1. (C) Begin summary: Sept. 15 Ambassador informed VP
Castiglioni of State ATA anti-kidnapping training at FBI
academy for 24 Paraguayans Dec. 5-16 (ref B.) They also
discussed: CHDS security workshop; money laundering and penal
procedure reform; and backsliding on airline price
deregulation, travel agency fees, and visa flexibilization
for AmCits. VP was pleased with training offer following his
June trip to Washington, anxious to take advantage of the
CHDS strategic seminar, and committed to pushing ML law and
addressing setbacks on aviation and tourism. End Summary.



--------------------------


ATA Anti-kidnapping Training


--------------------------





2. (C) Sept. 15 Ambassador detailed anti-kidnapping training
ATA would fund Dec. 5-16 (ref A) at FBI Academy for 24 police
and prosecutors. Noting that this initiative followed the
tragic Cubas case, an expert assessment, and the VP,s visit
to Washington, the Ambassador said it was a concrete example
of bilateral cooperation in attacking the public,s top
concern. The VP was grateful and enthused, adding that he
would publicize the offer widely and ensure full cooperation
in selecting top candidates. The Ambassador and VP agreed
the Embassy would work with the Attorney General (AG),
Minister of Interior, and Chief of Police to select
candidates. The Ambassador announced this initiative to the
press following the meeting.



--------------------------


Former AG Latorre to Intel Post


--------------------------





3. (C) VP confirmed that President Duarte would soon sign a
decree naming former AG Oscar Latorre a Ministerial rank
adviser on security issues. This will give Latorre legal
status to begin work while they prepare and pass a law
establishing a new intelligence service. VP said Latorre
will continue out-patient treatment care (rumored to be for
cancer) but that he is well enough to begin work as a
Ministerial adviser. Castiglioni said someone with a similar
health problem had received treatment where Latorre sought
help and recovered fully. Latorre has been involved in
preparations for the CHDS seminar and could remain a key
figure if his health holds up.



--------------------------


Money Laundering (ML), Penal Code Reform


--------------------------





4. (C) Ambassador listed ongoing efforts to push ML law and
sought continued support. VP noted President had pushed for
the law in recent summit with Congress and Supreme Court,
that he and others had met with key Senators, and that he
understood further meetings were scheduled. The Ambassador
agreed, noting that a 9/16 session between experts and key
Senate committee chairs was important. Supreme Court
president Fretes might not be available, but the meeting was
important nonetheless. Castiglioni said Colorado Senator
Bader Rachid was a clear problem on the law, although he said
he didn,t know why (Note: Post concludes it is Rachid's
connections to shady businesses, including in CDE).



--------------------------


Aviation Deregulation and Tourism


--------------------------





5. (C) Ambassador relayed reports that Aviation Director
Bittar was holding up supposedly agreed on deregulation of
airline operations and prices following the Open Skies
agreement. American Airlines rep had told DCM that Bittar
had made "major mistakes" and was bowing to pressure from
Brazilain carriers. VP said he had heard the same and had
WAS CORRECTED TO INCLUDE REF B).
called Bittar in for a report. GOP was committed to
deregulation, he said. Ambassador then asked about a tourism
law that would legally establish commission levels airlines
must pay to travel agents; American Airlines has threatened
to leave the market if the law goes into effect. Castiglioni
was visibly uncomfortable, and argued that he agreed that the
law was awful and had urged NDF to veto it. There were
counter pressures within his party, however, and he felt
isolated on this. He would, he said, raise it with NDF
again. Ambassador then asked about long-sought changes to
visa processing for AmCits. Catiglioni laughingly said he
had been isolated on that issue as well. His plan for a
"tourist card" system paid for at the airport in Asuncion was
ready, but a scheme was needed to replace revenues the MFA
would lose. He said this would be dealt with during upcoming
budget discussions.



--------------------------


Comment: An Ally with His Hands Full


--------------------------





6. (C) VP Castiglioni is reflexively pro-U.S. and seeks to
expand commercial and political ties with us, even at the
expense of upsetting nationalists, populists, and Brazil.
Reftel noted President,s impatience with VP,s forward
stance on some issues, however, and Castigioni needs to pick
his spots. The CHDS workshop (septel) was a great success,
but was very low key, at the request of the President and
following the pubic uproar over the SecDef visit and military
exercises. We will continue to cooperate with the VP to
advance major USG priorities and to strengthen those within
the GOP friendly to the U.S., but must be wary of burning him
with his party or even his President.
KEANE