DOMINICAN POLITICS #34: PRESIDENTS DO "SUMMIT"

S E C R E T SECTION 01 OF 03 SANTO DOMINGO 003877

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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