DOMINICANS OUTLINE APPROACH TO HAITI, CAFTA, U.S.

C O N F I D E N T I A L SECTION 01 OF 08 SANTO DOMINGO 000971

SIPDIS

STATE FOR WHA/CAR, WHA/EPSC, WHA/USOAS, EB/TPP/BTA,
EB/IFD/OMA;
NSC FOR SHANNON AND MADISON;LABOR FOR ILAB;
USCINCSO ALSO FOR POLAD; TREASURY FOR OASIA-LCARTER
STATE PASS USTR FOR VARGO, RYCKMAN, MALITO, CRONIN
USDOC FOR USPTO AND FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN
DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: DECL: 02/16/2010
TAGS: PREL ETRD KIPR EFIN EPET CJAN PHUM PGOV DR HA CU MX XM
SUBJECT: DOMINICANS OUTLINE APPROACH TO HAITI, CAFTA, U.S.
RELATIONS, FOREIGN AFFAIRS, ECONOMIC AND POLITICAL ISSUES

REF: A. OTTAWA 473 (NOTAL)


B. PORT AU PRINCE 387 (NOTAL)

C. SANTO DOMINGO 758 (NOTAL)

Classified By: DCM Lisa Kubiske for Reason 1.5 (b) and (d).


1. (C) Summary: Haiti, bilateral relations with the United
States, CAFTA ratification, promoting consensus on a new OAS
secretary general, more active participation in regional and

SIPDIS
multilateral diplomacy, foreign investment and technology are
priorities for the Dominican administration, according to
officials who received WHA/CAR Director Brian Nichols on
February 14-15. Foreign Minister Morales assured the
Ambassador he would press for more regional support for the
interim government in Haiti and would continue to promote the
Flores candidacy for OAS secretary general at an upcoming
CARICOM meeting in Suriname. The MFA outlined plans to
increase the staff devoted to Haiti and to the United States,
suggesting a periodic Dominican-U.S. commission to review
bilateral issues. On Cuba, the MFA confirmed that Mexico had
proposed an "informal consultation mechanism" on human rights
in the hemisphere, but denied that the initiative would
preclude country-specific resolutions in the UN Committee on
Human Rights. Dominican Congressional leaders agreed to form
a bicameral committee to accelerate the CAFTA ratification
process. A lawyer for the pharmaceutical industry expressed
concern about a new legislative proposal that, if passed,
would weaken patent and trademark protection. Opposition
politicians and commentators, whose parties control the
Dominican Congress, criticized President Fernandez for
promising more than he can deliver while his administration
follows economic policies they perceive as dangerous. The
legislators and a senior advisor to Fernandez say that
because of the 2006 elections, Congress is unlikely to take
on the fundamental fiscal reform agreed with the IMF. End
summary.


2. (SBU) Visiting WHA/CAR Director Brian Nichols met with
Dominican Government, Congressional, opposition, and business
leaders February 14-15, accompanied by the Ambassador and/or
DCM and other Embassy officers. The Dominicans offered
information of particular interest to the United States on
this country's opposition political views, on prospects for
ratification of the free trade agreement (CAFTA),on foreign
policy priorities including Haiti, and on intellectual
property rights (IPR) issues related to CAFTA.

Haiti and the OAS
- - - - - - - - -


3. (C) Haiti, Liriano emphasized, occupies perhaps
one-third of the Dominican bilateral agenda. Haiti's severe
problems affect the Dominican Republic directly, and the
Fernandez administration is moving from talk to action, with
a cooperative attitude. Foreign Minister Carlos Morales
Troncoso will attend a meeting of CARICOM foreign ministers
in Suriname starting February 17. While there, he will call
on CARICOM to endorse the candidacy of Salvadoran
ex-president Flores for OAS secretary general and will urge
the English-speaking Caribbean "not to leave Haiti alone at
this moment," but to support electoral preparations and
efforts to re-establish security in Haiti. The foreign
minister is still planning to attend a French-sponsored
donors' conference in Cayenne, French Guiana, on March 18
(Ref A),and President Fernandez plans to visit Haiti in
March. Liriano told Nichols that Fernandez already has 5 or
6 persons advising him on Haiti and the MFA will soon expand
its Haiti office to 4 or 5 officers, reflecting that
country's importance to the Dominican Republic. This country
wants a "permanent dialog" and "framework of cooperation"
with Haiti and wants to offer Dominican "resources that could
be used by Haiti" because of its proximity.


4. (C) Liriano privately confirmed to the DCM and Director
Nichols that Dominican Ambassador to Haiti Jose Serulle Ramia
(Ref B) had been brought to the Palace that day. She did not
know the outcome of the meeting. The foreign minister later
told the Ambassador that Serulle had been stripped of his
authority, though not technically fired. For now and
effective immediately, the MFA has asked its Haitian affairs
director Inocencio Garcia to cover the Dominican ambassador's
responsibilities in Haiti. Note: Serulle Ramia, we
understand, was not fired because of President Fernandez's
relationship with the local PLD chief in Santiago (another
Serulle). End note.

CAFTA Ratification
- - - - - - - - - -


5. (C) The Ambassador and WHA/CAR director Nichols discussed
the timetable for CAFTA ratification with Dominican Senate
President Andres Bautista and House President Alfredo
Pacheco, both of the opposition PRD, and pointed out recent
progress on ratification by other CAFTA signatories. After
discussing local concerns and potential opportunities under
CAFTA, Bautista commented that a bicameral committee could be
convened to accelerate the legislative process. (Currently,
the ratification bill is under consideration only in a Senate
committee.) Pacheco described himself as "a believer in
CAFTA" and agreed that, as soon as he received a formal
proposal from Bautista, they would form the bicameral
committee. Once that committee completes its work and issues
a favorable opinion to both houses, the Senate and Chamber
will be able to ratify in rapid succession. Bautista said he
would send the letter "tomorrow" (February 16). (As of
February 16, Senate Industry and Trade Committee chairman
Santos confirmed to us that his committee was planning
hearings and studies on CAFTA until early April. Bautista
and Pacheco confirmed to Nichols and to the Ambassador that
they have the authority to redirect the process as they
explained.)


6. (C) President of the Free Trade Zone Association
(ADOZONA) Arturo Peguero warned that CAFTA will not be
ratified until after the Dominican Government grants tax
breaks to the sugar industry and other sectors. Technical
Secretary of the Presidency Temistocles Montas, Customs

SIPDIS
Director Miguel Cocco, and Secretary of Finance officials
committed to these compensatory measures in December as a
condition for the Senate's repeal of the 25 percent tax on
corn syrup-sweetened beverages, he said. Hugo Rivera Santana,
a Secretariat of Industry and Commerce official tasked with
implementing CAFTA following ratification, described a clear
division of labor on trade issues in the Fernandez
administration: the Foreign Ministry has responsibility for
trade negotiations and the Secretariat of Industry and Trade
is in charge of implementation and administration of trade
agreements once ratified. Following CAFTA ratification, his
office will become a council for CAFTA implementation,
including other relevant agencies and private sector groups.


7. (C) In a later meeting Secretary of the Presidency Danilo
Medina said that the government would have to compensate for
lost revenues as tariffs are eliminated during CAFTA
implementation. He did not identify the manner of this
compensation, but added that "it had been agreed" that no
fiscal reform legislation would be considered before the May
2006 congressional elections, owing to candidates'
vulnerability on this sensitive issue.

United States
- - - - - - -


8. (C) The Dominican Republic wants to undertake "a series
of activities" with the United States, according to Liriano,
and the MFA plans to expand the U.S. affairs office from one
senior officer currently to 4 or 5 officials (U.S. desk chief
Roger Espaillat introduced Embassy officers to his newly
assigned assistant on February 11). Substantively, both
Liriano and, separately, senior presidential political
advisor Danilo Medina told WHA/CAR Director Nichols that
Santo Domingo wants to intensify the bilateral dialogue on
security issues. This includes strengthening internal law
enforcement (for example through expert visits from local
U.S. police departments),border security, immigration
issues, counter-narcotics, and counter-terrorism. Liriano
highlighted the need to coordinate the nation's foreign and
defense policies, traditionally separate, and proposed that
Fernandez's NGO "Global Foundation for Democracy and
Development" (www.funglode.org) host a conference on Third
Border issues including security. Caribbean affairs director
Danilo Clime, in a side conversation, proposed hosting a
Dominican-U.S. conference on military and security issues.


9. (C) Medina raised two immigration issues. He asserted
that U.S. deportations of Dominican citizens who have been
convicted of crimes and served prison sentences in the United
States are aggravating a rise in criminal activity here,
because the returning deportees bring with them patterns of
criminal behavior learned abroad. He said a bilateral
agreement is needed to regulate such deportations. The DCM
replied that available evidence does not support the belief
that these deportees significantly contribute to the crime
wave. Medina also complained about U.S. deportations of
illegal immigrants, when apprehended for minor legal
infractions, "breaking up families" and leaving U.S. citizen
children without guardians in the United States. Nichols
replied that these deportations are required under U.S. law
and that the large, concentrated Dominican-American community
should be able to provide alternate living arrangements for
the children.

Cuba
- - -


10. (C) WHA/CAR director Nichols and the DCM reiterated to
Liriano our demarche (Ref C) about the Mexican proposal to
establish an "informal consultation mechanism" on human
rights in the hemisphere, in the context of GRULAC and the UN
Committee on Human Rights (CHR). Liriano commented that the
Mexicans, in their meeting with GRULAC representatives in
January, had kept their presentation "very general," had not
referred to specific countries, and had not proposed any
restrictions on country-specific resolutions. She said such
restrictions would "put a straitjacket" on CHR proceedings,
given the wide divergence of views among member states. She
understood that the Mexican-proposed consultations did not
imply any requirement for GRULAC states to vote as a regional
bloc in the CHR. The Cubans at the GRULAC meeting had
expressed particular concern that their country might be
targeted in this year's annual meeting, she said. The DCM
expressed our appreciation for the Dominican Republic's
decisive vote on Cuba in the CHR last year; Liriano noted
that "the Cubans almost killed us" for casting that vote and
continue to show resentment.
Foreign Policy Priorities
- - - - - - - - - - - - -


11. (C) Deputy Foreign Minister Alejandra Liriano outlined
the Fernandez administration's priorities in foreign policy:

-- Active role: The Dominican Republic will participate
actively in regional international organizations, bringing
positions based on Dominican interests to meetings of those
organizations. Santo Domingo has proposed hosting the 2006
OAS General Assembly, in part to continue regional attention
to Haiti. It will seek closer ties with the Central America
and the English-speaking Caribbean.

-- Multilateralism: The Dominican Republic will look to
harmonize and sometimes to build consensus positions within
multilateral organizations and will take action every time
there is an issue that affects it. This means playing a more
active regional role, seeking closer ties with the
English-speaking Caribbean, and helping achieve consensus in
multilateral organizations on issues of interest,

-- Key countries: The Dominican Republic will focus on its
two most important bilateral relationships, those with the
United States and Haiti. At the same time, it will reach out
beyond the region, exchanging ambassadors with India and
South Africa and arranging a presidential visit to Japan in
March.

-- Investment and technology: Fernandez will seek to use
these diplomatic relationships and contacts with businesses
abroad to bring more foreign investment and information
technology to the Dominican Republic.

-- Energy: To supplement the agreement last year with
Venezuela on petroleum supplies and financing, the Dominican
Republic is trying to reach other agreements with Qatar,
Colombia, and Brazil.

-- Bilateral commissions: The Dominican Republic is proposing
annual bilateral commissions (with the United States, Haiti,
Colombia, and Spain, initially) to meet alternately in the
participating countries. The MFA wants to set up regular
formal exchanges between the Ministry and each overseas
embassy to discuss the full range of bilateral issues,
possibly at sub-secretary level, every 3-6 months.

-- Institution-building: The Dominican Foreign Service is
weak as an institution. The government wants to build a
permanent career foreign service to serve the country rather
than the personal interests of any president, to improve
computer-based diplomatic communications, and to assign to
embassies only the right number of qualified employees. The
Trujillo-era foreign service law needs an overhaul.

-- February 27 speech: The president will address foreign
policy in his state-of-the-nation speech to Congress on
February 27; Foreign Minister Carlos Morales Troncoso will
provide ideas to the text the president is drafting.

IPR Issues
- - - - - -


12. (U) A prominent local patent attorney whose clients
include international pharmaceutical manufacturers told
WHA/CAR director Nichols and Embassy officers that she had
recently learned of newly proposed legislation to modify the
law related to protection of industrial property (patents and
trademarks). The new draft legislation is slightly different
from a similar bill that has been under consideration by the
lower house of Congress for several months, which the Embassy
raised with House President Pacheco because it proposed
lowering penalties for violators of patents and trademarks.
The revised proposal allows prison sentences in cases of
trademark violations, but not for patent, infringements. The
attorney warned that if the proposal becomes law, convicted
patent infringers will not only avoid serving jail time but
will be able to pay a fine and avoid appearing in court
entirely. This is in keeping with the new criminal
procedures code implemented in 2004, which specifies that
crimes that do not carry a prison sentence allow payment of a
fine in lieu of a court appearance. The attorney expects the
legislative proposal to be submitted to Congress soon.

Opposition Critique of Economic Policy
- - - - - - - - - - - - - - - - - - - -


13. (SBU) Politicians from the opposition, an economist and
a journalist sketched for WHA/CAR Director Nichols their
concern that the Fernandez administration is overreaching,
promising the Dominican public far more than it can actually
deliver. None of those present was willing to predict that
Congress would pass fundamental fiscal reforms mentioned in
the IMF standby. With congressional election campaigning
less than a year away, few in Congress would be willing to
take the blame for increasing or significantly revising
taxes. (Later, presidential political advisor Danilo Medina
expressed the same concern.) Senator Santos acknowledged
that ratification of CAFTA and its entry into force would be
forcing events, depriving the government of important sources
of revenue.


14. (SBU) Economist Jaime Aristy Escuder, closely associated
with the Mejia administration but before that an advisor to
Fernandez, said that by targeting the exchange rate, the
administration is putting national finances in a "delicate
and very dangerous" position. Central Bank (CB) Governor
Hector Valdez Albizu has aggressively increased the
placements of CB certificates. Since January 1, said Aristy,
the CB has increased its net holdings by 9 billion pesos (US$
300 million),while rolling over 5 billion pesos in
certificates reaching their term. Limiting peso liquidity
has succeeded in keeping the dollar exchange rate below 30 to
the dollar. IMF projections for 2005 were made at an
estimated exchange rate of 37; Aristy says that the peso
should be trading at about 42 to the dollar to keep Dominican
enterprises competitive. Recent announcements by free-zone
apparel manufacturers of 6,000 or more layoffs in the central
Santiago/Cibao area are only the first signs of the downside
of the policy. Aristy stresses that many, perhaps most, of
the apparel workers are female heads of household. When they
lose their jobs, they and their children fall immediately
into conditions of extreme poverty. The hotel sector is
under pressure as well, given the fall of the dollar from 42
to less than 30.


15. (SBU) Aristy sees the Central Bank tactic as
unsustainable over the long term. He says that if continued
it will mean that the CB will eventually have to refuse to
honor its obligations, as happened in Argentina, or it will
resort to the printing press and unrestrained inflation.


16. (SBU) Before the meeting, Aristy had been withering in
his criticism of the Metro project touted by Fernandez
advisor Diandino Pena. Aristy sees the murky arrangements as
dangerous, since any financing provided to the Dominican
Republic at 4 to 5 percent per annum would necessarily be
offset by very high prices for materials furnished. Aristy
believes that a deal has already been cooked up with the
Brazilian Export Credit Agency for the sale of equipment from
factories owned by France,s Alsthom. In his view, Pena is
in a hurry to get approval of the deal before Congress is
obliged by the IMF standby and the terms of the free trade
agreement to pass legislation requiring open solicitations
for government purchases. Pena,s price tag of only USD 326
million for the first Metro line and his completion date of
three years are ridiculous, in Aristy,s view, and if pursued
will leave Fernndez with little more than "a big hole in the
ground" at the end of his term in 2008.

Opposition Political and Press Issues
- - - - - - - - - - - - - - - - - - -


17. (SBU) Acting President of the Dominican Revolutionary
Party (PRD) Tony Raful said that Fernandez,s electoral
triumph of 57 percent, unmatched in Dominican history, was
more a rejection of Hipolito Mejia,s economic mismanagement
than an endorsement of Fernandez. The PRD is returning to
its base, restructuring, and hoping to overcome differences
so as to retain an important presence after the 2006
congressional elections. Senator Alejandro Santos of the PRD
and "Reformista" congressional representatives Ito Bisono and
Marino Collante of the late president Balaguer's Social
Christian Reformist Party (PRSC) stressed that the
opposition-controlled Congress had cooperated so far with the
Fernandez administration to raise taxes and pass a budget
consistent with IMF requirements. Congress revised that
budget so as to provide more funding to education and health.


18. (SBU) The Reformistas said their party is undergoing
reorganization as well. Collante predicted that senior PRSC
leaders such as Foreign Minister (and former vice president)
Carlos Morales Troncoso who had bolted the party to support
Fernandez would be excluded.


19. (U) Independent on-line journalist Fausto Adames
recounted his discontent with the suppression of
investigative reporting by owners of newspapers, all of them
closely associated with banks and political interests. He
and other fired journalists have founded the on-line daily
www.clavedigital.com. Adames appealed to politicians to
place the national interest above partisan
beggar-thy-neighbor politics. Economist Aristy said daily
newspaper "Listin Diario" had lost all objectivity and had
arbitrarily ended his weekly column, which had run for years.

20. (U) This cable was cleared by WHA/CAR director Brian
Nichols.


21. (U) This piece and others in our series can be consulted
on our classified SIPRNET site
http://www.state.sgov.gov/p/wha/santodomingo/ along with
extensive other material.
HERTELL