PARAGUAY POLITICAL AND ECONOMIC UPDATE, JANUARY

UNCLAS SECTION 01 OF 02 ASUNCION 000148

SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OIA
STATE PASS TO USAID FOR LAC/AA
STATE PASS TO USTR FOR SCRONIN AND LYANG
NSC FOR KIM BREIER
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 PREL ECON PINR SNAR PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, JANUARY
22-28



1. (U) SUMMARY:
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-- Political Angel to Cubas Kidnapping Arrests
-- Resignation Drama at Immigration
-- Taiwan Seeking to Further Trade and Business Ties
-- Court Rules in Favor of Continuing Extradition of Drug
Trafficker

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Political Angel to Cubas Kidnapping Arrests
--------------


2. On January 25, Attorney General, Oscar Latorre announced
mounting evidence, including phone call logs, that links
members of the leftist Free Fatherland Party (PPL) to the
kidnapping of Cecilia Cubas, the daughter of former President
Raul Cubas. Police officials arrested eight individuals,
with alleged links to PPL, in the central departments of San
Pedro and Caaguazu; four have since been released and a
warrant is pending for the arrest of two other PPL suspects.
The leader of PPL, Juan Arrom, however, denied to local press
its involvement in the kidnapping of Cubas and stated the GOP
is politically persecuting the Party. He added that those
arrested were expelled from the Party in October 2004. One of
the suspects, Osmar Martinez, turned himself in after calling
on human rights groups to guarantee his safety, according to
press, stating that he feared he would suffer mistreatment by
GOP officials. (More on case to follow septel).

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Resignation Drama in Immigration
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3. Carlos Liseras, Director General of Immigration, resigned
on January 25 citing policy differences and personality
clashes with Minister of Interior, Nelson Mora. He was
reinstated on January 27 after President Duarte asked him to
stay in the position to help fight corruption. Liseras
claimed in local press that he suffered mounting pressure and
threats to protect Colorado Party members suspected of fraud,
such as a regional Colorado Party Leader, Luis Alberto Ayala,
who is currently detained for fraud and falsifying documents.
The Director presented Ayala's case to local prosecutors for
investigation. Liseras has served as Director since July

2004. On January 27, CONOFF spoke to the Secretary of
Immigration who claimed that Liseras might return to his
duties suggesting the resignation may have been a ploy to
gain public support from the President. However, his
resignation and comments to the press could have a long- term
effect on his working relationship with Minister Mora.

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Taiwan Seeking to Expand Trade and Business Ties
-------------- ---


4. During his visit to Taiwan this week, Paraguayan
Vice-President Luis Castiglioni met with President Chen
Shui-bian, who hopes to bolster trade with Paraguay and sign
a free trade agreement (FTA) by year's end. President
Shui-bian stated to Taiwanese press, his offers to travel to
Asuncion to sign the FTA with President Duarte. Paraguay
maintains close trade relations with Taiwan, despite Mercosur
pressure to trade with the People's Republic of China (PRC).
In recent weeks, GOP officials have stated they are willing
to consider the PRC as a trade partner of Mercosur, but will
not modify their current diplomatic relations with Taiwan in
the process.


5. On a related note, Senate President Miguel Carrizosa
announced to local press from Taipei, where he is
accompanying the VP and leading a delegation of congressmen,
that Taiwanese Agro-businesses have expressed interest in
investing up to USD 50 million in soy and corn processing
plants in Paraguay. Currently, Paraguay exports a majority
of its soy product for processing.

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Court Rules in Favor of Continuing Extradition of Drug
Trafficker
-------------- --------------


6. On January 21, a Judge in the Court of First Instance
ruled against Ivan Mendes-Mesquita's request to throw out the
request for his extradition to the U.S. for trial. Mesquita
has ten days to appeal the decision. (Background: In
November 2004, cooperation between Brazil and Paraguay
produced the arrest of Mesquita, a major narcotics trafficker
from the Beira Mar trafficking organization, and the seizure
of 262 kilograms of cocaine. The U.S. seeks his extradition
on drug trafficking charges.)
KEANE