PARAGUAY POLITICAL AND ECONOMIC UPDATE, MARCH

UNCLAS ASUNCION 000330

SIPDIS

SIPDIS

STATE FOR WHA/BSC 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: PGOV PREL PINR KCRM PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, MARCH
18-24, 2006

REF: A. ASUNCION 296


B. ASUNCION 200

C. ASUNCION 188


1. (U) Summary:
-- NDF Sidesteps Constitutional Ruling
-- Castiglioni View on American Airlines Case
-- Congressman Implicated in Disappearance
-- Paraguayan Company Linked with Arms-Trafficking

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NDF Sidesteps Constitutional Ruling
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2. (U) On 3/20, President Duarte withdrew his petition for a
Supreme Court review of whether Paraguay,s Constitution
permits him to exercise the Colorado (ANR) party presidency,
while serving as President of the Nation. By withdrawing his
petition, Duarte precluded the Court from ruling on whether
he violated the Constitution by temporarily assuming the
party presidency after winning the 2/19 ANR internal
elections (ref B). Duarte was legally (if not
constitutionally) able to assume the party presidency because
the Supreme Court divided along party lines and suspended the
Supreme Electoral Justice Tribunal,s (TSJE) earlier ruling
that he could run for the party presidency but not exercise
it. As a result of Duarte,s petition, the Supreme Court was
required to suspend the TSJE,s ruling "pending review" of
the underlying constitutional issue, a review that will not
occur now that Duarte has withdrawn his petition. Duarte then
assumed the party presidency, but immediately passed the
title to Jose Alderete, former Minister of Public Works.
Duarte told the nation that he withdrew the Supreme Court
petition to demonstrate his commitment to democracy and the
rule of law, forgoing his legal right to serve as party
president. He is now positioned to reassume the party
presidency in 2008, if he fails to secure a constitutional
amendment allowing him to run for re-election as President of
Paraguay.


3. (SBU) Comment: This was a calculated and well orchestrated
legal maneuver by Duarte. His ploy to circumvent the TSJE,s
ruling (and the Constitution) by petitioning the Supreme
Court drew significant criticism. The subsequent withdrawal
of his Supreme Court petition has further angered his
opponents. It is unlikely that many people will believe the
spin that Duarte is surrendering a legal "right for the
country,s benefit". Duarte,s legal maneuvering suggests he
is concerned less about his reputation than he is about
maintaining control of the Colorado party apparatus. Securing
a constitutional amendment that would allow him to run for
re-election as President of Paraguay in 2008 is a long-shot
in the face of stiff resistance from the opposition.
Reassuming the party presidency represents Duarte,s best
chance of remaining in control beyond 2008. End Comment.

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Castiglioni View on American Airlines Case
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4. (U) While on a visit to Miami to promote trade and
investment, Vice-President Luis Castiglioni denounced a
lawsuit brought against American Airlines by several
Paraguayan ex-employees, claiming that it could damage
Paraguay,s image abroad and make foreign businesses less
likely to invest in the country. He stated to the press that
he has been trying to promote Paraguay as a stable, positive
environment for business, and that cases such as this derail
that effort. On 3/21, an appeals court began looking at the
case to determine whether the amount awarded to the
plaintiffs was excessive. The ex-employees, who are suing for
compensation for loss of non-wage benefits caused by AA,s
leaving Paraguay, were awarded over 3 million USD (ref c),
despite the country,s laws, which stipulate that a limit of
211 million guaranies (about 33,000 USD) may be awarded to

each ex-employee. The award monetizes theoretical free air
travel at a ridiculous level, claiming this privilege as
salary. Other local companies have already begun reducing
employee privileges to avoid this precedent. The GOP says it
will take this to the Supreme Court if the appeal fails.

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Congressman Implicated in Journalist's Disappearance
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5. (U) Authorities are investigating Colorado Party
Congressman Magdaleno Silva for his alleged involvement in
the death of rancher Felix Garcia, his ties to drug
trafficking organizations, and most recently his suspected
involvement in the disappearance of Concepcion journalist
Enrique Galeano. Camila Rojas, the prosecutor in charge of
the investigation has claimed that Silva has been sending her
death threats. Rojas stated to the press that Attorney
General Candia has ignored her repeated complaints.


6. (U) Allegations in the press have accused Concepcion
Department policemen of purposefully bungling the case. The
policemen have made little progress in the investigation.
Furthermore, National Police Comandante Fidel Isasa noted to
the press that contradictions were found between the official
police report of the circumstances of the crime and records
of Galeano,s departure from a hotel in the capital of
Amambay. Magdaleno Silva publicly denied all charges,
claiming that they are part of a smear campaign by his
enemies to discredit him, and that he was actually a good
friend of Galeano. Silva has also publicly attacked the
US-sponsored anti-narcotics unit, SENAD.

-------------- --
Paraguayan Company Linked with Arms-Trafficking
-------------- --


7. (U) On 3/19, the Turkish government informed the GOP that
a shipment of 500 rifles originally shipped to Paraguay had
been confiscated in Istanbul in April of 2004. The Turks
named the Paraguayan firm, Hunter S.A., as the imported of
the weapons and noted that an indictment for its director,
Axel Hans Ingo Bendlin Beyersdorff. The Turks stated that the
company had authorization from the Military Materials
Directorate (Dimabel) to import 500 sporting rifles from
Bulgaria through Turkey to Paraguay. However, in Istanbul
authorities discovered that the "sporting rifles" were
actually AK-47 type machine guns and as such were contraband
and subject to confiscation. Turkish authorities suspect that
the documentation was forged. They also fear that the weapons
were intended to remain in the country to be sold to
terrorists.


8. (U) During an interview with local press, Axel Bendlin
denied the accusations of the Turkish government. He declared
that Turkey,s suspicions are the result of a
misunderstanding of the content of the invoices, which were
written in both Bulgarian and Turkish. He claimed the rifles
were intended for sporting use and were transported through
Turkey because there is no way to ship goods directly to
Paraguay from Bulgaria. Paraguayan Senator Miguel Abdon
Saguier has stated to the press that the case will be
investigated by Paraguayan law enforcement, and that Paraguay
cannot permit its citizens to be involved in the selling of
arms to terrorists.

JOHNSON