PARAGUAY POLITICAL AND ECONOMIC UPDATE, JULY 23-29

1. (U) Summary


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-- VP Castiglioni Meets with FBI Regional Director
-- Filizzola and President Duarte Discuss Key Issues
-- Cabral to Retire at Year's End
-- Deadly Hantavirus Reappears in the Chaco
-- Successful Conclusion to EXPO
-- Second Tier Public Bank Law Goes to President



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VP Castiglioni Meets with FBI Legal Attach


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2. (U) On July 26, Vice President Luis Castiglioni met with
Buenos Aires-based FBI Legal Attach William Godoy to discuss
training and cooperation and follow-up on Castiglioni's June
trip to Washington. Godoy reported the FBI plans to
establish a Legal Attach office in fiscal year 2007, pend
approval of funding. After the meeting, Castiglioni
announced to press that Paraguay also will continue to
receive security support from Colombia, as next week the
Colombian Motorized Police will conduct training for
Paraguayan National Police and Military components.
Castiglioni also told the press that next week officials from
the Center for Hemispheric Defense Studies will prepare for
security seminar for senior Paraguayan officials.



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Filizzola and President Duarte Discuss Key Issues


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3. (C) On July 25, newly elected Congress President Carlos
Filizzola met with President Duarte to discuss the
appointment of a new Attorney General and the passage of key
legislation including money laundering and anti-kidnapping.
Filizzola told the press after the meeting that he agreed
with Duarte on the need for appointing a capable, respected
individual to replace Attorney General Oscar Latorre, whose
term is ending in August. Filizzola noted that a previously
agreed political agreement not to reelect Latorre will be
honored. (Comment: See ref A for more information on
Duarte's top choices for the Attorney General position. New
Justice and Labor Minister Ruben Candia appears to be
Duarte's preferred candidate. End Comment.)



4. (U) During the same meeting, Duarte reportedly asked
Filizzola to expedite legislation relating to
money-laudering, a U.S. priority.



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Cabral to Retire at Year's End


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5. (C) The press reported this week that members of
Congress are seeking to promote Aristides Cabral, a notorious
corrupt police commander, to be the Chief of the Paraguayan
National Police. President Duarte withdrew his request for
Cabral's promotion last March, after Cabral's links with the
Biera Mar drug trafficking organization became public (ref
B). The Ambassador asked President Duarte on July 27 about
the press story, and Duarte assured him that the press
article was untrue. Duarte noted that Cabral will retire at
the end of this year with 30 years of service and until then
will remain on administrative leave.



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Deadly Hantavirus Reappears in the Chaco


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6. (U) The deadly Hantavirus Pulmonary Syndrome (HPS) has
claimed another life in the town of Fildelfia in the rural
Chaco region. It had been two years since someone had died
of HPS. Over 200 people have been infected, with 21 deaths,
since it was first discovered in Paraguay in 1987. Health
officials expressed concern over the lack of adequate
intensive care infrastructure to contain HPS in the Chaco.
HPS is carried by a certain type of Chaco rodent, making
rural field workers most susceptible, but it is not
transmitted person-to-person. Originally thought to exist
only in the U.S., HPS was first formally identified and
investigated in Paraguay by a task force from the U.S.
Centers for Disease Control in 1995.



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Successful Conclusion to EXPO


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7. (U) Paraguay,s annual business and agriculture fair
concluded on July 24. The EXPO is a county-fair style
exposition that takes place in Asuncion, usually drawing
participation from most large and medium sized businesses
with operations in Paraguay. Initial reports claim that over
725,000 people visited this year's EXPO, sponsored by the
Rural Association of Paraguay and the Paraguayan Industrial
Union. This year's attendance increased by about 150,000
from 2004, despite several days of cold and rainy weather.
Organizers highlighted the Industrial Pavilion as a great
success with 55 companies participating, also an increase
from last year. According to local news reports, the EXPO
will be responsible for around US$19 million in future
investments and business agreements in Paraguay.



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Second Tier Public Bank Law Goes to President


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8. (U) On July 21, the Chamber of Deputies passed without
modifications the second tier public bank law previously
passed by the Senate. The law creates the Financial
Development Agency (AFD), which will combine several smaller
entities and act as the sole wholesale lender meant to
channel long-term financing provided by the IFIs and other
sources, such as the social security fund, to first-tier
public and private banks. The IMF had previously indicated
that it was satisfied with the version passed by the Senate,
despite some changes from the version presented by the
executive. The law exempts the bank from restrictions on
refinancing and Basle guidelines on loan classification, but
provides the executive with sufficient latitude to write the
regulations implementing the law in such a way as to provide
sufficient prudential safeguards.
KEANE