PARAGUAY POLITICAL AND ECONOMIC UPDATE, OCTOBER 28

C O N F I D E N T I A L ASUNCION 001113 SIPDIS SIPDIS 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: DECL: 11/02/2026 TAGS: PHUM PGOV PREL ECON AID PA SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, OCTOBER 28 - NOVEMBER 3, 2006 Classified By: PolCouns James P. Merz; Reasons: 1.4(b),(d). ¶1. (U) SUMMARY: -- First Money Laundering Conviction in Paraguayan History -- Senior Military Official Indicted -- Bridging the Digital Divide FIRST MONEY LAUNDERING CONVICTION IN PARAGUAYAN HISTORY ¶2. (U) Daniel Fretes Ventre, the former Inspector General under President Wasmosy, was sentenced October 24 to 12 years in prison and a $68,000 fine for illicit enrichment, money laundering and other crimes. (NOTE: Members of Fretes' family were also convicted of the same crimes. Elisa Corvalan Caceres (spouse),Rosa Corvalan Caceres (sister-in-law),and Leonardo Fretes Ventre (brother) were all sentenced to 10 years in prison and must pay fines of $38,000, $5,690 and $85,000, respectively. In addition, Ruben Fretes Ventre (brother) was sentenced to 8 years in prison. END NOTE.) Fretes and his accomplices laundered the money through a family-established college (The Commercial and Development Technical University - UTCD) and three family-owned businesses. In addition to other penalties, the authorities confiscated 11 family-owned properties in Asuncion and Ciudad del Este. COMMENT: This decision revoked the December 2004 decision absolving the defendants. Current Paraguayan requires defendants be found guilty of a precedent criminal offense before they can be convicted of money laundering. This condition has proved a serious hurdle to building successful money laundering cases. This case easily represents the most significant money laundering conviction -- from less than a handful to date -- and reinforces the fact that convictions are possible, however difficult, unde the currently flawed legal framework. END COMMENT . SENIOR MILITARY OFFICIAL CHARGED WITH ILLICIT ENRICHMENT ¶3. (U) Col. Heribero Galeano, the Commander of the First Infantry Division and former Head of the President's Protection Regiment, was arrested and charged with illicit enrichment October 31. Anti-Corruption Prosecutor Arnaldo Giuzzio maintained Galeano had assets in his name that exceeded his income by well over $200,000. Galeano had already been the subject of controversy, alleged to have been involved in wiretapping political opponents when he headed the Presidential Protection Regiment until earlier this year. Duarte Administration officials questioned the timing of this arrest only weeks before municipal elections scheduled for November 19. Galeano represents the most senior active military official to ever face such serious charges. ¶4. (C) Prosecuting attorney Giuzzio has become a lightning rod for controversy himself. His five-year term as a prosecutor expired last year and he is up for renewal. Absent a vote, his contract runs month-to-month, allowing for no long-term stability, financially, professionally or personally. Many prosecutors in this situation prove cautious about taking on political interests lest they risk losing favor with a selection board that is driven by such interests. Giuzzio -- one of two full-time anti-corruption prosecutors -- told the DCM he takes a different approach. Refusing to bow to political pressure, he looks for cases that will place him in the spotlight as a crusader against corruption. Earlier in October, he opened a case against the President of the House of Deputies, Victor Bogado, for corruption. The Colorados voted down a motion that would have lifted Bogado's congressional immunity but Giuzzio maintains his investigation will continue. Guizzio insists he does not choose his targets based on political affiliation, and told DCM that newspaper exposes are his single-most important source for leads on where to look for cases of public corruption. BRIDGING THE DIGITAL DIVIDE ¶5. (U) Paraguay is one of 20 countries selected for funding under USAID's Global Last Mile Initiative, which is designed to bridge the "digital divide." The Paraguayan program aims to increase internet services to 100 sites in rural and other underserved areas. The U.S. Government is providing more than $400,000 to install internet access to the Chaco Region (particularly the Departments of Colonel Oviedo and San Pedro) including schools, clinics, and NGOs. Public-private partnerships, including a key alliance formed already with the Paraguayan company TIGO and a local NGO (Fundacion Paraguaya),are expected to leverage additional contributions to the project. (NOTE: Excessive prices continue to limit internet access, constraining economic opportunity. Recent corruption charges have been leveled against past and present senior officials at both the communications regulatory agency and service company, creating a "do-nothing" climate with respect to improving and increasing public access. END NOTE.) CASON