U.S. TRADE MOVE SHAKES BOLIVIA

Suspension of Preferences Raises Fears of Widespread Job Losses

LA PAZ, Bolivia -- The decision by the Bush administration to suspend
trade preferences that benefit Bolivia has left workers here worried
about the potential for widespread layoffs at a time when the nation
is struggling to cope with the international financial crisis.

U.S. officials estimated that between 20,000 and 30,000 Bolivians
might lose their jobs as a result of the suspension of preferences,
which are important for such Bolivian exports as textiles and jewelry.

"This decision is discriminatory and political," said Emilio Pinto
Marin, vice minister of the budget department. "It's going to affect
our productivity."

President Bush said Thursday that he signed the law suspending
Bolivia's trade privileges because the country had "failed to
cooperate with the United States on important efforts to fight drug
trafficking." But many officials here see it as the latest step in an
escalating feud between the two countries.

In recent months, cooperation between U.S. and Bolivian anti-drug
authorities has deteriorated. In September, President Evo Morales
expelled U.S. Ambassador Philip S. Goldberg over accusations that
Goldberg was conspiring with Bolivia's political opposition. Goldberg
denied the charges, and the United States responded by dismissing
Bolivia's ambassador to Washington. Amid roadblocks and outbursts of
political violence last month, the Peace Corps pulled its volunteers
from Bolivia.

"You have to say that the traditional relationship that Bolivia had
with the United States . . . has come to an end," Bolivia's minister
of the presidency, Juan Ramon Quintana, said in an interview. "I
believe this is the worst moment for the relations between the United
States and the entire world. The worst moment."

This is the first time Bolivia has been excluded from the Andean
Trade Preference Act, enacted in 1991, which affords some South
American countries lower tariffs on certain exports to the United
States. Bolivia's suspension can be reviewed and possibly reversed
after June 2009, U.S. officials said.

Through September, Bolivia exported $385 million worth of products
this year to the United States, its fourth-largest export market
after Brazil, South Korea and Argentina. Bolivian officials estimated
that about $70 million worth of Bolivian exports could be affected by
the U.S. decision last week.

Quintana, the presidency minister, said that Bolivia is reorienting
its textile exports to Brazil and Venezuela and that it would not be
hurt economically by the loss of preferences.

"From the Bolivian perspective, this is an absurdity," he said.
"Washington pretends they are going to confront the national
government through this textiles sector. If Washington was aware of
some basic facts, they would know this sector was always in
opposition to the national government. What is this going to achieve?"

The decision to suspend trade preferences was driven by several
developments that indicated Bolivia was not effectively combating the
drug trade, said Christopher J. McMullen, a State Department deputy
assistant secretary who specializes in South America.

At Bolivia's urging, the U.S. government this year removed workers
from the U.S. Agency for International Development and the Drug
Enforcement Administration from coca-producing regions of the
country, and Bolivian officials have cooperated less with the
narcotics affairs section of the U.S. Embassy in La Paz. The amount
of coca grown in the country increased by about 5 percent in 2007
over the previous year, according to U.N. statistics, although that
was far below the 27 percent jump in Colombia.

"It was regrettable that we had to suspend Bolivia," McMullen said.
"This is going to be a major blow, I think, for Bolivia in terms of
losing these jobs."

McMullen added that the United States wants to remain engaged with
Bolivia and is willing to reevaluate its position if it sees more
cooperation, illegal coca eradication and drug interdiction.

"Hopefully, by next June they will be cooperating enough on combating
drugs," he said.

Bolivian officials defend their coca policy, which allows farmers in
certain areas to legally grow a third of an acre of the crop for
traditional uses such as chewing the leaves and brewing teas. The
days when farmers engaged in bloody struggles against U.S.-backed
eradication teams are over, as coca has lost its stigma. Under
Morales, cocaine seizures have risen each year; nearly 20 tons has
been confiscated this year, according to government statistics.

But the drug war debate is not the primary concern for the small
businesses making textiles in El Alto, the sprawling city on the
plateau above the capital. Humberto Sandalio, president of the
Regional Federation of Small Businesses of El Alto, said the
companies are actively seeking new international markets to avoid
widespread losses. One textile firm, Nueva Esperanza, said it would
close down and lay off its 40 employees because of the loss of trade
preferences, according to Bolivian news reports Saturday.

"The biggest problem in this situation is a political problem between
governments," Sandalio said. "We can't manage this problem."