sábado, 3 de septiembre de 2011


Reference ID Created Released Classification Origin
09LAPAZ412 2009-03-17 18:16 2011-08-30 01:44 CONFIDENTIAL Embassy La Paz
DE RUEHLP #0412/01 0761816
P 171816Z MAR 09
C O N F I D E N T I A L SECTION 01 OF 05 LA PAZ 000412 
E.O. 12958: DECL: 03/13/2019 
     B. LA PAZ 373 
     C. LA PAZ 345 
     D. LA PAZ 305 
     E. LA PAZ 303 
     F. LA PAZ 176 
     G. 08 LA PAZ 2614 
     H. 08 LA PAZ 313 
     I. LA PAZ 247 
Classified By: Acting EcoPol Counselor Brian Quigley for reasons 1.4b,d 
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1.  (C)  As the Bolivian state extends its participation in 
the economy well beyond its capacity, corruption scandals are 
likely to surface across any number of the poorly managed and 
highly politicized state enterprises.  The state hydrocarbon 
company (YPFB) is far and away the largest of these companies 
and the recently uncovered corruption involving its former 
president Santos Ramirez spotlights corruption at the top, 
but the rot runs much deeper.  The scandal triggered the now 
standard spin of blaming the U.S. Embassy and opposition 
leaders, but on March 11 Ramirez was thrown out of the MAS by 
the party's ethics committee.  The treatment of Ramirez by 
Morales hints that he is walking a fine line between showing 
himself tough on corruption and making sure his own party 
doesn't turn on him.  The inner workings of the Morales 
Cabinet are still largely a matter of guesswork, but the 
continual reshuffling of the same names through cabinet posts 
indicates a lack of depth in trusted MAS leadership, a dirth 
of experienced managers, and the desire by senior leadership 
to continue to centralize power around themselves.  The 
administration claims that individuals are responsible for 
corruption, but the opposition is pointing (correctly) to a 
MAS economic model where corruption seems sure to thrive. 
End Summary. 
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Santos Ramirez:  A Necessary Sacrifice 
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2.  (C)  The scandal at the state hydrocarbon company (YPFB) 
involving the murder of a Bolivian businessman and alleged 
payoffs to then YPFB President Ramirez has led directly to 
the expulsion of Embassy Second Secretary Francisco Martinez, 
as the Morales administration tries to deflect blame for the 
corruption away from itself and prominent MAS leaders (Ref. 
B-G).  MAS leadership has identified corruption as a 
potential Achilles heal and is concocting conspiracy theories 
(many at our expense) to salvage their credibility on the 
issue. Foreign Minister David Choquehuanca allegedly briefed 
the incoming OAS Ambassador that, because of his senior 
position in Washington, he would be charged with vigorously 
refuting any negative stories about Bolivian stewardship of 
the economy, or commitment to fighting narcotics trafficking 
or corruption.  Choquehuanca identified these three issues as 
vulnerabilities that "could derail" Evo Morales' "change 
3.  (C)  On March 11, Ramirez was kicked out of the MAS by 
their ethics committee and may face jail time over the 
scandal.  It is inaccurate however, to conclude that Morales 
did everything he could to destroy a political rival.  We 
believe that Morales made a calculated decision that he 
couldn't stand publicly behind Ramirez and needed the cover 
of a public investigation (which buys him time to figure out 
a way to make sure it leads to the opposition (Septel), us, 
or elsewhere).  Additionally, Ramirez's party expulsion by 
the rank and file members of the MAS creates the impression 
that his expulsion was beyond the control of Morales.  The 
president initially deflected calls for Ramirez to be kicked 
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out of the MAS, but in the end Ramirez had to be sacrificed 
in the fight against corruption; it is a sacrifice that fits 
the administration's rhetoric that eliminating corruption is 
simply a matter of weeding out corrupt individuals wherever 
they may be. 
4.  (C)  Ruling MAS party congresswoman Ana Lucia Reis 
(strictly protect) told us during a February 4 meeting of MAS 
congressmen that Vice President Alvaro Garcia Linera told 
congressmen that the administration was genuinely concerned 
about combating corruption and that "the hand of the United 
States is surely behind this."  After initially supporting 
Ramirez in the face of the corruption charges, Reis said 
Morales "cut off" his longtime friend and political ally 
after reading a police report in late January detailing 
Ramirez's role in the latest scandal and "several others, 
most of which are not public; they found skeletons 
everywhere."  Lower House President Edmundo Novillo and other 
MAS leaders allegedly told Reis that Morales was "furious" 
when he learned the full scope of Ramirez's dirty dealing and 
immediately decided he wasn't worth the political capital of 
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Cabinet Infighting, Rumors Abound 
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5.  (C)  Dissident MAS member and Senate Vice President Luis 
Gerald Ortiz (strictly protect) told PolOff the fallout from 
the Ramirez case is dividing the party in congress.  Many MAS 
congressmen owe their political careers to Ramirez and have 
abiding friendships with him.  He is more popular among MAS 
congressmen than Vice President Garcia Linera, much to 
Garcia's irritation, and was the shoe-in favorite to take 
Garcia's place on the ticket, leading to conspiracy theories 
about MAS opponents setting him up. 
6.  (C)  Ramirez was also a direct rival for influence with 
Minister of the Presidency Juan Ramon Quintana.  In that 
sense, abandoning Ramirez to "justice" was also a victory for 
Quintana.  While Quintana remains unpopular among the 
indigenous and social group portion of the MAS base 
(ostensibly pro-Ramirez before the scandal), he remains an 
effective operator for Morales.  Indeed, Morales is reported 
to have recently told a MAS caucus that, "Quintana got me 
Fernandez (former governor of Pando, now in jail), what have 
you given me?".  Rumor mills contend that Quintana "has 
something" on Morales, but a more straightforward 
interpretation of his staying power is his effectiveness as a 
MAS hatchet man. 
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Incestual Reshuffling of "The Family" 
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7.  (C)  Beyond the big three of Quintana (Presidency), Rada 
(Government), and Lineira (Vice-President), the Morales 
Cabinet has been a constantly shifting mixture of generally 
the same people.  This may simply reflect a lack of qualified 
MAS members, but it also has the effect of keeping any 
corruption within "the family."  The newest member of the 
cabinet, Patricia Ballivian, left her post as Minister of the 
Bolivian Highway Administration (ABC), to head the Ministry 
of Development.  Corruption charges dogged her at ABC and the 
former minister, Jose Maria Bakovic, postulated in an 
interview that she was named development minister simply to 
protect her and the government from facing additional 
corruption charges and her shady dealings with Ramirez and 
the Brazilian construction firm OAS. 
8.  (C)  The same reshuffling is happening at YPFB, where 
ex-Minister of Hydrocarbons, Carlos Villegas has been 
appointed as the new head of YPFB (Note:  Such direct 
appointments are technically illegal, as the Senate should be 
asked to approve all new heads of state enterprises.  End 
LA PAZ 00000412  003 OF 005 
note.)  Moreover, the "watchdogs" (superintendents) across 
industrial sectors have been politicized.  For example, 
within hydrocarbons the ex-president of YPFB, Guillermo 
Aruquipa is now the superintendent of hydrocarbons, charged 
with monitoring the company he once headed. 
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"Teflon Evo" Avoids Investigation and Contract Reaffirmed 
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9.  (SBU)  On March 4, the senate commission set up to 
investigate the YPFB corruption case agreed not to 
investigate President Morales for decreeing YPFB's authority 
to use trust funds to enter into no bid contracts.  In a 
compromise with the commission's president Walter Gutieras, 
from the opposition party Podemos,  MAS members of the 
commission were able to exempt Morales from investigation. 
In exchange, four current and former members of the Morales 
administration will be investigated:  Carlos Villegas 
(ex-minister of hydrocarbons and the new president of YPFB), 
Saul Avalos (ex-minister of hydrocarbons), Luis Arce 
(minister of treasury), and Guillermo Aruquipa 
(superintendent of hydrocarbons).  Two days later, the MAS 
senators publicly retracted their signatures and Morales 
claimed they had been "misled" by the opposition members of 
the commission.  In the end however, the signatures were left 
in.  Additionally, in spite of the scandal, Villegas 
reaffirmed the contract with Catler-Uniservice to construct 
the controversial gas separation facility. 
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Corruption, Corruption: Who or What's to Blame 
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10.  (C)  For the MAS, at least publicly, corruption is 
simply the result of corrupt individuals; purge the dirty 
people and corruption will disappear.  For the opposition, 
the system being put in place by the MAS facilitates 
corruption.  Senate President Oscar Ortiz recently published 
a document that outlines how presidential decrees which 
create "strategic enterprises" and fund them with special 
trust funds (fidecomisos) are leading to a system rife with 
corruption.  To date, nine such public strategic enterprises 
have been created and funded by decree without Senate 
approval:  The Food Production Support Company (EMAPA), Milk 
of Bolivia (LACTEOSBOL), Paper of Bolivia (PAPEBOL), 
Cardboard of Bolivia (CARTONBOL), Business of Marketing 
(EDCO), Cement of Bolivia (ECEBOL), Bolivian Customs Deposits 
(DAB), Sugar of Bolivia (AZUCARBOL), Aviation of Bolivia 
(BoA).  Moreover, six previously existing enterprises (some 
taken over by the state during the Morales tenure) have 
received access to trust funds by decree for particular 
expansion projects:  Minera Huanuni, Mutun Steel (ESM), The 
Mining Corporation of Bolivia (COMIBOL), Vinto Metals, Entel 
(the nationalized telephone company), and YPFB.  In all, 
there are now 15 national strategic companies and every one 
of them creates a unique opportunity for corruption and 
political manipulation.  According to Ortiz, close to US$2 
billion has been placed in trust funds for these strategic 
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YPFB -- The Largest Example 
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11.  (C)  Beyond the well-documented case of Santos Ramirez 
at the top, corruption can be found throughout YPFB and the 
hydrocarbon sector.  Before listing four areas where 
corruption likely thrives, it should be noted that it has 
been over a year since YPFB published its previously 
extensive quarterly reports.  Since that time, no one can say 
how much money has flowed into or out of the company or, 
concretely, what activities the company has undertaken.  Four 
areas of corruption revolve around:  contraband, illicit 
sales, relations with the Venezuelan state company PdVSA, and 
LA PAZ 00000412  004 OF 005 
equipment purchases. 
12.  (C)  First, hydrocarbons in Bolivia are highly 
subsidized and a brisk contraband business exists with the 
country's neighbors.  According to a major daily, at least 60 
percent of employees at the National Migration Service have 
been dismissed for acts of corruption over the last year and 
a half.  Gas canisters and diesel are two of the most 
lucrative smuggled items.  YPFB, either at its refineries or 
at its service stations is reportedly tightly entangled in 
smuggling networks. (Note:  Hydrocarbons are not the only 
contraband products.  Still under senate investigation, the 
highly publicized case linking Minister Quintana to 33 trucks 
in Pando State also involves the illegal movement of 
merchandise across borders. End note.)  Second, because of 
diesel shortages, quantitative limits on sales have been 
imposed.  For a price however, these limits can be overlooked 
at the YPFB refineries, where middle men do a brisk business 
supplying necessary diesel to Santa Cruz farmers.  Third, 
YPFB's relations with PdVSA are opaque.  A former Treasury 
Vice Minister told us that in part financial problems at YPFB 
were exacerbated because it could not produce purchase 
receipts from PdVSA for diesel imports, and thus could not be 
reimbursed for those purchases by the Treasury. 
Additionally, and not surprisingly, an untested partnership 
between the newly created YPFB exploration company SIPSA and 
PdVSA won the first drilling contract from the now wholly 
nationalized Andina (formerly majority owned by Repsol).  It 
promptly spent $6 million to charter a ship solely for the 
purpose of bringing a drilling rig directly from Venezuela 
(Ref. G).  Finally, equipment purchases with these 
unsupervised trust funds (especially used equipment) are 
being criticized across the state enterprises.  For YPFB, the 
latest accusations revolve around faulty home gas connection 
monitors being installed in the poor, suburban areas of La 
Paz. (Note:  The newly appointed interim Prefect in Pando 
Rafael Bandeira is being accused of purchasing used 
replacement parts for the state governments vehicle fleet 
worth more that the vehicles themselves.  End note.) 
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A Quick and Dirty Laundry List 
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13.  (C)  Accusations of corruption are consistent and 
growing across the public sector enterprises.  The companies 
are operated by inexperienced political operatives under a 
cloak of secrecy.  For example, when PAPEBOL (paper) was 
formed, private sector industry contacts said that they were 
never consulted and state factory plans emerged out of secret 
government meetings (Ref. H).  Moreover, the used machinery 
PAPEBOL planned to purchase was obsolete and inappropriate 
for the recycled paper to be manufactured.  The milk company 
was launched without consideration of where the raw supply 
would come from, leading private executives to fear disloyal 
competition (and pressure on producers to sell to the state 
companies).  There have also been corruption allegations made 
about kickbacks by a water company (EPSAS) to government 
officials (Ref. I), plane leases for the new national airline 
BOA, the sale of visas, and bribes to police for political 
cooperation (Ref. C).  Finally, one may reasonably ask why 
Entel, the nationalized telephone company, recently donated 
23 computer systems to the Bolivian Workers Union (COB). 
While not explicit corruption, the Bolivian state is in a 
position to arbitrarily reward and punish through a growing 
network of public companies. 
14.  (C)  Additionally, the government lauds the threat of 
punitive action or expropriation over much of the private 
sector.  For example, an electric company executive told us 
that he was pressured to allow COMIBOL (the State Mining 
Corporation) to have a ten percent stake in a hydroelectric 
expansion.  When asked what service they provided to the 
company, the executive just laughed.  In agriculture, 
following the export ban on cooking oil in the spring of 
LA PAZ 00000412  005 OF 005 
2008, companies must now have all exports "approved" by the 
Ministry of Agriculture.  While our contacts say they have 
had no serious problems to date, it is a clear political 
lever held over the lowland agricultural producers. 
Additionally, potential disloyal competition for the purchase 
of agricultural production looms in the form of EMAPA, the 
Food Production Support Company. 
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15.  (C)  The Bolivian state now controls close to a quarter 
of the economy and a broad swath of economic actors have been 
created whose actions do not necessarily correspond to profit 
motives.  With lax oversight, political goals, and 
inexperienced managers, identifying and stopping corruption 
at all levels of state enterprises will be a difficult task 
indeed.  It should be noted that corruption in prior 
governments was also rampant.  But beyond creating a state 
oriented system where corruption will thrive, a difference 
between the Morales administration and prior governments is 
that in the past little public emphasis was given to the 
issue and few measurable promises were made to combat it. 
Morales, by contrast, has made the wholesale "elimination" of 
corruption a cornerstone of his political discourse.  Our 
contacts (even some MAS contacts) confirm that corruption is 
at least as bad in this administration as in prior 
governments and that the MAS has set themselves up for a fall 
by claiming to be anti-corrupt saints.  Unfortunately 
however, even MAS stalwarts like Ramirez appear more 
interested in lining their pockets than living up to the 
promise to break with Bolivia's long tradition of corruption. 

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