DGAC EXPLAINS ZEVALLOS' FLIGHT PERMISSIONS

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 004070

SIPDIS

DEPT FOR WHA/AND, EB/TRA/AN
TREASURY FOR OFAC
FAA MIAMI FOR JAY RODRIGUEZ
YAOUNDE FOR MALABO OFFICE

E.O. 12958: DECL: 09/19/2015
TAGS: EAIR SNAR PGOV EINV PE
SUBJECT: DGAC EXPLAINS ZEVALLOS' FLIGHT PERMISSIONS

REF: A. LIMA 3974

B. LIMA 3366

C. LIMA 2769

D. LIMA 2053

Classified By: Economic Officer Samantha Carl-Yoder for reasons 1.4 (b)
and (d).


1. (C) Summary. Despite pledges by the DGAC to ensure that
OFAC-listed Narcotics Kingpin Fernando Zevallos paid off
previous debts of his former companies, AeroContinente and
NuevoContinente, Zevallos received flight permissions for his
new company, AeroContinente EIRL in June. The Director
General of Civil Aviation Roberto Rodriguez explained that
the Ministry of Transport determined that Zevallos
technically did not own NuevoContinente and thus should not
be held responsible for the company's debts. Zevallos, who
sold AeroContinente to his former employees last year,
maintained ownership of the fleet of planes and continues to
rent them to Air Guinea Cargo, based in Equatorial Guinea.
Zevallos continues to push the DGAC, unsuccessfully, for
airworthiness certificates for his new company,
AeroContinente EIRL. End Summary.

Zevallos Not Responsible for Debts
--------------


2. (C) Econoff met with Acting Director General of Civil
Aviation Roberto Rodriguez and DGAC Director of Security Juan
Crovetto on September 14 to discuss the efforts of
OFAC-designated Narcotics Kingpin Fernando Zevallos to resume
AeroContinente operations. Rodriguez noted that while the
DGAC granted flight permissions to the company in mid-June,
none of Zevallos' planes have received airworthiness
certificates (Ref B). Although Zevallos was listed on the
OFAC Kingpin list and is currently on trial for
narcotrafficking, Rodriguez explained, there is no legal
impediment in Peru that prevents Zevallos from resuming
operations.


3. (C) Econoff noted that in a previous conversation,
Rodriguez emphasized that Zevallos would have to pay off
AeroContiente/NuevoContinente's previous debts, including
salaries for former employees and NuevoContinente's fuel bill
(ref C). According to DGAC records and information from
former NuevoContinente employees, these debts are still
outstanding. Rodriguez, acknowledging his prior comments,
noted that the Ministry of Transport decided, without DGAC
consent, that it could not hold Zevallos responsible for
debts incurred by NuevoContinente because Zevallos was not
technically the owner of the company. (Note: Zevallos sold
NuevoContinente to his employees in September 2004. End
Note.) The former owners of NuevoContinente, according to
the Ministry of Transport, should be held responsible for
these debts. Rodriguez commented that if it were up to the
DGAC, Zevallos would be held responsible and not granted
flight permissions. He further lamented that the Ministry of
Transport felt otherwise, resulting in the resumption of
AeroContinente operations.

But Zevallos Still Owns the Planes?
--------------


4. (C) Econoff pointed out, that using the Ministry of
Transport's logic, Zevallos technically sold his planes to
the new owners of NuevoContinente and should not have been
able to rent them to Air Guinea Cargo (Refs A and B).
Rodriguez agreed initially, but then speculated that Zevallos
may have maintained ownership of the planes and rented them
to Nuevo Continente. Econoff then inquired about the
airworthiness of the planes that Zevallos rented to Air
Guinea, as Zevallos was unable to purchase spare parts for
the Boeing planes under the Kingpin Act. Rodriguez noted
that before the planes left, Air Guinea representatives
registered the planes in Air Guinea's name and petitioned to
fly the plane as a "fair flight." Air Guinea pledged to
repair the planes once they arrived in Equatorial Guinea.


Comment
--------------


5. (C) Although the DGAC provided Zevallos with flight
permissions for his "new" company, AeroContinente EIRL,
Rodriguez continues to emphasize that unless Zevallos
purchases or rents new planes, the company's current plane (a
Fokker F28) will not receive its airworthiness certificate.
We suspect, however, that Zevallos will use his connections
within the Peruvian Government to try to manipulate permits
from the DGAC. Rodriguez very candidly informed us that
several Congressmen, including President of the
Transportation Committee (and alleged contact of Zevallos)
Victor Valdez, has put pressure on the DGAC to improve
competition in the Peruvian aviation industry by authorizing
new local airlines. We will continue to monitor the
situation and report any new developments.


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