Identifier
Created
Classification
Origin
05ASUNCION158
2005-01-31 17:21:00
CONFIDENTIAL
Embassy Asuncion
Cable title:  

PARAGUAY,S PRESIDENT ON REFORM, DRUGS, AND

Tags:  PGOV PREL KJUS ECON KIPR PINR SNAR PA 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 000158 

SIPDIS

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

E.O. 12958: DECL: 01/31/2015
TAGS: PGOV PREL KJUS ECON KIPR PINR SNAR PA
SUBJECT: PARAGUAY,S PRESIDENT ON REFORM, DRUGS, AND
CORRUPTION


Classified By: CDA Kevin M. Johnson for reasons 1.4 (b) and (d).

SUMMARY
---------
C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 000158

SIPDIS

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

E.O. 12958: DECL: 01/31/2015
TAGS: PGOV PREL KJUS ECON KIPR PINR SNAR PA
SUBJECT: PARAGUAY,S PRESIDENT ON REFORM, DRUGS, AND
CORRUPTION


Classified By: CDA Kevin M. Johnson for reasons 1.4 (b) and (d).

SUMMARY
--------------

1. (C) Ambassador followed up with President Nicanor Duarte
Frutos (NDF) January 28 recent calls on the Ministers of
Finance and Industry (septels) to push reform and emphasize
U.S. priorities. Explaining drug certification in detail and
praising significant success by SENAD, Ambassador stressed
the need for continued progress on enforcement (including
resources for SENAD),prosecution, and improved legislation,
including on money laundering. Ambassador decried increasing
pressures to stall major economic reforms and reverse fiscal
discipline, noting that a constitutional convention this year
would accelerate the political calendar and undermine reform.
Duarte vehemently reconfirmed his commitment to reform,
noting he recently ordered budget reductions sufficient to
meet IMF targets ($70 million.) Audits of state enterprises
were underway and the GOP would continue reforms and preserve
the macroeconomic conditions needed for international
confidence and economic growth.


2. (C) Duarte seconded the Ambassador on the need to delay
the electoral season to concentrate on reforms,
anti-corruption, and economic growth. Calling the enemies of
reform myopic, Duarte said he would do what is right for the
country, and added that this will also be in the long-term
interests of his party. Alleging ambivalence about
reelection, he said VP Castiglioni would win (easily) in 2008
if Duarte couldn't run, and that "I will manage his campaign
as party president". He reported telling Colorados resisting
reform and clinging to corruption that change was the only
way to avoid defeat, and that they should be smart if they
can't yet be moral. Calling himself pragmatic and a student
of history, he said the future belongs to democratic,

market-oriented societies, and no ideology can erase that.


3. (C) Duarte stressed that "Paraguay needs the confidence of
the USG" and thanked the Ambassador for his support. NDF
could not have been stronger in confirming support for
reforms and fiscal discipline in the face of increasing
pressures. His command of budget and reform details
indicates commitment to a plan, not just rhetoric, although
challenges remain. Expansive and forward looking on both
policy and politics, NDF appeared confident and confirmed a
reform agenda in line with major U.S. interests. End Summary.

DRUG CERTIFICATION
--------------

4. (C) January 28 the Ambassador praised to President Duarte
(NDF) CD achievements under his administration, especially
the work of SENAD chief Ibarra. Ambassador noted the need to
build on SENAD's success through more resources, stronger
prosecutions, and improved legislation. The Ambassador also
praised narcotics fiscal Vergara, and suggested another
prosecutor dedicated to narcotics cases would be useful. NDF
asked if we had anyone in mind, and the Ambassador mentioned
Fiscal Giuzzio as a good candidate. The Ambassador pointed
to unprecedented Brazil-Paraguay cooperation in recent major
cases, such as Mendes Mesquita, adding that this was the
direct result of professionalization of SENAD (with DEA/INL
assistance) and the ability to prevent intelligence leaks.
Ambassador left a letter explaining our CD priorities and
certification, adding that he would separately approach
Attorney General, Ibarra, and the Supreme Court President.
Duarte said he was proud of Paraguay's CD progress,
acknowledged much remained to be done, and signaled
determination to move forward.

CORRUPTION IN COURTS, FISCALIA, POLICE
--------------

5. (C) NDF lamented serious corruption problems, both
institutional and personal, in all these areas. Police Chief
Zelaya is honest, he said, but the police as a whole were a
mess. Duarte admitted the Ambassador was right about
specific police officers (implying Aristides Cabral) and
broader problems. Personally following the Cubas kidnapping
case, Duarte said he had seen terrible actions by police,
including leaking vital information. NDF lamented nepotism
and improper behavior by Supreme Court Magistrates, saying
that even some of the best fail to live up to their
positions. Calling himself a bit of a puritan, he said he
had asked the Magistrates to avoid drinking and carousing in
public to restore respect and regain authority. Future
Supreme Court President Antonio Fretes, his friend (and ours,
traditionally),needs to get more serious, he added. He
praised future Court VP PuCHETTA as the toughest and cleanest
of all Magistrates (she was his candidate),saying many of
the rest could not be trusted.

PRESSURES Vs REFORMS, FISCAL DISCIPLINE
--------------

6. (C) The Ambassador laid out concerns shared by the
international community that political pressures could weaken
or reverse key reforms, including the Public Banking law,
pension restraint, and fiscal discipline. NDF said he was
determined to push reform, retain sound macroeconomic
policies, and preserve fiscal discipline. He said the Public
Banking law had been stopped by the opposition, but would be
passed February 28. He recently confirmed dramatic spending
cuts ($ 70 million, or 2.8 percent of GDP),using executive
spending authority after attempts to limit the budget itself
failed in congress. This would keep the GOP within IMF
targets, he stressed. The President added his determination
to go forward with restructuring of state enterprises, with
international audits the starting point. The state oil
monopoly (Peteropar),telecommunications, and other entities
would see major restructuring, he predicted, while the
national cement company would be more problematical for a
series of reasons. Duarte stressed a pragmatic model that
would raise efficiency and promote growth to allow him to
help the poor while maintaining stability; solutions were
what mattered, he said, not ideology, whether "progressive or
neo-liberal."

POLITICAL CALENDAR
--------------

7. (C) The Ambassador said a possible constitutional assembly
this year would accelerate the political calendar and
undermine reform. NDF agreed, saying he told Colorado
Senators in January he wants this to be a year of reforms,
anti-corruption, and economic growth; "in 2006, we'll see
about constitutional reform." He is not burning for
reelection, he said, although his party is pushing him.
(Comment: His key allies are among those pushing for his
reelection, something he could stop if he wished; the
opposition might block constitutional reform this year or
simply demand unacceptable favors in return, so he may be
reluctant to openly pursue this. End Comment.) NDF said he
argues with members of his Colorado party that reform is
needed to win again, in addition to being the right thing for
the country. He won with just 37 percent of the vote while
his party lost seats in Congress and lost key municipal and
departmental elections. The old "carnival" would destroy the
party as well as the country, and he'll have no part of that,
he said. If he cannot run for reelection, his plan is to
become Colorado party president and push VP Castiglioni for
president, saying "I'll run his campaign and he'll win
easily." He denigrated Liberal party leaders, saying Patria
Querida (PQ) could come in second. Acknowledging that PQ was
the most responsible opposition party, he nevertheless warned
that PQ Deputy Lacognata was engaged in extortion with
Assembly President Salomon (a Colorado).

NDF's HISTORICAL AND PRAGMATIC VISION
--------------

8. (C) Duarte emphasized his historical vision of progress
contingent upon leadership. The world is headed toward
increased democracy, liberty, and free markets with
protection for the poor, he said. This isn't inevitable, but
it is desirable and possible and where he seeks to lead
Paraguay. Latin America needs a larger international voice,
but not through speeches and ideology, but through actions
and achievements. "I disagree with ideologues in the region"
he added, partly referring to Chavez (septel). "I'm
pragmatic and need international and USG support", he
concluded.

COMMENT: CONFIDENT REFORMER LOOKING FORWARD
--------------

9. (C) We remain concerned about certain appointments
(septels) and pressure Vs reform is unrelenting, but NDF
couldn't have been clearer or stronger in supporting key
reforms, with plans in addition to rhetoric. Relaxed and
confident and looking forward on both policy and politics, he
gave no/no indication that pressures were shaking his
resolve. Admitting that terrible corruption continues, it
was interesting to hear him expand on why his plan is good
for the Colorados politically (even if many can't see that or
don't care) as well as the right thing for the country. He
expressed frustration with the slowness of reforms under a
democracy, but said that was the price for liberty, which was
the wave of the future. Ambassador stressed key US
priorities on reform, CD, CT, etc., urging NDF not to lose
his momentum or hard-won credibility; the default setting for
most about Paraguay is not/not positive, the Ambassador
stressed, making Duarte's reform credentials that much more
valuable ) and perishable. Duarte said his administration
wasn't perfect, but it would not turn back from the reform
path.

BIO NOTES
--------------

10. (C) President Duarte had planned to attend the national
prayer breakfast in Washington, but on January 30 his mother
suffered a serious stroke and he canceled his travel to stay
with her. Duarte was also set to travel to Houston for
specialists to examine his chronic back problem (5th
vertebra.) When the Ambassador ordered a typical brewed
beverage (curtado),NDF said "a poor man's breakfast; I grew
up having one of those and three crackers for breakfast." He
said Paraguayans to this day think of poverty whenever they
have curtado. Describing his own poor childhood, he noted
his mother had raised the family alone, since his father was
a policeman stationed elsewhere and, as was typical, "had
many women." Joking about his efforts to discourage nepotism
in the Supreme Court, he said "becoming President was
terrible for my family, since no one can claim a job in
government now. Then again, my brother only has a 6th grade
education, like our father, so there's no place for him to
work!"


11. (U) The Ambassador did not have the chance to review this
message before departing post on leave.
JOHNSON