UNCLAS SECTION 01 OF 02 ASUNCION 000589

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 PINR PTER ECON KCRM PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 23-29

REF: A. ASUNCION 00557


B. ASUNCION 00512


1. (U) Summary
--------------
-- Senate votes to reactivate privatization law
-- AG intervenes in probe of Health Minister's prior conduct
-- Unconfirmed reports of FARC activity in Paraguay
-- U.S. cardiology team praised for its charity
-- Paraguay mourns the death of writer Roa Bastos

Senate votes to reactivate privatization law
--------------

2. On April 21, the Senate voted to repeal a 2002 law that
froze the privatization process. The repeal was a Senate
initiative and a bit of a surprise, even to the executive
branch, although the repeal still needs to be blessed by the
Chamber of Deputies. The eventual form of "capitalization"
(privatization is a bad word in Paraguay) remains to be seen,
and the motives behind the Senate action are unclear, but
reform of the many state-owned enterprises is badly needed.
A few international audits have been completed, and several
more are in the process of being awarded. Perhaps
coincidentally this week, the Paraguayan representative to
the binational entity that controls the Yacyreta dam was
suddenly replaced by Petropar's chief, who was in turn
replaced by the Planning Director of the state-owned
electricity company, ANDE. More to come when we learn more
about the various machinations behind these moves.

AG intervenes in probe of Health Minister's prior conduct
-------------- --------------

3. Following President Duarte's public show of support last
week for Health Minister Julio Cesar Velazquez, who faces an
inquiry into his administration of funds and projects as the
former Mayor of Fernando de la Mora (reftels), this week the
Attorney General's Office intervened in the matter, shelving
several of the complaints lodged against Velazquez.
According to press reports, several of the complaints were
pending further investigation and remain unresolved. (Note:
As noted in ref A, Velazquez is one of several Colorados
vying to become President of the Colorado party in upcoming
internal elections. He is also head of a committee exploring
the possibility of a Constitutional reform that would permit
the President of the country to run for re-election. End
Note.)

Unconfirmed reports of FARC activity in Paraguay
-------------- ---

4. Various unconfirmed reports of FARC activity in Paraguay
emerged in the local press this week. According to one
report, the Attorney General's Office is investigating the
possibility that six FARC members entered Paraguay last year
by way of Bolivia to assist with the kidnapping of former
President Raul Cubas' daughter, Cecilia Cubas. The report
also indicates that authorities received evidence that the
Paraguayan "mastermind" behind the kidnapping, Osmar
Martinez, was in email contact with FARC leader Raul Reyes
and FARC members residing in Argentina, in addition to his
known contacts with FARC "FM" Rodrigo Granda. According to a
separate report, police in Ciudad del Este thwarted an
attempt to kidnap a relative of "a well-known physician" by a
group that purportedly included a Colombian national "who
could be a member of the FARC." Post will report any
confirmation of these reports and additional details, as they
emerge, via septel.

U.S. cardiology team praised for its charity
--------------

5. A team of cardiologists from a children's hospital in
Connecticut traveled to Paraguay this week to perform
life-saving surgical procedures on 10 indigent children. The
visit received abundant praise in the local press.

Paraguay mourns the death of writer Roa Bastos
-------------- -

6. Novelist Augusto Roa Bastos, a 1989 winner of the
Cervantes Prize for Literature in Spanish and arguably
Paraguay's greatest author, died on April 26 at the age of

87. Roa Bastos's works often reflected the region's
political and social realities, which led to his decades-long
exile, first from Paraguay under the dictatorship, and then
from Argentina after a military junta seized power. He
remained a literary hero in Paraguay throughout his life, and
the country observed three days of official mourning upon his
death.
KEANE