Identifier
Created
Classification
Origin
04SANTODOMINGO5302
2004-09-22 22:52:00
CONFIDENTIAL
Embassy Santo Domingo
Cable title:  

FORMER DOMINICAN PRESIDENT OPTIMISTIC THAT SENATE

Tags:  ETRD PREL BEXP PGOV EFIN DR 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 005302 

SIPDIS

STATE FOR WHA - SHAPIRO, URS, MCISAAC; EB FOR DONNELLY,
MANOGUE, VOLK, YOUTH, HONAN, AARON, FRISBIE; E FOR CADE;
TREASURY FOR OASIA - LEE, TOLOUI, AND LAMONICA; WHITE HOUSE
FOR USTR - MALITO, VARGO; USTR FOR ALLGEIER; NSC FOR TOM
SHANNON

E.O. 12958: DECL: 09/22/2014
TAGS: ETRD PREL BEXP PGOV EFIN DR
SUBJECT: FORMER DOMINICAN PRESIDENT OPTIMISTIC THAT SENATE
WILL PASS FISCAL REFORM WITHOUT HFCS-RELATED TAX

REF: A. (C) SANTO DOMINGO 05242


B. (U) SANTO DOMINGO 05156

C. (C) SANTO DOMINGO 05080

D. (C) SANTO DOMINGO 05024

Classified By: AMBASSADOR HANS H. HERTELL FOR REASON: 1.4 (A) AND (D).

C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 005302

SIPDIS

STATE FOR WHA - SHAPIRO, URS, MCISAAC; EB FOR DONNELLY,
MANOGUE, VOLK, YOUTH, HONAN, AARON, FRISBIE; E FOR CADE;
TREASURY FOR OASIA - LEE, TOLOUI, AND LAMONICA; WHITE HOUSE
FOR USTR - MALITO, VARGO; USTR FOR ALLGEIER; NSC FOR TOM
SHANNON

E.O. 12958: DECL: 09/22/2014
TAGS: ETRD PREL BEXP PGOV EFIN DR
SUBJECT: FORMER DOMINICAN PRESIDENT OPTIMISTIC THAT SENATE
WILL PASS FISCAL REFORM WITHOUT HFCS-RELATED TAX

REF: A. (C) SANTO DOMINGO 05242


B. (U) SANTO DOMINGO 05156

C. (C) SANTO DOMINGO 05080

D. (C) SANTO DOMINGO 05024

Classified By: AMBASSADOR HANS H. HERTELL FOR REASON: 1.4 (A) AND (D).


1. (C) SUMMARY AND COMMENT. Former Dominican President
Hipolito Mejia told Ambassador Hertell September 22 that he
expects that the effort will succeed to remove from the
fiscal reform bill now in the Senate the proposed 25 percent
tax on beverages that use high-fructose corn syrup (HFCS).
It may take a few more days. Mejia has been lending, and
will continue to lend, his weight and political clout from
behind the scenes to resolve this issue. Mejia,s clear
support, plus that of President Fernandez, Monsignor Agripino
Nunez Collado and other heavyweights, including major
business organizations, brings new confidence that the vote
will come out the right way. End Summary and Comment.


2. (C) At short notice, former President Mejia agreed to
meet with Ambassador Hertell September 22 to discuss the
problematic 25 percent tax on drinks made with HFCS included
in the fiscal reform legislation currently up for a second
vote in the Senate. As reported in (Ref C),a first reading
of the draft legislation, which includes a 25 percent tax on
beverages made with HFCS, was approved last week in a rush
vote by the opposition PRD-controlled Senate. This meeting
followed a heated week of diplomacy and advocacy to remove
the HFCS-related tax from the fiscal reform legislation
needed for the Dominican Republic to resume its IMF program,
and then pass the fiscal reform package (See Reftels.)

Background: Ambassador,s and Fernandez, September 20
Meetings with Senators
-------------- --------------


3. (C) On September 20, the Ambassador met with Senate
President Andres Bautista, PRD whip and spokesman Senator
Anibal Garcia, and eight other senators (including several
from sugar provinces) to review the US position on the
question removing the HFCS-related tax from the fiscal reform
bill. The Ambassador unequivocally said that the Senate
should not allow the HFCS-related tax to be included in a tax
reform law, and cautioned that without senators' strong
leadership, our two countries would not realize the benefits
of DR-CAFTA. He conveyed Washington views that an attempt to
remove the HFCS-related tax after first passing the fiscal
reform bill would be unworkable. Though the senators present
complained that President Fernandez,s own position on the
issue was not entirely clear, they agreed to work to remove
the tax, pass the modified bill in the Senate, and then send
it back to the Chamber of Deputies for, hopefully, a quick
vote along the same lines.


4. (C) In the afternoon of the same day, President
Fernandez asked the Ambassador to join his own meeting with
the Senate leadership (Bautista and Garcia). The Ambassador
hand-delivered USTR Zoellick,s letter to Fernandez and
reviewed its contents. President Fernandez told the senators
that without DR-CAFTA, the Dominican Republic would be left
out of the region,s largest free trade group, while Mexico
and the Central Americans would have advantaged access to the
US market. Fernandez noted that the fiscal reform package
was a very high priority for the GODR, but it could not be
achieved at the expense of DR-CAFTA. He reiterated that a
week earlier, he himself had instructed his Technical
Secretary, Temistocles Montas, to send the Senate a letter

SIPDIS
asking it to remove the HFCS-related tax (which Montas had
done). Fernandez, speaking directly to the senators,
suggested that once the fiscal reform, minus the HFCS-related
tax, was passed, he could support private sector complaints
with a GODR-launched complaint against the United States at
the WTO. Bautista agreed that this might be a good way to
proceed. The Ambassador said the US position was that we
should be partners in the WTO (in ongoing multilateral
negotiations). Fernandez and the senators agreed to try to
get the support of the Senate leaders of all three major
political parties, in order to set an example for the Chamber
of Deputies, where the bill would be very controversial once
again. They agreed to try to move the legislation as quickly
as possible.
Politicking
--------------

5. (C) The senators spent the following day, September 21,
trying to broker this arrangement. In the meantime, the
Ambassador, who then traveled to Santiago, received public
support from all the major business organizations of this
trade-oriented city for DR-CAFTA (and for removing the
HFCS-related tax from the fiscal reform bill). These
organizations also took out full-page ads in the country,s
leading dailies.


6. (C) As of the morning of September 22, there were 14
senators ready to vote to remove the tax and pass a modified
fiscal reform bill, but 17 senators who wanted to pass the
bill as is. (One senator was out of the country.) Note:
These numbers have changed slightly throughout the day and
could change again. The PRD opposition reportedly saw an
opportunity to win concessions from the PLD on a host of
other issues, which further complicated the work. Faced with
this situation, the Ambassador called former President Mejia,
who arrived at the Ambassador,s residence a scant 10 minutes
later.

The Conversation with Former President Mejia
-------------- --------------

7. (C) The Ambassador reiterated that the US position
remained firm, that the Dominican Republic would lose its
participation in DR-CAFTA if the fiscal reform bill passed
with the HFCS-related tax in it. Former president Mejia
noted that the United States had been perfectly clear; "you
have been clearer than a diplomat," he joked. Mejia was
confident that the vote would come out right. "I didn,t
want to get out in front, but I,ve got control in the Senate
and can get enough votes." It would probably take a few
days, he said. He calls Foreign Minister Morales Troncoso,s
comments on behalf of sugar "unfortunate" and a reflection of
the foreign minister,s own personal opinion. He offered to
get together with the Ambassador again on Monday, September

27.

Other Conversations
--------------

8. (C) The Ambassador and Emboffs have had a series of
other conversations during the past several days, including
with Monsignor Agripino Nunez Collado, Senator Alejandro
Santos (PRD and favorable to the US position),former chief
Dominican negotiator and trade secretary Sonia Guzman,
Guzman,s assistant Hugo Rivera, and others. All of these
contacts have been (and continue to be) active, either out in
front or behind the scenes, and they come to the task
representing different constituencies.

Comment
--------------

9. (C) At this stage, given the participation of several
real heavyweights in Dominican politics and President
Fernandez,s clear language with the Senate leadership, we
are now guardedly optimistic of winning this titanic
struggle, though not as quickly as we had hoped. We have
confidence in Mejia,s ability to deliver the additional
Senate votes needed. This is not to say that the battle will
be over in the Senate; the likelihood is for a renewed battle
as well in the Chamber of Deputies (where, we have been told,
we can count on the support of Chamber of Deputies president
Alfredo Pacheco, of the PRD).


10. (C) This confrontation between Fernandez and the
Congress after just one month in office has provided the
first major test of the administration. In the executive
branch, we have seen a lack of discipline about the
government,s policy, e.g., in the public statement made by
Foreign Minister Morales Troncoso against his
own president,s position. We suspect the Foreign Minister
was motivated by his own personal loyalties from a long
association with the largest sugar interest in the country.
In the legislative branch, Fernandez has proved to be able to
sway the vote of his own PLD's sole senator, but seemingly
hesitant in the face of PRD and PRSC opposition. The best
outcome would be rapid passage of the fiscal reform -- minus
the HFCS-related tax -- and a resulting new respect for
Fernandez, presidency. Time and continued efforts by the
Embassy, Washington, and the GODR will tell. The outcome
could affect Fernandez,s ability to enact his proposals
into law between now and the 2006 legislative elections, when
his ruling PLD will have its first chance to tilt the balance
of forces in Congress.


11. (C) Events like this are opportunities to strengthen
democracy. In our view, former President Mejia, Senate
President Bautista, and political mediator Monsignor Nunez
have stepped up to the leadership plate. They are heavy
hitters, and there are several innings left in the game.


11.
KUBISKE