VZCZCXYZ0000
OO RUEHWEB

DE RUEHLP #0007/01 0142136
ZNR UUUUU ZZH
O R 142136Z JAN 10
FM AMEMBASSY LA PAZ
TO RUEHC/DEPT OF LABOR WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 0419
INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHSG/AMEMBASSY SANTIAGO
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS LA PAZ 000007 
 
SENSITIVE 
SIPDIS 
DEPARTMENT OF LABOR FOR SECRETARY SOLIS 
STATE FOR U/S OTERO, WHA 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM SNAR EAID OVIP BL
SUBJECT: SCENESETTER FOR PRESIDENTIAL DELEGATION TO BOLIVIA 
 
¶1. (SBU) Embassy La Paz warmly welcomes the Presidential Delegation 
headed by Secretary of Labor Hilda Solis to the January 22 
inauguration of Bolivian President Evo Morales for a second term. 
The U.S. delegation will visit Bolivia as efforts to normalize 
relations with the Morales government remain uncertain, hampered by 
consistently harsh rhetoric from the Bolivians and adverse 
ideological perceptions of the United States.  Energized by his 
overwhelming electoral victory last month (having won 64 percent of 
the vote), Morales nevertheless faces formidable challenges in 
leading  one of the least-developed nations in Latin America, rich 
in natural resources but saddled with a political leadership deeply 
suspicious of private enterprise, foreign investment and the U.S. 
"neo-liberal empire." 
 
Bilateral Relations: Difficult, but Sustained Engagement 
 
¶2. (SBU) Following the Bolivian government's expulsion of our 
ambassador in September 2008 and the Drug Enforcement 
Administration (DEA) three months later, we have sought to work 
constructively with Bolivia where we can -- on counter-narcotics, 
economic development, environment and health -- while insisting 
that any resumption of normal relations must follow clear signals 
from the Bolivians that they genuinely want more constructive ties. 
Last May, we embarked on a bilateral dialogue process aimed at 
addressing the Bolivian government's declared interest in 
negotiating a new framework for relations.   After a promising 
start and several rounds of talks (most recently in October), 
negotiations have stalled over disagreements on language governing 
assistance and trade.   Still, Morales continues to refer to the 
process publicly as a means of getting our relationship back on 
track, based on "mutual respect" and recognition of "sovereignty." 
 
¶3. (SBU) Although encouraged by his socialist ally and mentor, Hugo 
Chavez, Morales comes by his anti-imperialist, anti-American streak 
from his perceived personal experience, nurturing his grievances 
(he frequently mentions being physically abused by security forces 
in his early cocalero days) and apparently convinced that the U.S. 
is opposed to any social or economic reform in Latin America.  We 
harbor no hopes of changing Morales's mind about the U.S., but he 
has shown himself sufficiently pragmatic at times that we believe 
it possible to forge a more constructive relationship.   Our 
engagement policy with Bolivia is aimed at capitalizing on the 
opening offered by the new U.S. administration (early on, Morales 
evinced keen interest in connecting with President Obama; more 
recently -- following Chavez's lead -- he has taken to accusing the 
President of offering no change from his predecessor). 
 
Consolidation Morales's Likely Agenda, With Hopes for Steady Growth 
 
¶4. (SBU) Morales enters his second term at the height of his 
political popularity and power, with effective control of the 
government and legislature.  In his first four years in office, 
Morales won approval for a new constitution that redefines the 
country according to his statist, pro-indigenous vision, 
nationalized the gas and other industries, and out-maneuvered 
regional separatist and opposition movements.   With most of his 
ambitious goals realized, Morales is likely to focus on 
consolidating his gains and extending his control to the judiciary. 
Although sometimes unpredictable, for the most part Morales has 
adhered to a defined and transparent agenda, which for the coming 
years he has articulated as mostly more of the same (expansion of 
public investment, industrialization).    Moreover, there are real 
limits to the president's range of action, given his disparate 
coalition of supporters (including many skeptical of his socialist 
rhetoric) and the need to avoid radical measures that could lead to 
Bolivia's economic isolation. 
 
 ¶5. (SBU) President Morales and his government have benefited from 
healthy economic growth in recent years, thanks to strong oil and 
gas prices.  Even at the height of last year's global turndown, 
Bolivia managed to post growth of about three percent, and the 
outlook for the next few years is similarly favorable -- provided 
commodity prices remain steady.   Bolivia's $17 billion economy 
remains relatively small and its per capita income ($1700 in 2009) 
 
is among the lowest in the Americas, but the average Bolivian has 
seen a steady if modest increase in living standards, aided also by 
generous public spending (state transfer payments, or "bonos," for 
many low-income categories).   Brazil is by far Bolivia's largest 
trading partner (gas), while trade with the U.S. remains modest 
(about $850 million in exports and imports last year).  The U.S. is 
the third-largest source of net direct investment in Bolivia ($60 
million in 2009), after Spain and Brazil. 
 
Common Front Needed to Reverse Coca Growth 
 
¶6. (SBU) Since expelling DEA in 2008, the Bolivian government has 
sought to show that it can fight illegal narcotics production and 
traffic on its own.  The Bolivians have maintained eradication and 
interdiction (with vital logistical support from the Embassy's 
Narcotics Affairs Section, $26 million in FY09), but have been 
unable to compensate for the loss of DEA law enforcement 
intelligence and face continuing growth in coca production.   We 
are working closely with regional and European allies (the 
principal markets for Bolivian cocaine; only an insignificant 
amount of Bolivia's production reaches the U.S.) to 
internationalize counter-narcotics cooperation and press the GOB to 
reverse the growth in coca production.   Morales (still head of the 
coca growers' union) plans to raise the limits on the legal coca 
crop, although well below actual current production -- which could 
provide a basis for coordinated international pressure to begin 
real net reductions. 
 
U.S. Development Assistance Under GOB Review 
 
¶7. (SBU) We maintain a significant USAID-administered development 
assistance program in Bolivia, despite GOB pressure and budget 
constraints.  With almost $60 million in FY09, the U.S. remains by 
far the largest single aid donor in Bolivia.   Among our priorities 
are assistance for alternative crop development (alternatives to 
coca), at about $18 million, public health at $15 million and 
agriculture, private sector development and the environment, at $14 
million.   USAID programs are mostly well received by the Bolivian 
people and local stakeholders, but generated friction in recent 
years, as the Morales government has sought a greater role in 
defining our assistance programs.  Last year, the Bolivians forced 
the closure of our democracy and public administration programs and 
have insisted that the bilateral dialogue process address their 
concerns about assistance priorities. 
 
Populist, Anti-Imperialist Foreign Policy 
 
¶8. (SBU) President Morales will continue to pursue an approach that 
emphasizes solidarity with Hugo Chavez and other ALBA (Bolivarian 
Alternative  for the Americas) allies, in keeping with his populist 
conviction that the U.S. represents a constant threat to Latin 
America.  He can also be expected to seek deeper ties with Iran, 
Russia, China and other potential non-Western partners.  His 
approach over the past year shows he remains deeply suspicious of 
the U.S., but also recognizes the value of at least correct 
relations with us (and also the disadvantages of alarming centrist 
voters who believe his attacks have gone too far). 
 
¶9. (SBU) Still, Morales also cultivates close relations with 
Brazil, Bolivia's major economic partner and with whom it shares a 
3200-kilometer border, and values his personal ties with President 
Lula da Silva.  An enthusiastic supporter of the Union of South 
American Nations (UNASUR), Morales has also seen the limitations of 
that group for advancing his and ALBA's agenda (failing to reach 
consensus to oppose the Colombia base agreement, for example). 
Brazil, Chile and Argentina will continue to privately urge Morales 
to improve relations with the U.S., especially if more conservative 
leaders are elected in those countries over the next two years. 
Morales clearly relished his grandstanding, spoiler role at 
December's UN Climate Summit (where he railed against the developed 
world and demanded astronomical compensation for crimes against 
"Mother Earth"), but it remains to be seen whether he will sustain 
this campaign absent the spotlight of Copenhagen. 
 
Watch Out For:  Latest Bilateral Controversies 
 
¶10. (SBU) Bolivia's leaders point to a number of U.S. actions and 
events over the past year that have complicated our efforts to 
improve bilateral relations and conclude a new framework agreement. 
Many of these are likely to emerge at some point in discussions 
during the U.S. delegation's visit. 
 
-- Counter-narcotics Decertification:  In September 2009, the 
Administration determined in its annual report to Congress that 
Bolivia had "failed demonstrably" to meet its international 
counter-narcotics obligations.  Although a waiver was approved to 
allow U.S. assistance to continue, the finding was roundly 
criticized by Bolivia's leaders and opinion makers. 
 
-- Exclusion from ATPA (formerly ATPDEA):  After previously having 
their participation suspended in the Andean trade preference regime 
(which eliminates tariffs for certain imports in exchange for 
counter-narcotics cooperation), the U.S. Congress in December 2009 
excluded Bolivia entirely from legislation extending the program. 
President Obama's accompanying statement emphasized our desire to 
work with the Bolivians to enable them to qualify for the program 
in the future.   The actual economic impact was modest, as most 
Bolivian exports are covered under GSP, but the GOB reaction to the 
move was strongly negative. 
 
-- "Goni" Extradition:  The Bolivian government is seeking the 
extradition of former President Gonzalo "Goni" Sanchez de Lozada 
and associates for alleged crimes committed prior to his 
resignation and flight to the U.S. in October 2003 (some 59 were 
killed in clashes with police).  The U.S. Department of Justice has 
yet to respond to the GOB request, but the answer could provoke a 
violent reaction from the Bolivian government and affiliated social 
and victims' groups.  Meanwhile, a civil suit against "Goni" is 
moving forward in the U.S. District Court in Southern Florida. 
 
-- Opposition Politician in U.S. Exile:  Former opposition 
presidential candidate Manfred Reyes Villa fled to Miami days after 
losing to Morales in the December 6 election, and is expected to 
seek political asylum.   His escape in the face of numerous fraud 
and corruption charges has received national coverage and will 
likely lead to a formal GOB extradition request.  Reyes Villa's 
flight, which was unknown to the Embassy and confirmed only days 
ago, reinforces the GOB narrative of the U.S. as a safe haven for 
criminals. 
Creamer