Statement of the Hon. Ana Maria Solares, Vice-Minister of Trade and Economics,
Ministry of Foreign Affairs, Republic of Bolivia

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Summit of the Americas and Prospects for Free Trade in the Hemisphere

May 8, 2001

Mr. Chairman: In the last decade, the Andean countries have engaged in a serious effort to combat the scourge of drugs that was destroying the youth and the social fabric of our nations. We committed ourselves to fight vigorously and relentlessly in the elimination of all production of illegal coca plantations, to destroy drug laboratories, to seize drug shipments and to arrest individuals engaged in this illicit business. Our countries even created laws and government institutions to better address the problem. In no uncertain terms, Mr. Chairman, I would like to start my presentation by assuring you that the countries represented here, have invested all the human and economic resources available to us in this fight.

But as you know very well, the global nature of the problem surpasses the capacity of individual action by any nation. The fight against drugs, from the beginning, has demanded a global alliance between producing and consuming countries, based on the principle of shared responsibility. With this in mind, ten years ago, the United States of America and the countries of the Andean region established a strategic partnership, developing an integral vision of the problem. We all committed to confront the different aspects of the illicit drug trade ---supply, demand, and consumption---- through a combination of programs in the interdiction, prevention, and economic development areas.

The Andean Trade Preference Act (ATPA) was conceived a decade ago within this context. The United States and the nations of the Andean region would use trade as part of our mutual effort to strengthen our economies, which in turn, would help us in the war against drugs. Trade and the economic prosperity that accompanies it, we, and are seen, as the right way to push back against the drug cartels. 

The good news is we have had some success. In 10 years of existence, ATPA has become an essential tool for the commercial interchange between the United States and the Andean region. Approximately 140.000 new jobs have been created in the region. In addition it has created important flows of investment and has doubled the two way trade between the United States and the nations of the region. During this period, the Andean countries have also made important strides in the war against drugs. More than three hundred sixty six hectares of coca were eliminated preventing the availability of hundred tons of drugs in the U.S. streets; important drug cartels were disbanded; and hundreds of cocaine labs were destroyed.

Our fight has been aggressive, but our social and economic costs have also been extremely high. There have been thousands of lives lost, unemployment grew to unprecedented levels, and in the process, our democratic institutions have been under permanent threat.

Today, the Andean region face a very critical moment, and in accordance with the concept of shared responsibility that inspires our cooperation, we see the renewal and expansion of ATPA as critical to guarantee sustainability of our achievements and our ability to make further progress. Further, ATPA renewal and expansion is needed even more because of the competitiveness of the Andean nations in the U.S. market has been diminished due to the establishment of NAFTA and the preferential trade mechanisms granted to Caribbean and Sub-Saharan countries.

We, the Andean countries, are fully committed to the idea of and the process for negotiating the Free Trade Area of the Americas. But until the FTAA becomes a reality, we need a robust ATPA that would remain in place until the FTAA becomes a reality.

THE SITUATION OF BOLIVIA

Mr. Chairman let me address for a minute the specific situation of my country, Bolivia.

 As you know, in 1997, President Hugo Banzer made the historic commitment to eliminate all production of illegal coca/cocaine in our territory in only 5 years. When his plan was presented, many, including people in the United States were skeptical. At the time, Bolivia was the second major producer of coca/cocaine in the world. We had 45.800 hectares of coca plants in our territory. We were the second poorest nation in the Hemisphere after Haiti.

In three years, my government has eliminated 100% of coca production in the Chapare region, the largest area of coca cultivation for illicit purposes, with only 2000 hectares of illegal plantations remaining in the Yungas area. We have conducted more than 16.900 drug interdiction operations, have destroyed more than 4.000 labs of cocaine, have arrested more than 14.400 people implicated in narcotrafficking, have seized more that 50.000 kilos of cocaine, but most importantly, our anti-drug strategy has resulted in preventing the availability of some 240 tons of cocaine in the U.S. streets.

The social, economic and political cost of this fight, Mr. Chairman, has been extremely high in my country. We have lost in this process thousands of jobs, elevating the unemployment and underemployment levels to more than 24%. The coca/cocaine sub-economy in Bolivia, albeit illegal, went much beyond generating important levels of direct employment, it also fostered related economic activities in transportation, trade and industry. It is calculated that in the last 3 years, since the implementation of our anti-drug Dignity Plan, Bolivia lost $370 million dollars due to the reduction of the gross value of the coca, and $230 million dollars due to the concept of value added given to it. This means a loss of $600 million U.S. dollars, which comparatively amounts to 60% of our total exports.

This deep deactivation of our economy has also been aggravated by the impact of other necessary economic reforms taken by the Government of Bolivia. For example, Bolivian Customs reform, designed to eliminate corruption fueled by money laundering, and discourage informal trade, has also taken away another $300 million dollars, which contributed to increased unemployment levels. In addition, the strict compliance of Bolivia in abiding agreements in the area of intellectual property, and the fight against piracy, has meant another negative impact. In could go on mentioning other examples, but the bottom line is that all those factors have helped to create an economic downturn and very serious social unrest.

Because of all this, we face an urgent need to further develop our economy and to generate new sources of income. Our traditional exports have been agricultural commodities. If we are to use trade as an engine of growth for the Bolivian economy, we must diversify our export base. We believe that the textile and garment industry offers great potential for additional export income, which in turn, will also generate much needed new jobs.

Currently, the manufacturing sector in Bolivia represents 15% of our total exports, which last year grew to 1billion dollars. The textile and garment industry represents 4% of that amount. Our objective for the coming years would be to foster the growth of the textile and garment industry to 20%, equivalent to $200 million dollars. Even if we manage to grow to that level, the total exports of textiles and garments from Bolivia to the United States will represent a mere 0.3% of the total U.S. imports of textile and garment from abroad.

Within this context, Bolivia, united with all the Andean countries beneficiaries of ATPA, would like to see a renewal and expansion of the law that would be as wide and as simple as possible. Listing, only if needed, the products that would not be included for the preferential treatment. Bolivia would not be benefited if in the new law, regional inputs in the whole chain of production are conditioned or limited. The practice of "maquila" can be highly beneficial to other countries, but not to ours given its great distance form the U.S. market, its land locked condition and the high costs of transportation. Bolivia also hopes that in grating trade preferences to the Andean countries, the United States will consider the particular needs of Bolivia and the other nations of the region with regard regards to the raw material and the finished products made from llama, alpaca, and vicuña.

In conclusion, Mr. Chairman, I would like to thank you for the interest you have put in this very important matter to the Andean region, and request that the cooperation of the United States be expressed, fundamentally, in opportunities of market access to as wide range of products as possible.

Thank you very much, and I am prepared to answer any questions you might have on this topic.