DOMINICAN POLITICS #34: PRESIDENTS DO "SUMMIT"

S E C R E T SECTION 01 OF 03 SANTO DOMINGO 003877 SIPDIS SENSITIVE DEPT FOR WHA, WHA/CAR, WHA/AND, INR, EB/ESC/IEC/EPC; NSC FOR SHANNON USCINCSO ALSO FOR POLAD;TREASURY FOR OASIA-MAUREEN WAFER; USDA FOR FAS; USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI E.O. 12958: DECL: 08/03/2025 TAGS: PGOV ETRD DR CAFTA SUBJECT: DOMINICAN POLITICS #34: PRESIDENTS DO "SUMMIT" AND PLEDGE CAFTA RATIFICATION Classified By: EcoPol Counselor Michael A. Meigs. Reason: 1.4(b) and (d). ¶1. (U) Following is number 34 in our series on Leonel Fernandez's first year in office: Dominican &Summit8 -- LF and HM Pledge to Support CAFTA-DR (U) On the morning of August 2 President Fernandez and former president Hipolito Mejia met for breakfast at the residence of catholic university president Msgr Agripino Nunez and discussed cooperation on ratification of CAFTA-DR and the fiscal reform package. The press was informed only after the meeting started. El Nacional, the afternoon tabloid, carried a color picture of the two presidents smiling and embracing outside Agripino's house. (S) Msgr Agripino Nunez told the Ambassador this afternoon that the meeting had been prepared in great secret, coordinating through presidential chief of staff Danilo Medina. Nunez asked U.S. officials to treat his comments &with the secrecy of the confessional.8 Mejia had spoken to Nunez last week, stressing the final para of his letter to President Fernandez (see telegram),in which he avowed his willingness to cooperate for the interests of the nation. (SBU) Fernandez arrived first for the 8:30 encounter, 5 minutes before Mejia. He was accompanied by Danilo Medina. The closed door breakfast included only the presidents, Medina, and Msgr Nunez. The presidential press corps was informed at 9:00 and was awaiting when the participants emerged at 10:50. (C) According to Msgr Nunez, the presidents agreed on the necessity of ratification of the DR-CAFTA and the associated fiscal package that the Senate had declared must be passed at the same time. Mejia pledged to deliver the votes of virtually all PRD Senators. Nunez says that Mejia has the certain loyalty of at least 21 senators in the 32-member Senate. The PLD has a single Senator. (S) Senator Ramoon Albuquerque, just elected president of the PRD, is probably an exception. Nunez qualified Senator Albuquerque several times as corrupt and self-seeking, but emphasized that in the PRD process in June of selecting PRD Senator Andres Bautista for re-election, Mejia had demonstrated that Senator Albuquerque had no control over PRD senators. (C) Msgr Nunez said that the presidents were in agreement about the deal hammered out so far in the consultative committee chaired by Nunez (and boycotted by the PRD, an initiative of Albuquerque). Offsets have been identified for the 25 billion Dominican pesos (about $90 million) that disappear from the 2006 government budget, and participants in the process -- the administration's economic/fiscal team and representatives of economic sectors and interests -- are generally in agreement. The remaining task is to find a source for approximately 5 billion pesos (about $18 million) that are proposed to be used for subsidies, compensation and other benefits for the losing agricultural sector (principally through tax exemptions for imports of capital goods and inputs). The working proposal is for these to come from an increase in the corporate income tax from 25% to 30%; the powerful Entrepreneurs' Council (CONEP) is resisting this approach and proposed to extend the base for the value-added tax (with a rate of 16%) from just under half of all retail goods to all ("including even yams," according to Nunez). Participants in the dialogue will convene tomorrow, Wednesday, in the afternoon to resume this discussion. (SBU) Msgr Nunez says that he believes that agreement can be reached on the package elements this week. The agreement is that Fernandez will take those elements and present them formally to the legislature, which is due to reconvene in regular session on August 16. He has the option of calling an extraordinary session but there was no discussion of his doing so. (C) Other than the presidential inauguration a year ago, this is the first time the presidents have met face to face since a November 2003 session presided by Msgr Nunez to agree to approaches to the presidential campaign. Nunez says that the two were firmly agreed on the need to exert their leadership in the national interest to assure that CAFTA-DR is ratified. Nunez predicts that the agreement will be ratified by the end of August, at the latest. (S) The atmosphere was relaxed and cordial from the outset, according to Nunez, with no recriminations. In reply to Mejia's letter on bank fraud, Fernandez assured him that there had been a misunderstanding; he had not intended to imply that Mejia's economic policies were solely to blame for the crisis or that the bank frauds did not occur. The two agreed that it was necessary for the judicial cases to proceed normally through the courts. Mejia's characteristically gruff, accusatory remarks on television the previous evening were apparently no obstacle to the breakfast understanding. (S) Nunez said that during general discussion of crime and the threat of narcotics, Fernandez informed Mejia that much of the traffic in drugs was coming from Venezuela (clearly a reference to the chart of "air tracks" shown to presidents by Secretary Rumsfeld in the mid-May CAFTA-DR visit to SIPDIS Washington. They agreed that the narcotics trade had transformed Dominican society and that it had become difficult to know whether well-off individuals were associated with the trade. (SBU) Both agreed on the need for practical cooperation between the political parties on matters of national interest. (U) Remarks to the press reported in the afternoon tabloid El Nacional included Fernandez's comment that ratification of CAFTA-DR is of fundamental importance because the country cannot afford to scorn an agreement already approved by the United States; the U.S. is the principal commercial partner of the country. Concerning the fiscal discussions, he said that participants didn't seek to create new taxes but rather to substitute for lost revenues. Mejia said that PRD legislators are awaiting a draft proposal for study and eventual approval. He added, "The country stands above our individual interests and no one can stand in the way of dialogue." Mejia said that he was hardly in any position to oppose ratification, considering that his government was the one that initiated the negotiations. During the presidential campaign, he said, he and Fernandez said many things about one another, but that was all in the past. In their meeting they had spoken about many subjects. Msgr Nunez called it a &meeting of engagement and cordiality" in which the presidents left open the possibility of meeting again as many times as might be necessary; he said that they had left open the possibility of including a representative of the PRSC, the country's third major political party. ¶2. (U) Drafted by Michael Meigs ¶3. (U) This piece and others in our series can be consulted at our SIPRNET site http://www.state.sgov.gov/p/wha/santodomingo/ along with extensive other material. HERTELL