TRANSITION #14: LEONEL FERNANDEZ AT DOMINICAN

UNCLAS SECTION 01 OF 04 SANTO DOMINGO 004784

SIPDIS

SENSITIVE

STATE FOR WHA/CAR, WHA/EPSC, EB/OMA;
NSC FOR SHANNON AND MADISON;LABOR FOR ILAB; USCINCSO ALSO
FOR POLAD;TREASURY FOR OASIA-LAMONICA
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: N/A
TAGS: PGOV PREL EFIN DR
SUBJECT: TRANSITION #14: LEONEL FERNANDEZ AT DOMINICAN
INAUGURAL PROMISES AUSTERITY, ANTI-CORRUPTION AND SUPPORT
FOR SOCIAL CONCERNS



1. (SBU) This is #14 in our series on the transition between
the Mejia and Fernandez governments in the Dominican Republic.


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Fernandez promises Austerity, Anti-Corruption and Support for
Social Concerns
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In an eloquent, emphatic inaugural speech on August 16, a day
of national pageantry, Leonel Fernandez reassumed the
Dominican presidency with emphasis on the gravity of the
economic crisis, an admonition on the inevitability of
sacrifice, and the need for austerity. He declared his
intention to cut current expenditures of the goverment by 20
percent.

Following are other principal points in his August 16
declaration. (Our comments are at the end of this text.)

FISCAL MEASURES

- - He emphasized his intention to cut current expenditure
and to negotiate a revised IMF standby agreement.

- - To deal with the burden of Central Bank (CB) medium-term
debt issued to cover bank failures, the incoming
administration has obtained promises from national and
international investors to lend dollars to the Bank at
international rates. These dollars will be used to retire
some of the 90 billion pesos in medium-term debt (USD 2
billion),on which the Bank has been obliged to pay high
nominal interest rates (35 to 55 percent, according to date
and term of issuance)

- - He stated that the terms on all existing CB debt
instruments will be respected.

- - Fernandez asserts that these measures will result in new
investment and the return of flight capital, stimulating
growth and increased employment.

CORRUPTION

- - Corruption is "morally and legally unacceptable" and the
administration will take all appropriate measures to prevent
and punish corruption, in keeping with the OAS Interamerican
Convention against Corruption.

- - The administration will not pursue political reprisals
but will not provide "a clean slate and a new start" for
anyone accused of corruption.

- - "Let make clear once again: let no one try to whisper
something to me in private that he is unwilling and unable to
say to me in public."

SOCIAL PROGRAMS

- - UNDP statistics record that more than 1 million
Dominicans have passed below the poverty line in recent years.

- - The administration will initiate social action programs
in health, nutrition, feeding, and education, with the help
of civil society. Emergency feeding programs will reach out
to the poorest families, serving 25,000 families by January,
2005 and eventually as many as 200,000. An emergency program
will aim to resupply hospitals with basic medicines.

- - Special attention will be paid to subisidies and delivery
of electricity and household cooking gas.
- - Fernandez defended at length the concept of
"capitalization" (privatization) initiated by his first
administration, quoting a long paragraph from a recent report
by the Special Commission on Energy summarizing advantages to
date of privatization.

- - Electricity blackouts occur because of high costs for
fuel, electricity losses, non-payment by many users, and the
inability to date of the government to pay promised
subsidies. Fernandez cited, point by point, the ten
recommendations delivered recently by a national consensus
dialogue (NOTE: sponsored by USAID). He put numbers on key
recommendations -- USD 50 million in short-term credit for
fuel purchases and targeting the electricity subsidy to
households consuming less that 200 kilowatt hours per month.

- - In coming days the administration will take a number of
measures to assure normal distribution of cooking gas across
the country.

INSTITUTIONS

- - The country suffers serious institutional problems. The
dictatorship of Trujillo and the dominance of remarkable
charismatic leaders Juan Bosch, Joaquin Balaguer, and Jose
Francisco Pena Gomez shaped politics and restrained the
unscrupulous and greedy. A new generation now must take
action against insecurity, trafficking in influence,
clientelism, illicit enrichment, abuse of power, lack of
respect and the general lack of seriousness.

- - The executive and Congress must reconquer the respect of
the people. "If the current crisis has served for anything,
it is to utterly expose the bankruptcy of a system manifestly
incompetent, injust, and corrupt. Let us change it together.
Let us shake the tree of Dominican democracy and shake out
the rotten fruit."

MODERNITY, PROGRESS AND THE DIGITAL ERA

- - Fernandez quoted from Alvin and Heidi Toffler's essay,
"Creation of a New Civilization," concerning a "third wave"
of change and the arrival of a digital age. He asserted the
need to improve access to modern education for all Dominican
children, including particularly to computers.

- - He endorsed the concept of "community colleges" similar
to those in the United States as a means of vocational
education.

- - Fernandez advocated modifications to the Dominican
Constitution to establish economic, social and cultural
rights.

- - He wants to pass legislation on social participation,
criminal procedure and guarantees of due process. He wants
to continue programs of reform to improve the central
government, the judiciary, and the prison system; he wants to
"professionalize" the executive offices involved in
administration of justice.

INTERNATIONAL FOREIGN RELATIONS

- - Fernandez will pursue policies favoring peace and
international security, reinforcing multilateral mechanisms
in conformity with the UN and with the Organization of
American States. He expects to strengthen and diversify
bilateral relations across the world, "with special attention
to our neighbor, Haiti."
GOVERNMENT OF UNITY

- - He proposes a "government of national unity" including a
new Economic and Social Council with representation from
business, labor, civil society and churches to provide
direction to regional and provincial development authorities.
Fernandez concluded by invoking the guidance of God and
asserting that a "new spirit has taken hold in our people --
a spirit of optimism, faith, confiance and determination."
He called out a new PLD slogan, "All of us forward together!"
("E'palante que vamos!" -- a variation on the popular PLD
campaign merengue tune directed against the Mejia
administration, "They're on their way out!" -- "E pa' fuera
que van!").

Atmospherics

August 16 inaugural events were festive and formal, with
almost all those attending formal events dressed according to
tradition in white suits. Newly elected President of the
Senate Andres Bautista opened the morning ceremony with a
stiff but earnest speech promising legislative cooperation
with the new administration in the national interest, quoting
John F. Kennedy's inaugural call, "Ask not what your country
can do for you but rather what you can do for your country."

President Mejia was correct and cordial throughout the
ceremony. He shook hands with Fernandez at the opening and
congratulated him afterward, with a smile and a pat on the
back -- despite stinging language in the speech that some
might interpret as a reproach to Mejia.

Fernandez's clarity, his admonition of the need for
sacrifice, and his apparent mastery of the economic and
institutional brief were sufficient to reinforce the sky-high
expectations of Dominicans that a new day is ahead. Most
commentators strongly praised his speech and his messages.
PRD-associated economist Jaime Aristy Escuder pointed out
tartly that Fernandez had resorted to some rhetoric with
questionable math and selective history in order to make his
points about the seriousness of the situation, but Aristy
nevertheless found the general approach to be sound.

Fernandez was eloquent, assured, and reassuring, rarely
looking at his notes and delivering his citations from
memory. He reached both the educated and the unschooled,
using concepts, text and images in a bravado performance.
And in the afternoon, just before the military parade, he and
his attracive First Lady, attorney Margareta Cedeno, swept
majestically the length of the seafront Malecon in downtown
Santo Domingo, greeting the enthusiastic crowds from the back
of a Cadillac convertible that dated back to the mid-1950's
-- a reminder, perhaps, that the thinking man was smart
enough to touch on the memories of the dictator who built the
country.

That was day one. And now it's "all of us forward together"
as we figure out how Fernandez and his team are going to deal
with those big issues.


2. Drafted by Michael Meigs


3. This report, the full text in Spanish of the inaugural
address, and other reports in our transition and elections
series are available on our classified SIPRNET site
http://www.state.sgov.gov/p/wha/santodomingo/ along with
extensive other material.
HERTELL