WELCOME TO PARAGUAY, US SOUTHERN COMMAND CDR.

C O N F I D E N T I A L SECTION 01 OF 06 ASUNCION 000860

SIPDIS

STATE FOR WHA/BSC

E.O. 12958: DECL: 06/27/2015
TAGS: PGOV PREL MARR MASS PA
SUBJECT: WELCOME TO PARAGUAY, US SOUTHERN COMMAND CDR.
CRADDOCK

Classified By: Polcouns James P. Merz for reasons 1.4 (b) and (d).


1. (C) General Craddock, Embassy Asuncion and I warmly
welcome your visit as an opportunity to promote U.S.
interests in military, counter-narcotics and
counter-terrorism cooperation with Paraguay. You come at a
particularly sensitive time, with press and political
activity calling into question important aspects of our
military to military relationship. The open and permissive
environment for exercises and other military activities here
is both extremely valuable and potentially vulnerable to
local and regional pressures. The following updates the
situation you will find and highlights key issues. It is
important to avoid discussion of the ICC with Paraguayan
interlocutors.

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Your Program in Asuncion
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2. (U) I am glad to have this opportunity to host your
visit to Paraguay. After we meet, the visit will begin with
the Country Team's brief on the overall situation in
Paraguay. We then will transition to more detailed
discussions on CT. We have arranged for you to visit both
the Minister of Defense, Dr. Roberto Gonzalez Segovia and the
Commander of Armed Forces, GEN Jose Key Kanazawa Gamarra, and
his service chiefs. I understand that you met CHOD GEN
Kanazawa in Buenos Aires last month during the Southern Cone
Defense Conference. This meeting should afford you a good
opportunity to further your relationship with him. I also
recommend a meeting with Vice President Castiglioni. We are
also making arrangements for you to visit Ciudad del Este. I
understand this will be your first visit to Paraguay. I
believe that you will find your stay to be both enjoyable and
fruitful.

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The Political Scene: President Duarte's Efforts Under Fire
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3. (C) Your visit comes almost two years into the
presidency of Nicanor Duarte Frutos. In that time, Duarte
has taken steps to deal with a pressing fiscal crisis, revive
the economy, and fight corruption. In recent months,
however, political support for Duarte has sagged with polls
indicating the general population is not satisfied his
government has taken adequate measures to improve the economy
and tackle corruption. As part of a pact to gain control of
the Congress with the support of dissident Congressmen from
opposition parties, Duarte's party, the Colorados, supported
election of a member of the socialist "Country in Solidarity"
Party Senator (Carlos Fillizola) to be President of the
Congress. Congressmen opposed to this tenuous pact are
bitter about having lost control of the Congress in the June
elections and threaten to undermine the Colorados'
legislative agenda. Fillizola is a strong supporter of the
ICC, opposes U.S. military exercises, and has called actions
in Afghanistan and Iraq "Genocide." While as President of
Congress he will likely moderate his views, his ascendancy is
troubling for the U.S. agenda.

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Paraguay's Public Security Challenges
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4. (U) Members of the Patria Libre Party (PPL),a far-left
political movement based in the countryside, kidnapped and
subsequently murdered the daughter of a former president,
Cecilia Cubas, whose body was discovered in February.
Evidence ties the PPL to the FARC. A culture of distrust
allowing for little interinstitutional cooperation hampers
the ability of Paraguay's law enforcement community to tackle
rising concerns about public security; Paraguay's National
Police are widely disparaged by the general population as
incompetent and corrupt. Last November, given the lack of
confidence in the police, the President called the military
out of the barracks to assist with law enforcement efforts.
Its profile on the street has diminished in recent months as
focus on the Cubas kidnapping recedes from the public eye.
The Cubas killing and clear evidence of FARC involvement
shocked Paraguay's leaders and population. Increased
cooperation with Colombia and realization of the need for
better intelligence and other security measures were one
result.

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Reforming the Economy, But Growth Insufficient
-------------- -

5. (U) Paraguay's economy relies on agriculture. It
features bloated but weak state institutions and the heavy
involvement of state-owned enterprises. There is
considerable activity involving the trading of imported
legitimate goods, contraband and counterfeit products, most
of which are destined for Brazil or Argentina. The Duarte
government took office in 2003 on the heels of Paraguay's
worst recession in years promising to attack widespread
corruption and reform the economy. He named a non-partisan,
technocratic economic cabinet and has supported their
efforts. On a macroeconomic level, Paraguay's performance
has been strong: economic growth reached 2.6 and 2.9 percent
in 2003 and 2004, respectively, and inflation was brought
down to near 3 percent in 2004. However, whereas the
government succeeded early on in getting some significant
economic reform laws through Congress, progress over the last
year has been slow. For Paraguay to escape from the poverty
affecting roughly half of its population, the country needs
to increase productivity by attracting capital and raising
annual growth rates closer to 5 or 6 percent. Success will
require the government to stay the course on macro economic
stability and undertake deeper structural reforms.

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International Crime and Counter Terrorism
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6. (U) The Tri-Border Area (TBA),the area of Paraguay that
meets Brazil and Argentina, near the city of Ciudad del Este,
is a primary area of USG concern due to the high rate of
transnational crime that impinges on U.S. interests. The
area is notorious for drug and other smuggling, including
trafficking in persons, intellectual piracy, document
forgery, counterfeit cigarette manufacturing and loose border
controls, especially at the Friendship Bridge connecting
Paraguay with Brazil. A priority concern for that region is
terrorist fundraising, especially by Hezbollah. Despite the
lack of specific antiterrorist statutes, Paraguay has
actively prosecuted known terrorist fund-raisers on tax
evasion charges. President Duarte noted the threats from
international crime, including terrorist fund raising, in his
July State of the Union.


7. (SBU) Paraguay is a significant transit point for the
transportation of cocaine and other narcotics by air from
Colombia to Brazil. Much of the northwestern part of the
country is barren and uninhabited, and the GOP has
difficulties in enforcing the law due to geography and the
political power some drug traffickers wield. SENAD, the
national anti-narcotics secretariat, coordinates GOP
interdiction efforts, with significant assistance from the
DEA. In November 2004, Paraguay and Brazil collaborated in a
joint operation, with DEA assistance, that produced an
historic seizure of over 260 kilograms of cocaine and the
arrest of notorious Brazilian drug trafficker Ivan Carlos
Mendes Mesquita, wanted in the U.S. on drug trafficking
charges involving Colombia,s FARC guerrillas. Paraguay
cooperated with the USG extradition request and Mendes
Mesquita was taken into U.S. custody on June 27, a dramatic
and unprecedented step. Clear congratulations are
appropriate. Post considers this case emblematic of the
success we have been able to achieve by working with the
SENAD as an autonomous unit. Paraguay has no radar coverage
throughout the entire country and it is not unlikely some
interlocutors will request U.S. assistance in this area. We
are looking into this possibility in the context of JIATF's
"Southern Light" but Paraguay has many other tasks more
important than obtaining radars, and we are supporting phased
improvements in enforcement and prosecution.

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U.S. Interests in Paraguay
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8. (SBU) U.S. interests in Paraguay are focused on
strengthening democratic institutions, promoting sound
economic policies and good governance, disrupting criminal
organizations, and combating terrorist financing. Post
maintains bilateral assistance programs dealing with
combating narcotics trafficking, money laundering,
intellectual property violations, and trafficking in persons.
Post has a Department of Justice Resident Legal Advisor and
a Department of Treasury Resident Enforcement Advisor who
have worked quietly behind the scenes over the past year to
assist the Paraguayan Government in developing appropriate
money laundering and counter terror legislation. In the wake
of the Cubas kidnapping, Vice President Castiglioni traveled
to the U.S. for meetings with VP Cheney, SECDEF Rumsfeld, and
other key officials to discuss a comprehensive approach to
Paraguay's security challenges, including a planned
high-level seminar sponsored by the Center for Hemispheric
Defense Studies (CHDS) in September or October. USAID and
the Peace Corps also have programs in the country. Paraguay
has been named a threshold country for Millennium Challenge
Account funding; its poor historical record on corruption was
the major reason it did not qualify for full participation in
the program.

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The Military's Mission
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9. (SBU) Paraguay's military is a small force struggling to
redefine its mission while it endures insufficient funding,
scandals, and frequent and questionable leadership
appointments. The Army is the largest of the three services
(9,000),followed by the Navy (2,000) and Air Force (1,200).
The Navy has a law enforcement mission on Paraguay's rivers.
The military's primary mission is to protect Paraguay,s
territorial integrity, defend the legitimate authorities in
accordance with the Constitution, and cooperate in civil
defense. It does not have a lead role in counter drug
operations; however, the military provides a specialized
tactical unit to support SENAD. The military's Special
Forces unit is in the process of organizing a company- size
counterterrorism unit, and the Presidential Guard Unit has a
specialized counterterrorist platoon. More recently,
Paraguay has attempted to increase its presence in
peacekeeping operations. It is seeking Spanish support to
deploy a 200 person contingent to Haiti subsequent to a
failed attempt to get sufficient Brazilian support.


10. (U) Military infrastructure and equipment is old,
obsolete and in desperate need of repair/replacement.
Paraguay's defense budget for 2005 represents approximately
1.7 percent of the national budget or USD 59M, an USD 8M
increase over 2004. Ninety percent of the budget is used to
pay salaries and 5 percent is used for sustaining conscripts,
leaving only 5 percent for operations, maintenance and
training. Budget problems are not expected to go away in the
near future due to lack of strong support in congress and
lingering memories of Paraguay's 35-year dictatorship among
some politicians. Also, the military is continuously beset
by public scandals including the July 4 arrest of an active
duty AF Colonel for flying smuggled cigarettes into
Argentina.


11. (U) Despite the above-noted challenges, the military
has remained subordinate to civilian authority and has
remained in their barracks. When called, it has supported
law enforcement activities, public health campaigns and
provided transportation assistance for farmers to bring their
products to market. The military is still seen as the first
to be called whenever there is a "crisis," and many
Paraguayans feel "safer" when the military is out on the
streets with the police. The role of the Presidential Guard
and its leader, Col. Galeano, have created controversy. With
its own armor, artillery and other material, and better
trained troops, it is the strongest unit in country and acts
independently.

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Strong Record of Military Cooperation
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12. (U) Post's Office of Defense Cooperation (ODC) has
developed a robust JCET/CNT program, second to only that of
Colombia in the region, and implemented the Counter Terrorism
Fellowship Program contributing significantly toward
establishment of host nation CT capability, including
designation and creation of a Paraguayan Tier 1 unit.
Funding from the Enhanced International Peacekeeping
Cooperation (EIPC) program has facilitated the training of
over 700 observers and peacekeepers and the deployment of
approximately 252 Paraguayans in support of peacekeeping
operations in this hemisphere and Africa. Currently, 61
Paraguayans are deployed in support of peacekeeping
operations. Separately, ODC has also launched an outreach
program, leveraging the State Partnership Program, designed
to encourage the military to build institutional links with
legislators in part through visits by Paraguayan Congressmen
as well as Flag officers from the Joint Staff and Ministry of
Defense with their counterparts in the U.S. The partnership
with the Massachusetts National Guard is robust; the MARNG
designation of a full time TCA coordinator from MARNG has
greatly promoted this lash up. These visits have generated
greater appreciation for the value of military cooperation
and helped solidify support in Congress for approval of
protections and authorizations for U.S. participants in the
exercises. The incredible impact of MEDRETES and other
humanitarian deployments in poor areas over the years is
invaluable. During a recent public controversy, one
legislator answered critics of military exercises by citing
the poor who have vision, hearing, or their lives saved. US
military support after the tragic fire last August also made
a lasting impression.

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Flap Over Article 98/Immunities
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13. (U) In the absence of a SOFA, the U.S. has gained
protections for U.S. participants in a diverse range of
U.S.-Paraguay joint military exercises for defined periods of
time, most recently gaining Congressional approval of
immunities for exercises scheduled from July 2005 through
December 2006. In June, however, an article in an Argentine
newspaper criticizing the Paraguayan Senate's decision to
extend the immunities for these exercises and suggesting
these exercises were a harbinger to creation of a U.S. base
in Paraguay, prompted significant press treatment here on the
issue. FM Rachid and MOD Gonzalez defended 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 late June, the Senate
granted the U.S. participants permission to enter for these
exercises over the next 18 months.


14. (SBU) In 2003, President Duarte said Paraguay would not
negotiate an Article 98 agreement. Nevertheless, Paraguay's
FM has conveyed a willingness to extend protections to U.S.
citizens provided it would not have to be approved by
Paraguay's Congress and would not be considered to contravene
Paraguay's Rome Treaty obligations. Negotiations have been
going on for two years. In the wake of the recent flap over
the immunities for participants in military exercises,
Argentina, Brazil, Paraguay, and Uruguay signed a declaration
at the MERCOSUR Summit committing themselves not to sign
bilateral or multilateral agreements that would affect the
jurisdictional basis of the ICC, particularly in connection
to Article 98. Paraguay's lawyer for Article 98 negotiations
with the U.S. conveyed concern that this declaration could
pose a further obstacle to concluding an agreement.


15. (SBU) Paraguay currently provides a very permissive
environment for U.S. military exercises. Given the recent
flap over immunities for those exercises and the MERCOSUR
Summit declaration, negotiations over Article 98 negotiations
have entered a very delicate stage with lawyers on both sides
engaging closely. We recommend not entering into a
discussion of this issue given the risk it could prompt
another controversy that could set back negotiations on
Article 98 and the record of success on protections for
current exercises.

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The Impact of Your Visit
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16. (U) Press interest in the your visit will be high,
although not exceedingly so as members of the Paraguayan
press are accustomed to visits by SOUTHCOM chiefs. The
Paraguayan journalists are generally friendly people. Even
if you have no time, it is better to stop and answer one
question than to refuse questions. If you refuse, then it
becomes a case of offended reporters claiming "secret
meetings." It is also advisable to plan in advance with your
meeting host what you will say to the press after the meeting
and to stick to answering questions on topics that you are
comfortable with. If something out of your area is asked,
refer the question to the U.S. Embassy press office or the
Ambassador.

Some talking points you might consider are:

Purpose of visit

-- This is an initial visit to Paraguay to meet key civilian
and military leaders valued friend.

Immunities for troops

-- The immunities granted to U.S. troops by the Paraguayan
Congress are typical of those that would be granted to troops
doing similar training in other countries.

-- The Ambassador can provide more details about the
bilateral discussions and arrangements here in Paraguay.

International Criminal Court/Treaty of Rome

-- I would refer you to the Ambassador on this issue.

Rumors of a base

-- Reports of the basing of U.S. troops is without any basis
in fact.
-- The truth is that small numbers of U.S. personnel,
generally 10-20 persons, will train with their Paraguayan
military colleagues during periods of two to six weeks. No
U.S. soldiers will be deployed in Paraguay for extended
periods of time, and there will never be more than a few
dozen U.S. service members in Paraguay for longer than 45
days.

-- The exercises include humanitarian medical assistance to
thousands of needy campesinos and others in the interior.

-- The exercises will take place during the next 18 months.
The official status for these troops, for sake of efficiency,
was requested for the trainings and medical exercises over
the entire time period.

-- Again, none of the trainings lasts more than 45 days.
These exercises are not linked to any other assistance being
provided by the U.S. government.

Guarani aquifer (rumors that the U.S. wants to steal
Paraguay's supply of fresh water)

-- I have heard of these rumors and they are without basis in
fact.

-- The U.S. has access to adequate water supplies. In the
unlikely event of a crisis, there are sources much closer and
more cost-effective.

International Crime and Counter-terrorism

-- As clearly outlined in the U.S. report on global
terrorism, we believe the activities in the Tres Fronteras
are basically fundraising and financing ) not operational in
nature.

-- We rely on the authorities in the countries involved to
provide the legal structure to allow the investigation,
arrest, and prosecution of persons involved in such
activities.

-- We are pleased by Paraguay's active cooperation in the
fight against terrorism. It has taken important steps to
counter this grave problem and was instrumental in helping
strengthen regional cooperation with the U.S. (through the
"3 1" mechanism).

But where is your proof that Paraguay funds terrorists?

-- President Duarte mentioned the threat from terrorist
financing in his annual message to congress

-- Illicit activity, particularly along the tri-Border,
fosters corruption, discourages investment, inhibits economic
development, and creates a milieu favorable to money
launderers and terrorist financiers.

-- In recent years, Paraguay has convicted individuals for
tax evasion who have also been implicated in laundering money
to terrorist groups.

-- It is vital Paraguay continue to prosecute and convict
those implicated in illicit activity, including money
laundering and terrorist financing.

Anti-drug effort

-- Paraguay is making an important effort against drug
trafficking, despite limited
resources. We applaud historic achievements including the
arrest and extradition of Mendes Mesquita who had ties to the
FARC.
-- We are confident there will be continued good performance
in this area, which will
benefit the Paraguayan people, as well as the region at large.

What will SOUTHCOM be doing to help Paraguay fight drug
trafficking? Can you give us radars and helicopters?

-- In 2004, the U.S. provided Paraguay with USD 1,000,500 in
funds to assist Paraguay in combating narcotics trafficking,
money laundering, trafficking in persons, and intellectual
property rights piracy.

-- Those funds support training for judges, prosecutors, and
police, purchase of equipment, and conduct of operations.
U.S. funds also support construction of SENAD offices in
Pedro Juan Caballero and expansion of SENAD's offices in
Mariscal Estigarribia.
-- Since 1987, the U.S. has donated over USD 5.8 million to
assist Paraguay's law enforcement efforts.

What will SOUTHCOM do to help Paraguay deal with the threat
posed by the FARC?

-- Evidence of FARC ties to the Cubas kidnapping is very
disturbing. The FARC has demonstrated its readiness to
commit any number of atrocities, including kidnappings and
other forms of terrorism, to advance its objectives.

-- The U.S. recognizes Paraguay's commitment to address this
problem. We are exploring ways we can support Paraguay,
particularly in the law enforcement field, with appropriate
training.

-- In May, the Vice President traveled to the U.S. to discuss
ways to expand U.S.-Paraguayan cooperation. That visit
produced agreement to create a Trade Transparency Module in
the Customs Department, provide anti-kidnapping training, and
conduct a workshop sponsored by the Center for Hemispheric
Defense Studies (CHDS).

KEANE