PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 8-15

C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 000512 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: DECL: 03/20/2013 TAGS: PGOV PREL PINR PTER KCRM PA SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 8-15 REF: A. ASUNCION 00458 ¶B. ASUNCION 00453 ¶C. ASUNCION 00308 ¶D. ASUNCION 00038 ¶E. 04 ASUNCION 01226 Classified By: PolOff Mark Stamilio, reasons 1.4(b) and (d). ¶1. (U) Summary -------------- -- Council rules Rienzi must seek re-appointment to Supreme Court -- IMF employee accepts offer to head Central Bank -- Health Minister on thin ice with NDF? -- NDF polls Governors about constitutional reform, re-election -- Release of supermarket owner sparks heated protests -- Two new charges filed against Hatem Barakat -- SENAD Agents Arrest Police Officers in Kidnapping/Extortion Case Council rules Rienzi must seek re-appointment to Supreme Court -------------- -------------- ¶2. (U) Following the March 30 postponement of a Senate vote on Supreme Court Justice Wildo Rienzi's re-appointment, the Duarte administration announced that it planned simply to leave Rienzi on the Court for two more years, when he would reach the mandatory retirement age of 75 (ref B). The announcement provoked a debate over two conflicting statutes regarding the tenure of Justices and the proper procedures for announcing and filling vacancies on the Court. The Court ultimately conceded the issue, announced the vacancy created by the expiration of Rienzi's current term, and transferred the matter to the Council of Magistrates. The Council ruled that Rienzi must compete for re-appointment. Within a proscribed time frame, the Council will present a list of qualified candidates to the Senate for selection with the concurrence of the President. ¶3. (C) Rienzi is perceived as a strong supporter of the Colorado Party. Supreme Court President Fretes confided to PolCoun that President Duarte supported the decision to announce Rienzi's vacancy over the strong opposition of Colorado Party insider Sen. Galaverna. Until a new candidate is selected, however, Rienzi remains a sitting member of the Court. Galaverna continues to explore deals to keep Rienzi on the Court; it is not unlikely that his name will appear on a list of three names the Council submits to the Senate for a vote. IMF employee accepts offer to head Central Bank -------------- -- ¶4. (U) On April 12, Vice President Castiglioni announced that IMF economist Monica Perez had accepted the Duarte administration's offer to head Paraguay's Central Bank. If confirmed by the Senate, Perez would replace Gabriel Gonzalez, who resigned after a shooting incident at his home on March 30 (ref A). Perez, a native Paraguayan, worked at the Central Bank prior to joining the IMF, and previously interned at the Inter-American Development Bank, the World Bank, and the U.S. Federal Reserve. She completed her undergraduate studies in economics at Paraguay's National University in Asuncion, and received her Masters and Ph.D. in economics from the University of Nuremberg, Germany. Although a handful of opposition Senators have characterized Perez as an outsider who does not understand Paraguay's economic situation, the appointment reportedly faces little opposition. Health Minister on thin ice with NDF? -------------- ¶5. (U) Prior to his appointment as Minister of Health, Julio Cesar Velazquez served as Mayor of Fernando de la Mora, a community on the outskirts of Asuncion and one of 15 municipalities facing probes into the administration of funds and contract awards, including during Velazquez's tenure as Mayor. President Duarte submitted the list of 15 municipalities to the Chamber of Deputies last week. Velazquez subsequently commented that complaints lodged against him and his successor were merely politically motivated attacks by detractors. Velazquez's comments provoked a sharp public rebuke from Vice President Castiglioni, who stated that any member of the administration who does not adhere to principles of transparency and rule of law should resign. Duarte has refrained from public comment. Commentators suggest that he would like Velazquez to resign but does not want to lose the support of Velazquez's followers in Central Department. NDF polls Governors about constitutional reform, re-election -------------- -------------- ¶6. (U) On April 13, during a meeting with Governors from several Departments, President Duarte re-introduced the possibility of pursuing constitutional reform, which would likely include amending the Constitution to permit the President to run for re-election (refs D and E). Duarte reportedly asked the Governors their opinion on holding a referendum to determine whether there would be public support for a constitutional convention, which would be held within the year. The leaders of all five opposition parties later expressed their opposition to the proposal. The Liberal Party, Paraguay's largest opposition party, has indicated in the past a willingness to consider amending the Constitution to allow a President to run for reelection only if an amendment were also made to require a runoff election for President if the candidate tallying the highest number of votes did not receive a simple majority. Release of supermarket owner sparks heated protests -------------- -------------- ¶7. (U) On April 11, Judge Ramon Melo ordered the house arrest during pretrial detention of Juan Pio Paiva, the owner of the Ycua Bolanos supermarket that caught fire on August 1, claiming nearly 400 lives. The authorities are investigating Paiva for criminal negligence and for allegedly ordering his employees to lock the doors to the supermarket during the fire to prevent looting. Melo ordered Paiva's transfer from Tacumbu prison to the National Police Polyclinic Hospital for treatment of his diabetes and heart condition, but since there were no beds available in the hospital, he was placed under house arrest. News of his release sparked heated protests in front of Paiva's residence and one of his supermarkets, forcing several businesses in the area to close their doors on April 12. The protests led Melo to reverse his decision, citing his failure to consider the "social effects" of Paiva's release. Melo was subsequently recused from the case, and Paiva was finally admitted to the Polyclinic Hospital in the early morning hours of April 14. For the sake of other patients, the protesters have agreed not to protest in front of the hospital -- which is across the street from the Embassy -- but will continue to picket Paiva's supermarkets. Two new charges filed against Hatem Barakat -------------- ¶8. (U) Prosecutors filed two new charges against Hatem Barakat, a brother of money launderer and suspected terrorist financier Assad Barakat, who in 2003 was convicted of tax evasion and sentenced to six years in prison (ref C). The new charges against Hatem involve the falsification of his children's birthplace for purposes of obtaining Paraguayan citizenship. Ironically, these seemingly less serious charges carry a greater maximum penalty than the tax evasion charges, subjecting Hatem to the possibility of eight years in prison if convicted. SENAD Agents Arrest Police Officers in Kidnapping/Extortion Case -------------- -------------- ¶9. (U) On April 14, two agents from SENAD's Operations Unit arrested three police officers and two employees of the Public Ministry's Judicial Investigative Center (CIJ) on charges of extortion. The gang allegedly kidnapped the two- year old son of a woman whom they blackmailed for USD 1,000. They also threatened to bring drug trafficking charges against the woman who admitted to the DOA agents she had traveled to Spain transporting cocaine. The employees of the CIJ had identified themselves as DOA agents in telephone calls to the woman demanding the ransom. The case broke however when the woman lodged a complaint with the Attorney General's implicating police and CIJ officials leading to their arrest by the DOA agents. KEANE