PARAGUAY,S MINISTER OF INDUSTRY ON REFORMS AND

C O N F I D E N T I A L SECTION 01 OF 02 ASUNCION 000150

SIPDIS

STATE WHA/BSC
STATE PASS TO USAID LAC/AA
NSC FOR KIMBERLY BREIER
SOUTHCOM FOR POLAD DAN JOHNSON

E.O. 12958: DECL: 01/27/2015
TAGS: PGOV PREL KJUS ECON KIPR PINR PA
SUBJECT: PARAGUAY,S MINISTER OF INDUSTRY ON REFORMS AND
ANTI-CORRUPTION

REF: ASUNCION 52

Classified By: DCM KEVIN M. JOHNSON FOR REASONS 1.4 (B) AND (D).


1. (C) Summary: The Ambassador raised concerns over threats
to reforms and placement of corrupt officials to Minister of
Industry Ernst Bergen. Bergen shared the Ambassador's
concerns and added that it was vital to preserve the current
economic team. Bergen said President Nicanor Duarte Frutos
put the nation above politics and that he would stress to
Duarte the need to resist pressures against reform. U.S.
pressure is important, especially when coordinated with key
reformers. End Summary.


2. (C) January 27 the Ambassador called on Minister of
Industry and Commerce (MIC) and presidential confidant Ernst
Bergen to urge continued GOP emphasis on reform and fighting
corruption. (Note: Bergen is a religious mentor of the First
Lady and President, vacationed with the Duartes last year,
suggested Duarte attend the February 3 National Prayer
Breakfast in Washington, and will join him there. End Note.)


3. (C) The Ambassador raised the international community's
concern over possible threats to structural reforms and
pressures to place corrupt officials in key positions.
Bergen's close relationship with NDF and their upcoming joint
trip offered an opportunity to remind the president of these
issues. The Ambassador noted the near promotion of police
official Aristides Cabral, who is tied to narcotics
traffickers, late last year (reftel). The president later
assured the Ambassador Cabral would not/not be promoted when
the legislature reconvenes in March, but pressures continue.
A corrupt official, Arnoldo Samaniego was recently named to a
key Customs position over the objection of the Minister of
Finance and Customs Chief, continued the Ambassador. In
addition, the EU is pressing for more energetic prosecution
of Padre Rubio case, where a priest and others stole millions
from social welfare programs. The Ambassador added that
hard-won reforms of pensions were under attack, the public
banking law has been held up, reform of state enterprises is
stalled, and pressures to abandon fiscal discipline were
mounting. The Ambassador stressed that Duarte's reputation
as an anti-corruption reformer was hard earned, but could be
endangered by an accelerating political calendar (there is
discussion of a constitutional convention this year to
examine reelection, inter alia.) Paraguay's improved
reputation is fragile, the Ambassador noted, urging Bergen
and other reformers to weigh in with the President.


4. (C) Bergen said he shared the Ambassador's concerns. NDF
was not/not fanatically dedicated to reelection, so the
nation comes first with him, but pressures are strong and
everywhere. NDF had pushed strongly in a cabinet meeting
last week for quick progress on the Padre Rubio case, Bergen
pointed out, so he did not see the executive as lacking will.
He said he and Finance Minister Borda were both surprised by
the appointment of Samaniego in Customs. This was bad news,
he said, but the President had told Samaniego by phone in
their presence that he would be watched carefully, that he
was to follow the orders of his superiors, and that he would
be fired if there was any corruption. Bergen said he gave
Samaniego the same message personally, stressing the
importance of stopping CD and other smuggling and IPR
violations.


5. (C) Bergen said that, in addition to sharing the
Ambassador's concerns, he felt it vital to retain the entire
Economic team, noting that the President is very unlikely to
fire Borda because he recognizes his value. There is some
risk that a stressed-out, rigid and unhappy Borda might
resign, Bergen added. An expression of support from the
international community and Paraguayan leaders will buck him
up to persevere. Bergen is working to improve the
relationship between Borda and NDF and reminds the President
of what Borda has accomplished. Bergen concluded that he
appreciated the Ambassador's frank assessment, shared his
concerns, and would reiterate them to the President. He
lamented that "we can't do everything at once, but we can't
let reforms be turned around".


6. (C) Comment: Key reformers in the cabinet and elsewhere
face a tortuous daily balance, seeing continued corruption
while trying to make things a bit better and preserve major
achievements. The President must live both with his own
party and with powerful special interests and choose his
fights carefully. Our counter-pressure is important,
especially when coordinated with key reformers. End Comment.
KEANE