PARAGUAY: MINISTER OF PUBLIC WORKS ON ANR

C O N F I D E N T I A L ASUNCION 000201

SIPDIS

SIPDIS

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

E.O. 12958: DECL: 02/22/2016
TAGS: PGOV PREL KDEM KCRM ENGR ECON PINR PA
SUBJECT: PARAGUAY: MINISTER OF PUBLIC WORKS ON ANR
ELECTIONS, FUTURE PRIORITIES

REF: A. A) ASUNCION 200

B. B) ASUNCION 183

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

--------------
SUMMARY
--------------


1. (C) In the Ambassador's introductory call on Minister of
Public Works Jose Alderete, who was also President Duarte's
campaign manager for the just concluded ANR internal
elections, Alderete said the President's decisive win (with a
margin of 31 points) was better than expected and provides
Duarte with renewed political capital. He said he expects
progress soon on the GOP's reform agenda. Alderete expressed
appreciation for the U.S. government's support through the
MCC Threshold Program, which he viewed as a recognition of
the GOP's efforts to formalize the economy, fight IPR piracy
and reduce contraband. He characterized the program as an
important political boost at a key time, and expressed
confidence that the GOP would work to comply with its
commitments. The Ambassador raised the importance of the
passage of the anti-money laundering law, and Alderete told
the Ambassador that the law was important to the GOP, but
acknowledged that gaining passage would require effort. The
Ambassador noted that he had discussed a strategy with the
Vice President, and offered to collaborate on pushing for
passage of the law. Alderete identified "creating a market"
as the GOP's number one priority, by which he meant
formalizing the Paraguayan economy and making Paraguay a
place attractive for investment. On the work of the
Ministry, Alderete singled out road construction and
specifically completion of the "bioceanic" project linking
Paraguay to the Pacific via Bolivia and Chile as his first
priority. The Ambassador and Alderete also discussed the
ongoing exploration for hydrocarbons in western Paraguay.
Alderete expressed optimism that commercial quantities would
be found, and made a pitch for the Embassy to send would-be
investors his way.
End Summary.


2. (U) On February 21, Ambassador Cason, accompanied by
Econcouns, had his introductory call on Minister of Public
Works Jose Alderete, who as a close confidant of President
Duarte served as his campaign manager for the just concluded
Colorado Party (ANR) internal elections (ref A). Alderete
was gracious, candid, and eager to establish a positive and
productive relationship with Ambassador Cason.

-------------- --------------
ANR INTERNAL ELECTIONS -- THE COLORADO HOUSE IN ORDER
-------------- --------------


3. (C) Alderete was clearly pleased with President Duarte's
strong showing in the ANR elections. He said the campaign
team expected to beat the ODD/Stroessner ticket by at least
18 points, but thought the best they would do would be a 22
point difference. In fact, NDF received 31 percent more of
the votes (63 percent for NDF versus 32 percent for ODD).
Alderete sees this as an important political boost for the
President. He called it a vote of confidence in NDF and his
policies, and said the result was even stronger for the high
voter turnout (for an internal party election) of nearly 48
percent of Colorados. He said that now the Duarte government
has both legitimacy of entry (i.e., a clean 2003 election) as
well as legitimacy of governance (i.e., the election
represented almost a referendum on NDF's administration, with
a very favorable result). He predicted that the President's
hand would be strengthened and that the GOP would be able to
make advances on its reform agenda.


4. (C) Alderete characterized the President's decision to run
for the Presidency of the ANR as a great, but necessary risk.
If NDF had not achieved a strong mandate, he would be
seriously weakened. However, he said that when three or four
possible ANR candidates emerged, none of which could stand up
to an ODD/Stroessner ticket, the President decided that he
must run to obtain this mandate and unify the party.
Alderete pointed out that while the elections were internal,
the ANR is the country's most important party, and that the
turmoil and unpredictability of the first 14
post-dictatorship years were entirely the doing of the
Colorado Party. He felt that now, for the first time, the

President had the governability within the Party necessary to
govern effectively. He named Stroessner nostalgia and
Oviedismo as victims of this election that are now
discredited.

-------------- --
MCC THRESHOLD PROGRAM IMPORTANT POLITICAL BOOST
-------------- --


5. (C) Alderete expressed appreciation for the U.S.
government's support through the MCC Threshold Program, which
he viewed as a recognition of the GOP's efforts to formalize
the economy, fight IPR piracy and reduce contraband. He
characterized the program as an important political boost at
a key time, and expressed confidence that the GOP would work
to comply with its commitments. The Ambassador emphasized
the fact that the program and its goals were designed by the
GOP, and that it was up to the GOP to live up to its own
goals. He told Alderete that it was an ambitious program
viewed in Washington as reflective of a serious desire to
attack the roots of corruption. The topic of the GOP's
seriousness led Alderete to criticize Transparency
International, saying that while he had no problems with such
organizations, he resented the apparent lack of appreciation
for the progress the government has made so far, which he
said included successes in the anti-piracy campaign and the
passage of important legislation such as tax and pension
reforms. He acknowledged, though, that Paraguay had a long
way to go, and emphasized on more than one occasion the
difficulty of formalizing the economy.

--------------
ANTI-MONEY LAUNDERING LEGISLATION
--------------


6. (C) The Ambassador raised the importance of the passage of
the anti-money laundering law, and asked Alderete if he
thought the votes were there for passage. Alderete told the
Ambassador that the law was important to the GOP, but he
acknowledged that gaining passage would require effort. He
said that the Senate would be the problem, while he
considered the Chamber of Deputies to be much more in the
control of the ANR. He mentioned the Liberal Party (PLRA)
and Beloved Fatherland (PQ) parties in particular, and said
that Embassy intervention would be valuable. The Ambassador
noted that he had discussed a strategy with the Vice
President, and offered to collaborate on pushing for passage
of the law. (Note: Colorado claims that the opposition is
holding up the law are false and self-serving; we are urging
the President to use his influence to get his Senators in
line, the crucial step for passage. End note.)

-------------- --------------
GOP's FUTURE VISION -- IMPORTANCE OF CREATING A MARKET
-------------- --------------


7. (C) Alderete identified "creating a market" as the GOP's
number one priority, by which he meant formalizing the
Paraguayan economy and making Paraguay a place attractive for
investment. He underscored that the task is difficult, that
the GOP is fighting vested interests, and that large numbers
of jobs arise from informality. He cited the social unrest
experienced by Gonzalo (Goni) Sanchez de Lozada, former
President of Bolivia, as an example of the dangers of
shifting from one economic model to another. He asserted
that the GOP must be able to provide an alternative for those
displaced through the process of formalization.

-------------- --------------
BIOCEANIC PROJECT PROGRESSING BUT GOOD NEIGHBORS HARD TO FIND
-------------- --------------


8. (C) On the work of the Ministry, Alderete singled out road
construction and specifically completion of the "bioceanic"
project linking Paraguay to the Pacific via Bolivia and Chile
as his first priority. He praised the assistance the
Ministry of Public Works and Communication (MOPC) has
received from the InterAmerican Development Bank and the
Texas Highway Institute associated with Texas A&M University.
He said work is well advanced on the project, and that he
had met with former Bolivian President Mesa and former
Chilean President Lagos in the negotiating phases. The road
project should make Paraguayan projects more competitive in
Asian markets by reducing transportation costs. According to

Alderete, the Bolivian road construction team is about 130
kilometers from the Paraguayan border. He expects the
project to be completed by the end of 2007. The GOP
considers the Chaco (Paraguay's sparsely inhabited western
half) a priority, and Alderete said that about $180 million
of the $300 million the Ministry will spend on public works
will be spent in the Chaco.


9. (C) In the context of the bioceanic discussion, Alderete
became fairly animated as he expressed his disdain for the
rhetoric of Paraguay's neighbors, specifically Brazil. He
said he had the good fortune of accompanying the President on
his foreign trips and meetings with other heads of state.
From the region, he said he has heard too much talking and
seen too little action. He mentioned the MCC and
concessional financing received from Japan as examples of
foreign countries trying to help Paraguay. He contrasted
this with Brazil, which offered Paraguay financing for road
construction at 8 percent.

--------------
SEEKING HYDROCARBONS INVESTMENT
--------------


10. (C) The Ambassador asked about on-going petroleum
exploration in the Chaco region. Alderete expressed optimism
that usable resources will be found, but cautioned that more
testing needed to be done to assess the viability. He noted
that oil had been found in eastern Paraguay, but of a poor
quality rendering it non-commercial. Alderete said he'd
rather cut out middlemen and deal directly with potential
investors in the energy sector, offering to make himself
available to any investors who might inquire with the
Embassy. In addition to the ongoing exploration (ref B),
Alderete noted that 27 million hectares remain open for
potential exploration.

--------------
BIO NOTES
--------------


11. (C) Alderete began the meeting by giving an overview of
the early part of his 29-year political career, shedding
light on the origins of his relationship with President
Duarte. He said his interest in politics began as a student,
and he participated in school government. He has always been
a member of the ANR, and said he led a youth organization
known as Ignacio Pani from 1985-1988 that worked against the
Stroessner regime. Alderete said he could have left, but
decided it was better to work against the dictatorship from
within the Colorado Party. He fondly recalled the interest
shown in him by then U.S. Ambassador Taylor, who attended the
group's meetings from time to time. He told the Ambassador
that he had participated in an International Visitor Program
to the U.S. during that time, something he appreciated very
much.


12. (C) Alderete said that President Duarte was a respected
journalist for the still-existing newspaper Ultima Hora in
those days, and that Duarte gave Alderete a voice, something
he appreciated. He claimed to have played a key role in
convincing Duarte to leave journalism in 1990 and enter
politics, a move Alderete admired for the difficulty of
making such a risky career change. Alderete was a Senator
from 1993-1998. He does not speak English.

--------------
COMMENT
--------------


13. (C) If Alderete is correct about the recent ANR elections
strengthening President Duarte, the next six months or so
will be an excellent opportunity for the Duarte
Administration to again make headway with a reform process
that has largely stalled after a very successful first year.
Both the MCC Threshold Program and possibly a new IMF
agreement will provide ample opportunity to demonstrate
political will.
CASON