PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 21

UNCLAS SECTION 01 OF 02 ASUNCION 001090

SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OIA
STATE PASS TO USAID FOR LAC/AA
STATE PASS TO USTR FOR LYANG
NSC FOR SUE CRONIN
TREASURY FOR OSIA MAUREEN WAFER
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR
COMMERCE FOR ITA SARAH COOK
SOUTHCOM FOR POLAD DAN JOHNSON

E.O. 12958: N/A
TAGS: PGOV PHUM PREL KCRM ETRD PINR PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 21
- AUGUST 27

REF: ASUNCION 1053


1. Summary
-- Ambassador Reaffirms Commitment to Strengthen US
- GOP Relations
-- Negotiating for Oviedo Release
-- Cespedes is New Minister of Justice and Labor
-- Visit Sparks New Interest in EXIM Financing


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Ambassador Reaffirms Commitment to Strengthen US - GOP
Relations
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2. (U) On August 24, Ambassador Keane used a 30 minute
live-radio interview to discuss the broad US - GOP agenda.
The Ambassador discussed issues such as job creation,
strengthening municipal finance, and citizenship
participation initiatives spearheaded by USAID. He also
talked about current health assistance programs funded by
USAID and DOD. The Ambassador clarified the bilateral
trade and free trade agreement agendas and emphasized the
potential of trade to lift people out of poverty.

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Negotiating for Oviedo Release
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3. (U) It has been reported recently that the National
Union of Ethical Citizens Party (UNACE),headed by jailed
coup plotter Lino Oviedo, and the Colorado Party (ANR) are
planning to begin negotiations about the possibilities of
Oviedo's release. UNACE seeks the release of Oviedo in
exchange for UNACE support of the ruling Colorado Party for
the creation of a Constituent Assembly to allow the ruling
president to run for reelection -- a key Colorado
objective. Senator Martin Chiola, deputy leader of the
Senate Colorado Party bloc, confirmed earlier this week
that his bloc is going to meet with UNACE. President
Duarte Frutos, however, said the ANR would not make any
concessions to members of UNACE to free Oviedo. Supreme
Court Justice Nunez also reminded speculators that the
courts are independent and would not follow any political
deal to question a just conviction. (NOTE: UNACE's
unexpected change of position to vote for Ruben Candia
Amarilla, the President's candidate for attorney general to
replace Oscar Latorre, fueled speculation of some deal in
the works.) (reftel)

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Cespedes is New Minister of Justice and Labor
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4. (U) On August 26, Derlis Cespedes, 35 years old and a
former Economic Crimes Attorney, was sworn in as the new
Minister of Justice and Labor. Cespedes replaces Ruben
Candia Amarilla, who last week became the Attorney
General. (Comment: Cespedes is highly regarded by the
Embassy and has worked well with the Embassy in the past,
specifically in drafting the money laundering legislation,
which is now before the Senate. End Comment.) (reftel)

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Visit Sparks New Interest in EXIM Financing
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5. (U) On August 22, Paul Tumminia, Director for Latin
America of the Export-Import Bank visited Asuncion. During
his visit, Tumminia hosted a working breakfast for
approximately fifty (50) Paraguayan businesspeople at which
he explained the products and services offered by EXIM. He
also met with a group of local bankers, officials from the
Ministry of Industry and Commerce (MIC) and the President
of DINAC, Paraguay's civil aviation authority, where they
discussed possible EXIM financing alternatives for a
pending $20-$30 million USD upgrade of Asuncion's Silvio
Petirossi International Airport. Tumminia also had
individual meetings regarding some concrete projects
involving river transportation and a water pipeline that if
completed, could result in up to $20 million USD in US
exports.
KEANE