PARAGUAY POLITICAL AND ECONOMIC UPDATE, JUNE

UNCLAS ASUNCION 000844

SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OIA
STATE PASS TO USAID FOR LAC/AA
STATE PASS TO USTR FOR SCRONIN AND LYANG
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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 EFIN MASS SNAR
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, JUNE
25-JULY 1


1. (U) Summary
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-- Protest on behalf of Former Army General
-- Drug Busts Give Hope
-- Senate Grants Entry of US Troops
-- Peasants Killed in Land Dispute
-- Revival of Privatization Law Halted

Protest on behalf of Former Army General
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2. (U) Thousands of protesters rallied on June 28 in support
of former Paraguayan Army General Lino Oviedo. The protest
marked the first anniversary of Oviedo's return to Paraguay
after five years in Brazil. Oviedo is serving a 10-year
prison sentence for a conviction on charges of leading an
attempted coup in 1996. The demonstrators, organized by the
National Union of Ethical Citizens (UNACE),were demanding
Oviedo,s release from prison and urging authorities to drop
their investigation of Oviedo's alleged role in the 1999
assassination of former Vice President Luis Argana.

Drug Busts Offer Hope
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3. (U) The National Anti-drug Secretariat (SENAD) had three
separate seizures at check-points last week. INL-funded dogs
from the SENAD Canine Unit successfully uncovered 726 grams
of cocaine in the city of Mariscal Estigarribia, and a total
of 55,840 kilograms of marihuana in two unconnected seizures
in Ciudad del Este. SENAD agents arrested four individuals.

Senate Grants Entry of US Troops
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4. (U) On June 28, the Senate granted permission for 13 US
military units to enter Paraguay for joint military exercises
from July 2005 until September 2006. The motion passed with
27 votes in favor, six against, and two abstentions. This is
the first time the Senate passed multiple permissions to
enter; they were previously done individually. Embassy sought
immunities and entry permission (separate steps) for 13
exercises over 18 months to limit the possibility of a new,
leftist Senate leader blocking them. Several Senators argued
for a clause affirming Paraguay would honor its obligations
to the Rome Treaty in connection to immunities for U.S.
participants. In comments to the press, FM Rachid said that
the MFA is prepared to consider developing language that
addresses Congressional sensitivities on this issue in future.

Peasants Killed in Land Dispute
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5. (U) On June 24, on orders of a local prosecutor, police
evicted and arrested a number of peasants from a property
claimed by Brazilian settler Ademar Aloisio Lotterman in
Tekojoja, Caaguazu Department. When Lotterman returned to the
property accompanied by several workers, a confrontation with
peasants still in the vicinity ensued resulting in the
shooting death of two peasants. There are conflicting claims
to the land and versions of events. Lotterman and several of
his employees have been arrested on murder charges as part of
the investigation underway. The VP alleges that the lands
were illegally transferred to the Brazilian settlers.

Revival of Privatization Law Halted
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6. (U) On June 30, the Chamber of Deputies unanimously
rejected a bill passed in May by the Senate that would have
reactivated a 2002 privatization law. The renewed prospect
of privatization generated a wave of protests by campesino
groups and unions. President Duarte announced that he was
against the law. An opposition deputy, whose party had
supported the law in the Senate, said his party,s deputies
would oppose it based on their belief that the process would
be manipulated for the purposes of illicit enrichment.
Reform of the state-owned enterprises may go forward,
however. President Duarte has said he favors reform of the
enterprises to increase their efficiency, quite possibly with
as yet undefined private sector participation, and there is
speculation in the press that a revised law will be
introduced in the near future.
KEANE