Identifier
Created
Classification
Origin
03SANTODOMINGO7342
2003-12-15 17:41:00
CONFIDENTIAL//NOFORN
Embassy Santo Domingo
Cable title:  

AMBASSADOR MOBILIZES DIPLOMATIC INITIATIVE AGAINST

Tags:  PGOV PREL EFIN ECON DR 
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C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 007342 

SIPDIS

SENSITIVE

DEPT FOR WHA, WHA/CAR (MCISAAC),WHA/PPC; DEPT PASS USAID

E.O. 12958: DECL: 12/05/2008
TAGS: PGOV PREL EFIN ECON DR
SUBJECT: AMBASSADOR MOBILIZES DIPLOMATIC INITIATIVE AGAINST
DOMINICAN FRAUD AND CORRUPTION


Classified By: DCM LISA KUBISKE. Reason: 1.5 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 007342

SIPDIS

SENSITIVE

DEPT FOR WHA, WHA/CAR (MCISAAC),WHA/PPC; DEPT PASS USAID

E.O. 12958: DECL: 12/05/2008
TAGS: PGOV PREL EFIN ECON DR
SUBJECT: AMBASSADOR MOBILIZES DIPLOMATIC INITIATIVE AGAINST
DOMINICAN FRAUD AND CORRUPTION


Classified By: DCM LISA KUBISKE. Reason: 1.5 (b) and (d).


1. (SBU) Summary. On December 2, the Ambassador urged eight
ambassadors of the OECD "Dublin Group" of the need for strong
coordinated action against banking fraud and corruption.
Ambassadors agreed on the poor state of the economy, the need
for free and fair presidential elections, and the ability of
the diplomatic community to make an impact. The group
decided that joint public calls would draw attention to
international concerns and help the Dominicans help
themselves. They agreed to call jointly on the Central
Election Board (JCE),Friday, December 5. End Summary.


2. (SBU) On December 2 the Ambassador hosted a meeting at
the Embassy to discuss Dominican bank fraud cases
(particularly the Baninter case) and the financial downturn
in the Dominican Republic. Ambassadors to the Dominican
Republic from Canada, The United Kingdom, Italy, France,
Germany, The Netherlands, Spain, and Japan attended, along
with the EU ambassador and Embassy Santo Domingo's DCM, USAID
Director and EcoPol Chief (hereinafter, Group). The
discussion quickly turned to the general state of the economy
in the Dominican Republic with all members agreeing that the
financial crisis was brought on in large part by the massive
bank fraud in the Baninter case as well as other bank
failures (Bancredito and the expected failure of Banco
Mercantil). Opinions were varied on what, if anything, the
Group could do to assist the Dominicans in their plight.

--------------
Economic Questions and Comments
--------------


3. (C) EU ambassador Miguel Amado inquired about the
November 21-22 to Santo Domingo of U.S. Treasury Under
Secretary John Taylor. Canadian Ambassador Adam Blackwell

SIPDIS
gave an account of measures taken that day by President Mejia
to stabilize the currency exchange rate (septel) and
commented that the underground economy may total 20 per cent
of GDP. Spanish Ambassador Maria Jesus Figa Lopez Palop

commented that one way to deal with the crisis is simply not
to deal with it at all, but to let nature take its course.


4. (C) The U.S. delegation provided an overview of U/S
Taylor's trip and commented on the status of the IMF
negotiations. After some debate and acerbic comment,
especially from the French Ambassador Jean Claude Moyret, all
members of the Group concluded that the Dominicans are on the
path of meeting IMF conditionality and staying on track so as
to benefit from IFI financing. The Group is concerned about
the possibility of political destabilization during a period
of austerity.

--------------
Politics and Elections
--------------


5. (SBU) The Group agreed that a joint visit to the
Elections Board (JCE) would make a strong statement to the
GODR and the public that the international community is
engaged and will be watchful during the 2004 Presidential
elections. First proposals were to do this on December 5;
subsequently, due to unidentified scheduling difficulties
(and probably because of the unavailability of the U.S.
ambassador next week) the call was set for December 15.


6. (C) British ambassador Andrew Ashford, seconded by the
German ambassador, made the point that individual missions,
as well as the Group as a whole, should remain engaged in
promoting fair elections throughout the campaign. He
proposed that the Group meet each of the three major party
candidates to stress this message. Some members hesitated on
contacts which might be seen as overtly political, but the
Group did agree that continued involvement was key. All
favored meeting jointly during the transition period with the
eventual winner of the election.

--------------
Back to Baninter and the other Banks
--------------


7. (C) The Ambassador returned the discussion to fraud and
failures at Baninter, Bancredito and Banco Mercantil. German
Ambassador Eva Kendeffy said that the Central Bank had
guaranteed repayment of USD 20 million that Germany had
contracted through Baninter for loans to small and medium
sized businesses. The Germans doubt the return of these
funds any time soon, given the Central Bank's lack of funds.
A number of contact clauses were broken by Baninter in regard
to the funds. The USD 20 million was not used in the manner
stipulated in the agreement and the Germans were not
officially notified when Baninter began liquidation
proceedings, also a requirement under the contract.


8. (C) Spanish Ambassador Figa Lopez Palop said that Spain
had no interest in the bank and, therefore, it was not of any
concern to her country. She did comment that "(Arturo)
Pellerano now has to be considered, along with a third bank."
(Note: Pellerano was the President of Bancredito. Fraud
charges against him are being reviewed by the Attorney
General's Office (septel). The "third" one is Banco
Mercantil. No charges have been made against its executives,
but the business community is expecting them. End Note.)
Both British Ambassador Andrew Ashcroft and Dutch Ambassador
Rasha ter Braack also said that the greater concern is the
number of banks that have been or are in trouble. British
Ambassador Ashcroft tried to find the bright side in the
dismal banking situation: "Without Baninter there would be no
IMF (loans and conditionality),so some good has come out of
Baninter."

--------------
Strikes and Civil Unrest
--------------


9. (SBU) The Dutch, Spanish and German ambassadors raised
the prospect of further strikes and possible civil unrest if
the economic fortunes of the country do not turn around.
Press reports on December 2, said that a second general
strike toward the end of January is possible. The German
ambassador commented that the German press widely covered the
last strike (November 11),resulting in hundreds of calls to
the German Foreign Ministry about the safety of relatives and
friends vacationing here. ("Most of the Germans were
probably, "in Punta Cana and did not even know of the
strike.") British Ambassador Ashcroft noted the recent
floods, increase in the price of gasoline and shortages of
propane cooking gas, could prompt further protests.

--------------
The Group's Agenda
--------------


10. (SBU) Pondering further action, members of the Group
proposed other visits in addition to the trip to the JCE: one
to the civil society 'Elections Monitoring Group" chaired by
Msgr Agripino Nunez to discuss elections; one to the
Dominican association of bankers for information on the
financial climate; and a separate discussion of bank fraud
with Finance Minister Rafael Calderon, Central Bank Governor
Lois Malkum, Technical Secretary to the President Carlos
Desperdel, and Superintendent of Banks Julio Cross. These
visits and meetings have not been scheduled, but the Group
seemed to be aiming for after the holiday season.



11. (U) Ambassadors of the Group thanked Ambassador Hertell
for his initiative in hosting the meeting. They complimented
him on the timeliness of discussing the economic and
political events currently taking place in the nation.
--------------
Comment
--------------


12. (SBU) Comment. The response of the senior diplomatic
community to the Ambassador's invitation was encouraging, as
was the frankness of the discussion. A united diplomatic
front of leading developed nations calling on the Electoral
Board, the banking sector, and civil society will advance
U.S. goals for promoting democracy and good governance. The
Dominican press will certainly publicize the initiatives.


13. (C) French Ambassador Moyret was by far the most
pessimistic of the group -- "There is no way to stop the
disaster" and "IMF loans will not be enough, four times the
amount of the loans will be needed." Canadian Ambassador
Blackwell and EU representative Amado were engaged and
verbal, advocating early, visible action. Spanish Ambassador
Figa Lopez Palop was outspoken but fatalistic. Japanese
Ambassador Okamoto sat stoically through the two hour meeting
saying not one word.
HERTELL