POLICY POINTS; WASHINGTON VISIT OF DOMINICAN

C O N F I D E N T I A L SECTION 01 OF 03 SANTO DOMINGO 002576

SIPDIS

NSC FOR SHANNON; DEPT FOR S/S, WHA, WHA/CAR, EB,
EB/TPP/BTA/EWH; TREASURY FOR DO:N LEE, R TOLOUI, L CARTER;
SECDEF FOR OSD; SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 05/05/2015

TAGS: PREL OVIP ETRD DR

SUBJECT: POLICY POINTS; WASHINGTON VISIT OF DOMINICAN
PRESIDENT LEONEL FERNANDEZ, MAY 11-12

Classified By: Ambassador Hans H. Hertell. Reason: 1.4 (b) and (d)


1. (C) Dominican President Leonel Fernandez travels May
11-12 to Washington for the first time since his August 2004
inauguration. The USG and regional focus of the event is the
CAFTA free trade agreement now under consideration in the
U.S. Congress. For Fernandez, however, the visit is much
more: it is a validation of his status as the democratically
elected leader of the Dominican Republic. Fernandez has told
the Ambassador repeatedly that he could not afford to go to
Washington without calling on President Bush; if he were not
received by the U.S. President on his first visit, Dominican
commentators and politicians would construe any Washington
visit as a personal snub and a failure of his administration.
Following is background and a suggested approach for several
topics that could be discussed during the trip, depending on
the final Fernandez schedule. They include CAFTA,
corruption, support for the Coalition, and the need for a
national security strategy.

ECONOMIC BACKGROUND


2. (C) Fernandez and his party have articulated a
market-friendly, socially conscious approach to domestic
politics. Fernandez is an eloquent advocate for
international cooperation and multilateralism. In the nine
months to date of his administration his economic team has
successfully put the country back into a standby agreement
with the International Monetary Fund and adhered to agreed
targets. They openly favor the CAFTA free trade agreement
and in December secured the repeal of a CAFTA-unfriendly
protectionist tax. The CAFTA is under consideration in the
Dominican Senate; powerful domestic business interests,
especially from the sugar industry, are seeking significant
fiscal concessions as a price for non-opposition to the
agreement. At the same time, the Dominican letter of
agreement with the IMF specifies that the government will put
forward proposals for fundamental tax reform this year to
offset significant revenue losses that will occur pursuant
CAFTA and WTO commitments to ending many levies on imported
goods. Dominican legislators would prefer to wait until
after the mid-2006 congressional elections to consider fiscal
reform.

ACTIVE ENGAGEMENT IN CAFTA RATIFICATION
- - - - - - - - - - - - - - - -


3. (C) President Fernandez is eloquent in public
pronouncements about globalization and free trade, and he has
endorsed CAFTA in general terms. He has not engaged
legislators or business interests personally on the subject
or sought to broker a practical agreement that would end the
debate about ratification. His passivity is of great concern,
for influential business interests assert that lawmakers must
grant them extensive tax concession BEFORE ratifying CAFTA.

The Dominican Senate is controlled by the opposition PRD.
Congressional elections for all seats in both houses are
scheduled for May 2006.


CAFTA APPROACH:

- - The Dominican people and legislature need their President
to engage actively in the CAFTA ratification process.

- - You have spoken eloquently about globalization and free
trade. With your 57 percent mandate in the presidential
election, you have the moral authority to pursue passage of
CAFTA.

- - The obligations of CAFTA require a major tax reform, a
fact your government acknowledged in negotiations with the
IMF. You personally and your team need to engage now to
articulate these reforms and pursue them.

CORRUPTION
- - - - -


4. (C) Fernandez says he is deeply concerned by levels of
corruption in the country. The Dominican public and press
are discussing the corruption revealed over the last two
years, including, most prominently, the "Baninter" bank fraud
and related embezzlements at Bancredito and Banco Mercantil
that collectively cost 20 percent of GDP in 2003; narcotics
trafficking and payoffs; government procurement scandals
affecting the previous administration and both of Fernandez's
administrations. Fernandez has appointed men of integrity to
key law enforcement positions. USAID is providing him help to
mount an anti-corruption/ethics in government mechanism and
campaign. On May 2, responding to the urgings of the U.S.
ambassador, President Fernandez he belatedly and without
comment relieved his intelligence chief and two other senior
officers known to be corrupt. The government is preparing
several pieces of legislation to assure greater transparency
and to prevent opporunities for corruption.

CORRUPTION APPROACH:

- - We greatly admire your Attorney General Francisco
Dominguez Brito and several other key law enforcement
officials in your administration.

- - The USG will continue to support you in your stand
against corruption.

- - CAFTA and new Dominican legislation will provide stronger
safeguards.

- - The public must see your government act strongly and
impartially against those suspected of fraud and corruption.

SUPPORT FOR IRAQ- - - - - - - -


5. (C) Fernandez did not criticize his predecessor's dispatch
of a 300-soldier batallion to Iraq and never commented
publicly on Operation Iraqi Freedom. The Dominican Armed

Forces Minister, acting on his understanding that he has
authorization from the President, is in the process of
selecting a limited number of Dominican staff officers,
perhaps 15-20, for duty with the U.S. Central Command and in
the Iraq area of operations. The Dominican government has
not formally notified the United States of this decision and
it has not been publicized. Selection and testing is under
way; first deployments could occur in June.

APPROACH ON IRAQ SUPPORT:

- - I understand that you have given your Armed Forces
Minister authorization to select a number of staff officers
to support the coalition efforts to protect and rebuild Iraq.

- - The Iraqi people and authorities will appreciate this
support. So do we.

- - We appreciate the quality of Dominican military
professionals; this will further qualify those officers to
participate in multilateral operations with the UN or the
Organization of American States.

NATIONAL SECURITY STRATEGY-


6. (C). President Fernandez has expressed great interest in
drawing up a national security strategy. Senior military
officers have not begun this work in earnest, devoting their
attention instead to a "White Paper" on the military instead,
and have not been receptive to Fernandez's military advisor.
The U.S. Embassy's Military Advisory and Assistance Group
can assist in drawing up a national strategy.

SECURITY STRATEGY APPROACH:

- - The President bears the responsibility for defining the
National Security Strategy of a nation, giving guidelines to
the government and armed forces.

- - I encourage you to take a direct interest in this work,
to constitute a working group headed by your personal
representatives with a mandate from you, and to insist on a
concerted effort.

- - A clear vision of security threats, requirements, and
resources is vital to assuming your responsibilities toward
your own population and toward the community of nations.

HERTELL