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Cablegate: Scenesetter for Presidential Delegation to Bolivia

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

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