YPFB PRESIDENT RESIGNS

Código Fecha Clasificación Origen
06LAPAZ2342 29 August 2006 No clasificado Embassy La Paz

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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 002342

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STATE FOR WHA/AND P.FRENCH AND L.PETRONI
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E.O. 12958: N/A
TAGS: ECON, EINV, ENRG, EPET, PGOV, BL
SUBJECT: YPFB PRESIDENT RESIGNS

REF: LA PAZ 2056

1. (SBU) Summary: On August 28, President Morales announced
the resignation of the President of the state oil company
YPFB, Jorge Alvarado. Alvarado resigned in the face of
corruption accusations related to a contract between YPFB and
Iboamerica Trading (reftel). Morales also announced the
replacement of four officials who had uncovered and
publicized Alvarado’s presumed malfeasance, and spoke of a
"conspiracy" against the nationalization process. Initial
private sector reactions to the naming of Juan Carlos Ortiz
as the new YPFB President were positive. He is regarded as a
solid technocrat. End Summary.

YPFB President Resigns


2. (U) On August 28, President Morales announced the
resignation of the President of the state oil company YPFB,
Jorge Alvarado, on television. Alvarado resigned in the face
of corruption accusations related to a contract between YPFB
and Iboamerica Trading (reftel). Morales also announced the
replacement of four officials who had uncovered and
publicized Alvarado’s presumed malfeasance, and spoke of a
"conspiracy" against the nationalization process. The
dismissed officials include the Director of the Hydrocarbons
Regulatory Agency, the Legal Adviser in the Regulatory
Agency, and the Vice Minister of Hydrocarbons.

New YPFB President: An Experienced Technocrat


3. (SBU) Alvarado was replaced by Juan Carlos Ortiz, the
former Vice President of Administration and Contracts of
YPFB. Ortiz, 38, is a native of Santa Cruz. He is an
economist and holds an MBA. He previously worked as the
Distribution Manager of Petrobras Bolivia and as the Deputy
Director of the Hydrocarbons Regulatory Agency. In a meeting
with Ortiz on August 17, he told Econoff that he wanted to
transform YPFB into a transparent, modern corporation. He
said that Bolivia could not rely on foreign investment for
development, but needed to generate internal savings. He
cited the models of Petrobras, Brazil’s semi-state owned oil
company, and ENAP, Chile’s state-owned oil company, which he
said had played important roles in the development of those
countries. Private company representatives present responded
that they wanted a revamped, capable YPFB with whom they
could negotiate.

New Hydrocarbons Superintendent Against Contracts


----
4. (U) The Director of the Hydrocarbons Regulatory Agency,
Victor Hugo Sainz, was replaced by Santos Berrios. Berrios,
68, is a native of Potosi and a constitutional lawyer. He
has served as Supreme Court judge and representative of the
oil company Andina. He is known as an opponent to private
investors in Bolivia’s hydrocarbons sector, having published
texts and lodged a constitutional complaint against the 72
shared risk contracts between YPFB and private companies.

Hydrocarbons Vice Minister Supports the MAS


5. (U) The Vice Minister of Hydrocarbons, Julio Gomez, who
confirmed the regulator’s accusations that the contract
signed by YPFB violated the nationalization decree, was
replaced by Guillermo Aruquipa. Aruquipa has served as
adviser to Evo Morales and Senate President Santos Ramirez.
He was involved in drafting the 2005 Hydrocarbons Law and is
a strong supporter of the MAS party.

6. (SBU) Comment: Morales’ decision to accept Alvarado’s
resignation was the result of a growing drumbeat of public
opinion against the former YPFB President’s alleged
malfeasance. On the other hand, Morales’ decision to fire
those who accused Alvarado of corruption indicates the GOB’s
limited tolerance of political dissent within its ranks.
However, on the bright side, the new interim YPFB President
is viewed as a reasonable interlocutor by private industry
representatives. Sector contacts are hopeful that Ortiz’
take-over of YPFB will enable progress on contract
negotiations. End comment.
GREENLEE