PARAGUAY: AMBASSADOR CALLS ON NEW SENATE

C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 000939

SIPDIS

STATE PASS TO USAID FOR LAC/AA
NSC FOR SUE CRONIN
SOUTHCOM FOR POLAD DAN JOHNSON

E.O. 12958: DECL: 07/25/2015
TAGS: PGOV PREL PINR EAID MARR KDEM KWMN PA
SUBJECT: PARAGUAY: AMBASSADOR CALLS ON NEW SENATE
LEADERSHIP, AG OPINES ON POLITICAL SCENE

Classified By: PolOff Mark A. Stamilio, reasons 1.4(b) and (d).

Summary
--------------

1. (U) On 7/22, the Ambassador called on the new Senate
President, Carlos Filizzola, and discussed the pending
Millennium Challenge Corporation (MCC) project aimed at
improving transparency and legislative effectiveness;
legislation to increase citizen participation in government;
military exercises scheduled for the next 18 months; the
termination of USAID's reproductive health program; and
Filizzola's priorities for this year's legislative agenda.


2. (C) The Ambassador also called on the new First Vice
President of the Senate, Alejandro Velazquez, and the new
President of the Senate Foreign Relations Committee, Adriana
Franco. Velazquez complained at length about the
deterioration of relations between the majority multi-party
bloc in Congress and the opposition. Franco asked how to
increase openness and cooperation with the USG. The
Ambassador responded that cooperation was very good in areas
such as counter-narcotics, anti-corruption and
counter-terrorism, but that Paraguay needed to improve its
performance with respect to enforcing the law, especially on
money laundering, and needed to improve its business climate.
Both Velazquez and Franco complained that imprisoned UNACE
leader Lino Oviedo was seeking to punish them for working
with the Colorados by calling in large alleged debts.


3. (C) Attorney General Oscar Latorre shared with the
Ambassador later that same day his concern that the country's
political leadership has embarked on a perilous road toward
sterile confrontation. Latorre was also disdainful of two of
the reported leading candidates to replace him, describing
one as a "bandit" and the other as a farm team criminal
hoping to get into the major leagues. End Summary.

Meeting with Senate President
--------------

4. (U) On 7/22, the Ambassador called on the new President of
the Senate, Carlos Filizzola of the socialist Country in
Solidarity Party (PPS). Filizzola said he would like to work
together whenever possible and strengthen relations with us.
He was open to the idea of traveling to the U.S., noting that
he has traveled to the U.S. on several occasions and is a
member of the Inter-American Dialogue.


5. (U) The Ambassador explained the pending Millennium
Challenge Corporation (MCC) project aimed at improving
transparency and legislative effectiveness, and stressed the
need for Paraguay to take ownership of the proposal and
refine it for final presentation in Washington in three
months. Filizzola voiced general agreement with the project.
He added that the Congress was working with the
Inter-American Development Bank and the World Bank on similar
projects, and that the newly appointed projects coordinator
for the Congress, Marializ Sosa, would work to ensure
continuity. The Ambassador said that he would have the USAID
Country Director get in touch with Sosa.


6. (SBU) With respect to transparency, Filizzola told the
Ambassador that he would push for legislation to increase
citizen participation in government through public hearings.
He noted that he had done the same as mayor, passing
ordinances that gave constituents access to public records
and a voice in the budget process through public hearings.
When the Ambassador inquired whether the Senate would open
the Puerto Casado (Moon Sect) land expropriation debate to
public hearing, Filizzola said there had already been a
debate on it early in the year, and focused instead on the
government taking a greater role in resolving the rural
crisis through technical assistance and credit, typical PPS
demands. Additionally, he argued that 52,000 hectares was a
drop in the bucket for Victoria SA, the Moon Sect company
that owns the land, and that expropriation was a "rational"
solution to the crisis since it would generate employment in
the zone "without affecting Victoria's investment."
(Comment: It was clear that Filizzola would not be swayed
that expropriation would have longer term negative effects on
investment throughout Paraguay. End Comment.)


7. (U) Filizzola raised the issue of military exercises,
assuring the Ambassador that the new Congress would respect
the previous Congress's decision to approve our request for
immunities and permission for U.S. military personnel to
enter the country for a series of routine medical and
training exercises that will take place over the course of
the next 18 months. Filizzola opined that the recent debate
over the issue was merely a reaction to the length of the
period in question.


8. (U) The Ambassador explained that USAID would terminate
its family planning program in Paraguay since USAID in
Washington is shifting funds to Africa, which means that
USAID will no longer provide contraceptives for distribution
in Paraguay. USAID currently provides 95 percent of the
contraceptives distributed, the Ambassador noted, hoping that
the GOP would develop a plan to provide needed services.
Filizzola, a medical doctor, voiced agreement with the aims
of the USAID program, and stated that he had presented a bill
on sex education and family planning. He agreed that it
would be beneficial for USAID and the Paraguayan commission
involved in family planning to coordinate as USAID turns the
reins over to the GOP.


9. (U) In response to the Ambassador's question, Filizzola
listed the following as his priorities for the legislative
agenda:

-- Health issues, such as reproductive health
-- Protection of women and children, and victim assistance
programs
-- Reform of the public banking law
-- Social issues, such as employment and poverty
-- Decentralization of government
-- Anti-corruption legislation, such as illicit enrichment
and influence peddling laws and whistleblower protection

Senate First Vice President
--------------

10. (C) Immediately after their meeting with Senator
Filizzola, the Ambassador called on Senator Alejandro
Velazquez of the National Union of Ethical Citizens (UNACE)
party in his capacity as the new First Vice President of the
Senate. Prompted only by an inquiry as to how things were
going, Velazquez meandered for 45 minutes through complaints
that the atmosphere in the Congress was "conflictive" and
"destructive" with the opposition threatening to deny a
quorum any time a majority legislator even "went to the
bathroom." Velazquez also confided that a group of Senators
who "do not accept Filizzola's presidency" had approached him
about taking over as Senate President, but that he declined
their offer and would "respect the institution."


11. (C) At the end of the meeting, Velazquez produced a
suitcase full of cash (local currency equivalent of USD
120,000) that he was going to take to Oviedo supporter and
owner of Paraguay's largest daily Aldo Zuccolillo. Velazquez
claimed Oviedo was threatening legal action over alleged
debts against him and others from UNACE cooperating with the
Colorado Party. Oviedo's attempt at intimidation would fail,
he concluded. (Note: Velazquez' story on the debt was opaque
and confusing, but he claimed Oviedo was simply trying to
smear those who abandoned him. It was not clear why he was
paying Zuccolillo. End Note.)

President of Senate Foreign Relations Committee
-------------- --

12. (C) Following their meeting with Velazquez, the
Ambassador called on Senator Adriana Franco in her capacity
as the new President of the Senate Foreign Relations
Committee. (Note: Franco recently left UNACE and returned to
the ruling Colorado party, something Velazquez had done de
facto but not formally. At the end of the meeting, concerned
that she had made a "grave mistake" in leaving UNACE, Franco
asked whether the Ambassador had information on whether
jailed UNACE leader General Lino Oviedo might harm her. Like
Velazquez, she claimed Oviedo was threatening her over debts.
The Ambassador told her that we did not have any such
information, but that it appeared Oviedo was under tight
military control. End Note.)


13. (C) Franco professed her love for the U.S. as the only
hope against the leftists ("socialists and communists") that
surround Paraguay in Latin America, and strong pressure from
Mainland China. She asked for increased openness and
cooperation with the USG, rating current relations with us a
"7" on a scale of 1 to 10 and hoping that we could get to a
"10".


14. (C) Franco also asked what Paraguay needed to do to
achieve the goal of getting to a "10". The Ambassador noted
that cooperation was very good in areas such as
counter-narcotics, anti-corruption and counter-terrorism, but
that we needed to see progress in important areas such as
money laundering; and that first and foremost Paraguay needed
to enact new anti-money laundering legislation. The
Ambassador stressed the importance of not creating the
appearance that such legislation was a U.S.-led project.

Attorney General's Observations
--------------

15. (C) Attorney General Oscar Latorre, one of the more
astute and sober observers of the local political scene,
shared with the Ambassador later that same day his concern
that the country's political leadership has embarked on a
perilous road toward sterile confrontation which could set
back many of the gains made during the last few years in a
number of fields. It will be difficult, he said, for the
Executive to make significant legislative advances. Populist
measures will become harder to resist and short-term
political calculations -- looking toward the upcoming
electoral calendar -- may undermine some of the progress made
and the plans for additional reforms in strengthening
institutions, including what he described as the unique
opportunity presented by the MCC Threshold Program.


16. (C) Latorre believes the President should have made a
serious effort to bring together the key party leaders to
work out a modus vivendi for another two years, until the
municipal elections, when cutthroat competition would become
inevitable. He expressed concern that the President will
"make a fatal mistake" if he chooses a new Attorney General
based principally on political expediency or for other
unspeakable motives, because it would polarize the country
and the three significant opposition parties would be joined
by the private sector and many other societal groups in
confronting Duarte and the Colorado party. (Note: Latorre's
term expires in one month.) Latorre likened the current
Congressional President, Socialist Carlos Filizzola, to "road
kill" the day he steps down 11 months from now because he
blatantly sold out to attain his current position. This
severely limits his maneuvering room as Congressional
President.


17. (C) Latorre was disdainful of two of the reported leading
candidates for the AG slot, describing one (Ruben Candia) as
a "bandit", and the other (Ruben Romero) as a farm team
criminal hoping to get into the major leagues. Latorre said
he warned Duarte Frutos about his concerns and suggested that
he (Latorre) be appointed for another term even though they
both know Latorre has to take medical leave for a while,
since it would give Duarte more time to find a good
replacement when/if Latorre must resign for health reasons.
Latorre noted that the only current prosecutor who he thinks
has the stuff to be an honest and successful AG is Edward
Irala, currently the Assistant Fiscal for the Department of
Itapua (Encarnacion).


18. (C) Comment: Latorre's remarks are self-serving, but in
general they square with our own observations of current
troubling trends. Latorre reportedly has cancer, although he
did not admit it, and he avoided discussing his health except
to say that he is going to Sao Paulo for some examinations.
The AG position is probably the second most powerful job in
the country. He is independent from the other three powers
and, as Latorre noted, has information or can collect
information that can destroy almost anyone in Paraguay.
KEANE