PARAGUAY POLITICAL AND ECONOMIC UPDATE, OCTOBER 7

UNCLAS ASUNCION 001040

SIPDIS

SIPDIS
SENSITIVE

STATE FOR WHA/BSC, INL/LP (JIM HIDES),AND EB/IFD/OIA
STATE PASS TO USAID FOR LAC/AA
STATE PASS TO USTR FOR LYANG
NSC FOR SUE CRONIN
TREASURY FOR OSIA MAUREEN WAFER
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR
COMMERCE FOR ITA SARAH COOK
SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: PHUM PGOV PREL KCRM SNAR ECON ETRD PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, OCTOBER 7
- 13, 2006



1. (U) SUMMARY

-- Remittances Hit USD 650 Million
-- Paraguayan Export Share to US the Lowest in the Region
-- SENAD Money Approved
-- Paraguay's Securities Exchange Growing


REMITTANCES HIT USD 650 MILLION


2. (U) The InterAmerican Development Bank (IDB) announced
this week that Paraguay will receive USD 650 million in
remittances for 2006, or roughly 8 percent of GDP.
Seventy-five (75) percent of these remittances are sent from
Paraguayans living in Europe (principally Spain, France and
Italy) and Argentina, with 15 percent coming from the United
States. While IDB's survey showed that Paraguayans, like
many remittance receivers throughout the region, use the
money to meet basic family needs, it indicated that
remittances in Paraguay are used more frequently for savings
and investment (e.g. starting a business) than is the case in
other countries. Despite Paraguay,s clear persistent
poverty, survey results also suggested more optimism here,
with half of the respondents indicating their family,s
economic situation was either "excellent or good" (or maybe
Paraguayans just have a lower standard for what is an
acceptable economic situation). In Peru and Bolivia, by
comparison, only 15 percent of respondents were satisfied
with their economic situations in similar IDB surveys.

PARAGUAYAN EXPORT SHARE TO US THE LOWEST IN THE REGION


3. (U) According to data from the UN's Economic Commission
for Latin American and the Caribbean (ECLAC),Paraguay,s
exports to the US as a share of total exports were the
region,s lowest in 2005 at 3.2 percent. Only Cuba, with
zero exports, was lower. The data, reported by a local
newspaper, considered CARICOM countries as a unit.
Paraguay,s 2005 exports to the US amounted to approximately
USD 54 million. Products exported to the US included organic
sugar, wood moldings, and other non-traditional export
products. In 2005, Paraguay ran a negative trade balance
with the US of USD 774 million, while its worldwide trade
balance was a negative USD 1.564 billion.

SENAD MONEY APPROVED


4. (SBU) The Paraguayan Senate approved October 12
supplementary funding for the hiring of 50 new anti-drug
(SENAD) agents. This decision will allow SENAD to deploy
upwards of 25 agents to its new (INL and DEA supported)
office in Pedro Juan Cabellero. It also creates a basis upon
which SENAD can ask for more funds in its 2007 budget.
Opposition Senators told the press it would be a mistake to
conclude their approval of supplementary funding for some 15
items on the President's list (including the SENAD agents)
signals a reconciliation with the Duarte administration.
Rather, they maintained the decision devolved from their
commitment to SENAD as one of the most effective institutions
in the country and their concern that if they broke out
funding for SENAD from the package it would have had to go
back to the House of Deputies for a lengthy, potentially
problematic reconsideration process.

PARAGUAY,S SECURITIES EXCHANGE GROWING


5. (U) Paraguay,s securities exchange, BVPASA, inaugurated
new facilities and celebrated its 13th anniversary on October

11. The Inter-American Development Bank (IDB) donated USD
80,000 to the exchange so it could purchase the software for
a trading system used in Argentina. The grant supports the
IDB,s business climate objectives in Paraguay. As of
end-2005, BVPASA had 54 listed companies with a total market
capitalization of about USD 272 million. Most trading
involves fixed income securities, though, which total about
US 617,000 in local currency securities and USD 11.2 million

in dollar-denominated securities. While a tiny market, it
has been growing rapidly: its owners, the IDB and the
securities regulator hope the market will gain greater
acceptance and provide an effective source of financing for
Paraguay,s business sector. BVPASA has entered into a
cooperated agreement with the futures exchange in Rosario,
Argentina, and eventually plans to offer trading in futures
and other derivatives.
CASON