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Cablegate: Transredes Update

VZCZCXYZ0003
PP RUEHWEB

DE RUEHLP #2011 2071305
ZNR UUUUU ZZH
P 261305Z JUL 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 0058
INFO RUEHAC/AMEMBASSY ASUNCION 6013
RUEHBO/AMEMBASSY BOGOTA 3331
RUEHBR/AMEMBASSY BRASILIA 7182
RUEHBU/AMEMBASSY BUENOS AIRES 4445
RUEHCV/AMEMBASSY CARACAS 1720
RUEHPE/AMEMBASSY LIMA 1735
RUEHMN/AMEMBASSY MONTEVIDEO 3935
RUEHQT/AMEMBASSY QUITO 4351
RUEHSG/AMEMBASSY SANTIAGO 8913
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 002011

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW

E.O. 12958: N/A
TAGS: ECON EINV ENRG EPET BL
SUBJECT: TRANSREDES UPDATE

REF: A. LA PAZ 1842

B. LA PAZ 1936

1. (SBU) Summary: Transredes' board will meet at the end of
July to discuss acquisition of the company's shares by the
GOB. According to a Transredes executive, the company could
live with GOB majority ownership, as long as the private
investors, Shell and Prisma, retained operating control. The
GOB's failure to implement transportation regulations means
that Transredes continues to operate in a legal limbo,
compounding its difficulties in securing needed financing.
Transredes is concerned about the erosion of Bolivia's weak
democratic institutions and the increasing presence of
Venezuelan energy firm, PDVSA. End summary.

Transredes to Discuss Ownership Structure
-----------------------------------------
2. (SBU) Transredes executive Maria Claudia Dabdoub told
Econoff on July 24 that Transredes' board would meet during
the last week of July to discuss its ownership structure and
draft a proposal to present to the shareholders. She said
that the board would likely accept selling the 16 percent of
shares to the GOB needed for it to gain majority ownership of
the company (ref A) if Transredes' private investors, Shell
and Prisma, maintained operating control. If the GOB refused
to delegate operating control to the private investors, she
argued that Transredes would not be able to continue
operating in Bolivia, as it would not be able to guarantee
results.

Still No Transportation Regulations
-----------------------------------
3. (SBU) Dabdoub complained that the GOB had still not
promulgated transportation regulations based on the 2005
Hydrocarbons Law, which would provide Transredes with a more
certain operating environment and possibly aid the company in
unlocking credits frozen by the Inter-American Development
Bank and the Andean Development Corporation (ref B) needed to
complete several pipeline construction projects. The company
is using its cash flow to finance current operations and
would not pay out dividends in the near-term, she said.

Concerns about Venezuela and Democracy
--------------------------------------
4. (SBU) Dabdoub added that the Venezuelan energy firm,
PDVSA, had increased its presence and visibility in Santa
Cruz and begun an advertising blitz nation-wide. Press
reports on July 25 indicated that PDVSA would soon begin
hydrocarbons exploration in the northern La Paz region.
Dabdoub expressed concern about Venezuela's influence in the
country and the weakening of Bolivia's democratic
institutions, including respect for the law. A recent
example, she noted, was the GOB's attempt to avoid sharing
hydrocarbons revenue with the regions as required by law (ref
B). Instead of following the law, she complained, the GOB
offered to "dialogue" with the parties involved in any given
dispute and then did what it wanted in the end. However, in
the case of revenue sharing, she believed that the regions
would force the GOB to back down and share the wealth.
GREENLEE

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