PARAGUAY: BRAZIL SEEKING GREATER COOPERATION ON

C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 001260

SIPDIS

NSC FOR SUE CRONIN
SOUTHCOM FOR POLAD DAN JOHNSON
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR

E.O. 12958: DECL: 08/19/2015
TAGS: PGOV PREL PINR PTER KCRM PA BR
SUBJECT: PARAGUAY: BRAZIL SEEKING GREATER COOPERATION ON
CRIME

Classified By: A/DCM James P. Merz for reasons 1.4 (b) and (d).


1. (C) Summary. On 10/5, Emboffs met with Brazilian Embassy
Poloffs to discuss views on GOP reform efforts, particularly
as they relate to efforts to combat contraband, money
laundering, and other illicit activities in the Tri-Border
Area (TBA). Brazilian PolCouns conveyed an interest in
deepening U.S.-Brazilian cooperation on specific cases as
well as openness to bringing more pressure to bear on
Paraguay through the UN CTC. Brazil continues to object to
the U.S. making public pronouncements regarding its concerns
about terrorist financing in the TBA absent the U.S.
providing evidence. Brazil's Polcouns sought to play down
the controversy over FM Amorim's recent remarks criticizing
Paraguayan-U.S. relations; separately, he expressed concern
about "heavyhanded" GOP measures against Brazilian landowners
in Paraguay. End Summary.

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Brazilian-Paraguayan Cooperation on Crime Difficult
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2. (C) On 10/5, Polcouns and post's Resident Enforcement
Advisor (REA) met with Brazilian PolCouns Antonio Da Costa
and Poloff Luis Galvao to discuss our respective efforts to
combat transnational crime. Da Costa made it clear that
efforts to develop joint activities with Paraguay on customs
and immigration controls and even basic information sharing
had not progressed significantly notwithstanding commitments
made at 3 1 meetings. Brazilian officials did not trust
their counterparts particularly in the TBA; they had shared
information with Paraguay on some customs cases and the
information had been compromised. Brazil remain committed to
combating contraband in the TBA but saw little evidence that
Paraguay shared that commitment. (Note: Notwithstanding
Brazil's distrust of Paraguay's law enforcement community,
Brazil has deepened cooperation with Paraguay's Anti-Drug
Secretariat (SENAD) on the investigation of key drug cases,

SIPDIS
including one that led to Paraguay's arrest of Brazilian drug
kingpin Mendes Mesquita in November of last year. End Note.)

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U.S. Focus on Key Institutions, Key Cases
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3. (U) Emboffs appreciated and shared Brazil's frustration.
Corruption within customs remained a daunting challenge.
Nevertheless, President Duarte's appointment of non-political
technocrats to key offices including the Ministry of Finance,
Customs, and the Tax Revenue Department offered some hope.
The Embassy has focused on building trust and capacity in key
agencies/offices including the Anti-Drug Secretariat (SENAD)
and the Secretariat for the Prevention of Money Laundering
(SEPRELAD). Last year, we had helped create and fund
Paraguay's Statistics Center and a Specialized Technical Unit
(UTE) to help investigate IPR violations. Presently, we are
sponsoring a four-week training course in the conduct of
economic crime investigations into a variety of areas such as
trademarks, copymarks, piracy, tax evasion, corruption and
money laundering for investigators from SENAD, SEPRELAD, UTE,
the Finance Ministry, the Tax Revenue Department, and
Customs. All participants had been polygraphed as were the
prosecutors from the Economic Crimes Unit with whom we work
on specific cases.

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Towards Broader U.S.-Brazilian Cooperation
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4. (C) Da Costa repeated Brazil's objections to U.S. claims
that terrorist financing occurs out of the TBA, urging the
U.S. to share evidence in support of these claims or desist
from making them. As an example, he noted that Brazil
considered Assad Barakat a criminal but not a terrorist
financier. (Note: Barakat is a Brazilian citizen of Lebanese
descent who was sentenced to 6 1/2 years in prison in
Paraguay for a conviction for tax evasion in 2004. The U.S.
has reason to believe he was involved in terrorist financing.
End Note.) However, on a broader level, Da Costa agreed
Brazil shares our concern about illicit activity that takes
place in the TBA, including money laundering, and made a
point of requesting that Brazil and the U.S. cooperate more
closely, not only in terms of coordinating to avoid
duplication, but also in terms of information/intelligence
sharing to advance key initiatives and the investigation of
key cases, including the case of Kassem Hijazi. (Note:
Hijazi is a Brazilian citizen of Lebanese descent who has
been charged with tax evasion and is implicated in money
laundering. The U.S. has reason to believe he has been
involved in terrorist financing. End Note). Brazil had a
deeper knowledge of the region and the key players but the
U.S. had its own information and expertise to offer. Da
Costa specifically requested that this cooperation extend to
our respective customs and law enforcement officials both in
Washington and Brasilia, conveying the hope that our
communicating this message to both places would improve
prospects for concrete follow-up.


5. (C) Aware that adoption of Paraguay's anti-money
laundering (AML) legislation -- introduced to Congress in May
2004, over 16 months ago -- is a high USG priority, Da Costa
also offered to consider ways Brazil could support that
objective. Recalling Brazil's reticence last year to have
the UN CTC draw greater attention to Paraguay's failure to
adopt AML and CT legislation, Polcouns requested Brazil's
support for bringing greater pressure to bear before the UN
CTC. According to Da Costa, Brazil was reluctant to work
through the CTC last year in view of GOP efforts to ratify
the UN's counter terror conventions and its readiness to
receive a team of experts from the UN CTC, UNODC, CICTE, and
UNCHR. During that visit last December, Paraguay assured
officials that Congress would adopt the AML law in early
Spring 2005 and that President Duarte would introduce the
counter terror bill immediately afterwards. Ten months
later, Paraguay had done neither, yet meaningful
international pressure had not been brought to bear on it.
Da Costa appreciated U.S. frustration with Paraguay and
conveyed GOB openness to bringing more pressure to bear upon
Paraguay both through the CTC and the 3 1 mechanism.

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GOP-GOB Frictions
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6. (U) Brazil has come under political and public
criticism in Paraguay for conveying concern about the August
visit of SECDEF Rumsfeld and Paraguay's military cooperation
with the U.S. as well as for warning Paraguay against
pursuing a bilateral trade agreement with the U.S. In
September, the Paraguayan Congress adopted a resolution
rejecting Brazilian FM Amorim's remarks about U.S.-Paraguayan
relations. At the same time, Paraguay's Environmental
Ministry has opened an investigation into the activities of
Brazilians owning large tracts of land in the Department of
Alto Paraguay, in northwestern Paraguay bordering Brazil. Da
Costa sought to shrug off the controversy over Brazil's
criticism of Paraguay's relations with the U.S., attributing
the stir to a misrepresentation of his FM's words. Instead,
he focused on Paraguay's "heavyhanded" investigation of
Brazilian cattle ranchers accused of violating laws
pertaining to the purchase and titling of land and import of
heavy machinery. He conceded some ranchers may have skirted
the law or should have known better than to trust the local
Paraguayan officials assisting them with legal paperwork.
However, he maintained that a GOP bias against landed
Brazilian interests was driving the investigation.


7. (C) Comment. Brazil's complaint about public U.S.
statements regarding terrorist financing is a common refrain
that we can expect to hear repeated in stronger terms in
upcoming 3 1 events. If it were possible and appropriate, it
would be helpful to share the intelligence that supports our
concerns with the Brazilians to push back this complaint.
Post welcomes closer cooperation with Brazilian law
enforcement officials in Paraguay, Brazilia and Washington
with a view to investigating key cases. Post's REA plans to
meet more regularly with Brazilian Embassy customs and police
liaisons. We similarly support strengthened cooperation with
Brazilian law enforcement officials in Brasilia and
Washington provided it improves prospects for concrete
results. While skeptical Brazil will back up its expressed
openness to bringing more pressure to bear on Paraguay before
the UN CTC with action in New York, we find it encouraging
Brazil appreciates our frustration and has expressed
readiness to explore options in international fora including
the UN and 3 1 Security Group. Post requests Department/USUN
explore ways we can bring CTC pressure to bear upon Paraguay
including by requesting the CTC Director seek an invitation
to Paraguay to assess its progress in moving on key AML and
CT legislation. End Comment.
KEANE