Has the US Written Off Bolivia As Having Fallen Into the Chavez Camp?

Friday, June 2, 2006

BOARD OF ADVISORS Featured Q&A With Our Board of Advisors

Bernard Aronson Peter Hakim Managing Partner, President, US President George W. Bush development assistance, the US needs to re- ACON Investments LLC Inter-American caught some Bolivian officials think its bilateral aid and find ways to gar- Diego Arria Dialogue off guard last week when he ner more positive PR from it—as do the Director, Donna Hrinak lumped Bolivia in with Venezuela Venezuelans and Cubans. The US should Columbus Group Director for Corporate Q and expressed concern about an "erosion attempt to work with the Bolivians on their Genaro Arriagada and Govt. Affairs, of democracy" in the two countries, an recent submission of a $600 million project Kraft Foods Inc. Board Member, Banco apparent break from previous efforts to proposal to the MCC on infrastructural del Estado de Chile Jon Huenemann reach out to the government of Bolivian development in northern Bolivia—which Joyce Chang Principal, President Evo Morales. Has the US' could make significant improvements for International Global Head of approach toward Bolivia changed? Has the country, definitely eclipsing any of Emerging Markets Department, Research, J.P. Morgan Miller & Chevalier Washington written off Bolivia as having Venezuela's and Cuba's recent financial Chase & Co. James R. Jones fallen into the anti-US Chavez camp? commitments to Bolivia. With the illicit Adrian Cruz Co-chair, narcotics recertification process around the Founder and Senior Manatt Jones Guest Comment: Ivan Rebolledo: corner and the upcoming expiration of the Partner, Global Strategies LLC "US policy toward Bolivia has not ATPDEA, Bolivia will be looking more Crisis Simulations Nicolás Mariscal significantly changed since Evo closely at the US for its actions. Bolivia is International, LLC Chairman, Morales took office in January— not yet lost to Chavez, but the next few W. Bowman Cutter Grupo Marhnos A albeit President Bush's first time ever pub- months will be critical .... " Partner, Juan Felipe Munoz lic remarks on Bolivia were surprising. The Continued on page 4 E.M. Warburg President, State Department's attitude has been one Pincus The Otun Group of limited engagement with a 'wait and see' PHOTO OF THE DAY Rui da Costa Thomas F. approach. However, four months have now Managing Director, McLarty III Latin America & the President, passed, and President Morales has made Caribbean, Kissinger McLarty key decisions that clearly demonstrate to Hewlett-Packard Co. Associates the world the path he intends to take Dirk Donath Beatrice Rangel Bolivia on, which include nationalization Managing Director, President & CEO, of the hydrocarbons sector; a free trade Eton Park Capital AMLA Consulting agreement with Venezuela and Cuba; Management José Antonio Ríos reversing the capitalization (privatization) Jonathon Flott International President, process of the 1990s; land reform, etc. It is Senior Economist for Global Crossing Latin America, Africa time for the US to rethink its policy with Andrés Rozental and the Middle East, Bolivia, get clearly away from its narcotics- President, Chilean President Michelle Bachelet on General Motors centric bilateral relationship, and focus on Mexican Council on Thursday offered concessions to Wallace Gardner Foreign Relations other important issues in the areas of protesting high school students. See Vice President, health and education. Although it is Everett Santos story on page 2. Worldwide Sales, CEO, Emerging impossible for the US to ever be publicly Chubb & Son Photo: La Moneda. Markets praised in Bolivia for its impressive levels of Michael Gavin Partnership Head of Latin Roger Scher America Econ. Head of Latin Inside This Issue Research, UBS American George W. Grayson Sovereign Ratings, FEATURED Q&A: Has the US Written Off Bolivia Bolivia Awards El Mutun Iron Professor of Govt., Fitch Ratings as Having Fallen into the Chavez Camp? ...... 1 Ore Contract to India's Jindall...... 2 The College of Tony Smith William & Mary Bachelet Offers Concessions to Azcarraga: Televisa Will not Join Senior Counsel, Protesting High School Students ...... 2 with Saban to Acquire Univision ...... 3 Schmeltzer, Aptaker & Shepard Lula Enjoys Wide Lead in Capitol Hill Watch: A Weekly Look at US Brazilian Presidential Poll...... 2 Congressional Activity on Latin America...... 3

NEWS BRIEFS Political News Governor Geraldo Alckmin. Including blank and null votes, Lula would garner 48 Statoil Hit with $1.5 Million percent of the votes versus 18-19 percent Back Tax Bill in Venezuela Bachelet Offers Concessions to for Alckmin. The poll of 2,002 people was Venezuela's Seniat tax agency on Protesting High School Students conducted May 28-31 and had a margin of Thursday demanded Norwegian oil error of plus or minus two percentage firm Statoil pay $1.6 million in back Chilean President Michelle Bachelet on points. Alckmin, of the Brazilian Social taxes stemming from 2002, accord- Thursday offered several concessions Democratic Party, or PSDB, faces an uphill ing to Reuters. Statoil is the latest aimed at ending nationwide protests by battle in unseating Lula, whose popularity high school students fed up with what was battered by a series of scandals involv- foreign oil company to be hit with a they say is a lack of resources and equality ing his Workers' Party over the past year, bill for back taxes after the govern- in public secondary education, the but who is currently riding Brazil's recent ment launched a review of foreign Associated Press reported. Bachelet said positive economic performance. On oil companies' past tax payments the government would address the Wednesday, the government reported that last year. protesting students' demands, including the economy expanded 1.4 percent in the reduced transportation fares, repairs to first quarter of this year from the previous Chavez Calls Carlos the buildings, and their central demand, a fed- quarter, and 3.4 percent from the first Jackal a "Good Friend" eral takeover to reduce inequality between quarter of 2005. Venezuelan President Hugo Chavez on Thursday referred to notorious Venezuelan-born terrorist Ilich Ramirez Sanchez, known as "Carlos “ The state will be the guarantor of a the Jackal," as a "good friend," the quality education for all Chileans. Associated Press reported. Chavez ” made the remark at a meeting of – Michelle Bachelet OPEC members states in Caracas. Ramirez, who has admitted to lead- ing a 1975 attack that killed three rich and poor schools. "The state will be people at the OPEC headquarters in the guarantor of a quality education for all Economic News Vienna, Austria, is serving a life sen- Chileans," Bachelet said. The president tence in France for the 1975 mur- said she would send a bill to Congress to ders of two French investigators and reform Chile's education law, which gives Bolivia Awards El Mutun Iron a Lebanese man. municipalities responsibility for public Ore Contract to India's Jindall schools. The law was issued by ex-dictator Bolivian Doctors Stage One-Day Augusto Pinochet one day before he left The Bolivian government on Thursday Strike to Protest Cuban Doctors power in 1990. The protests have posed awarded a contract to India's Jindall Steel Bolivian doctors staged a one-day the biggest challenge yet to Bachelet's and Power to develop El Mutun, believed strike on Thursday to protest the three-month-old government. On to be the world's biggest iron deposit, state Tuesday, at least a dozen people were news service ABI reported. Jindall is presence of Cuban doctors sent by injured and more than 700 arrested during expected to invest $2.3-2.5 billion over the Fidel Castro to give free medical street clashes between protesters and next eight years to develop the site, which treatment, Reuters reported. "We police in Santiago. is located in eastern Bolivia near the think the health of the Bolivian peo- Brazilian border. It would be the biggest ple should be managed by Lula Enjoys Wide Lead in investment in a single project in Bolivian Bolivians," Fernando Arandia, presi- Brazilian Presidential Poll history, according to Reuters. Bolivia's dent of the Bolivian Medical minister of planning and development, College, was quoted as saying. Some Brazilian President Luiz Inacio Lula da Carlos Villegas, said development of El 600 Cuban doctors are working in Silva would easily win re-election if the Mutun, which holds some 40 billion tons Bolivia, mainly in eye clinics and vote were held today, according to an of iron ore, marked the creation of a steel rural areas without government- Ibope poll published on Thursday. The industry in Bolivia and would help the funded health-care facilities, accord- poll, commissioned by local media giant South American nation diversify its econ- Globo, found that not including blank omy away from a dependence on the pro- ing to Reuters. and null ballots, Lula would receive 63 duction and export of raw materials. percent of the votes versus 25 percent for Villegas credited the government of his closest rival, former Sao Paulo state President Evo Morales of bringing the

Copyright © 2006, Inter-American Dialogue Page 2 of 4 Inter-AAmerican Dialogue’s Latin America Advisor Friday, June 2, 2006 project to fruition after decades of delays. "The El Mutun project was dormant for Capitol Hill Watch more than 50 years," the minister was quoted as saying by ABI in the eastern city A weekly look at US congressional activity on Latin America of Santa Cruz. "Many governments have gone by that said they had a national Immigration Reform Unlikely to Pass Before November Elections, Kolbe Says vision, and the project continued dor- Any passage of immigration reforms in the US Congress will almost certainly be mant. Now a government has arrived delayed until after the November mid-term elections, Rep. Jim Kolbe (R-AZ) said from popular movements, from indige- last Friday. The congressman, who is retiring this year, told an audience at the nous peoples, and that government is ful- Inter-American Dialogue in Washington that it was "90 percent likely" that the filling El Mutun." Development of the site House and the Senate would not go to conference over immigration reform and related steel production should gener- before the November elections. Kolbe added that he expects the House to resist ate 10,000 direct jobs and 30,000 indirect going to conference for "as long as possible." The slim chance that the Senate's jobs, according to the government. compromise bill will reach conference before the elections reflects the possibility that public pressure on the president will grow so intense that the House will be Company News forced to go to conference to seek a compromise. If pressure builds to this point, Kolbe said, President Bush will have to play a big role in pushing the House toward a compromise. Azcarraga: Televisa Will not Join with Saban to Acquire Univision Inglis Still Supports CAFTA, Despite Constituent Complaints Rep. Bob Inglis (R-SC) remains a CAFTA supporter, despite an increase in com- The chairman of Televisa, Mexico's plaints from business constituents upset by the unexpected high costs that have biggest broadcaster, said Thursday his come along with the Central American trade agreement's passage in the US con- company would not team up with media gress nearly a year ago. "These things are going to work out," Inglis told the investor Haim Saban to buy US Spanish- Gannett News Service this week. "It does show the wheels of justice turn slowly language broadcaster Univision, even if and the wheels of legislation even slower," he said. Some businesses in textile Televisa's bid with another group of manufacturing states have complained about higher duties that must be paid investors is unsuccessful, Reuters report- when dealing with CAFTA-DR countries that haven't yet ratified the agreement. ed. "If a bid by Televisa and its partners is "It's caused trade to be much harder to do in Central America," said Jason not accepted as the winning bid, Televisa Copland, president and chief executive officer of North Carolina-based Copland has no intention of engaging in any nego- Industries. The primary problem is that only three of the countries—El Salvador, tiations with Haim Saban and the group Honduras, and Nicaragua—have ratified the agreement that allows them to ship he has formed or any other party with textile and apparel goods duty-free to the United States, and duties or import respect to Univision," Emilio Azcarraga taxes on textile goods from Costa Rica, the Dominican Republic, and Jean was quoted as saying. Televisa has Guatemala—which haven't ratified CAFTA—are now as high as 30 percent, joined with with US billionaire Bill Gates' according to the Gannett report. Some of these goods were duty-free imports Cascade Investment and four other pri- under the Caribbean Basin Initiative, a trade program the six nations participat- vate equity companies to explore a bid for ed in before CAFTA. Univision, which announced in February it was considering "strategic alternatives," Bayh Cites Venezuela, Brazil in Call for US Energy Independence including its possible sale. Saban is part of Senator Evan Bayh (D-IN) cited Venezuela and Brazil in a speech Wednesday as a group that includes Madison Dearborn motivators for prioritizing US energy independence, according to the South Bend Partners, Providence Equity Partners, Tribune. Bayh, during a visit to a South Bend ethanol plant, said that "it's not Texas Pacific Group, and Thomas H. Lee healthy for our country to be as dependent as we currently are on unstable places Partners that is exploring a bid for like Saudi Arabia and Venezuela and several other countries around the world." Univision, which could fetch more than The solution, Bayh said, would be to provide incentives to produce more bio- $12 billion, according to Reuters. Televisa, based fuels such as ethanol and to encourage Americans to produce and buy more which already has an 11.4 percent stake in high-mileage vehicles. According to Bayh, Brazil's success in getting motor fuel Univision and provides 90 percent of the from bio-based resources should be a model for the US. "If the Brazilians can do US broadcaster's programs as part of a that," he said, "we can sure do a whole lot better right here in Indiana, providing deal that expires in 2017, has been named for our energy needs through bio fuels." as a likely suitor for Univision. Televisa has to bid for Univision through a group of investors in order to get around US laws Editor's Note: Congress is out of session until Tuesday, June 6. which restrict foreign ownership of televi- sion stations to 25 percent.

Featured Q&A comment about democratic backslid- Continued from page 1 Latin America Advisor ing—and putting Bolivia and Venezuela is published every business day by the Guest Comment: Russell in the same category—reflects the domi- Inter-American Dialogue, Copyright © 2006 Crandall: "No, the Bush nant assessment within the administra- Erik Brand, administration still has not tion that, for whatever reason, Morales General Manager, Publishing written off Bolivia as one more has decided to cast his lot with the A Robert Simpson, country lost to the Bolivarian supremely confident and aggressive Editor Revolution. Rather, the administration's Chavez, Washington's chief adversary in stance toward the Morales government is the region." Elisabeth Burgess, Reporter evolving along with events in Bolivia. The administration first attempted at Guest Comment: Donald Danielle Jetton, series of diplomatic 'carrots' in an effort Planty: "I would not try to read Computer Services Coordinator to demonstrate to Morales that there too much into the president's Inter-American Dialogue: were many important benefits to warm statement with regard to Peter Hakim, A President relations with Washington. Yet, Morales' Bolivia. I think that the Bush administra- perceived dealings with Venezuela and tion would like to engage Bolivia in a Michael Shifter, Cuba have tossed cold water on any constructive dialogue that furthers the Vice President, Policy potential warm Washington-La Paz rela- interests of both countries. I do not Joan Caivano, tionship. Hence, Bush's remarks about think that Washington has 'written off' Director of Special Projects the state of democracy in the country. Bolivia or that Bolivia is necessarily seen What is particularly fascinating about in the anti-US Chavez camp. That said, I Dan Erikson, Senior Associate, US Policy the Bush administration's stance toward do believe that there are real concerns Bolivia is that it reinforces the reality that surrounding the 'erosion of democracy' Claudio Loser, in Latin America the US still holds in both Venezuela and Bolivia. The case Senior Fellow tremendous power, but its influence has is clear in Venezuela. In Bolivia, concerns Judith Morrison, diminished." may revolve more around the rapid Executive Director, Inter-Agency Consultation change in national administrations in on Race in Latin America Guest Comment: Michael response to street demonstrations and Manuel Orozco, Shifter: "My sense is that, from violence. Morales himself probably has Executive Director, Remittances and Rural Washington's perspective, the only a limited amount of time to effect Development Project Morales government's nation- change that is perceived by the masses in Marifeli Pérez-Stable, A Vice President for Democratic Governance alization of the natural gas sector on Bolivia as economic and political May 1 was a critical turning point. The progress. The same forces that swept pre- Jeffrey M. Puryear, general thrust of the decision was of vious governments from office could be Vice President, Social Policy course not unexpected, as it had been unleashed against Morales if he fails to Viron Vaky, promised during the campaign. But produce. In that sense, democracy is not Senior Fellow sending soldiers to occupy the natural working smoothly in Bolivia." gas fields was seen as unnecessarily Subscription Inquiries are welcomed at provocative and a sure sign of divisive [email protected] politics. The effect within the Bush Ivan Rebolledo is President of the Latin America Advisor is published every administration, I suspect, was to Bolivian-American Chamber of business day by the Inter-American Dialogue strengthen the hand of hardliners, who Commerce. 1211 Connecticut Avenue, Suite 510 from the outset were convinced of a Washington, DC 20036 Phone: 202-822-9002 Fax: 202-822-9553 close Castro/Chavez/Morales connec- Russell Crandall is an Associate Professor tion, and to weaken the position of those of Political Science at Davidson College The opinions expressed by the members of the Board of Advisors and by guest commentators do who advocated attempting to engage and was Director for the Western not necessarily represent those of the publisher nor with the new Bolivian government. To be Hemisphere at the National Security do they represent any consensus of belief. The analy- sure, the Morales administration is still Council from 2004 to 2005. sis is the sole view of each Advisor and does not necessarily represent the views of their respective evolving and taking shape. It is unclear employers or firms. The information in this report whether it will be possible to reach an Michael Shifter is Vice President for has been obtained from reliable sources, but neither understanding with Brazil, Argentina, Policy at the Inter-American Dialogue. its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have any ques- and Spain on the natural gas question. tions relating to the contents of this publication, And elections for the Constituent Donald Planty is President of Planty & contact the editorial offices of the Inter-American Assembly on July 2 could also be a sig- Associates, LLC and was Director of Dialogue. Contents of this report may not be repro- duced, stored in a retrieval system, or transmitted nificant measure of where Bolivia's poli- Brazil and Southern Cone Affairs at the without prior written permission from the publisher. tics may be headed. But President Bush's US State Department from 1992-96.