only when locally 
manufactured products and service providers are unavailable 
or when the Bolivian government fails to award a contract to 
a domestic supplier.  The government can call for 
international bids. 
 
Bolivia is not a signatory to the WTO Agreement on Government 
Procurement. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
In 1999, the Bolivian government established the National 
Intellectual Property Rights Service (SENAPI) to oversee IPR 
issues.  The organization initiated a USAID-supported 
restructuring process in early 2003, but that process was not 
completed.  Currently the office is focused on the 
registration of traditional knowledge. 
 
The 1992 Copyright Law recognizes copyright infringement as a 
public offense and the 2001 Bolivian Criminal Procedures Code 
provides for the criminal prosecution of IPR violations. 
However, IPR protection remains insufficient and ineffective. 
 Despite the prosecution of a criminal case in 2003, 
enforcement efforts are sporadic and largely ineffective.  As 
a result, Bolivia remains on the U.S. Trade Representative,s 
Special 301 Watch List.  Video, music, and software piracy 
rates are among the highest in Latin America. 
 
Patents and Trademarks 
 
Supreme Decree number 29004, issued in January 2007, 
establishes a "Prior Announcement" requirement for 
pharmaceutical patents to allow the government, with the 
input of various interest groups, to determine whether a 
pharmaceutical patent would "interfere with the right to 
health and access to medicines."  This additional step in the 
patent process increases delays, raises questions of 
confidentiality of proprietary information, and adds an 
unclear "social good" element to the patent process. 
 
Enforcement 
 
The 1992 Copyright Law recognizes copyright infringement as a 
public offense, and the 2001 Bolivian Criminal Procedures 
Code provides for the criminal prosecution of IPR violations. 
 Despite these legal protections, IPR enforcement remains 
insufficient.  There is a continued need for more deterrent 
penalties to be applied in civil and criminal cases.  Border 
enforcement also remains weak.  Video, music and software 
piracy rates are among the highest in Latin America, with the 
International Intellectual Property Alliance estimating that 
piracy levels in 2006 reached 100 percent for motion 
pictures, 90 percent for recorded music and 82 for software 
piracy (numbers are not yet available for 2007.) 
 
INVESTMENT BARRIERS 
 
The 1990 Investment Law opened Bolivia,s economy to foreign 
investment.  The Investment law provides for equal treatment 
of foreign firms and guarantees the unimpeded repatriation of 
profits, the free convertibility of currency, and the right 
to international arbitration in all sectors.  In-kind 
transfers are not allowed.  Companies must follow the 
Bolivian commercial code to close down operations and 
repatriate their capital.  The Bolivian government is still 
discussing a bankruptcy law and modification to its 
commercial code. 
 
In the mid-1990s, the Bolivian government implemented its 
"capitalization" (privatization) program.  The program 
differed from traditional privatizations in that the funds 
committed by foreign investors: (a) could only be used to 
acquire a 50 percent maximum equity share in former 
state-owned companies; and (b) were directed to the 
company,s investments. 
 
Bolivia has signed bilateral investment treaties with several 
countries, including the United States.  The United 
States-Bolivia Bilateral Investment Treaty (BIT) entered into 
force in June 2001.  The treaty guarantees recourse to 
international arbitration, which may permit U.S. companies to 
obtain damages in disputes that cannot be adequately 
addressed in the Bolivian legal system, where judicial 
processes can be prolonged, non-transparent, and occasionally 
corrupt.  In 2006, however, the new Bolivian administration 
announced its intention to renegotiate its bilateral 
investment treaties.  In October 2007, Bolivia became the 
first country ever to withdraw from the International Center 
for the Settlement of Investment Disputes (ICSID), a World 
Bank body that referees contract disagreements between 
foreign investors and host countries. 
 
President Morales has nationalized several industries 
(telecommunications, gas transport) and publically announced 
further industries, including electricity, water and the 
transportation sector could be nationalized as well. Bolivia 
is currently in international arbitration with Telecom 
Italia, who previously owned the now-national 
telecommunications entity, Entel. 
 
Article 139 of the Bolivian Constitution stipulates that all 
hydrocarbon deposits, whatever their state or form, belong to 
the government of Bolivia.  No concessions or contracts may 
transfer ownership of hydrocarbon deposits to private or 
other interests.  The Bolivian government exercises its right 
to explore and exploit hydrocarbon reserves and trade related 
products through the state-owned firm Yacimientos 
Petrolferos Fiscales Bolivianos (YPFB).  The law allows YPFB 
to enter into joint venture contracts for limited periods of 
time with national or foreign individuals or companies 
wishing to exploit or trade hydrocarbons or their 
derivatives. 
 
In May 2005, the GOB passed Hydrocarbons Law 3058, which 
required producers to sign new contracts within 180 days and 
imposed a 32 percent direct hydrocarbons tax on production. 
The law required operators to turn over all of their 
production to the state and re-founded YPFB, assigning the 
state responsibility for controlling the entire hydrocarbons 
production chain.  The private companies began to pay the 32 
percent tax under protest, but new contracts were not signed, 
YPFB was not revamped, and companies did not turn over their 
production to the state. 
 
In May 2006, the GOB issued Supreme Decree 28701.  The Decree 
generally reinforced the provisions of the 2005 Law - 
claiming state ownership of production, requiring companies 
to sign new contracts within 180 days, and mandating YPFB to 
take control of the hydrocarbons chain.  YPFB signed new 
contracts with production companies in October 2006 and took 
control over the distribution of gasoline, diesel, and LPG to 
gas stations. 
 
The state also had a legal mandate to gain a 51% stake in all 
of the companies operating in the sector that were part of 
the privatizations (called "capitalization") that took place 
in the 1990s.  Leading up to May 2008, this process was still 
incomplete, and private companies owned a majority of shares 
in Chaco (Pan American Energy), Andina (Repsol), and 
Transredes, the principle pipeline operator, partially owned 
by Ashmore Energy International (AEI), headquartered in 
Houston, TX, and Shell). 
 
In May 2008, President Morales announced that the government 
would obtain the 50 plus one percent control over these three 
capitalized companies, as well as outright ownership of the 
German/Peruvian controlled Bolivian Logistical Hydrocarbon 
Company (CLHB), which had been fully privatized in the 1990s. 
 Except for CLHB, which considers the government,s move 
expropriation, the other three companies all appear willing 
to sell the necessary shares to the government; the real 
sticking point is who will have operational control.  By 
October 2008, the government had acquired back a majority of 
the shares in the capitalized companies and had also fully 
nationalized the pipeline operator Transredes. 
 
The "nationalization" of the hydrocarbon industry remains a 
work in progress and YPFB is clearly struggling with its 
broad mandate.  By all accounts YPFB is in disarray and 
suffering from a lack of technical know-how.  These strains 
are becoming even more publically apparent.  Regional strikes 
have broken out and complaints of indiscriminate contracting, 
lack of a coordinated policy, and logistical incompetence 
have all been aired publically.  Moreover, from late 2007 
through 2008, diesel shortages have been commonplace 
(especially in Santa Cruz) and shortages of liquefied natural 
gas (LNG) canisters are becoming more frequent throughout the 
country. 
 
Outside the hydrocarbons sector, foreign investors face few 
legal restrictions, although a possible change to the mining 
code could require all companies to enter into joint ventures 
with the state mining company, COMIBOL.  The government's 
draft constitution, which will go to a national referendum in 
January 2009, also would include requirements for state 
involvement in natural resource companies.  The current text 
of the draft constitution could also limit foreign companies' 
access to international mediation in the case of conflicts 
with the government. At the same time it mandates that all 
Bilateral Investment Treaties (BITS) must adjust to the new 
provisions. 
URS