PARAGUAY POLITICAL AND ECONOMIC UPDATE, JUNE 11-17

1. (U) Summary


--------------------------



-- MERCOSUR Summit to Focus on Economic Integration
-- Flap Over U.S.-Paraguayan Military Exercises
-- New Leaders in Congress
-- Chavez to Address Congress but not Meet President

MERCOSUR Summit to Focus on Economic Integration


--------------------------

---


2. The 28th Mercosur Summit, focusing on economic
integration and cooperation, is scheduled to take place 6/17
to 6/20 in Asuncion (ref A). Foreign Ministers will meet
6/18-6/19 before the Presidents gather on 6/20. According to
the MFA, the Presidents of Argentina, Brazil, Uruguay, Chile,
Ecuador, Colombia, Venezuela, Peru, and Panama will attend.
Bolivia's President has not yet confirmed. President Nicanor
Duarte Frutos will meet bilaterally with the Presidents of
Argentina, Brazil, Chile, and Panama; Foreign Minister Leila
Rachid will meet with her counterparts from Ecuador and
Venezuela.

Flap Over U.S.-Paraguayan Military Exercises


--------------------------




3. A 6/13 article in the Argentine newspaper, El Clarin,
criticizing the Paraguayan Senate's decision in May to extend
immunities to participants in a variety of U.S.-Paraguayan
military exercises -- scheduled to occur in the course of 18
months from July 2005 to December 2006 -- and suggesting
these exercises were a harbinger to creation of a U.S. base
in Paraguay, prompted significant press treatment here on the
issue. On 6/14, FM Rachid and MOD Gonzalez gave a press
conference defending the decision, qualifying it as
consistent with GOP treatment of cooperation agreements with
other countries and with Paraguay's commitments under the
Rome Treaty. In the press and during the 6/16 Senate
plenary, many Senators similarly defended the decision
extending to U.S. participants immunities granted to
administrative and technical staff at the Embassy. On 6/23,
the Senate will vote on whether to grant U.S. participants
permission to enter for these exercises. There has been some
talk of granting permission to enter in sixth month stints or
for each individual exercise versus all of the exercises
covered during the entire 18 months. Post will report with an
update septel.

New Leaders in Congress


--------------------------




4. The Chamber of Deputies elected Congressman Victor
Bogado, the candidate of President Duarte's ruling Colorado
(ANR) party as its new President on June 16. Bogado won his
seat with support from six dissident Congressmen from the
opposition Authentic Radical Liberal Party (PLRA) and one
from the Country in Solidarity Party (PPS). In exchange for
their support for Bogado, dissident Congressmen Luis Neuman
(PLRA) and Lino Aguero (PPS) were elected as first and second
Vice Presidents respectively.

Chavez to Address Congress but not Meet President


--------------------------



--------------------------




5. Senate President Miguel Carrizosa and former House
President Oscar Saloman have invited Venezuelan President
Chavez to address a joint session of the Paraguayan Congress
on June 20 during his visit to Paraguay in connection to the
Mercosur Summit. We are not aware that any other President
has been invited to address the Congress. We understand