PARAGUAY: FM ON VENEZUELA, MONTGOMERY WATSON

C O N F I D E N T I A L SECTION 01 OF 02 ASUNCION 000567

SIPDIS

STATE FOR WHA/BSC; NSC FOR KIM BREIER; SOUTHCOM FOR POLAD
DAN JOHNSON

E.O. 12958: DECL: 02/17/2015
TAGS: PGOV PREL PHUM ECON PA KICC VZ
SUBJECT: PARAGUAY: FM ON VENEZUELA, MONTGOMERY WATSON
HARZA, FTAA, OPEN SKIES, MILITARY EXERCISES, UNCHR VOTES,
ARTICLE 98

REF: A. ASUNCION 0519


B. ASUNCION 0526

Classified By: Political Chief James P. Merz, reasons 1.4 (b) and (d).


1. (U) In a 4/21 meeting, FM Rachid and Ambassador
discussed the assault on Paraguay's Ambassador to Venezuela,
proper compensation of U.S. firm Montgomery Watson Harza,
FTAA progress, status of an Open Skies agreement,
Congressional consideration of privileges and immunities for
participants in U.S.-Paraguayan military exercises, key UNCHR
votes, and the status of Article 98 negotiations.

Venezuela's Response to Attack on Paraguayan Ambassador
-------------- --------------


2. (U) Ambassador qualified as "ridiculous" comments by
Venezuela's Ambassador to Paraguay Jose Huerta Castillo
implying that the U.S. was involved in the attack on
Paraguay's Ambassador to Venezuela Ana Maria Figueredo on
4/8. Rachid agreed. She suspected that Figueredo had been
targeted in a bad neighborhood for mere suspicion that she
was a member of Venezuela's wealthy elite. Paraguay had
demanded that Venezuela provide Figueredo with proper
protection.

Proper Compensation for MWH
--------------


3. (U) Montgomery Watson Harza (MWH),a U.S. engineering
firm, designed and oversaw construction of the Yacyreta Dam
which is administered by a joint Paraguayan and Argentine
Binational Entity. The Binantional Entity has canceled its
contract with MWH and owes MWH more than USD 1 million for
work done prior to contract cancellation as well as a
cancellation fee. Ambassador noted that GOA Minister Devito
has agreed to pay MWH but Paraguay's representative Carlos
Goiburu continues to study the issue. The U.S. Congress has
registered interest in the case. Ambassador requested FM's
good offices in gaining Paraguayan agreement to proper
compensation for MWH. Rachid asked for letters exchanged on
the case and said she would look into it.

FTAA Negotiations
--------------


4. (U) Ambassador conveyed U.S. views regarding FTAA in
wake of recent negotiations with Brazil. Integrating our
hemisphere economically will help all our people prosper and
compete more effectively in a global economy. Rachid offered
support in principle but nothing concrete regarding next
steps. Paraguay has tended to follow Brazil's lead on FTAA
negotiations.

Open Skies
--------------


5. (U) Ambassador stressed the importance the U.S. attached
to the signing of an Open Skies agreement. Such an agreement
would foster greater competition in the airline industry and
create opportunities for new companies. Rachid signaled her
support for an agreement and her understanding that a deal to
produce an agreement was under consideration. Note: Since
the meeting with the FM, the Vice President contacted the
Ambassador to prepare a May 2nd signing. End note.

Military Exercises
--------------


6. (U) Ambassador thanked Rachid for expeditious MFA
movement on the U.S. dipnote seeking diplomatic privileges
and immunities for U.S. participants in U.S.-Paraguayan
military exercises over the period extending from 7/2005
through 12/2006. The MFA has offered its agreement to the
terms laid out in our March dipnote. The Paraguayan Congress
will review this request over the next several weeks.

Paraguay Supports Key UNCHR Votes
--------------


7. (C) Ambassador applauded Paraguay's decision to support
the UNCHR Resolution condemning human rights violations in
Belarus which demonstrated its commitment to human rights.
Rachid conveyed personal satisfaction in the victory scored
in defeating Cuba's resolution on Guantanamo particularly
when juxtaposed with adoption of the U.S. sponsored
resolution on Cuba.
Article 98 Negotiations Under Review
--------------


8. (C) Ambassador conveyed disappointment with the GOP
position adopted in recent negotiations between USG and GOP
lawyers. In the wake of Rachid's constructive participation
in negotiations in Washington in March, we had hoped our
lawyers could forge meaningful progress. Instead, Paraguay
had taken a step backwards reverting to positions we had
already dismissed as untenable. Rachid said that she had not
had a chance to discuss developments with the GOP lawyer but
expressed her willingness to reenter discussions with
Washington interlocutors. Rachid departs for Washington on
4/28 in order to be present for the 5/2 OAS SYG vote. She
was prepared to review U.S. proposals and conveyed
willingness to explore bringing the GOP's lawyer with her to
Washington to participate in negotiations. Notwithstanding
the Arab Summit 5/9-11 and the Mercosur Summit 6/18-20 she
expected to be in country and available for negotiations in
the coming months.


9. (C) Rachid and her lawyer effectively send contradictory
signals regarding the GOP's readiness to produce a
satisfactory Article 98 agreement. Their joint participation
in negotiations would be helpful in attempting to determine
if Paraguay is prepared to negotiate in earnest the concrete
terms of an agreement. We request Department provide us with
its latest proposals emerging from negotiations with Rachid
and her lawyer with a view to setting up a meeting with both
of them during her upcoming visit to the U.S. the week of
5/2.







KEANE