PARAGUAY: AMBASSADOR MEETS WITH VP CASTIGLIONI

C O N F I D E N T I A L ASUNCION 000162

SIPDIS

SIPDIS

NAIROBI FOR MICHAEL FITZPATRICK
SOUTHCOM FOR POLAD BARBARA MOORE
NSC FOR SUE CRONIN

E.O. 12958: DECL: 02/10/2016
TAGS: PGOV PREL KDEM CVIS KCRM PINR BL PA
SUBJECT: PARAGUAY: AMBASSADOR MEETS WITH VP CASTIGLIONI


Classified By: ECON Patrick R. O'Reilly for reasons 1.4(b),(d).

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SUMMARY
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1. (C) During the Ambassador,s February 6 introductory call
on Vice President Castiglioni, the VP was eager to establish
a productive relationship. Castiglioni raised the election
of Evo Morales in Bolivia and said that Bolivia,s future is
a source of concern given its proximity and the possibility
that secessionist pressures could increase. He suggested
that the USG could consider Paraguay an &anchor8 of
stability in the region. The Ambassador raised the
importance of the passage of the anti-money laundering law,
which he called a litmus test of the GOP,s political will.
The VP claimed that it was a priority for the GOP, but one of
the VP,s aides expressed pessimism that it would be passed.
The Ambassador urged a rapid resolution of the disparity
between the short-term visas issued to American citizens and
the US policy of issuing ten-year visas. The VP asked for a
reprieve until after the February 19 internal Colorado Party
elections, but showed the Ambassador a draft Presidential
Decree that would eliminate the visa requirement for American
citizens, replacing it with an administrative fee to be paid
at the point of entry into Paraguay. The Ambassador and VP
also discussed potential cooperation on arranging for a trade
mission from Florida to visit Paraguay. End Summary.

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SEEKING INVESTMENT, TRADE, AND SECURITY
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2. (U) On February 6, Ambassador Cason, accompanied by A/DCM,
had his introductory call on Vice President Castiglioni.
Castiglioni had just returned from two weeks in the United
States, during which he spent some time meeting with
potential investors and promoting Paraguay as a place with
commercial opportunities. Castiglioni was gracious and eager
to establish a positive and productive relationship with
Ambassador Cason.


3. (C) Castiglioni began by making reference to an article he
saw in a Miami paper on Saturday, February 4, which quoted a
senior US military commander who evidently made the point
that adequate national security was a prerequisite for
development. He promised to send the Ambassador a copy of
the article, and made reference to the statements several
times, which he said echoed discussions he had had with Vice
President Cheney in June 2005. The VP asserted that the US
and Paraguay should base our relationship on mutual respect
and cooperation, and reiterated the importance of regional
security cooperation for development and poverty reduction.

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EXPORTS, EDUCATION, MCC
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4. (U) The Ambassador agreed, and told the VP that he had
three goals in mind for his time in Paraguay: 1) to help
increase Paraguayan exports to the US, noting that trade is a
two-way street, and specifically mentioning meat and stevia
(a natural sweetener derived from a bush native to Paraguay);
2) to find a way to make more scholarships available to
Paraguayan students and 3) to work together to increase
transparency and reduce informality. He shared with the VP
that we expected a positive outcome from the Millennium
Challenge Corporation's February 8 Board meeting.


5. (C) Castiglioni lamented that in many countries in the
region, the people don't see the benefits of democracy. He
blamed poor governance, and said the point needs to be
reached where citizens appreciate democracy as a common good.
The Ambassador emphasized the need to work together to
strengthen institutions, and the VP agreed that the MCC
Threshold Program would be of great help. The Ambassador
underscored the importance of solid performance on the
challenging agenda set forth in the Threshold Program, since
Paraguay will have to make significant progress in order to
one day qualify for the MCC,s main program. Castiglioni
later commented on the importance of reducing informality and
fostering an open, predictable and stable economy.

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WORRIES ABOUT MORALES ) BUT PARAGUAY AN &ANCHOR8
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6. (C) The Vice President raised the election of Evo Morales
in Bolivia and said that Bolivia,s future is a source of
concern for the GOP. The VP noted that not only is Bolivia a
neighbor, but that the provinces bordering Paraguay have
diverging interests from the capital, which might one day
lead to decisions &affecting Bolivia,s sovereignty.8 The
Ambassador noted that while skepticism is perhaps prudent,
Morales has some political capital and the ability to do some
good things. He told the VP that the USG would wait to judge
Morales' actions, and hope that he makes the right decisions
for the people of Bolivia. The VP used the discussion of
Bolivia to make a pitch for Paraguay being an &anchor8 of
stability and security in the region, and an even more
important partner for the United States.

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COMMERCIAL TIES WITH FLORIDA
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7. (U) The VP briefed the Ambassador on meetings he had in
Florida with business leaders and with Governor Bush in
November 2005, with the eventual goal of arranging a Florida
trade mission to Paraguay. Sectors that have been discussed
include energy, textiles, beef, and technology. The Vice
President will be in Florida in mid-March with the Minister
of Industry and Commerce Raul Vera, Presidential Economic
Advisor Carlos Walde, and some prominent Paraguayan business
leaders. The Ambassador noted that he would be in Miami at
the same time and both discussed the possibility of the
Ambassador's participation in the event, which greatly
pleased the VP.

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ANTI-MONEY LAUNDERING LEGISLATION
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8. (C) The Ambassador raised the importance of the passage of
the anti-money laundering law, which he said the USG
considers a litmus test of the GOP,s political will.
Castiglioni said that the Executive Branch has been fighting
for passage for a long time, and noted that President Duarte
has raised it publicly and strongly pushed for passage last
year in a meeting of the three branches of government.
Castiglioni said that there have been advances, and that the
status should be clearer in March. The VP,s Economic
Advisor, Luis Maria Duarte, related that Carlos Yegros, the
director of Paraguay's Financial Intelligence Unit
(SEPRELAD),had expressed pessimism to him after a number of
meetings with Senators, who Yegros claimed did not understand
the importance of the law.


9. (C) The Ambassador and the Vice President agreed on a
strategy in which President Duarte would meet with the
Colorado Senators, after which the Ambassador would host four
or five key Senators from the Colorado party and then
separately from opposition parties at the Residence where we
could push for passage. The VP claimed to be more optimistic
than Yegros, noting that a few notable opponents to the law
had changed their views.

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VISAS FOR AMCITS
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10. (C) The Ambassador stressed the importance of resolving
the disparity between Paraguay granting 90-day visas for
American citizens, while the US grants Paraguayans ten-year
visas. He noted that it is in Paraguay's interested to find
a solution that will benefit Paraguay by making it easier for
tourists and investors to travel here. The Vice President
said that he has been working with Economic Advisor Carlos
Walde and that he had spoken to President Duarte about the
issue. The VP asked for a reprieve until after the February
19 internal Colorado Party elections, but showed the
Ambassador a draft Presidential Decree that would eliminate
the visa requirement for American citizens, replacing it with
an administrative fee to be paid at the point of entry into
Paraguay.

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COMMENT: VP A FRIEND...BUT CAN HE DELIVER?
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11. (C) Less populist, more pro-U.S., and with private sector
experience, Castiglioni is a positive influence on President
Duarte and our outspoken ally. As internal Colorado
elections progressed, his differences with the President have
become more public, however, and his influence may be
declining. He has publicly disagreed with Duarte several
times in recent months, only to disappear from public view at
other moments. His advice was (by his own admission)
decisively rejected by the President on some issues of major
importance to U.S. (e.g. Cabral, American Airlines
controversy, and visas). Castiglioni has supporters within
his party, especially in the business sector, and is a useful
complement to Duarte's populism, as long as he is not
considered disloyal.
CASON