C O N F I D E N T I A L SECTION 01 OF 02 ASUNCION 001174

SIPDIS

STATE FOR 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: DECL: 09/15/2010
TAGS: PGOV PREL ECON PA
SUBJECT: PARAGUAY SUMMIT: OPPOSITION ABSENT, BUT GOOD WORDS
ON MONEY LAUNDERING AND BUDGET

Classified By: PolOff Sterling D. Tilley, reasons 1.4(b) and (d).


1. (U) Summary. On 9/13 President Duarte convened a meeting
with senior officials from the executive, legislative and
judicial branches to discuss issues that included foreign
relations, internal security, corruption, the 2006 budget,
and Mercosur. Duarte, Senate President Carlos Filizzola,
Country in Solidarity Party (PPS), and Supreme Court Chief
Antonio Fretes signed an agreement on these issues. The
Ambassador discussed the outcome of the summit with Alejandro
Velasquez, a Colorado Party Senator, who indicated that
Duarte has taken a nationalist stance on foreign policy and
also discussed the passage of the anti-money laundering law,
the 2006 budget, and renegotiation of the agreements of the
Itaipu and Yacyreta Dams. End Summary.


2. (U) On September 13, the Fourth Summit of the Three
Government Branches completed its work after 4 hours of
discussions. The summit was held in the Congress and headed
by President Nicanor Duarte Frutos, Senate President Carlos
Filizzola, PPS, and Supreme Court Chief Justice Antonio
Fretes, in addition to other high ranking officials from the
three branches. (NOTE: Representatives of the Authentic
Radical Liberal Party (PLRA), Beloved Fatherland Party (PPQ),
and the National Union of Ethical Citizens Party (UNACE) did
not attend, qualifying such meetings as a waste of time
rather than a genuine forum to discuss serious issues. End
note.) After the meeting, Duarte Frutos held a press
conference announcing some details of the signed agreement,
which highlighted the government's achievements as well as
its primary priorities.


3. (C) The Ambassador discussed the substance of the meeting
with Alejandro Velasquez, a Colorado Party (former UNACE)
Senator and strong supporter of the U.S. Velasquez stated
that President Duarte started the discussion of foreign
relations by saying that Paraguay is recovering the dignity
that has been smeared by its neighbors who do not respect
agreements or understandings. Duarte continued, "when we
reached agreements with Cuba and Venezuela we were accused of
being leftists. Now that we are also expanding ties with the
U.S. we are being accused of being rightists. Neither is
correct. We are pursuing Paraguay's national interest and we
will continue to have good relations with all of those
countries and others."


4. (C) According to Velasquez, Duarte said that he would like
to see the passage of anti-money laundering (AML) legislation
and urged Velasquez to coordinate with Senators Gustavo
Pedrozo and Bader Rachid, the presidents of the Finance and
Legislative committees reviewing the law. (COMMENT: Rachid
has been a strong opponent of anti-money laundering
legislation. Asking Velasquez, a well known US ally, rather
than more powerful Senators to push the law is a mixed
signal. However, it is positive that Duarte mentioned it.
End Comment).Duarte urged Congressional leadership against
exceeding the budget caps for 2006. He said that Paraguay
sought to re-negotiate the agreements on the Itaipu and
Yacyreta Dams. At this current time, he said, Paraguay is
paying 11 percent interest on the debt while market rates
were closer to 4 1/2 percent. Duarte believes it would be
fair for Paraguay to pay 7 percent, which would save Paraguay
USD 150 million annually money he wants to use for social
programs.


5. (C) Comment: The opposition parties discount the periodic
"Summit of the Three Powers" as little more than a public
show. For the first time, the leading opposition parties
refused to send representatives. Duarte uses these meetings
to demonstrate his administration's commitment on key issues
and consolidate support from other segments of the government
for his agenda. His appeal for adoption of the AML and his
call to hold the line on the budget are noteworthy,
particularly in view of the fact that supporters from his own
party represent some of the more serious obstacles on both
accounts.
KEANE