Identifier
Created
Classification
Origin
05ASUNCION675
2005-05-19 21:00:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Asuncion
Cable title:  

PARAGUAY'S FINANCE MINISTER RESIGNS

Tags:  ECON EFIN ETRD PREL PGOV PINR 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.
UNCLAS SECTION 01 OF 02 ASUNCION 000675 

SIPDIS

STATE FOR WHA/BSC, WHA/EPSC, EB/IFD/OMA
STATE PASS TO USTR FOR SCRONIN, LYANG
USAID FOR AA/LAC ADOLFO FRANCO
TREASURY FOR OSIA MAUREEN WAFER
COMMERCE ITA SARAH COOK
NSC FOR MIKE DEMPSEY
SOUTHCOM FOR POLAD
US SOUTHERN COMMAND MIAMI, FLORIDA

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL PGOV PINR PA
SUBJECT: PARAGUAY'S FINANCE MINISTER RESIGNS

REF: 05 Asuncion 670

UNCLAS SECTION 01 OF 02 ASUNCION 000675

SIPDIS

STATE FOR WHA/BSC, WHA/EPSC, EB/IFD/OMA
STATE PASS TO USTR FOR SCRONIN, LYANG
USAID FOR AA/LAC ADOLFO FRANCO
TREASURY FOR OSIA MAUREEN WAFER
COMMERCE ITA SARAH COOK
NSC FOR MIKE DEMPSEY
SOUTHCOM FOR POLAD
US SOUTHERN COMMAND MIAMI, FLORIDA

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL PGOV PINR PA
SUBJECT: PARAGUAY'S FINANCE MINISTER RESIGNS

REF: 05 Asuncion 670


1. (U) Sensitive but unclassified - protect accordingly.


2. (U) Summary: President Duarte accepted the resignation
of Finance Minister Dionisio Borda today, and shortly
thereafter named current Minister of Industry and Commerce
Ernst Bergen as Borda's replacement. In naming Bergen, the
President praised Borda and said he expected Bergen to
maintain fiscal discipline. Prior to the announcement, a
contact close to the Vice President assured us that there
would be no significant changes to economic policy. The
President named Raul Vera, a former President of the Central
Bank who had been highly regarded by IMF staff at the time,
to replace Bergen. Borda resigned over a longstanding debt
dispute between the Ministry of Finance and the Central
Bank. End Summary.


3. (U) On May 19, President Duarte Frutos accepted the
resignation of Finance Minister Dionisio Borda. After a
meeting with the President, Borda told the press that he
resigned over a longstanding dispute between the Finance
Ministry and the Central Bank (BCP) regarding
recapitalization of the BCP. Prior to Borda's press
conference, a contact close to Vice President Castiglioni
provided us with advance warning of the impending
resignation, and assured us that there would be no
significant change in economic policy.


4. (U) Less the 45 minutes after Borda's announcement,
President Duarte announced that the current Minister of
Industry and Commerce, Ernst Bergen, would be the new
Minister of Finance. Duarte praised Borda for his
contributions and listed a number of them, including
legislative successes and macroeconomic stability. He
specifically said that he expected Bergen to maintain fiscal
discipline, and added that he thought Bergen might be better
able to promote job creation. At the MIC, Bergen has
strongly supported Paraguay's efforts to improve its IPR
enforcement and legal regime. He is a Mennonite known for
his honesty and close relationship with the President; he is
an engineer and not an economist.


5. (U) President Duarte also announced that he had named
Raul Vera to be the new Minister of Industry and Commerce.
Vera was the President of the BCP in 2002 when Paraguayan
Ambassador to the US, James Spalding, was Finance Minister.
The two were highly regarded by the IMF at the time as
reformers with solid technical skills. It was only a lack
of political support under the former government that kept
their efforts from bearing fruit, and which ultimately led
both men to resign. We understand that Vera currently lives
in the Dominican Republic doing consulting work for one of
the IFIs.


6. (U) The dispute that allegedly precipitated Borda's
resignation involves bonds issued by the Ministry of Finance
to recapitalize the BCP in the mid-1990s. In 1999, the
Ministry gave $100 million of the proceeds of a loan from
Taiwan to the BCP to help pay depositors affected by the
banking crises of the late 1990s. The Ministry and the BCP
signed an agreement by which that payment also canceled the
Ministry's debt to the BCP. Former President Gonzalez
Macchi issued a Presidential Decree two days before leaving
office in August 2003 affirming the agreement. All
subsequent BCP Presidents have claimed the agreement was
illegal. The President has reportedly sided with the BCP,
at the behest, according to the press, of Monica Perez, the
new President of the BCP. Borda resigned rather than take
part in administrative procedures that would recreate the
Ministry's debt.

Comment
--------------


7. (SBU) With the naming of Bergen and Vera, it seems
likely that the change at the Ministry of Finance will not
represent a step backward in terms of reform efforts. A
local World Bank contact told us they are not concerned
about the change from Borda to Bergen. Bergen may do a
better job of earning the trust and support of the private
sector than Borda, whose style tended to be more rigid than
Bergen's. Since he is not an economist, though, his
effectiveness may depend, in part, on the advisors he
appoints.

KEANE