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Cablegate: Millennium Challenge: An Update From Bolivia

VZCZCXRO3355
PP RUEHLMC
DE RUEHLP #2572/01 2631712
ZNR UUUUU ZZH
P 201712Z SEP 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 5043
INFO RUEHAC/AMEMBASSY ASUNCION 7082
RUEHBO/AMEMBASSY BOGOTA 4452
RUEHBR/AMEMBASSY BRASILIA 8347
RUEHBU/AMEMBASSY BUENOS AIRES 5576
RUEHCV/AMEMBASSY CARACAS 2802
RUEHPE/AMEMBASSY LIMA 2989
RUEHMN/AMEMBASSY MONTEVIDEO 4854
RUEHQT/AMEMBASSY QUITO 5436
RUEHSG/AMEMBASSY SANTIAGO 0043
RUEHUB/USINT HAVANA 0541
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 LA PAZ 002572

SIPDIS

SIPDIS

MILLENNIUM CHALLENGE CORPORATION: PLEASE PASS TO AMY
KIRSCHENBAUM

E.O. 12958: N/A
TAGS: ECON PGOVBL BL
SUBJECT: MILLENNIUM CHALLENGE: AN UPDATE FROM BOLIVIA


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Summary
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1. (U) Despite recent hostile pronouncements against US
assistance from the national government, Bolivia continues
its pursuit of a Millennium Challenge Corporation (MCC)
Compact for US$650 million. There are signs however, that
the GOB is not united in its pursuit of such a Compact.
Despite previous announcements of his intentions to deliver
personally a completed proposal to the MCC, Vice President
Garcia Linera cancelled the appointment at the last minute,
claiming the English translation was not complete. Instead,
the proposal was delivered to the MCC for "technical review"
via email on September 5 and is supposed to be formally
submitted on September 21 by the Bolivian Ambassador.
Currently, the proposal focuses on development of the
northern region of Bolivia through road building and
agricultural development. End Summary.

--------------------------------------
Mixed Signals and Managed Expectations
--------------------------------------

2. (SBU) The week leading up to Vice President Linera's
visit to Washington (September 5-6) was marked by vehement
attacks by the GOB on USAID, its employees, and its programs.
Within the context of this intentionally hostile
environment, the Vice President was to deliver the official
Bolivian Country Proposal to the MCC. At the last moment,
however, Garcia Linera canceled his appointment with the MCC,
saying that the English translation of the proposal was not
ready. The proposal was delivered, however, in English and
Spanish to the MCC via email for technical review that same
day. Graciela Toro, the MCC project coordinator here in La
Paz, later met with the DCM and explained that the proposal
had been ready since August 31. Initially, she was
instructed by the Vice President not to submit the proposal
so that he could do it personally. The day before the
scheduled presentation though, she was told only to submit it
on a technical level and that Ambassador Guzman would
officially deliver it in a couple weeks.

3. (U) The local press has reported that the technical
proposal was submitted. Graciela Toro is quoted as saying
that the GOB is hoping to sign a Compact around June in order
to have the money budgeted for 2008. On the other hand,
Ambassador Goldberg was quoted as saying that although
Bolivia is eligible, it will be difficult to sign a Compact
for 2008 given that the process is a long one and Bolivia is
only at the beginning of the road. While he did not rule out
the possibility, he reiterated that there are many steps to
be taken before funding can be awarded. Typically due
diligence takes anywhere from 6-9 months after an Opportunity
Memorandum is approved by the MCC's Investment Committee.
Currently, without even the official proposal, it is too
early in the process to estimate when a MCC Compact to
Bolivia might be finalized.

------------
The Proposal
------------

4. (U) The proposal concentrates on the northern region of
Bolivia in the departments of La Paz, Beni, and Pando. It is
designed to improve both major road corridors and lesser
rural connecting roads. The proposal also includes a smaller
project focused on rural productive development. The main
objectives of the proposal are to: 1) Increase integration of
a region historically isolated from the rest of the country;
2) reduce transportation time/costs while improving road
infrastructure; and 3) diversify the Bolivian economy away
from its heavy reliance on natural gas and mineral resources.

5. (U) The Bolivian proposal presents various scenarios
for the infrastructure components. The Compact amount for
Bolivia could fluctuate significantly depending on which
scenario is ultimately agreed upon after a thorough technical

LA PAZ 00002572 002 OF 002


review and due diligence. MCC's funding allocations will
also impact this total. The "base amount" the GOB is
requesting in its proposal is approximately US$657 million.

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Comment
-------

6. (U) For ultimate success, the MCC needs to be a top
priority for the Morales Administration. The technical team
must enjoy the support of the President and his
administration. The USG will continue to work with Bolivia
on the Compact, but much depends on the GOB. Continued
participation in the MCC program is reliant on Bolivia's
continued commitment to ruling justly, investing in people,
and encouraging economic freedom. Casting further doubt on
the President Morales' commitment to a MCC Compact were
comments he made this past weekend noting that President Lula
of Brazil was also offering financing (to the tune of
US$300-500 million) and that Morales would at some point
chose between the American and Brazilian "offers".
GOLDBERG

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