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Cablegate: Morales Announces "Surprises" for Mining Industry

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DE RUEHLP #2780 2892115
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R 162115Z OCT 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 0892
INFO RUEHAC/AMEMBASSY ASUNCION 6187
RUEHBO/AMEMBASSY BOGOTA 3501
RUEHBR/AMEMBASSY BRASILIA 7362
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RUEHSG/AMEMBASSY SANTIAGO 9090
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS LA PAZ 002780

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STATE FOR WHA/AND LPETRONI
COMMERCE FOR JANGLIN
TREASURY FOR SGOOCH

E.O. 12958: N/A
TAGS: EMIN EINV ECON BL
SUBJECT: MORALES ANNOUNCES "SURPRISES" FOR MINING INDUSTRY

REF: LA PAZ 2046

1. (SBU) Summary: President Morales announced October 15 that
the mining industry should expect "surprises" permitting the
state to regain control of mineral production. His comments
caused anxiety among U.S. mining company executives, who said
October 16 that they were "nervous" about the GOB's
intentions but lacked a clear understanding of the
administration's plans. At this point, they said, it is
impossible to determine how company operations might be
affected. End summary.

2. (U) Bolivian President Evo Morales announced October 15
that the mining industry should expect "surprises" permitting
the state to recover natural resources and regain control of
mineral production. Speaking in Challapata, in the
department of Oruro, Morales said the mining sector would be
the "next step" in his drive to nationalize natural
resources, declaring that tin, silver, gold, and other
minerals "should pass to the hands of the Bolivian state."
(Note: Industry representatives believe all mineral resources
will be affected. End note.) Immediately afterward, new
Minister of Mining Jose Dalence told the press that the GOB
sought to increase its participation in all aspects of
mineral production, from exploration to sale, and would
consider audits and revisions of existing contracts, along
with the negotiation of new contracts and significant changes
to the mining code. Dalence earlier announced that the GOB
would release a comprehensive mining plan October 31.

3. (SBU) Morales' comments caused anxiety among U.S. mining
company executives, who told Econoff October 16 that they
were "nervous" about the GOB's intentions but lacked a clear
understanding of the administration's plans. The president's
failure to provide specifics left company representatives
guessing at possible changes; according to Gerardo Garrett,
vice president of U.S.-based Apex Silver's San Cristobal
silver-lead-zinc mine, the GOB could take control of current
projects, modify existing contracts, return unproductive
mining concessions to the state, or simply follow through on
earlier promises to rewrite the mining code and raise taxes
and royalties (reftel). Counterparts at Coeur d'Alene and
Newmont Mining subsidiaries echoed Garrett's concerns, noting
that the GOB's actions were difficult to predict. At this
point, executives said, it is impossible to determine how
company operations might be affected.

4. (SBU) Comment: Morales' announcement sparked renewed fears
of GOB intervention in the mining sector and caused
executives to question GOB officials' past assurances that
the Morales administration would not nationalize the mining
industry. U.S. company representatives are concerned about
possible changes, but as one executive noted, they also
recognize that Morales' announcements often have little
impact. Until they know more about the GOB's intentions,
executives can do little more than watch and wait. End
summary.
GOLDBERG

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