Identifier
Created
Classification
Origin
05ASUNCION1218
2005-09-26 15:32:00
CONFIDENTIAL
Embassy Asuncion
Cable title:  

PARAGUAY: THE DUARTE ADMINISTRATION AT TWO YEARS

Tags:  PGOV PREL ECON PINR PA PTER KCRM PAC 
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C O N F I D E N T I A L SECTION 01 OF 08 ASUNCION 001218 

SIPDIS

NSC FOR

E.O. 12958: DECL: 08/19/2015
TAGS: PGOV PREL ECON PINR PA PTER KCRM PAC
SUBJECT: PARAGUAY: THE DUARTE ADMINISTRATION AT TWO YEARS

Classified By: PolCoun James P. Merz for reasons
C O N F I D E N T I A L SECTION 01 OF 08 ASUNCION 001218

SIPDIS

NSC FOR

E.O. 12958: DECL: 08/19/2015
TAGS: PGOV PREL ECON PINR PA PTER KCRM PAC
SUBJECT: PARAGUAY: THE DUARTE ADMINISTRATION AT TWO YEARS

Classified By: PolCoun James P. Merz for reasons 1. (b) and (d).

--------------
Progress Justifying Continued Support
--------------


1. (U) President Nicanor Duarte Frutos remains the dominant
figure on the political scene. Earlier this month, he
announced his candidacy for his Party's presidency; he and
his supporters continue to explore prospects for amending the
Constitution so as to allow him to run for reelection in

2008. In the course of the past year, he has taken
significant strides to consolidate power, particularly within
Congress. Many key Ministers either resigned or were fired;
on the positive side, most were replaced by technocrats not
beholden to narrow, partisan interests. Duarte's
administration boasts delivering unprecedented political and
macroeconomic stability. It arrested and extradited a major
drug trafficker and collected more taxes. With U.S.
assistance, it has created a number of valuable investigation
units; it seeks USAID assistance on some reforms.
Nevertheless, the public gives the government low marks for
not meeting expectations in the area of job creation, public
security and the fight against corruption. The kidnapping
and murder of Cecilia Cubas, the daughter of a former
Paraguayan President, by a leftist group with ties to the
FARC, and overarching rising crime levels have contributed to
security concerns. Low growth and high rates of
unemployment, despite macroeconomic stability, continue to
generate discontent.


2. (C) Duarte's foreign policy lately has been marked by a
perceived shift away from MERCOSUR, Brazil in particular, and
towards the U.S. We are exploring ways to respond to shared
concerns about security issues arising from the Cubas
kidnapping; earlier in the year, Paraguay qualified for
participation in the Millennium Challenge Account Threshold
program which could lead to significant funding of
anti-corruption efforts. However, it would be premature to

suggest Paraguay has made a paradigm shift in terms of its
foreign policy orientation. Duarte is open to improved
relations with the U.S. to the extent it will redound to
Paraguay's benefit in terms of economic gains and security.
At the same time, Paraguay must maintain a close relationship
with its MERCOSUR partners, especially Brazil, and the
President has indicated he intends to continue cooperative
relations with Cuba and Venezuela.


3. (C) Duarte still has three more years in office, yet he is
already eyeing a possible reelection bid. The opposition is
fragmented; his decision to run for the party's presidency
reflects a bid to bring together the disparate movements
within his own party. As he enters the midway stage in his
term, there is the concern he will adopt irresponsible
spending policies out of a desire to win greater popular
support. Despite the fact that he continues to say the right
things in terms of fighting corruption, he has proven
reluctant to adopt state reform, probably due to resistance
within his own party that such measures would undermine its
claim to political power and spoils. Duarte listens and
cares what we think; we will continue to use our consequent
leverage to prod his government to hold the line on economic
reforms, respond to rising security concerns, and intensify
measures to fight corruption and transnational crime. End
Summary.

-------------- --------------
Duarte Ratings Down but a Giant Among Pigmies
-------------- --------------


4. (U) While Duarte's approval ratings have gone down
dramatically from the levels of 85 percent registered in
April 2004, he benefits from the non-emergence of any
significant opposition figure and the public's general
perception that if conditions have not improved under his
government, then at least they have not become worse -- a
low, but understandable standard given the poor performance
of recent governments. In one August opinion poll, 49
percent of those polls described the performance of Duarte's
government as "so-so," 11 percent as good, and 28 percent as
bad. In a separate poll, 41 percent of those polled said
they thought the economic situation would be the same a year
from now, 31 percent thought it would improve a little, 18
percent thought it would worsen a little, and 8 percent
thought it would worsen a lot. These numbers hardly qualify
as a ringing endorsement but they are also not damning given
the failure of any opposition figure of significance to
appear and challenge Duarte.

--------------
Consolidating Control of Congress
--------------


5. (C) Duarte has taken significant strides to consolidate
his claim to power. Capitalizing on division within and
among opposition parties, Colorado Party leaders and their
allies succeeded in taking control of both houses of
Congress, for the first time in Duarte's administration, in
June 2005, when the Colorado Party forged a coalition with
the socialist Country in Solidarity Party (PPS) and
dissidents from the opposition Liberal Party (as well as the
lone National Encounter Party (PEN) Senator). (Note: The
coalition was one of convenience rather than principle; as
such, its foundation was never very solid. To gain the
support of the opposition, the Colorados agreed to support
election of a PPS Senator as President of the Congress,
appoint a candidate supported by the dissident Liberals to be
Controller General and support legislation to expropriate
land owned by the Unification Church endorsed by PPS. Two of
the dissident Liberal Senators announced on 9/22 that they
would leave the coalition and realign themselves with the
Liberal Senators, leaving the coalition short of a majority
in the Senate. End note.) In August, Duarte gained Senate
election of his hand-picked candidate for Attorney General
over the virulent objections of the opposition. And he
retained Colorado party dominion over the Supreme Court, the
influential Magistrate Council which oversees the selection
of judges and prosecutors, and the Judicial Review Council
charged with responsibility for disciplining judges and
prosecutors.

--------------
Duarte for Colorado Party President
--------------


6. (C) On 9/7, Duarte announced his candidacy for the
Colorado Party Presidency elections scheduled for next year.
A number of Duarte loyalists had been prepared to run against
each other for Party leadership but lined up behind Duarte
once he declared his candidacy. At the same time, Duarte's
candidacy may galvanize those within the Colorado ranks
opposed to him to unite behind a single candidate and lodge a
serious challenge to his bid. Not a few commentators,
including most prominently members of opposition parties,
have qualified his bid for the Colorado Party leadership as
inconsistent with his obligation as the country's President
to dedicate himself entirely to those presidential
responsibilities. Duarte has defended his decision claiming
essentially that "as the Colorado Party goes so goes Paraguay
and thus I must lead the Party to continue to lead
effectively the country." (Note: If he wins the Party
Presidency, NDF would step aside formally in favor of a Party
VP for the duration of his period as President of the
Republic. End note.)

--------------
Presidential Reelection?
--------------


7. (U) Under Paraguay's constitution, the President cannot
run for reelection. On several occasions, Duarte and his
supporters have signaled a desire to amend the constitution
to allow reelection. Currently, Duarte does not have the
two-thirds support within the Senate it would take to
initiate the process. Members of leading opposition parties
have said they would only consider an amendment allowing for
a second term if the Colorados agreed to a second round in
elections when the leading candidate did not receive a
majority of the votes. (Note: Duarte won the Presidential
election in 2003 with 37 percent of the vote. End Note).
The Colorados are not prepared to make that concession.
However, it would be premature to write off Duarte's bid for
a second term. Rumors that Lino Oviedo's Union of Ethical
Citizens (UNACE) was discussing its support for a Constituent
Assembly in exchange for his early release from prison serve
as reminder that in politics all things are possible.

--------------
Erratic with Autocratic Tendencies
--------------


8. (C) Duarte's personal style is a bit erratic with some
autocratic tendencies. Recently, when a fruit producer in
the interior called on Duarte to ensure the State paid for
private land Duarte was proposing be used to construct
warehouses for small time merchants, Duarte scoffed in reply,
akin to Louis XIV, &The State, it is I.8 Duarte respects
all democratic forms but often succeeds in influencing the
"independent" judicial system. In an effort to advance his
own political agenda, he spends an inordinate amount of time
"campaigning" and giving out pork/patronage. He's forged
pacts with political parties on the basis of expediency
rather than principle. His ambition drives him to work
harder than anyone else but its an ambition driven as much by
his desire to expand his power for power itself as it is to
pursue specific objectives for the country. Duarte's
populist autocratic tendencies often endear him to
Paraguayans accustomed to strong leaders while unnerving the
opposition.

--------------
Reform: A Few Steps Forward ...
--------------


9. (C) Duarte continues to denounce corruption ) both
private and public -- and convey his own frustration with the
lack of progress his government has been able to achieve. On
occasion, it sounds as if he were a member of an NGO with no
immediate ability to address concerns. Several senior
members of his government have told us, though, that Duarte
makes it clear in private that he will support the
prosecution or removal of any corrupt official at any level,
as long as solid evidence is produced. The public continues
to suspect the government of widespread corruption and
complains about impunity. Nevertheless, a number of
achievements and reforms, either undertaken or under
consideration )- several with USG support -- reflect well on
the government's reform record and intentions including inter
alia:

-- strong U.S.-Paraguayan counter-drug cooperation, building
on DEA support and INL funding, highlighted by the arrest of
Mendes Mesquita, a notorious Brazilian drug trafficker from
the Beira Mar organization, in November 2004, and his
extradition to the U.S., in June 2005, in the face of
significant political pressure for his release;

-- UTE, the anti-piracy unit supported by INL funding has a
strong track record of seizures of counterfeit goods. The
unit's leader, after being offered USD 40,000 to release some
containers of merchandise, worked the case that culminated in
the 9/15 arrest of a politically connected (Colorado) customs
official from the Cuidad del Este area who has been an
important player in facilitating trade in contraband and
counterfeit goods in the region;

-- establishment of a respectable and well trained FIU thanks
in large measure to the support of a Treasury Department
Office of Technical Assistance (OTA) Resident Enforcement
Officer (REA) and INL funding used for training and
equipment;

-- creation of three new investigative units ) in customs,
the tax administration and an anti-corruption, inspector
general unit within the Ministry of Finance, all under the
guidance of OTA REA and trained and equipped in part with INL
funds;

-- the first-time conviction of individuals, in late 2004,
for involvement in trafficking in persons (unfortunately the
two convicted were released on appeal but we remain
reasonably confident the Supreme Court will reinstate their
six year sentences);

-- the first-time conviction of a customs employee for
illicit enrichment earlier this year on the basis of a law
adopted in late 2004;

-- a continued increase in year-on-year tax and customs
revenues, sustaining momentum following huge gains realized
in the government's first year;

-- reforms by the Judicial Council, supported by USAID, to
reduce political factors in the selection of judges and
prosecutors, through the introduction of more objective
selection criteria, including a written examination;

-- requests by the Ministry of Finance and the Supreme Court
for USAID assistance in the development of whistle blower
protection programs;

-- announcement of a new tax regime to encourage
formalization of some of the leading commercial sectors in
Ciudad del Este, a haven for contraband, piracy, and other
illegal activity.

-- continued strong macroeconomic management, supported by
the President Duarte, that has led to strong performance
under Paraguay's IMF program, a public commitment to seek a
follow-on program long enough to last through Duarte's term,
and continued fiscal restraint expected to achieve a balanced
budget this year.

--------------
... And A Few Steps Back
--------------


10. (C) Critics fault the government for not doing more,
particularly to combat impunity and introduce state reform.

-- The judicial sector is widely viewed as one of the most
corrupt institutions subject to influence peddling by
powerful interests. Many criminal cases involving some form
of customs fraud are opened but few produce convictions as
most involve wealthy businessmen or politicians, many with
Colorado or Liberal Party connections.

-- The government has been slow to move on state reform, to
include privatization or rationalization of the many
state-owned enterprises and civil service reform. Many
government ministries have scores of "employees" on their
rolls who don't work and whose only virtue is enjoying the
support of a prominent politician. The Colorado Party is
notorious for relying on this patronage system to maintain
its political base, leaving the state both bloated and absent
in terms of services. The government has proven reluctant to
reform a system that has redounded to its own success at the
polls.

-- Both houses of Congress each gutted in different ways an
important piece of reform legislation intended to modernize
Paraguay's state-owned banks. The Lower House did so despite
lobbying by the President urging the body to pass the
executive version of the law. To his credit, Duarte has said
he would veto the law when it reaches his desk (it must first
be reconsidered by the Senate). A veto would be politically
difficult and a positive sign of his continued seriousness
with respect to economic reform.

-- In July, the Congress passed a law to expropriate a large
tract of land owned by the Unification Church in the northern
part of the country. Originally against the expropriation,
the President reversed his position, raising concern about
the country's respect for foreign investment and property
rights. (Note: It is worth recalling Colorado agreement to
support expropriation in exchange for PPS participation in
its coalition, although some prominent Colorados also
supported it. End Note.)

-- Congressional efforts to pass anti-corruption legislation,
such as a financial disclosure bill, lagged as political
infighting and competition between draft bills impeded
further progress.

-- We remain frustrated with the Congress' failure to move on
key anti-money laundering legislation that has remained in
Committee since May 2004. Duarte has come out publicly in
support of the law but we also know key Colorado Senators
oppose its adoption out of concern over the impact it could
have on their personal financial and/or political interests.

-- We also had to weigh in heavily with Duarte on several
occasions to prevent the promotion of Aristides Cabral, a
senior police official linked to drug traffickers. Most
recently, Duarte admitted that he was under heavy pressure by
politicians, presumably Colorados, to promote Cabral but
backed down when warned of potential negative consequences on
our relationship.

--------------
Cabinet Retains Important Reformers
--------------


11. (C) No fewer than six Ministers as well as the Central
Bank President, resigned or were fired over the course of the
last year. Most prominently, Dionisio Borda, respected for
his independent and professional management of Paraguay's
finances, resigned as Finance Minister in May on grounds he
was coming under pressure by powerful Colorado politicians to
ease up on fiscal discipline. Concerns about his
resignation, however, were allayed when he was replaced by
Ernst Bergen, similarly respected for the independence and
commitment he demonstrated as Minister of Industry and
Commerce in stepping up the campaign against contaband and
IPR piracy. Separately, Duarte asked his ministers of
Health, Justice and Labor, and Agriculture to resign, as the
first two were devoting a significant amount of time to
campaigning for the Colorado Party (ANR) internal elections
and the third was alleged to be involved in corruption. Both
the Health and Agriculture ministers were replaced with
technical experts vice politicians. Duarte resisted pressure
to remove the Director of Customs and the Director of Tax
Revenue, both of whom were put in place by former Finance
Minister Borda and come under attack from powerful business
interests, many tied to the Colorado Party, hurt by the
Directors' fortitude in seeking to improve the effectiveness
of both of their agencies. He appointed a respected
technocrat as President of the Central Bank, clashing with
Colorados resisting her efforts at transparency and
efficiency at the expense of patronage.

-------------- --
Macro Economic Progress, But Persistent Poverty
-------------- --


12. (U) The Duarte administration can rightly boast of its
achievements on the macroeconomic front, including clearing
arrears, strong performance on its IMF program, and achieving
and maintaining low inflation. However, in the face of high
rates of unemployment, underemployment, and overall poverty,
most polls consistently register the need for more jobs as
the most important challenge facing his government. Annual
growth rates around three percent over the last two years
have not made a significant dent in addressing concerns over
employment. (Note: The GOP was disadvantaged by a rare
two-year drought over the same period, without which growth
would have been higher. End Note.) A recent UNDP survey
identifying Paraguay as the country in Latin America with the
worst level of wealth distribution (and fourth overall in the
world) only reinforced the notion that the government is not
doing enough to combat poverty and create economic
opportunity for the large impoverished segment of the
population.

--------------
Security a Growing Concern
--------------


13. (U) Most polls also consistently register concerns about
public security as the second most important challenge facing
Duarte. In September of last year, Cecilia Cubas, the
daughter of a former Paraguayan President, was kidnapped.
The subsequent investigation led to the discovery of Cubas'
body in February; it also produced evidence implicating the
leftist Free Fatherland Party and revealing that group's ties
to the FARC. This murder, taken together with a number of
other prominent criminal cases, overall rising levels of
crime, and an overriding lack of confidence in a police force
viewed as corrupt and incompetent, have brought the
government under attack for its performance.

-------------- --------------
GOP Looks to Colombia, U.S., Chile for Security Ideas
-------------- --------------


14. (C) As part of its response, particularly in connection
to its concern over the Cubas kidnapping and apparent links
with the FARC, Paraguay entered into close consultations with
and received some training from Colombia. Paraguayan
Vice-President Castiglioni has also been keen to appeal for
U.S. assistance. He traveled to the U.S. in June to address
security concerns, meeting with Vice President Cheney, SECDEF
Rumsfeld and other senior officials from the FBI and other
agencies. On 9/16-9/18, DOD's Center for Hemispheric Defense
Studies (CHDS) facilitated a workshop designed to assist
senior Paraguayan officials in developing a national security
plan based on closer inter-institutional coordination. In
December, we will sponsor the participation of 24 Paraguayan
policemen and prosecutors in a DS/ATA funded course in
conducting kidnapping investigations. In FY 2007, we expect
an FBI legal attach to begin working at the Embassy. Chile
has also provided police training and the GOP has proposed a
new Urban Police Force modeled partly on Chile's urban police.

--------------
GOP Absence in the Countryside
--------------


15. (C) Recently, the murder of a policeman in the interior
and the subsequent discovery of a high caliber weapon and a
firing range, and rumors of the possible involvement of a
Colombian, resparked concern about the possible existence of
violent leftist groups in the countryside. Deployed military
units investigating the crime have not made any further
noteworthy discoveries. While some commentators cite a
concern about large tracts of land under the control of
campesino groups where the government has no real presence,
others consider the problem overplayed. Due to a lack of
resources both for security forces and social benefits,
Duarte will remain hard pressed to establish a visible and
lasting government presence in many of these regions in the
interior.

--------------
Brazil is Paraguay's Super Power
--------------


16. (C) It is difficult to overemphasize Brazil's political
and economic sway over Paraguay. Brazil dominates MERCOSUR
and is far and away Paraguay's most important trading
partner. The Itaipu dam provides 25 percent of Paraguay's
budget and represents nearly 40 percent of its GDP.
Brazilians own large tracts of land in Paraguay that export
soy. Poor Brazilians cross into Paraguay each day in Ciudad
del Este as mules to purchase large quantities of licit and
illicit )- contraband, pirated )- goods for resale on the
Brazilian market. Most of the major drug traffickers who
operate out of Pedro Juan Cabellero on the northern border
with Brazil are Brazilians. Paraguay's sense that it gets a
raw deal from MERCOSUR in terms of tariffs and non-tariff
barriers for its exports has sharpened over the past year
with some business leaders calling upon Paraguay to quit the
organization.

--------------
Seeking U.S. Help
--------------


17. (U) Paraguay qualified for participation in the MCA's
Threshold Program late last year and we are working closely
with Paraguayan experts on their broad and ambitious program
to combat the problems of impunity and informality. Earlier
this year we negotiated an Open Skies agreement with
Paraguay, an effort driven by Paraguay's outward-oriented
Vice President. Duarte regularly appeals to the U.S. to open
its market to Paraguayan goods, particularly textiles and
meat, a common refrain of his in relations with many
countries. He sometimes implies that the U.S. owes Paraguay
greater market access given the progress the GOP has made
combating IPR piracy and drug trafficking. Paraguay
benefited again this year from the increase in the quota for
organic sugar, and we have told the President the U.S. is
open to import of Paraguayan beef should it meet health
safety standards. GOP rhetoric often ignores the need for
Paraguayan actions in order to increase exports to the U.S.,
preferring to allege that U.S. markets are closed.

--------------
Valuable, but Vulnerable Military Relations
--------------


18. (C) Paraguay avails the U.S. a permissive environment to
conduct military exercises. While we don't have an Article
98 agreement with Paraguay, Paraguay has regularly extended
our soldiers immunities on a year-to-year basis. In May of
this year, the Paraguayan Congress approved a range of 13
exercises ) generally involving the participation of 10-20
soldiers in country for 2-6 weeks at a time -- to take place
over 18 months from July 2005 to December 2006. Shortly
after the Senate approved the exercises in May, rumors began
to circulate that Paraguay had agreed to the U.S. deployment
of over 400 soldiers for an uninterrupted stay of 18 months
with the ultimate purpose of constructing a large U.S.
military base. When SECDEF Rumsfeld accepted Vice-President
Castiglioni's invitation to visit Paraguay in August, this
only bolstered the concerns of some Paraguayans hostile to
the U.S. as well as Paraguay's neighbors in Argentina and
particularly Brazil.


19. (C) Ironically, Brazil's heavy-handed and indelicate
request that Paraguay explain the SECDEF visit and its
cautioning that Paraguay not enter into trade arrangements
with the U.S. that violate its MERCOSUR commitments only
galvanized Paraguayan resentment of Brazil from all quarters,
including those normally critical of U.S.-Paraguayan
cooperation. On 9/15, the Paraguayan Senate passed a motion
rejecting the Brazilian FM's criticism of Paraguay's
relationship with the U.S.

--------------
Courting the U.S.
--------------


20. (C) Pulling out of MERCOSUR is not under realistic
consideration by the government. Duarte has indicated he
intends to curtail the Cuban doctor program at year's end but
has no intention of terminating the Cuban Scholarship program
for over 600 Paraguayans studying in Cuba nor turning down
Venezuelan offers of subsidized fuel. Duarte is clearly open
to closer ties to the U.S. to the extent it redounds to the
economic benefit of Paraguay in terms of increased trade or
security. Vice-President Castiglioni is genuinely
well-disposed to the U.S. and actively promotes closer
economic, political and security ties to the U.S. However,
all perceptions to the contrary aside, it is premature to
conclude Paraguay is embarking on a paradigm shift with
regard to its foreign policy. There is clearly an element of
courting the U.S. to extract concessions from Brazil.

-------------- ---
Political Stability ) The Unspoken Success Story
-------------- ---


21. (C) Paraguay's transition to democracy, beginning with
the overthrow of Stroessner in 1989, has been riddled with
significant detours in the form of two coup attempts in 1996
and 1999, the assassination of a Vice-President in connection
to the second coup-attempt and subsequent civil unrest, and
repeated impeachment threats. Its last three Presidents face
corruption charges. With this backdrop, the level of
political stability that prevails in Paraguay as Duarte
enters his third year is noteworthy. Duarte is hardly above
sharp criticism, including allegations of corruption, by both
opposition parties and opponents within his own party. Late
last year, he had to deal with widespread land invasions by
poor landless peasants. However, these attacks on his
government's policies have not translated into an effort to
seek his removal either by impeachment or some
extra-constitutional means. Instead, opposition parties have
taken their campaigns to the public or have sought alliances
with other parties. Duarte effectively put an end to the
land invasions by bringing the military out of the barracks
as a show of force, and by changing his public rhetoric to
support property rights.

--------------
No Threats from the Military
--------------


22. (C) In May, after two failed attempts, Duarte finally
gained the Senate's support to award Gen. Jose Kanasawa his
fourth star as Commander of the Armed Forces. Kanasawa is
widely viewed as being unquestionably faithful to Duarte,
availing him a luxury enjoyed rarely by Paraguay's presidents
in recent history. At the same time, Duarte has continued to
enhance the role of the Presidential Escort Regiment, a
uniformed VIP protection detail that falls under direct
Presidential authority, outside the usual military chain of
command. It's commanding officer, Col. Heriberto Galeano,
has ambitiously sought to strengthen his unit through
equipment acquisition, acquisition of some of the best
soldiers from other military units, and involvement in
intelligence. Galeano's tactics have spurred some resentment
and distrust in military circles. There are serious concerns
about Galeano's involvement in corrupt activities. However,
it appears that Duarte has come to rely on Galeano to protect
him against any coup attempts.

--------------
The Way Ahead
--------------


23. (C) Duarte's second year in office did not produce the
same scope of changes we witnessed in his first year, but
there still were a number of key achievements ) many with
U.S. assistance ) in important areas such as combating drug
trafficking, creating investigation units, and embracing some
judicial reform measures. To date he's held the line on
economic reform. The public is impatient for improvements on
the job and public security fronts. On the corruption front,
he often appears held back by his own party and its
determination not to lose the spoils of power.


24. (C) Duarte has taken significant strides to consolidate
his power; the political stability that prevails in Paraguay
as he enters his third year is noteworthy. Duarte is already
eyeing a possible reelection bid as he runs to be his Party's
President. He is unquestionably the most dominant politician
in the country. Yet, he appears, on occasion, overly
concerned with his popularity, tailoring his speeches to the
audience he is addressing. There exists the concern he may
begin to compromise reforms, particularly in the economic
arena, as he steps up his campaign for the Colorado Party
election likely scheduled for next February.


25. (C) Paraguay is increasingly resentful of Brazil. Duarte
is open to strengthening Paraguay's relationship with the
U.S. to the extent it redounds to Paraguay's benefit,
particularly in the areas of trade and security. We should
seek ways to respond constructively as a more prosperous,
safer, more stable and law abiding Paraguay is in the U.S.
interest. We are working closely with senior advisors on
developing a strong MCC program to combat impunity. Our
influence is significant but not categorical. Whereas the
government arrested and extradited a major trafficker in
Mendes Mesquita, we've twice had to go to the mat to block
promotion of a senior police commissioner with drug ties. We
will need to continue to track closely Duarte's words and
actions to guard against any possible slippage in commitment
to reform in the bid to stay in office. Paraguay's
transition toward being a more "normal" and "serious"
country, to use Duarte's words, is not complete. The
progress made justifies continued USG investment, however,
while we avoid exaggerated expectations and remain vigilant
for slippage.
KEANE