DOMINICAN ELECTIONS SERIES #1: SIX MONTHS TO THE

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 006664

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DEPT FOR WHA - A/S NORIEGA,DAS DESHAZO; WHA/CAR, WHA/PPC,
WHA/EPSC, INR/AA; NSC FOR SHANNON; TREASURY FOR U/S TAYLOR,
LEE, TOLOUI; SECDEF FOR OSD

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TAGS: PGOV EFIN ETRD DR
SUBJECT: DOMINICAN ELECTIONS SERIES #1: SIX MONTHS TO THE
PRESIDENTIALS



1. (SBU) Following is the first in a series on the
presidential elections in the Dominican Republic.

(begin text)

SIX MONTHS TO THE PRESIDENTIALS

Incumbent Hipolito Mejia of the Dominican Revolutionary Party
(PRD) is hitting about 20 percent in various polls in the
Dominican Republic, while former president Leonel Fernandez
(1996-2000) of the Dominican Liberation Party (PLD) is
comfortably scoring almost 60 percent when matched with any
of the other declared aspirants. Those polls come well ahead
of any serious direct debate between the two; researchers are
varied and may be slanting questions; though far apart, the
numbers will narrow. Perpetually in third place, Eduardo
Estrella is dealing with a grumbling opposition within the
Reformist Social Christian Party (PRSC) but is generally
considered to be an unlikely third-place (and perhaps
third-rate) performer.

Six months of campaigning will change those numbers.

President Mejia should not be counted out, despite widespread
and deep discontent with his economic policies. "He has a
fuel to burn yet," Santo Domingo's most prominent attorney
told Ambassador Hertell last week. Mejia is dividing his
time between presiding and running for office. In both roles
he is perpetually in motion.

As President, Mejia is working toward an accommodation with
the IMF following his precipitous decision in early September
to buy back two electricity distribution firms from Spanish
firm Union Fenosa. He obtained from monetary authorities a
5.15 percent increase in exchange charges for imports and on
November 18 finally got a reluctant PRD-dominated Senate to
approve a 5 percent levy on exports (the measure now goes to
the House). He successfully challenged exporters and
hoteliers to commit to defined contributions to meet GODR
revenue goals previously set with the IMF. He has just
ridden out a mostly peaceful -- and successful -- national
strike on November 11, while reminding citizens in rhetoric
and with a display of police and military presence that he is
still in charge.

As candidate for re-nomination, Mejia is playing a boisterous
game with six rivals within the PRD and just secured a formal
agreement from the three most prominent of them to contest
the nomination in a party convention in December. The
disbursement this week of USD 100 million by the
Inter-American Development Bank for the social sector gives
him the means to deliver on small-scale projects across the
country. Mejia pitches his comments in vigorous and
frequently vulgar colloquialisms toward the common citizen
and seeks to come across as a "crafty peasant."

Fernandez, in contrast, is busy sounding presidential.
Heading his own lavishly-funded 'Global Foundation for
Development,' he recently traveled to deliver speeches in
Madrid, San Juan and New York (Columbia University and the
UN). He comfortably criticizes Mejia for the fall in the
value of the peso, for the banking scandals, for falling into
the hands of the IMF - - in brief, for all the country's
ills. In September at a political event he went so far as to
assert the collapse of the (notoriously corrupt) Banco
Intercontinental (Baninter) "was not the fault of the bank's
officers, it was the fault of the
government." Intellectuals, one of the PLD's traditional
constituencies, have begun to fulminate about Fernandez's
"triumphalism" and his mendacity. The PLD continues
presenting him as a smooth-talking statesman blameless for
Dominican ills.

There's a long game ahead. There are a lot of longtime PRD
stalwarts mooting the idea that Mejia would do best for the
country simply by dropping his campaign for re-election. If
Mejia secures the PRD nomination - - and his command of
patronage and party structures suggests that he can if he
wants to do so - - then Hipolito Mejia will carry out some
serious savaging of Leonel Fernandez. Many expect that
Fernandez's acceptance of generous retainers from Baninter
will provide the starting point.

Some big issues will affect the fortunes of both, and of all
candidates:

- - The IMF and austerity. With inflation approaching 40
percent and the peso at barely half its 2002 value in
exchange markets, the challenge to Mejia is to make the IMF
agreement comprehensible to the public and to make it work.
He will need to convince them that Fernandez is at least
partly to blame for the corruption and fraud that drove the
government to seek IMF help. Fernandez will put the blame
for every pinch and groan on Mejia.

- - Corruption and impunity of malefactors. Each will seek
to tar the other. The enrichment of associates and families
will be alleged; Fernandez's Global Foundation, set up and
constructed with generous private donations, will be
presented as built on graft.

- - Free trade negotiations with the United States. Mejia's
team is ready and is convinced of the possible benefits to
gain in the tight schedule of negotiations, January to March
of 2004, just as the election race reaches white heat.
Dominican negotiators understand the parameters and the
limits set by the U.S.-Chile model. Mejia will portray the
outcome to his advantage, whether an agreement is reached or
not. Fernandez will criticize every step of the way,
suggesting undue U.S. influence and scaring farmers and
workers. Conservative voters may perceive Fernandez becoming
more firmly anti-U.S. and
will recall even more vividly his establishment of diplomatic
relations with Cuba.

- - Electricity. There's plenty of blame for both sides on
this one and little prospect that power supplies will improve
significantly before the May elections. The privatization of
state enterprises occurred on Fernandez's watch and was
unpopular then; the continuing blackouts and the government
failure to make the system work are Mejia's headache. Some
observers think that Mejia can take credit for throwing out
the "rascals" of Union Fenosa, while others think his
agreement to buy their shares at a premium was the worst
possible solution.

- - Dominican soldiers in Iraq. Mejia knows that any injury
or death in the Quisqueya battalion in Iraq will prompt an
outcry that could affect the course of the elections.
Dominican partnership in the Coalition of the Willing will be
hotly debated and Fernandez will use it to argue that Mejia
is too close to the United States. We believe that Mejia
will be steadfast in seeing the batallion serve out his
formal twelve-month commitment, even despite these risks,
especially if he perceives greater appreciation from
Washington.

In sum, the game is just beginning in the Dominican
presidential elections. Embassy Santo Domingo expects to be
providing a lively account throughout the next six months.
This piece is the first of a series of reports, which we aim
to make them short, focused, frequent and relatively
informal.

(end text)


2. (U) Drafted by: Michael Meigs.
KUBISKE